Farmers of North America was first established by a 6th generation Saskatchewan farm, in 1998, with the sole mission of “Maximizing Farm Profitability.”
Since then, FNA has been central in breaking monopoly pricing on glyphosate, driving competition in the entire crop protection industry and most recently the effort to build a fertilizer plant with farmers as owners, not just customers. FNA has over 10,000 members across Canada working over 20 million acres of land.
Achieving the status of a stable, thriving organization did not come easy. In the early years the only benefits that could be offered derived from businesses who themselves wanted to be part of the farm income solution, those suppliers to FNA Members we call “Preferred Suppliers.”
But FNA knew that Preferred Suppliers alone could not make the kinds of contributions to input cost reduction required to have a meaningful impact on individual farm profitability. To achieve would require working directly with suppliers to get low-cost inputs directly to farmers.
Our first efforts were to try to work with established domestic manufacturers and distributors. FNA asked us what quantities of various inputs we required (were willing to buy for cash and receive delivery earlier in the season) and then asked the input suppliers to submit bids based on our combined volume and lower cost terms so everyone could win. It was an attempt to work with a highly consolidated input industry in the traditional “bulk/volume buyer” model, to try to create more competition and fairer price discovery in the marketplace.
Every company refused. All of them.
The attitude was very simple. They would not offer discounts on large volumes of product because the farmers would be forced to buy at prevailing retail prices regardless. On the basis of refusal to supply by all suppliers, FNA filed a complaint with the federal Competition Bureau. After an extensive investigation, the Bureau could not prove anti-competitive behaviour within the meaning of Canada’s weak competition laws. They indicated that a solution would be to work with a retail dealership, as refusal to supply an established dealership whose business relied on being supplied would be contrary to the governing legislation.
So FNA got an independent farm chemical retail business involved. Through that dealership, Members were able to get crop protection products at wholesale or better pricing, and the volume of the retailer increased dramatically. When the suppliers found out that FNA Members were involved and that the massive increase in sales was not only being generated by FNA Members, but also being made at below prevailing retail prices, the dealership was cut off from supply by all the manufacturers and distributors.
Based on their own earlier advice, another complaint was filed with the Competition Bureau. The end result was a finding that, even though the manufacturers and distribution network were consolidated and clearly exerted market-wide power, the fact that they were doing so in the context of many independent dealerships made that level of market power “okay.” The fact that independent dealers themselves were strongly managed by the manufacturer was disregarded. It was difficult to prove or determine “abuse of a dominant position” in Competition Act terms. It was nevertheless clear to us that these companies were acting unfairly, and contrary to any legitimate understanding of a free competitive market. The absurdity of the situation was reflected in the correspondence from the oligopolistic input companies, writing that they would not provide supply because the retailer was not following their “business model.” Logically even if there are 100,000 retailers, if all of them are forced to adopt the same business model as dictated by the suppliers, there is clear and extensive abuse of a dominant market position. Merely responding that there are “lots of retailers” is utterly beside the point.
Still, the failure of Canada’s competition laws meant that something else would have to be done if FNA was to deliver on its mission of maximizing farm profitability.
Yet individual farmers were not ready to directly invest in a new crop protection company, assume all the risk of start-up capital, as well as absorb the ongoing risks of trying to get chemical registrations approved and manufactured. Most people thought, and many said, “It would be crazy to invest in some start-up that thinks it can take on the big chemical companies.”
Thus there was a potentially significant business opportunity for one or more suppliers to gain access to FNA Members’ combined purchasing power, matched by a vital Member Value imperative to find Members competitively priced alternatives.
So the first major successes came when FNA was able to work with new or out-of-market suppliers across a range of products.
Most famously FNA led a political and organizational fight to make active use of a little known regulation that allowed Canadian farmers to import crop protection products for their own use, the “Own Use Program” or OUI. This phase of our history is commonly called the “glyphosate wars.”
While FNA took the fight to the regulators, an America generic manufacturer was willing to supply FNA Members with quality glyphosate and a supplier was in place to organize Members, facilitate the paperwork and arrange the transportation.
It resulted in an historic victory for farmers, but also in an aggressive campaign to eliminate the OUI program. This effort which succeeded by PMRA issuing a fiat that they would no longer recognize OUI, but with the public relations benefit for them of not having actually repealed the program.
Later, when fertilizer prices got completely out of control (remember $1,000 / tonne?), FNA was able to negotiate with a supplier, based on confirmed advance orders from Members, to have it find international suppliers and get more competitively-priced fertilizer into the Canadian market. It resulted in shipments into the Ports of Churchill and Montreal, and up the Mississippi, all delivered to the farm. And all this at a lower cost than the Canadian manufacturers were willing to offer, even though they were making significant profits. The supplier to FNA Members was literally able to expend the resources required to source foreign supplies, get the fertilizer on a ship, move that ship across an entire ocean into the Port of Churchill and move that fertilizer from port direct to farmers all at a lower price than the fertilizer being manufactured right next to farmers being forced to pay the outrageous prices. Since that time, the fertilizer supplier to FNA Members has interceded on an ad hoc basis when it is able to provide price advantages on fertilizer imported from around the world, keeping the domestic industry competitive with global prices.
This nevertheless has been a short term approach, as the increasing cost of logistics has been difficult to overcome and global prices have started to exceed the cost of domestic production. As a result, FNA brought its membership base to the table to encourage the launch of ProjectN as the real long term solution, a permanent fix to provide reasonable fertilizer prices at all times for Members. That project now has multiple private entities driving it toward completion and is owned by the group of partners (Member-farmers) in the FNA Fertilizer Limited Partnership.
FNA has also been able to work with suppliers in making the MPower Rewards program a meaningful vehicle of sharing returns with Members, whether those savings arise from the suppliers’ own productivity improvements or from their ability to successfully find more competitive sources of their own inputs. The cash back rewards are now possible on a wide range of inputs from a wide range of suppliers.
But it has all been extremely challenging. Try to imagine a company responding if FNA were to say “We want you to find supply somewhere in the world that will ‘wreck’ the near monopoly price you are able to command at home.” Or, “if you find a less costly way to do business, we want you to share the gains with the Members of our farm business alliance and what you get in return is access to a strong base of farmer-customers with powerful combined purchasing power.”
As FNA has grown to over 10,000 Members, we have been successful in developing positive relationships with suppliers who “get” FNA. Together with our “local first” policy, these suppliers see FNA for what it is: a group of progressive farmers who just want competitive prices that respect their need to maximize farm profitability, while the supplier also earns a fair profit. More of these enlightened suppliers have joined with us to be part of the mission to maximize farm profitability and earn good, reliable business from FNA Members.
So FNA has not only worked with suppliers of all kinds to see Members achieve competitively priced inputs, we have caused changes in the entire business of serving farmers by multiplying Members’ Market Power over all parts of the supply chain.
Recent Comments