【Opinion】Reengineering member associations of agricultural cooperatives (Jan. 24, 2017)


[By Yoichi Tashiro, professor emeritus at Otsuma Women’s University]

Agricultural cooperatives are in the middle of eagerly designing and implementing their midterm three-year plan including reviewing their sales and procurement business, as well as the agriculture promotion plan and the self-reform plan. While the situation surrounding global agriculture is in turmoil along with Donald Trump becoming the president of the United States, the farm coops must tackle challenges of reform in order to live up to farmers’ expectations.

Meanwhile, the agriculture working group of the government’s Regulatory Reform Promotion Council suggested halving the number of farm coops engaging in financial business in three years.

If financial business is separated from farm coops (JAs) and they are turned into agencies for affiliated financial institutions, namely Norinchukin Bank and prefectural federations of credit cooperatives, it would become difficult for JAs to keep their business going, as they have been using profits from financial business to cover the deficit from agricultural business. Deposits which JAs have been accepting could no longer be used for JAs’ other businesses, and JAs would have to borrow money from affiliated financial institutions for everything they do. It is doubtful whether they can meet their initial goal of boosting farmers’ income under such a condition.

If JAs want to continue engaging in financial business and improve its efficiency so that they can spend resources more on agricultural business, one option is to consider more mergers to benefit from economies of scale. However, it is uncertain whether it would help expand farmers’ income.

This means farm coops could be forced into a tunnel called “reform” with no way out, eventually becoming exhausted with reforming.

In any case, we should not forget the fact that it is the members of farm coops who decide on which path they should take. To begin with, agricultural cooperatives are organizations comprising business activities and cooperative movement. However, recent reform moves only focus on business aspects.

If all the members, including non-farmer members who invest in farm coops, together think of ways their farm coops should choose, they might come up with the third way beyond becoming agents or merging. What is a true agricultural cooperatives reform? It is a renovation of members’ associations that supports reform of farm coops as management entities.

Farmers’ unions appear to be losing momentum these days due to aging and increase of non-farmer households in rural areas. It is questionable whether they are functioning as a place for farmers and non-farmer members to express and discuss their ideas and opinions. Different groups in the cooperatives, such as those for producers, women and young people, have been existing for a long time and seem to be suffering from institutional fatigue, becoming unable to cope with new circumstances and challenges. Lack of smooth communication among different generations also seems to be a problem.

While the outer goal of agricultural cooperatives reform is to boost farmers’ income, its inner goal is institutional reengineering. It is indispensable to make progress on the reform with both goals in mind.

To realize such a reform, exchange of information and experience among farm coops is vital. Central organizations such as the Central Union of Agricultural Cooperatives should encourage farm coops to create more of such opportunities.

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