Farming Co-op Planting New Ideas for Sector
26 April 2017 at 8:40 am
The future of organic farming could be cooperative with a new organisation ORICo-op entering the space to shake things up, writes Wendy Williams in this week’s Spotlight on Social Enterprise.
Everyday Australians are being given a chance to invest in organic and ecological farms across Australia with a new organisation poised to turn the cooperative industry on its head.
The Organic & Regenerative Investment Co-operative (ORICo-op), which launched this month via a membership drive and Pozible crowdfunding campaign, is the first of its kind in Australia.
It aims to provide a vehicle for companies and people to invest directly in successful organic farms and businesses and allow aspiring farmers to get farming without needing millions of dollars.
ORICo-op founder and director Carolyn Suggate told Pro Bono News the co-op will be a model for other groups, and will help farmers with their succession planning over the long term.
“Our intention is for organic farms to be preserved and to be held in perpetuity. Investors and farm managers can come and go, but the entity is secured for longevity, with Australian ownership and long-term benefit,” Suggate says.
“One of the biggest factors in organics is about preservation and restoration rather than profit extraction and so that’s why a co-op structure is more suitable.
“For retiring farmers it is a structure to allow them to step back and leave equity and invest into a cooperative structure, that offers them a secure exit in a timely manner.
“Their children can lease the farm from the co-op, but if something happens on either end of that arrangement, both the investors and the managers are protected through the mechanism of the co-op. It means people can step back and young farmers can get in without massive risk from either side.”
She says she was motivated to learn about new ways of doing business to limit the land being sold to foreign investors.
“I can see, coming from a farming background, the way that farming is at the moment, if we don’t fix it we are going to sell a huge amount of our land to overseas investors and for me I don’t want to see that happen in my lifetime,” she says.
“I’ve actually participated in that and I’ve been part of that and one of the reasons I actually left the industry was I don’t want the majority of our land owned by foreign investors.
“I think this mechanism enables them to invest but it doesn’t give the control of the asset to the investors, that’s the difference. We absolutely value and welcome their investment but it doesn’t mean that they own 80 per cent of an asset and they can just flick it off and sell it back to their own governments.”
According to the founders of ORICo-op, the organic sector is currently experiencing exponential growth but is stifled by lack of security, supply and investment.
They say investors are keen to be involved in the sector, but given it’s lack of scale and data capacity, this has been limited… until now.
Suggate says she spent five years exploring different ways of looking after financial returns at the same time as looking after the land.
“I was very disillusioned and still am, with how superfunds are not investing into agriculture and they’re basically about extracting profit and return, and I guess I believe that Australian money should be investing into the land that is feeding our country,” she says.
“So I come from quite a deep place in that sort of way and I have spent five years exploring different ways that we could achieve a number of different parameters about food security, about land security and also about fair return for investment. Because investors need to be able to get a return, but how much control should investors have versus the actual security and longevity of the land.
“I guess I have done a full circle in terms of looking at setting up a fund and looking at the whole investment world and going, I actually don’t think that that is the right model because that actually does not enable the landholders to have much right or much say, as you can see from those examples where they pull the trigger and suddenly they are liquidating assets that were meant to be 20 year assets.”
She says their model is unique in promoting a horizontal type of management.
“The cooperative industry in Australia has been around a very long time and there are some really good examples and unfortunately like with anything, there has been some really bad examples as well,” she says.
“And so we obviously want to create a model that is about collaboration and about member engagement and really horizontal types of management rather than demutualising and selling off a portion of it, being taken over, which is what a lot of people reflect when they think of cooperatives.”
Suggate says it has been challenging to get people’s heads around how it works.
“We’ve got some really good tech people working on a website that is going to go live [in a few days] that really will help people to understand that we want them as members to be part of our journey and it is not like: ‘Come and invest us and let us manage all your money.’ It is: ‘Come and be part of what we’re doing and actually contribute to what you think we should be looking at and investing in’,” she says.
“So some of our members for example can bring investment proposals to the cooperative and say: ‘We live in this community, this region has got this farm which is going to go on the market, can we look at that?’ And that is totally possible for it to happen this way.
“For some people the process is really new. So for some of our farming members, I must say it is a bit of a learning curve for them because they’re not used to communicating in that kind of way.
“I guess we’re not like a normal cooperative in that we’re not in one town. We’re actually all over Australia, so we’re having to overcome some of those barriers in the sense of, I don’t sit in the cafe with you and talk to you, I actually just have to see what you write online and then respond to that in that way.”
She says the co-op has already attracted a good mix of members from “hardcore farmers to passionate organic people who want to be able to buy organic food more readily”, to people interested in the cooperative model.
“Anyone is welcome to become a member, and by becoming a member you actually become one of the participants of our learning journey,” she says.
