Feature: New Generation Co-operative Profile

New Generation Co-operatives

Purpose: To add value to producer goods through the joint processing of raw commodities.
Members: The producers who purchase shares obligating them to deliver a specified volume of raw product to the processing facility.

The name New Generation Co-operative (NGC) refers to a type of processing co-operative which uses a particular form of marketing agreement to raise the large sums of capital required to invest in value-added processing activities. As in any co-operative, to be a member of an NGC a producer must purchase shares in the business. However, the financial structure of an NGC is based on equity shares which are tied to the right and obligation to deliver a certain amount of raw product to the processing plant.

The equity shares used by NGCs not only provide the co-op with needed capital, but also commit the producer to delivering a specified volume of raw product to the plant. In turn, the co-op is committed to accepting the delivered product, as long as it meets certain pre-established quality standards. As with other contractual agreements, contingencies are incorporated to account for unusual occurrences, such as crop failure. With fixed supply commitments and quality controls in place, the co-operative can run its processing facilities efficiently, producing and developing markets for high-quality end products.

The number of shares available in an NGC is limited according to the capacity of the processing plant. Once the plant is operating at maximum capacity, shares can be traded among members pending board approval. The price at which the shares are traded reflects the benefits members expect to receive from the co-operative over time. The benefits to members include a guaranteed market for a portion or all of their production and the potential to share in the earnings generated by the co-op's processing operations.

Upon delivery of raw product to the processing facility, the members of NGCs typically receive a predetermined portion of the market price. This initial payment is followed by a second payment at the end of the co-op's operating cycle. The second payment represents the members' share, based on the volume of product delivered, of the returns received from the sale of the final processed product by the co-operative. To date, no New Generation Co-operatives have been formed in British Columbia. However, the success of many NGCs in the upper mid-western United States has generated substantial interest in this type of co-operative as a model for the development of agri-based processing facilities in western Canada.

New Generation Co-operative Profile

The North American Bison Cooperative is a New Generation Co-operative which buys and processes bison produced by its member-owners and then markets fresh and processed bison meat into European and upscale domestic restaurant markets. The shared challenges which led to the formation of the co-op included the need for product and market development, a lack of processing facilities and marketing channels, and the absence of grading standards. The $1.6 million processing plant built by the co-operative was financed through the sale of shares tied to delivery rights. Each share sold entitles the owner and member of the co-op to deliver one bison per year for slaughter to the facility. A total of 5,000 delivery shares were issued corresponding to the 5,000 head processing capacity of the plant. Current membership in the co-operative covers fourteen states and four Canadian provinces. Out of the 250 members, 60 are western Canadian ranchers.

Source: New Generation Co-operatives: Revitalizing Rural Communities. Centre for the Study of Co-operatives University of Saskatchewan, Saskatoon.