The Role and Significance of Cooperatives in New Zealand Agriculture: A Comparative Institutional Analysis
Report prepared for the New Zealand Ministry of Agriculture and Forestry by Lewis Evans and Richard Meade, New Zealand Institute for the Study of Competition and Regulation
December 2005
Contents
1.1 Purpose of the Report
1.2 Agricultural Sub-Sectors Considered
1.3 Cooperative Definition
1.4 Analytical Framework
1.5 Public Policy Questions
1.6 Structure of the Report
1.7 Main Findings
2.1 Cooperative Principles
2.2 Functional Definitions
2.3 Comparative Legal Definitions
2.4 Features and Criticisms of Traditional Cooperatives
2.5 The New Generation Cooperative (NGC)
2.6 A Cooperative Typology
2.7 Cooperatives in New Zealand Agriculture
2.8 Policy Implications
3.1 An Institutional Framework
3.2 Arguments for Cooperative Formation
3.3 Model of Cooperative Evolution
3.4 Contemporary Drivers of Cooperative Evolution
3.5 Policy Implications
4.1 Efficiency and Financial Performance
4.1.1 Studies based on Financial Ratios
4.1.2 Studies based on Economic Efficiency and Other Measures
4.1.3 Summary – Efficiency and Financial Performance
4.2 Competition and Competitiveness
4.2.1 Competitive Effects of Cooperatives in Mixed Industry Structures
4.2.2 Implications of Mixed Industry Structures for Procurement
4.2.3 International Competitiveness of Cooperatives
4.2.4 Summary – Competition and Competitiveness
4.3 Product Differentiation, Value-Added and Innovation
4.3.1 Product Differentiation
4.3.2 Value-Added and Quality Choice
4.3.3 Innovation
4.3.4 Summary – Product Differentiation, Value-Added and Innovation
4.4 Governance
4.4.1 Agency Cost Problems
4.4.2 Impact of Member Heterogeneity
4.4.3 Information, Adversity and Trust
4.4.4 Summary – Governance
4.5 Access to Capital, Investment, and Growth
4.5.1 Access to Capital
4.5.2 Investment
4.5.3 Growth, and Failure Risk
4.5.4 Summary – Access to Capital, Investment, and Growth
4.6 Cooperative Evolution
4.6.1 Nature and Incidence of Cooperative Reorganisations
4.6.2 Results of Cooperative Reorganisations
4.6.3 Drivers and Success Factors
4.6.4 Obstacles to Cooperative Evolution
4.6.5 Summary – Cooperative Evolution
4.7 Policy Implications
5.1 Background on New Zealand Agricultural Organisation
5.1.1 Cooperatives in the Late Nineteenth and Early Twentieth Centuries
5.1.2 The Development of Statutory Producer Boards
5.1.3 Transition to New Industry Structures
5.2 Dairy
5.2.1 Milk Processing
5.2.2 Downstream Processing
5.2.3 Other Industry Activities
5.2.4 Discussion
5.3 Beef, Lamb and Venison
5.4 Wool
5.5 Fishing and Aquaculture
5.6 Horticulture
5.6.1 Kiwifruit
5.6.2 Apples
5.7 Forestry
5.8 Rural Supplies
5.9 Fertiliser Production/Importation
5.10 Comparison with Other Sectors
5.10.1 Agricultural Cooperatives Overseas
5.10.2 Cooperatives in New Zealand Non-Agricultural Sectors
5.11 Summary
5.12 Policy Implications
Abbreviations
| AFL | Aotearoa Fisheries Limited |
| ASX | Australian Stock Exchange |
| BSE | Bovine spongiform encephalopathy, or “mad cow disease” |
| CAP | EU common agricultural policy |
| EU | European Union |
| FCB | Farmer-controlled business |
| FMA | Fisheries management area |
| FOB | Farmer-owned brand |
| GATT | General Agreement on Tariffs and Trade |
| GE | Genetic engineering |
| HEA | Horticulture Export Authority |
| ICA | International Co-operative Alliance |
| IFRS | International financial reporting standards |
| IOF | Investor-owned firm |
| IPS | Industrial and provident society |
| ISCR | New Zealand Institute for the Study of Competition and Regulation |
| ITQ | Individual transferable quota |
| MAF | New Zealand Ministry of Agriculture and Forestry |
| NGC | New-generation cooperative |
| NZAX | New Zealand Alternative Exchange, run by NZX |
| NZSX | New Zealand Stock Exchange, main listed share board run by NZX |
| NZCA | New Zealand Co-operatives Association |
| NZDB | New Zealand Dairy Board |
| NZX | New Zealand Exchange |
| PMO | Producer marketing organisation |
| TIMOS | Timber management organisations |
| TNC | Trans-national corporation |
| USDA | United States Department of Agriculture |
Exchange rates as at 30 September 2005:
1 NZD = 0.91 AUD = 0.57 EUR = 0.39 STG = 0.70 USD = 77 YEN
Acknowledgements
The authors gratefully acknowledge the support and assistance of MAF staff members in researching and preparing this report. Particular thanks go to Gillian Mangin and colleagues for assisting with the identification of cooperative players across New Zealand's various agricultural sub-sectors. Ali Harley and Marion Riddell of the MAF library, and Lynne Biggs, have provided invaluable assistance in identifying and locating source materials, sometimes obscure.
The authors wish to specially thank Ian Reid of the New Zealand Co-operatives Association (NZCA) for generously sharing with them his time and resources. Mick Calder and Phillip Porter also provided useful backgrounds on aspects of the structure of New Zealand's meat and wool industries.
Helpful comments on a draft of the report were received from Gillian Mangin, Dan Bolger and Garry Herrington of MAF, Ian Reid of NZCA, Eric Hansen of Fonterra, and Professor Gert van Dijk, Director General of the Dutch National Cooperative Council for agriculture and horticulture (NCR).
Last but not least, the authors thank Yinjia (Andrea) Lu and Rathy Manickaratnam for their invaluable research assistance. Any errors or omissions remain the responsibility of the authors.
Author Contacts
| Lewis Evans | New Zealand Institute for the Study of Competition and Regulation Victoria University of Wellington Email: lew.evans@vuw.ac.nz |
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| Richard Meade | New Zealand Institute for the Study of Competition and Regulation Victoria University of Wellington Cognitus Advisory Services Limited Email: richard.meade@cognitus.co.nz |
Important Notice
In preparing this report the authors have relied upon public information, and information provided by MAF, New Zealand Co-operatives Association, and others. No warranty or indemnity, express or implied, is given by the authors or their related institutions, to any party, as to the accuracy or completeness of this report, and no liability is accepted by the authors or their related institutions for any losses or damages incurred by any party relying on this report. The views expressed in this report should not be taken to represent those of the institutions to which the authors belong.
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