Agricultural co-operatives have deep roots in Saskatchewan. Since the early part of the twentieth century, farmers have used the co-operative model to organize agricultural activities. The last two decades, however, have seen significant changes in agricultural co-ops, including the disappearance of the Saskatchewan Wheat Pool, once the largest agricultural co-op in Canada. While research has focused on the failure of the large co-ops, little attention has been directed to smaller agricultural co-ops and the environment in which they operate.
Recent research at the Centre for the Study of Co-operative shows that the number of agricultural co-ops in Saskatchewan has fallen from 307 in 2001 to 178 in 2015, a decline of 42 percent. Why has this occurred?
To understand this change, we need to examine the complexities around the entry and exit rate of co-ops. In a given year, co-ops are categorized as entrants, incumbents, and exits. For our purposes, we will focus only on entrants and exits. Entrants are active in the current year but not in the previous year; exits are active in the previous year but not in the current year. The entry rate is the number of entrants divided by the number of active co-ops; the exit rate is the number of exits divided by the number of active co-ops. Active co-ops are defined as the number of active co-ops in the previous year, plus entrants, minus exits.
Figure 1 (below) presents the entry and exit rates of agricultural co-ops in Saskatchewan from 2001 to 2015. With the exit rate higher than the entry rate (the only exception is 2001), the number of co-ops is clearly declining. In addition, despite considerable year-to-year fluctuation, the exit rate has been rising over time (particularly since 2009), while the entry rate has been mainly falling. Further, the number of co-ops is not only declining; the decline is accelerating.
Figure 1: Entry and exit rates of agricultural co-ops in Saskatchewan, 2001 to 2015; Source: Information Services Corporation
Co-op entries and exits may well reflect something going on in the agricultural economy. To see if this is the case, we need to examine the entry and exit rates of other forms of agricultural businesses. This is shown in Figure 2 (below). The numbers include co-ops, which make up less than 5 percent of the total. As can be seen, the entry rate for all forms of agricultural businesses has been constant, while the exit rate has been declining, at least since 2004.
Figure 2: Entry and exit rates of all forms of agricultural businesses in Saskatchewan, 2001 to 2014; Source: Statistics Canada, calculation based on the Longitudinal Employment Analysis Program, 2001 to 2014
The data presented above indicate that the behaviour of agricultural co-ops is different from that of other agricultural businesses. Why is this the case?
In The Future of Canadian Agricultural Co-operatives: A Property Rights Approach (1995), Fulton identified two challenges to co-operatives. One of these was the industrialization of agriculture and its focus on longer and more vertically integrated supply chains, more highly differentiated products, and a greater focus on quality. The other was a change in farmers’ views regarding co-operation. Fulton argued that the increasing industrialization of agriculture would leave less room for co-operatives as the preferred organizational structure, while the increasing individualism of farmers would result in reduced member commitment and an increased attention to obtaining the best prices for inputs and outputs.
What is behind the decline of new co-ops in Saskatchewan’s agricultural sector? Why has the exit rate for co-ops increased? Is it due to the industrialization of agriculture? Is there a shift in farmer philosophy, and does it play a role in shifting values? Has the shift in values increased over the last twenty years? We’d like to hear from you. Let us know what you think.
Yawen Luo has been the research co-ordinator at the Centre for the Study of Co-operatives for the past year. She is beginning the PhD program at the Johnson Shoyama Graduate School of Public Policy this fall and will continue as a research assistant at the Centre.
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