South Peace Grain Cleaning Co-operative

Membership: approximately 200
Date Incorporated: January 1964
Activities: Consumer-owned grain cleaning

Area Served: Dawson Creek

Meeting Farmers' Needs

In the early 1960s, farmers in the Peace region needed a cleaning facility to remove wild oats and weed seed from their grain. Wild oats and weed seed deplete the soil of essential nutrients, reduce the land's productivity, and ultimately result in less grain for farmers to sell.  Before the co-op plant was built, farmers had to clean their grain by hand!

Four year of planning became a reality in December 1963. The co-op raised money to open a $63 000 plant by selling $50 shares to farmers. Since that time, grain-cleaning co-ops have emerged in the (relatively) nearby communities of Ft. St. John, Rycroft, Wembley, and Sexsmith; however, the South Peace Grain Cleaner Co-operative (SPGCC) continues to be the only grain cleaning facility in Dawson Creek.

The Service and the Plant

Almost 40 years later, SPGCC membership shares still cost $50.  The co-op serves members and non­members; however, members receive a $.05 per bushel discount on cleaning.  Most farmers become members as they are able to earn their $50 membership share after cleaning only 1000 bushels of grain.

The cleaning facility can handle 500 bushels of grain per hour, and cleans 550,000 bushels per year.  It can store 25,000 bushels, has 2 government certified scales, and runs 2 gravity tables. The SPGCC specializes in treating all cereals, specifically wheat, barley, oats, rye, peas and canola, and it employs 2 certified operators, one of whom is a certified seed grader.

Growth and Member Input

Jarvis Taylor, the current manager of SPGCC, started working there on January 13^th, 1964. It's not surprising that he now knows the co-op and the grain industry inside out. Taylor charts the growth of the co-op by the size of truck the group needs to use to haul seeds. Before long the trucks were so huge they couldn't fit through the facility's doors.  In the early 1980s, the board started planning to build a new plant.

Before building its present facility, the board presented several building options to the members.  "Do you want to expand the plant? Do you want to rebuild it? Do you want to move it to a new location?" Taylor recalls they tried to formally survey the membership but in the end, hashing the issues out over coffee proved more effective.  Taylor explains the importance of encouraging member input:  "I think that is what you have to do to have a satisfied co-op. What I mean by satisfied is even the guy that spends very little here has a voice and is listened to. That's very important in any co-op."

Members are not involved in the business of the co-op on a day-to-day basis. However, the board enables member participation and board accountability by ensuring the members have access to minutes and manager's reports.  The Co-op has a long-standing practice of keeping these reports on the counter of the front office.

From time to time, members come in and talk with the manager.  When the co-op is experiencing 'business as usual', this is how the board hears member concerns. The manager, Jarvis Taylor, has worked for the co-op for almost 40 years. The members rely on him to deal with their concerns or bring them to the board.

Raising the Capital for the New Building

The decision to build the new building for the co-op was made in 1983. At that time interest rates were high. The SPGCC invested $500 000 in the Dawson Co-op Union which was paying 2% higher interest than the bank. The return on this investment was $260 000. The co-op raised the remaining cash by 'borrowing' from the members.  The current president, Marvin Meier, asserts raising capital from the membership as opposed to borrowing from the bank is good, solid business practice.

The co-op raised the necessary cash from their members by increasing the cleaning rates and by retaining dividends. In order to raise significant cash through retained earnings the co-op raised the allocation limit to $7500 per member.  In other words, the co-op could keep up to $7500 of a members patronage earnings (earnings resulting from cleaning grain) and any amount of patronage earnings above the amount of $7500 had to be paid out to the member.  The decision to raise the allocation limit for patronage dividends went before the members and was agreed upon by the membership. For the remaining amount of money, the co-op got a loan from the Toronto Dominion Bank.  Generally, the co-op does all of its banking with the local credit union, Lake View.

