When a Co-op is no longer a Co-op

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By Dwain Duxson

When a Co-op is no longer a Co-op -- I've been thinking about business models in Ag and how some a brilliant and work a treat and others never see the light of day. The Co-op is a model used over time to bring Farmers together to either buy goods in numbers or sell goods in numbers. 

So why don't we see many Co-op's these days? My theory is that they don't really work, especially in a broadacre Cropping situation. Most Co-op's start when a group of Farmer's gather to do something together. They then recruit paying members, and then those members have to commit to either buying or selling through the Co-op for it to work. 

Farmer's are very independent and run their businesses accordingly. And what happens is, the Co-op puts a price out for Fertiliser, but over there, the price is cheaper. The Farmer feels obliged to the Co-op because they are paying members, but human nature takes over, and they buy the cheaper Fertiliser. Already the Co-op's model is starting to break. 

Some Dairy ones have been successful, but the dynamics are different. Croppers buy Fertiliser a couple of times a year, whereas a Dairy Farmer Milks every day, so they become sticky members, and then the Co-op survives. Co-op's require a level of commitment, and if the members opt-in and out when it suits them, then the Co-op is no longer a Co-op. 

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