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Grain World Symposium March 2, 1999 - 2:15 p.m. The Lombard Hotel

New Generation Cooperatives. Grain World Symposium March 2, 1999 - 2:15 p.m. The Lombard Hotel. PRESENTERS. Dr. Brian T. Oleson, P.Ag. Professor, Department of Agricultural Economics & Farm Management, University of Manitoba Agribusiness Chair in Cooperatives and Group Marketing

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Grain World Symposium March 2, 1999 - 2:15 p.m. The Lombard Hotel

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  1. New Generation Cooperatives Grain World Symposium March 2, 1999 - 2:15 p.m. The Lombard Hotel

  2. PRESENTERS • Dr. Brian T. Oleson, P.Ag. • Professor, Department of Agricultural Economics & Farm Management, University of Manitoba • Agribusiness Chair in Cooperatives and Group Marketing • Kim Nesvig • Cooperative Development Specialist, Dakotas Cooperative Business Development Center • Project Manager, Heart of the Valley Cooperative • Thomas P. Dooley • Partner, Aikins, MacAulay & Thorvaldson, Barristers and Solicitors • Adjunct Professor, Department of Agricultural Economics & Farm Management, University of Manitoba • Dr. Murray Fulton, P.Ag. • Professor, Department of Agricultural Economics, University of Saskatchewan • Director, Centre for the Study of Cooperatives

  3. Rochdale/Manchester 1. Voluntary and Open Membership 2. Democratic Member Control 3. Member Economic Participation 4. Autonomy and Independence 5. Education, Training and Information 6. Cooperation Among Cooperatives 7. Concern for Community U.S.A. 1. User-owned 2. User-controlled 3. User-benefit What is a Cooperative?

  4. Similarities to Traditional Cooperatives • User-owned (but…) • User-controlled • democratic control, elected board • in most cases, “one member, one vote” • User-benefit • Distribution of earnings based on patronage

  5. Value-Added Focus High initial equity investment Closed cooperative Investment directly tied to use Distinguishing NGC Characteristics

  6. Why Producers Are Interested In NGCS • Capture processing profits • Market creation • Reduce variability of basis • Production-related niche (“first-mover”) • Job creation and other community benefits

  7. Capital Issues • NGCs overcome several capital issues: • Direct link between investment and patronage • Free-rider problems reduced • Transferable shares allow members to value expected returns and reduce horizon problem

  8. Examples of NGCs • Alfalfa/biomass • Aquaculture • Carrot processing • Bison slaughter and processing • Corn (ethanol, sweetener, oil) • Sugar beet processing

  9. Processing plant has assured supply Producers have an assured market for their products Producers can mobilize capital to respond to opportunities Producers capture share of processing returns Vertical integration is driven by producers Producers and processors become more committed to quality Benefits of NGC Formation

  10. Establish the need Product/Market Match Committed Supporters/Steering Committee (Project Champion) Seed money drive Feasibility Study Business Plan Establish the cooperative Equity Drive Implementation Key Steps in Establishing a NGC

  11. Identifying theProject Champion • Necessary qualities of the project champion: • Credibility • Financial Stability • Knowledge of the Industry • Play Dual Role of Leader & Servant • Ability to Develop, Not Promote

  12. Conducting the Feasibility Study examine critical opportunities and obstacles examine interest level for idea, market issues, operating costs, and availability of financing if insurmountable problems are revealed, project can be abandoned early Writing the Business Plan 2 purposes: provides a blueprint for development & operation of the facility provides supporting documentation to attract lenders and investors Includes: a complete description of the cooperative and those involved market analysis R & D related to the product marketing & sales plan complete financial data Study & Planning Stage

  13. Establishing the Cooperative • Draft Articles of Incorporation • describe the structure the cooperative • Draft By-Laws • describe how the cooperative will be governed • Apply for required licences and other government approvals

  14. The Equity Drive • Member equity commonly accounts for 35-50% of total start-up costs • Higher degree of member capitalization results in greater availability of outside financing from lenders • The cooperative will rely on a well-written business plan to attract the required equity investment • Why equity drives succeed or fail

  15. Closing Comments • Business Merit • Niche Markets • Project Champion • Outside Support

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