CoBank: Changes Afoot For Farm Supply Cooperatives
According to a new report from CoBank’s Knowledge Exchange, the business model for farm supply co-ops has been threatened by challenging fundamentals, disruptive forces and increased competition. It notes reduced input spending by farmers, mergers among cooperatives, and consolidation in suppliers as additional factors creating change.
Those forces could add up to a catalyst for co-ops to embrace a new business model, particularly strategic partnerships that embrace technologies and enhanced advice and service.
"The farm supply space remains dynamic and cooperatives have several tools to strengthen their operating model,” Kenneth Scott Zuckerberg, lead economist, grain and farm supply, at CoBank, said in a news release. “Beyond pursuing internal operational excellence, co-ops are uniquely positioned to help guide the digital transformation of agriculture.”
Three tactical ideas shared in the report include:
- Pursue the “low hanging fruit” with initiatives to improve general operational excellence and efficiency.
- Align with a strategic partner(s), such as a local or regional competitor.
- Partner with an aerial imagery or robotics company
The report notes how farm supply co-ops are uniquely positioned to help guide the digital transformation of agriculture.
The current trends give a very good reason for co-ops to re-evaluate their business model and seek out new strategic opportunities. CoBank sees the likely outcome that farmers will embrace changes to the business that add service capabilities.
As a starting point, CoBank provides the table below, which applies Porter’s Five Competitive Forces model to farm supply co-ops as an analytical tool:
You can read the full report from CoBank here.
