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Grain and Oilseed cooperatives need to change in order to meet the challenges ahead.

In the medium to long term, European grain and oilseed (G&O) cooperatives will need to increase scale and control costs. This change is needed in order to meet the challenges and opportunities ahead.

Strong role

Cooperatives have historically played a strong role in the European G&O industry. They have been very active over the past two decades. A number of transactions have positioned them at the top. However, according to a recent Rabobank report, they will need to go through key changes in order to keep performing.

Challenges

In the next decade, there will be a number of challenges that are likely to impact not only how farmers operate, but also how they purchase inputs and produce outputs. This, in turn, will impact the G&O cooperatives.

“The EU’s Farm-to-Fork Strategy and Green Deal will pose challenges, but also weather and climate volatility will have an effect on G&O yields and, consequently, on harvest volumes. The growing competition and pressure in the supply chain will force cooperatives to take new and/or stronger strategic directions,” explains Vito Martielli, Senior Analyst – Grains & Oilseeds at Rabobank.

Succes

Changes will be needed in order to capture the opportunities that lie ahead, states Martielli. Opportunities such as the growing potential for grain exports to Africa, which will increase trade volumes to new destination markets. Furthermore he points to the long-term growth in demand for malt and the rising demand for G&O as an ingredient for alternative proteins.

Mergers

Rabobank’s financial analysis shows that cooperatives are often highly leveraged and do not generate sufficient cash flow to execute major transactions, like large acquisitions. “Mergers are one likely option that allows cooperatives to grow in size. For example by continuing the consolidation process without necessarily taking on more debt. At the same time, this process realizes synergy by cutting costs as well as investing in digitalization and sustainability,” says Martielli.

In order to overcome financial challenges, cooperatives will need to find ways to open up to external investors, but this will, in some cases, require a change in their legal structure.

Modernize

Finally, the Rabobank report highlights that most cooperatives will need to further modernize their governance structures. “They can do this by introducing member councils in order to streamline the decision-making process and by increasing gender inclusion and the number of professionals who can help to set new strategic directions, improve digitalization, and/or implement organizational changes in the supply chain,” concludes Martielli.

Also read: Asia and Africa lead demand in grain and oilseeds

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