By Eddie Oczkowski, Associate Professor in Economics and Quantitative Methods, School of Management, Charles Sturt University, Wagga Wagga, and Co-Director of ACCORD

It is reasonably clear that given the structural changes emerging from the effects of globalisation on the agricultural food sector, traditional co-operatives are finding it difficult to survive. The need to generate additional capital to expand and compete in a more competitive global environment has led some traditional co-operatives to modify their organisational form. Recent examples of moves toward demutualisation by some Australian agricultural co-operatives, include, Warrnambool Cheese and Butter and Dairy Farmers.

Given this context it is important to consider the types of new agricultural co-operative forms emerging around the world. Fabio Chaddad and Michael Cook (Review of Agricultural Economics, 2004, vol 26, pp348-360) have recently published an examination of emerging new co-operative forms and provide a useful typology from an ownership rights perspective.

Based on a series of case studies, Chaddad and Cook have developed a typology of six co-operative forms. The description of these forms below, starts with the traditional form and then outlines modification to this form as we progress toward characteristics of the investor owned form.

Traditional Co-operatives
Member patrons only; residual return rights are non-transferable, non-appreciable but redeemable; benefits distributed according to patronage; non-proportional member investment.

Proportional Investment Co-operatives
Members invest in proportion to patronage

Member Investor Co-operatives
Benefits are distributed according to member investment.

New Generation Co-operatives
Rights are tradable and appreciable and patronage and investment are aligned.

Co-operatives with Capital Seeking Entities
Ownership rights are no longer restricted to members. Outside equity is acquired by a separate legal entity.

Investor-Share Co-operatives
Separate classes of shares are issued. Investors receive additional ownership rights over and above traditional co-operative rights.

Chaddad and Cook list numerous examples of these new emerging forms operating world-wide, including Australia. Australian examples include:

Australian Member Investor Co-operatives
The use of co-operative capital units (CCUs) by the Walgett Special One Grain Co-operative. The use of redeemable preference shares by Tatura Milk.

Australian Co-operatives with Capital Seeking Entities
The Dairy Farmers Group recent split into a traditional co-operative and a publicly listed subsidiary.

Australian Investor-Share Co-operatives
The public listing of non-voting shares while maintaining voting shares in the hands of members exists for the Australian Agricultural Co. and AWB Ltd.

In summary, the impact of restructuring across the agricultural sector has brought many challenges to the traditional co-operative. In response to these challenges the need to seek substantial levels of additional capital has lead to the emergence of new co-operative forms. These forms still maintain some vestiges of the traditional form and present operational viable alternatives to full demutualisation and conversion to the investor owned form.