The View From Level 3

Irish dairy farmer’s scathing comments on NZ co-ops

Posted by Ramsey Margolis on 29 September 2009 | 0 Comments

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Writing in NZX AgriFax, Irish dairy farmer and Nuffield scholar Jason Rankin had strong words for what he found in New Zealand cooperatives:

“One of the major items on my agenda was to find out ways of releasing the value of the wealth of my own cooperative, which is barely expressed in the nominal shares… In the end I left New Zealand with a far different set of conclusions than I thought I would when I arrived.”

He continued, “I have to say that among the senior figures in the industry many have a mental image problem with being involved in a cooperative. A common attitude is ‘We are a co-op because we are owned by our suppliers/customers but in every other regard we operate like a PLC.’ They see cooperatives as being wimpish and socialist and somewhat running against the grain of the New Zealand free enterprise spirit.”

Could it be that what he has observed are cooperatives acting as profit-maximising entities with the stated aim of distributing profits to members as rebates?

Given that the members of most NZ co-ops are themselves profit-maximising entities, they may of course not see anything wrong with this.

However, the relationship between a cooperative and its members – its suppliers or its customers – and that of an investor-owned business and its suppliers and customers is quite different, Jason might argue.

Investor-owned businesses buy cheaply and sell dear, the difference supplying the profit that investors ultimately receive.

Cooperatives either buy dear and sell dear, or buy cheaply and sell cheaply with the intention of making a profit of course, but not maximising profits.

He concludes his article: “the real value of a dairy cooperative is to secure the best price it can for its members’ milk this year, next year and in ten/twenty years’ time…

“Allowing retiring farmers to take far more money out of Fonterra then they ever put in, while creating enormous hurdles for new entrants, is simply unethical. While it itself is only a few years old, Fonterra is a culmination of decades of hard work by generations of New Zealand dairy farmers.

“Perhaps we should think as they did and treat our cooperatives not as something we inherit from our fathers, but rather borrow from our children.”●

– from the October/November 2008 Cooperatives News