Deer and elk farmers are currently facing many challenges, with more on the horizon as we look towards the new millennium.
The downturn in the velvet antler markets brought on by the Asian financial crisis, and the softening of prices for breeding stock,are but two issues impacting the industry. However, we must remember that change creates new opportunities as well. Change has resulted in the need and the desire for the development of new markets for our products, and marketing of our products in innovative ways.
Agriculture has undergone a major transformation in recent years. The farming community is experiencing vertical integration as the ownership, control of production, and processing becomes centralized into few hands.
Historically, cooperatives were developed as a response to individual power in the marketplace. In essence, coops empower farmers, and give them more control over the products they produce.
Conditions in the north-central United States have resulted in a significant wave of development and expansion of cooperative enterprises. This “cooperative revival” has attracted attention from across North America. The term “New Generation
Cooperative” has been applied to dozens of cooperatives that have emerged in this region of the USA in recent years. They have helped improve rural economies and incomes of their producer members. One of the best and most applicable examples is the North American Bison Cooperative (http://www.nabisoncoop.com) that operates in North Dakota, USA. Deer and elk farmers would be wise to take notice of what bison producers have accomplished in the last few years, in terms of stabilizing the prices they receive for the animals they produce.
New Generation Cooperatives are significantly different from the more traditional consumer cooperatives that most farmers know. For example, consumer co-operatives buy goods in bulk and sell them at competitive prices. Examples are retail coops, direct charge coops, and buyers’ clubs.
New Generation Coops share many of the key attributes of these traditional cooperatives including:
1. Democratic control, based on one-member, one-vote.
2. A board of directors elected by the members of the cooperative.
3. Distribution of earnings based on sales by the cooperative.
There are three important ways in which New Generation Coops differ from traditional ones:
1. A tied-contract that stipulates both delivery rights and obligations.
2. Membership exclusively limited to those who purchase delivery rights.
3. Higher levels of equity investment by individual members.
New Generation Cooperatives issue shares that are purchased by individual producers, allowing membership and participation in the cooperative. Each share is a tied-contract between the member and the cooperative. Shares are sold to allocate delivery rights/obligations among the members and to generate capital for the cooperative. Shares give a member the right and obligation to deliver one unit of product to the cooperative (e.g., 100 bushels of durum wheat or 1 bison).
Ideally, the total delivery rights available should equal the total capacity of the cooperative. If the producer is incapable or unwilling to meet the delivery obligations, the cooperative reserves the right to purchase the required amount of raw product (in this case animals) and to charge the cost to the individual producer who did not fulfill his obligations. This ensures a dependable supply of product necessary to establish new markets or an industry.
New Generation Coops have typically raised between 30% to 50% of total capital necessary through the sale of shares tied to delivery rights. The total number of members will be restricted by the availability of shares/delivery rights. The price tag of each share is established by dividing the total amount of equity capital the coop wishes to raise by the number of shares issued.
This level of equity is a notable deviation from traditional cooperatives, which generally need only minimal capital contributions by their membership. The higher equity level generated by the New Generation Cooperatives minimizes dependency on traditional debt financing and can contribute to the project’s viability. It is important to point out that members are not obligated to hold equal numbers of shares and delivery rights. The Cooperative may issue other classes of shares or debentures that are not linked to delivery rights.
New Generation Cooperatives hold a great deal of potential for marketing deer and elk products. The producers can control their own destiny, instead of depending on middle men to purchase, process and distribute deer/elk products. Producers benefit from a market in which they have a major role in helping to develop. As an industry, we need to move forward on this concept.