“And the cooperative side of things, is for me really exciting because it is actually helping people to understand and we become a model for others to be able to emulate what we’re doing.
“So we’re really keen to be able to share our journey so that others can actually set up their own reflection of ours to be able to facilitate investment into areas that really need it and they don’t just need money dumped in it, they need people to be engaged and really direct it.
“It is directed by the people. That’s what this is about. It is about where do we need to put investment into the organic industry that is going to make a good difference but is really going to be impactful and it is going to help education and collaboration among communities in regional areas.
“You can’t just go and buy a massive beef farm in the middle of outback Queensland and think that that is going to make a big difference in terms of the community in Sydney or Melbourne who don’t have enough organic food right now.”
Suggate says the cooperative has the capacity to scale to any height.
“Our initial starting point is we are hoping to raise $5 million to $10 million for our first few farms, so we have got around three farms that we would like to secure to basically create and demonstrate the model, and then the cooperative actually has the capacity to scale to any height from there,” she says.
“I fully expect it to be around the $50 million within a two year period. And so suddenly it becomes a really substantial entity that has all different types of farms, all managed by individuals.
“We don’t manage the farms, we just lease them to experienced farm managers and also, research facilities and organic businesses. There is a whole myriad of different sorts of investments that we’re looking at and what that does is create a really stable supply and it enables people to be part of a learning journey throughout that supply chain, so they are not just a farmer, they actually become the processor and the retailer and the marketer as well.”
Suggate says the Pozible campaign, which is aiming to raise $19,000 to go towards web development, investment analysis, marketing and consultants, is their “soft launch”.
“So we want to launch with specific investment opportunities for our members and for wholesale investors. So the Pozible campaign is a way that people can become part of it,” she says.
“We’ve got a membership launch in the middle of May and so that will be a way that people can actually sit in the room and meet each other and network and understand our board.
“I just think it is a really new concept and so we are taking it not slowly, but really steady so people can get their heads around that this is a new way to do business. Not just from a management perspective but even from the type of investment we are looking for and the way that that return is reflected to our investors.
“It is about a capped return and then we’ve also got a carbon component and we’ve got the social component and the energy component. So we’ve actually got different ways of measuring return on investment, it is not just about the financial return and that just all takes education and lots of it.”
She says they are turning the cooperative industry on its head.
“We’ve had incredible support from our legal experts and people who have helped us on our journey, a lot through the Farming Together program, so that has been an incredible merit to us. But some of the lawyers in there have basically said we are turning the cooperative industry on its head because what we’re doing is actually moving away from the vertical model and saying we’re actually achieving a horizontal model,” she says.
“A lot of cooperatives are structured with a board and a CEO and the members are just kind of stuccoed there and they don’t actually have a lot of influence in terms of the actual cooperative which is not how they were meant to be structured in the beginning.
“If you look at Mondragon, and some of the really good cooperatives around the world they are very different to how cooperatives generally are structured in Australia… [which] started based on the farmers needs but then they become about the big part of business and the big end of town and I guess, we are really striving to create a different kind of model.
“The CCU (Co-operative Capital Unit) enable that to occur. They enable that engagement of investment with membership so suddenly your members are able to actively invest directly, rather than via the stock exchange which creates a whole world market, [where] the world market drops and suddenly the membership and the reason that it was actually formed in the first place is forgotten because of the risk of the world market.
“I understand there are seven cooperatives in Australia that have got CCUs as part of their constitution but very few of them are using it to raise ongoing capital. They might do like a fundraiser but then they’ll stop and that is all they’ll do. What we’re looking at doing is actually offering ongoing opportunities of different investment assets and that’s all done through the CCU offerings, very much like Community Shares in the UK.”
She says their journey includes a lot of firsts.
“We are creating an investment industry that has never been done before, we’re talking about an investment proposal that’s never been done before, and we’re working with people who have never been part of this kind of entity before. So in every way we are being pioneers,” she says.
“But I think at the same time, some of our board members are so, so passionate about it and I guess our philosophy is that will be it’s own filter. And it really is because we are saying, we’re not about profit extraction. In agriculture a lot of it is about profit extraction and ultimate selfish interest where you buy land, you take out the profit and then you leave.
“What we’re saying is we’re actually looking at holding land in perpetuity and taking a fair financial return out of that but we’re actually wanting to reinvest to build the carbon, to build the biodiversity and to build long-term security in those farms so they are not about flicking them off and extracting profit in 20 years time.
“It is a whole different way of understanding but when you explain that to people it almost is a divider in the road because people either understand that and go ‘I’m absolutely onboard’ or they say: ‘No I’m about 12 per cent return from agriculture and thank you very much I’m going to go to the other side of the room’. And there are those people I can tell you.”