Spring
2016
Grains
West
24
there over the longer term. And that’s the
advantage the co-operative has. We are
owned by the people who use us. We
are not owned by Wall Street. We are not
owned by investors who only care about
a quarterly return. We need to provide
value and service in the long-term
rationale, looking at how our producers
can be successful.”
CHS is a co-operative formed
through the 1998 merger of two other
large co-operatives: Cenex, which
focused on energy and agronomic
services, and Harvest States, which
focused on the grain side of the
industry. The co-operative serves
1,300 local co-operatives in 26 states
and directly serves 85,000 producer
members.
Johnson said CHS’s success is built on
providing value
and service to its
members, as well
as its grassroots
governance
system. A board
of directors locally
governs each CHS
outlet, or business
unit of several
outlets.
“We have
anywhere from
one to 15 outlets
in a business unit,
depending on the
geographic area,
that has local governance,” Johnson
said. “The local board is able to provide
direction to the co-operative concerning
the markets and the needs of farmers
in that local area. In Illinois it may be a
corn-growing area, whereas in Montana
it might be a beef-producing area, so
each board of directors is responsive
to the needs of farmers in those areas.
We are accountable to the member-
owners to provide value and service as
well as a return on investment, which is
returned back to members in the form of
patronage payments.”
Back on the Canadian front, Milton
Boyd at the University of Manitoba said
he isn’t sure if Prairie farmers are willing
to or interested in giving co-operatives
another chance.
“As the co-operative model and
management began to decline over
the years and leave farmers less
satisfied, many of the larger and more
progressive grain farmers took their
business to private firms, creating even
more difficulty for the co-operatives and
leading to more decline,” Boyd said.
“For Sask Pool, some older farmers
who had dividends owed took Sask Pool
shares as payment because Sask Pool
wanted to preserve cash, only to see
Sask Pool make a lot of poor decisions
and poor investments, and pile on
excessive debt. Sask Pool went near
bankruptcy, and some farmers lost nearly
all their stock value, became upset, and
took their business
elsewhere as a
result.
“Historically,
co-operatives arose
many years ago at a
time when farmers
were at more of a
disadvantage, and
were to serve as
a countervailing
power to offset the
alleged excessive
market power of
private firms. Grain
companies, banks
and railroads didn’t
face enough competition, and farms
were smaller, [and farmers were] less
independent, less educated and less
informed, and could be taken advantage
of on price as they had poor price
information. And some likely didn’t even
have electricity, telephone or radio, and
[had] horses and trail instead of trucks
and highway.
“Today, Farm Credit Canada and credit
unions have helped provide competition
to banks. Farmers now have highway
trucks and can haul long distance—that
has helped some with transportation
competition, and brought some more
competition between grain companies.
Today, with Internet, smartphones and
better price information, farmers are
better educated and informed. With
large, modern trucks they can now carry
their grain long distances within Canada,
or to the U.S. markets, for example, if
needed.
“So as long as government can ensure
sufficient competition and efficiency
in the grain industry, there is less need
for co-operatives to arise and provide
competition and countervailing power.”
From a farmer perspective, Kent
Erickson, who farms at Irma, AB, said the
key element for him in grain company
ownership is having a competitive
industry.
“Whether it is a publicly traded
company or a co-operative, what I want
to see as a farmer is more competition
in the industry,” Erickson said. “I think
farmers get concerned when they see a
concentration of company outlets, with
reduced choice or options. We want
to see an industry where the company
assets are spread out so a producer
does have a choice. More competition
is healthy.”
Erickson said the concept of a
farmer-owned co-operative returning
to the grain handling industry has
potential, although he isn’t sure if a new
co-operative can manage the financing
to be a player today.
“It might be easier today to manage
a co-operative simply because there
aren’t as many small farms as there
was years ago,” Erickson said. “A
co-operative needs to serve all size of
farms—I consider my own as a small to
medium-size operation—but it might
be simpler today simply because there
aren’t as many farmers. I believe there
is also much more business sense
out there today to better manage
co-operatives. I can see potential for
20 to 30 farmers to form a co-operative
to operate a particular facility, but if
the group is buying assets from a large
company, that company may not be
interested in selling individual locations,
so then it becomes a challenge to raise
the capital for a larger investment.”
“So as long as government
can ensure sufficient
competition and
efficiency in the grain
industry, there is less need
for co-operatives to arise
and provide competition
and countervailing
power.”
–Milton Boyd
