Implications for Agricultural Business

The variety of agricultural cooperative models and the many sectors in which they operate (including input distribution, collectors and traders, and processors) suggest that there are no simple way to present the questions that result from the trends highlighted above, but a few overall themes do emerge. In the following narrative we discuss five key questions that stakeholders should consider to be prepared for tomorrow's reality.

Can Agri Business Renew And Maintain Their Membership Base In Light Of Shifting Trends In Ownership?

The new generation of younger farmers with different profiles and ambitions, as well as the rise of new kinds of owners such as investors and governments, pose risks that coops must be ready to mitigate. As the interests of their members start to diverge, agri business need to focus on offerings that are relevant to each of their members' segments. They might begin by seeking to understand in more detail the segments to which their members belong, as well as finding the best way to design an offering that appeals to all of them. They might modify their investment approach to ensure that capital investment and returns had better reflect utilization and the risks taken by each member segment. They might consider eliminating cross subsidies between their smaller and larger members to reduce the chances that larger farmers might delay decision-making, as well as to ensure long-term alignment of interests and cohesion of membership. Finally, a service model that offers an alternative operating approach for farms looking to consolidate, could position the business effectively for the impending generational shift in ownership.

How can Agri Business Capture the Growth Opportunity in Emerging Markets?

Agricultural business are by nature regional entities. Agri business should consider whether they can benefit from increased links with emerging markets. Such a move might offer direct benefits to members through access to higher-value or unique markets for products, or a more diversified customer base. But to do so, they need a competitive edge that will distinguish them from the players already operating in these markets. They will need to carefully evaluate the value proposition of each model against the particular needs of the chosen emerging market.

Which Advanced Capabilities Could Agri Business Turn Into A Strategic Advantage?

Mastering new technologies will require new skills, as will the" financialization" of commodities trading. Agri businesses will need new abilities in financial risk management and advanced analytics in order to serve their members and remain relevant to the full spectrum of grower needs. They must determine how to optimally deliver value-added products and services better than traditional players, based on their unique relationships with and insights about their members. Should the agri business simply provide these services to members, or should it help members build these skills for themselves? Can they develop a significant competitive advantage and increase member loyalty? Alternatively, pre-empt competition by positioning themselves as a provider of these services.

How Can Agri Business Anticipate Shifts In Consumer Tastes?

In a consumer-driven environment, agriculture's stakeholders will need to continually monitor the market to understand changes and identify emerging trends. This will be particularly true for farmers, who require plenty of lead-time to adapt. Agri business and their members will need to become more consumer practical understanding and increase their interactions with end customers. Agri business should determine if they have sufficient market intelligence and analytical capabilities to anticipate shifts in customer preferences and value pools. If not. they might consider better collaborations with retailers or food processors. After that, questions arise, such as: How can agri business best leverage market information to add value to members? Could agri business better coordinate production patterns (timing, characteristics) to ensure all members meet quality requirements and are maximizing the value of their production? If not, should they consider new incentives or control mechanisms such as sharing production information among members? Should coops move downstream in the value chain to get better access to new markets, customer information, or control over processing quality?

How Can Agri Business Better Prepare Members For Regulatory Change?

Food surpluses in one region can address shortages in another, but many agriculture analysts agree that are vision of tariffs and quotas is critical to boost international trade. Deregulation is not straight forward, however, and support for it varies considerably from sector to sector and country to country. For instance, certain milk producing countries in Europe would likely oppose deregulation, which they believe would put their farmers at a disadvantage versus others. To help their members prepare for regulatory change, agri business should have a clear understanding of the international regulatory landscape and how changes would impact the competitive position of their members. They should determine if forums or lobbying efforts could help them play a more active role in shaping the regulatory agenda. They may also consider training programs to help members understand and prepare for impending regulations. Agri business could even go so far as to participate in the creation of standards and productivity reforms that will help position them against a new regulatory regime.

Summary

Several major structural forces will redefine the agricultural sector over the next decade. As they react and adjust, leaders of agriculture agri business should think about how the distinct characteristics of their organizations can help them gain a competitive advantage and better fulfil their mission in the long-term.