Senate boosts farm co-ops

An inquiry into the operation of co-operatives and mutuals in the Australian economy, including the farm sector was conducted by the Senate Economics References Committee over the past year.

It held three public hearings in Sydney, Melbourne and Canberra and published 60 public submissions with a final report handed down last month.

The report made 17 recommendations including demanding the Commonwealth government examine proposals to amend the Corporations Act 2001 to provide co-operative and mutual enterprises with a mechanism to enable access to a broader range of capital raising and investment opportunities.

Other recommendations focussed on expanding understanding and awareness of the role co-operatives and mutuals play in the economic landscape and to encourage their establishment and development, including better regulations.

The government was also urged to review and amend the eligibility criteria for grants and funds across all government grants and program guidelines to ensure co-operatives and mutual enterprises weren’t excluded due to their business structure.

Another recommendation called for support in the formalisation of innovative market-based approaches to raising capital for small and medium sized co-operative and mutual enterprises, in the form of advice and information.

The committee handed down a bipartisan report along with endorsement from Independent Senator Nick Xenophon who instigated the inquiry with Victorian Nationals senator Bridget McKenzie.

“The committee heard a consistent message from contributors that a cultural change is required in the financial trading and regulatory sectors in order to take full advantage of the co-operative model,” the report said.

“Sectors such as community health care or regional agriculture, where the mainstream market may not be able to service a community or provide the economy of scale required to compete nationally and internationally, are well suited to the model whereby community investment drives social enterprise to create sustainable business models.”

The report noted that the Agricultural Competitiveness White Paper committed $13.8 million over two years from 2015-16 for a pilot program to improve access for farmers to training and information about co-operatives, collective bargaining and innovative business models.

It said Rural Research and Development Corporations would be funded to develop and deliver the training packages and related materials.

Chair of the Business Council for Co-operatives and Mutuals Dr Andy Crane said the Committee’s report provided the necessary reforms to enable the sector to grow and compete in increasingly globalised markets.

He said the bipartisan support for the report was welcomed by the co-op and mutuals sector and the BCCM would engage with all political parties for implementation of its recommendations.

BCCM CEO Melina Morrison said the report was “just the start in levelling the playing field so co-ops and mutuals can deliver on their potential for Australia’s community and economy”.

“The federal government must act to implement these reforms because the sector needs action now in order to continue delivering economic returns to members, the economy and society,” she said.

In its inquiry submission, Norco dairy co-operative said Australia wasn’t yet taking full advantage of the co-operative model due to a lack of education and awareness.

“The Free Trade Agreement with China has been a welcome announcement by the Federal government and will potentially allow Australian processors to compete equally with other dairy exporting countries,” its submission said.

“However, it seems that many of Australia’s trading partners know the value of cooperatives better than Australia.

“The sector is not well understood in Australia, resulting in little or no educational content at secondary or tertiary levels.

“It is essential that we educate our young people regarding the benefits and opportunities that the co-operative, mutual and member-owned business model can achieve in Australia.”

A submission by WA grain handling giant CBH - which has been targeted for structural change to become publicly listed to help overcome perceived limitations with raising capital - highlighted supply chain advantages of the co-op model.

“CBH’s integrated business model (storage, handling, transportation, marketing and port operations) seeks to ensure grain growers have greater influence and control throughout each element of the chain, as well as providing the vital interface between growers and their customers,” it said.

Dean of Newcastle Business School Professor Morris Altman told the inquiry that the supply and purchasing co-operative was a model that assisted small farmers who can replicate the benefits afforded to larger producers by combining their purchasing power.

“This type of cooperative is quite important in agriculture where farmers establish a cooperative to obtain goods and services required for their business or for personal use at lower prices than would be possible if they go it alone,” he said.

“Thus farmers can take advantage of economies of scale and scope that are afforded to larger corporate farms.

Professor Altman said marketing co-operatives aligned the interests of producers with regards to marketing output to retailers or wholesalers and could also store, process, and package output prior to sale.

He said that allowed farmers to take advantage of economies of scale and scope in storage and production, increasing their net income over what it might otherwise be.

It also serves to increase the bargaining and marketing power of farmers, he said.

“In addition, a marketing cooperative can help stabilize farmers’ income through its inventory capacity, providing farmers with a relatively stable income as marketing prices fluctuate,” he said.