For the last century dairy farmers have successfully joined together for mutual benefit and, as a result, that joining has facilitated very significant improvement in all aspects of dairying. However, whether today’s farmer cooperatives recognize or admit it, working together in dairying in the form of cooperatives, associations, societies and alliances is currently under challenge. Challenges, especially on value-added and effectiveness will come from competitors offering enhanced, expanded and linked services for dairy farms. Tomorrow’s farms will list quite different priorities in services needed. These different priorities and the rapidly changing dairy economy mean that cooperatives will need to adjust their services in order to stay relevant.
This Bullvine article is a call-to-action for farmer cooperative organizations to address the future and to work with other organizations for the benefit of farms and members. Cooperatives that primarily focus on their organization’s past success will be recorded in the history books as a tool no longer used.
Is Your Organizations Involved?
Every organization that has a dairy producer board of directors that sets policy provides direction oversees finances and serves dairy farms is subject to the challenges. Farmer organizations were established when there were seven to ten times more farms than those currently shipping milk. Most cooperatives started as a specific service or as regional groups. Over time they have grown the size of the areas serviced but have not necessarily expanded the scope and effectiveness of the services provided.
Tomorrow’s dairy farmers need their cooperatives to remove duplication, eliminate ineffective programs and to increase the effectiveness of services retained. Often cooperatives are slow to critically evaluate and improve or eliminate member services.
These challenges must be addressed by all cooperatives – breeds, herd/milk recording, artificial insemination, milk and genetic marketing, input buying groups, milk transport, farm supplies, data/genetic analysis and any other cooperative seeking to a share of time and money from dairy farms.
Is Your Cooperative Ahead of the Challenges or Falling Behind?
We are talking about CHANGE. Dairy farming is no longer characterized by labour-intensive, stand-alone enterprises with less than 100 cows. Today’s dairies and those that survive into the future will be specialized in scope and programs. Narrow margins mean that farms and their service organizations must focus on increased efficiency and effectiveness. In general, consumers want cheap food of high quality. For processors and stores that means listening to and not telling customers what they will get and what they will pay. Consumers will set the standards and the products. Tomorrow’s new consumers will live in Africa and Asia, as that is where population growth will occur.
Farmer cooperatives once had a single focus and ‘life was fine’. Breeds registered animals and may have assisted with animal marketing. DHI’s milk recorded the cows and details to manage by. A.I. sampled bulls and inseminated females. Milk marketing cooperatives bargained for price. Data centres analyzed and reported. In the past, farmer cooperatives provided most of the services needed on-farm except for animal health, equipment and financial services. In improvement cooperatives, the technology was not advanced. Reasonably priced labour accounted for 60-70% of total costs. Travel was relatively inexpensive, and farms were not demanding in the scope of information they wanted to know. (Read about future data needs at Owner Collected Data: The Future of the Dairy Industry’) Government services filled in where cooperatives did not provide.
Yesterday Is Gone
But that was yesterday and yesterday is gone! The technical and legal reasons as to why cooperatives were started no longer exist. Tomorrow’s farms will buy and use services based on value-added and/or cost-benefit.
The Changing Scope of Tomorrow’s Services
Dairy farms will require an extensive array of linked services all the way from inputs to the point of sale of product. In some cases, farms will be very large and will be vertically integrated from the soil to the consumer.
Overall, farm performance and profit will be more important than purity and individual animal performance. Services will cover all animals on the far, not just milking cows. Feed conversion, animal health and welfare and future consumer product buying decisions will be added to selection and improvement programs. Technology will replace labour and will greatly enhance decision making. Specific nutrients in feed will be integral to feeding regimes. In total, dairy farming will be all-encompassing, and the services used on-farm will be markedly different. So will the sources that win the privilege of providing what is needed.
Private Companies Will Take on Whatever Services Cooperatives Ignore
Where once farmer cooperatives were the primary providers of service, private providers have filled in when farmer needs expanded, and services became more sophisticated. A need was seen and answered.
Private or Cooperatives – Improvement Will Occur
On-farm improvement, profit and success will take place no matter whether the service provider is a cooperative or a private company. Current cooperatives that have stood still and not increased scope or benefits to their services will be left behind.
What are Progressive Cooperatives Doing?
Progressive cooperatives have expanded their scope of services or joined forces with other cooperatives or private companies to provide a more complete scope of services. A.I. organizations have done extensive combining and expanding over the past fifty years. Breed societies have been the sector most determined not to join with others. With herd recording falling in between the other two.
The need to combine is not new to 2019. Cooperatives have been joining and expanding services for quite some time. The global list is long – LIC (NZ), Select Sires (US), CRV (NL & BE), Semex (CA), Viking Genetics (Scandinavia), Milk Marketing Board (UK, later disbanded by the government), Fonterra (Oceania), … and many more.
Recent examples of combining/aligning include URUS (US cooperative CRI and NL private Koepon Holdings); and Lactanet (effective June 01, CDN, Valacta and CanWest DHI will be combined in CA).
At present, there are farmer boards or trade associations planning their futures where they may be part of a combined or aligned organization.
Is it too Late for Some Cooperatives?
Yes, the time is up for farmer cooperatives which are standing still on providing and implementing value-added services. Other organizations, some of them global, are expanding to compete with the services that the standstill cooperatives have provided.
Many services are going private company or global. Where once farmers felt it necessary that their country have its own national cooperative services. It won’t be long until there are discussions on having an international animal registry, herd recording and genetic evaluation services? Already there are proprietary company genetic indexes.
Is Your Cooperative Ready for Vertical Integration?
In the future, vertically integrated farming companies will provide all their own on-farm services and may outsource for new progressive value-added services.
The Bullvine Bottom Line
The tradition of farmer cooperatives has been to stick with their tried and true limited scope of services. For them, change or die is written on the wall. Their choices include: immediately provide much more value to users; combine with partners to save costs and add value; or close the doors and save their members the expense.
By the time farmers discontinue the use of their cooperative’s services, it will be too late for those organizations to be able to take items of value to another organization.
Dairy farmers wanting to see their farmer-owned cooperatives continue need to stop being silent and demand dynamic progressive action by their leaders.
No matter the outcome on who provides on-farm services, the positive outcome is that dairy farms will be well served in the future.
