Sources of investment capital
Ms Moynihan says agricultural cooperatives usually accrue capital from members over a long period of time, based on setting aside contributions from members transacting with the cooperative, through retained earnings or the capital comes from modest debt facilities.
“Obtaining capital from these sources alone will limit many cooperatives’ ability to pursue the current opportunities and is unlikely to provide sufficient or timely funding at the current rate of change,” she says.
“This is leaving cooperatives now in many cases facing a quandary of how to access sufficient capital to tap into the opportunities before them without compromising the cooperative business model.”
Cooperatives are increasingly turning to external capital options, such as third party investors (including pension funds, hedge funds, retail investors and end users seeking supply) and financial instruments (including capital notes, bonds, shares and units).
External capital is alluring for cooperatives due to its accessibility and availability, the report says, but brings with it challenges for the cooperative model.
“For large agricultural cooperatives, accessing external capital in the same way that a publicly listed or private company would is not straightforward,” Ms Moynihan says. “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 cooperatives though, retention of ownership and control strikes at the very core of cooperative enterprises and is usually non-negotiable.
“So the challenge is to accommodate the needs and additional demands this type of capital can bring within the cooperative model and strategy.”
In seeking to address this challenge, the Rabobank report cautions, cooperatives need to ensure they have a clear vision for the business, are highly relevant to their members and that they have strong member engagement.
“Even then,” Ms Moynihan says, “tradeoffs will exist and any potential solution will require compromise and at least some degree of risk appetite from all parties.”
Rabobank Australia & New Zealand is a part of the international Rabobank Group, the world's leading specialist in food and agribusiness banking. Rabobank has more than 115 years' experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 41 countries, servicing the needs of approximately 10 million clients worldwide through a network of more than 1600 offices and branches. Rabobank Australia & New Zealand is one of Australasia's leading rural lenders and a significant provider of business and corporate banking and financial services to the region's food and agribusiness sector. The bank has 94 branches throughout Australia and New Zealand.
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