After 4 years of planning and raising the necessary capital, the new co-op plant was built in 1987. In less than 20 years, the SPGCC had grown from a $63 000 facility to a $1 million facility!

Facing Challenges

In recent years it has become increasingly difficult to make a living through farming.  Most farm families have part- or full-time off-farm work.  When profits are slim for the farmers, profits are slim for the co­op. For example, the co-op currently needs new equipment, but will hold off for another year until there is a better season. Last year the co-op chose to pay $58 000 in dividends to the farmers because they wanted to make sure the money was circulating within the community and the farms had enough cash flow to keep going.

These days, the term 'young farmer' usually refers to someone in his or her forties.  It is very difficult to support a family through farming and very few young people are getting into it. Approximately 15 of SPGCC 200 members are 'young farmers.' Jarvis describes how he has witnessed the devaluing of farming in his lifetime:

A bushel of wheat is 60 pounds.  You can make probably 100 loaves of bread out of it. And the farmer is getting $2.60. Back in 1958 he was getting $3.15 for the same thing. So if you take 1958 prices and 2000 prices, that same bushel of wheat, if you consider the price of energy going up and inflation and everything around you, that price of wheat should be $60. If we keep losing farmers at 40% per year, by the year 2010 there will be two farmers controlling the total [agricultural] land base. Well, when that happens instead of $50 or $60 per bushel of wheat, you're going to be paying $200. End of story. (Taylor, 2001)

Similarly, Statistics Canada reported in 2001:  "From 1946 to 1997, the number of persons employed in agriculture decreased by 64%. During the period of 1941-1996, the number of farms dropped by 62%."¹

It costs approximately $200 to produce 45 bushels of wheat. In year 2000 world prices that equates with a loss of $83 per bushel. It is not difficult to imagine why few people are going into farming.  The co-op knows that if the trend towards fewer, larger farms persists, and farmers' lack of control over sale prices and input costs continue, the group will gradually lose its membership.

In order to alleviate some pressure, the co-op has diversified. They clean wheat that is destined for fish farms on Vancouver Island, malt barley for beer, pony oats for racehorses, and organic oats and rye.

Co-operation and Competition

Some might argue that co-ops are even more important today than they were in the 60s, when SPGCC was formed. Marvin Meier explains the importance of continued support for co-operatives:

You can sell your grain to Agricore² or Cargill.  Just like farmers can buy their fuel through the co-op or Esso. Now Esso may be a little less money, but in the end, after you get your cash dividend or the profits go back into the co-op... you end up with basically the same cost per gallon at the end of the year.

Now, without competition Esso could charge what they like.  And that's where your co­operative comes into play.  It becomes a direct competition to multi-national corporations. And it's a way of keeping companies like that in check. (1991)

The foundation of SPGCC and many other co-ops is their ability to fill an unmet need for a particular service. Before SPGCC, there was simply no other way for founding members to access the facilities they needed. Now, to ensure its continued success, the co-op must evolve as the conditions around it change.

Endnotes

¹ http://www.statcan.ca/cgi-bin/downpub/listpub.cgi?catno=21-601-MIE01051 ² Agricore has demutualised since the time of interview.  In 2001, Agricore and United Grain Growers merged to form one corporation, Agricore United.  Both companies were originally member-owned co-operatives.

Case Study Information

This case study was developed for a report entitled Situating Co-operatives in British Columbia - 2000 - 2001, which was prepared for the Province of B.C. (Ministry of Community Development, Co-operatives and Volunteers) by the British Columbia Institute for Co-operative Studies, University of Victoria.  To obtain the information for the case study BCICS and the co-operative entered into a partnership agreement. BCICS is grateful to the co-op members for their contributions and time. The case study is published with the approval of the co-operative. Further information regarding this study includes the following:

Researcher: Nicole Chaland

Date of research: 2001

Author: Nicole Chaland

Date of writing: 2001

Editing: BCICS editorial group

Supervision: Kathleen Gabelmann, BCICS Research Co-ordinator

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