A new report from CoBank details from 2007 to 2017, on average, 70 co ops were consolidated annually. During the current ag economy downturn, the pace of co-op consolidation has quickened averaging 4% annually in 2016 and 2017.
The CoBank report also details by number over time the reasons for cooperative businesses decline: merging with or being acquired by another co-op; co-op dissolving or bankrupt; merging with or being acquired by non co-op; no longer co-op.
Dan Kowalski, vice president, Knowledge Exchange, CoBank, says since 2004 co-ops have been putting themselves in offensive positions to adapt to new customer/member demands and offer greater scale and services.
Three of the biggest impacts have been:
- Location changes (USDA data shows co-op numbers close to 10,000 65 years ago, and today are less than 2,000; but facility numbers haven’t declined)
- Employment (The number of co-op employees nationwide has increased slightly since 2005. Also the average co-op now employs more than 100 people, a 33% increase over the past 20 years.)
- Financial strength (Co-ops are financially stronger than they’ve ever been)
“Co-ops have continued to consolidate even as the number of farms and farmers has stabilized,” Kowalski said in a recent news release. “That signals a transition from the defensive consolidations we’ve seen in the past to the offensive consolidations we’re seeing more recently.”
As noted in the report, in 1983, 90% of co-ops had sales of less than $15 million. Today, only 50% have sales less than $15 million.
Looking ahead, Kowalski says he expects consolidation in the industry to continue as businesses seek competitive advantages and face challenging ag markets.