Co-ops need growth cash, says bank

The bank said in a research note that sourcing capital is on the agenda for almost every large agricultural co-operative. Photo / NZME.

Growing global market opportunities and the need to strengthen supply chains are creating a thirst for capital among agricultural co-operatives around the world, rural lending specialist Rabobank said.

The bank said in a research note that sourcing capital is on the agenda for almost every large agricultural co-operative.

With the food and agribusiness supply chain becoming increasingly complex and global, and with rising demand for food and agricultural production, the need for further expansion of productive capacity is clear, the report says.

Rabobank research director Hayley Moynihan said traditional sources of investment capital for cooperatives - their member base and modest debt facilities - may now no longer be enough to allow co-ops to fully participate in a dynamic global and local food and agribusiness market. She said agricultural co-operatives usually accrue capital from members over a long period.

Co-operatives' operating environment was also becoming more complex and the basis for competition was changing, she said.

"Obtaining capital from these sources alone will limit many co-operatives' ability to pursue ... opportunities and is unlikely to provide sufficient or timely funding at the current rate of change," she said.

"This is leaving co-operatives now in many cases facing a quandary of how to access sufficient capital to tap into the opportunities before them without compromising the co-operative business model."

External capital is alluring for cooperatives due to its accessibility and availability, the report says, but brings with it challenges for the co-operative model.

Strategic and financial investors typically want the capability to influence and control strategy and enjoy the benefits of ownership and full recourse in return for their risk-bearing capital.

For co-operatives though, retention of ownership and control strikes at the very core of co-operative enterprises and is usually non-negotiable, Moynihan said.