Machinery Co-operatives in Ireland
Ireland’s first farm machinery sharing co-operative was formed by members of Kilnamartyra dairy discussion group in West Cork. The machinery co-op provides a sound business structure for the sharing of machinery between farmers and can be applicable to farmers in any enterprise, especially tillage
In November 2018, Comharcumann Gleann an Laoi was registered with the Friendly Societies Register for co-operatives which is maintained by the Companies Registration Office (CRO). It is Ireland’s first farm machinery sharing co-operative of it’s kind, formed by members of the Kilnamartyra dairy discussion group near Macroom in West Cork. The machinery co-op provides a sound business structure for the sharing of machinery between farmers and can be applicable to farmers in any enterprise but especially enterprises that require a heavy input of expensive machinery such as tillage.
Inspiration & Support from France
The machinery co-operative is modelled on the French CUMA (Cooperatives d’Utilisation de Matériel Agricole). The CUMA structure is a co-operative and is widely used in France. Up to 50% of all French farmers are members of machinery co-operatives (CUMA).
The inspiration for the idea came from a discussion group trip away to France where the group were impressed with the CUMA structure and how it delivered for farmers in North West France. In tandem, Thomas Curran (Teagasc Regional Manager in West Cork) in his previous role as Farm Business Structures Specialist with Teagasc undertook a study trip to France to meet with the staff of FR CUMA Quest and FN CUMA to learn about how to set up and operate a machinery co-operative in practice. Thomas says that the help and support received in France was exceptional we continue to stay in touch in relation to CUMA’s. Some key people who organised visits and technical meetings to learn more about the practical operation of the CUMA’s were: Ms Christine Ferrier (Formerly of FN CUMA); Mr Stéphane Diard (Dairy farmer and board member of FN CUMA) and Mr Luc Vermuelen (President of FN CUMA). All of whom welcomed the interest from Ireland and encouraged staff to engage with the study visit, provide information, and support as required.
On his return, Thomas made contact with the Kilnamartyra group and they worked together to set up the co-operative and work towards the first machinery purchase project which was a low emissions slurry tanker. Stéphane Diard is a dairy farmer and he is also the chairman of the board of FN CUMA which is the national organisation that governs CUMA’s across France. Stéphane says the CUMA has allowed him to access expensive machinery that he could not afford on his own and also provides a social aspect by working with neighbouring farmers on a regular basis.
The main objective of a machinery co-operative provide machinery and make it available to co-operative members at a lower cost than buying machinery individually. Therefore, it operates as a non-profit/breakeven entity. The co-operative model can also be used to share labour across members’ farms at busy times of the year. There is great flexibility in the structure in the members have the freedom to invest only in a machine project that they have a need for on their farm.
On any farm, there are machines that are used every day and others that are only used occasionally or even seasonally. These occasional/seasonal machines are expensive to buy, can be expensive to maintain and depreciate in value sitting idle for much of the year. Machinery is a fixed cost on the business and has a significant impact on net profit depending on the stage of development of a farm business. In the tillage sector, where there is a high dependence on machinery, the costs for cereals are in the order of 30% of total production costs. The formation of machinery co-operatives by farmers can help to reduce production costs and consequently increase net profit while also providing access to better and more efficient machinery.
Benefits of a machinery sharing co-operative
- Access to more modern and efficient machinery at a lower cost to the member. Large modern machinery is beyond the financial scope of the average individual farmer and is a major cost for agricultural contractors. The cost of machinery is shared through the co-operative structure and reduces the financial burden on each individual member.
- Access to machines that are only occasionally used on a farm. For example a stone cart for land drainage, post driver or a cattle trailer.
- Collaborating with other farmers can ease work load at busy times. The machinery co-operative structure encourages farmers to work together and help each other out in times of need. It also has the ability to hire full-time employees to work across a number of farms in the co-operative. This benefit can also reduce rural isolation even on busy farms by increasing social interaction through the co-operative.
- Farm Safety. The co-operative sets high standards in the safe use of the machinery with compulsory training courses in the correct and safe operation of the machines. It also includes an annual NCT of the machine by the machinery dealer and on-going safety checks before and after use by the farmer members. This approach empowers the farmer members to take personal responsibility of the safe use of the machine.
- Environmental benefits. Access to more modern machinery has many environmental benefits. Technology advances can ensure reduced compaction of soils and less CO2 release during routine tillage operations. In livestock farming, the use of Low Emissions Slurry Spreading (LESS) equipment can help to reduce ammonia (NH3) losses to the atmosphere. This has the added benefit of helping the farming sector to reach 2030 carbon emissions and ammonia targets while also reducing fertiliser costs as more nitrogen is retained in the soil.
- New Entrants to farming. Membership of machinery co-operative can reduce the set-up costs for young farmers starting out as they can prioritise their available set-up capital for livestock and farm infrastructure rather than machinery.
- The Department of Agriculture, Food and the Marine have included registered machinery co-operatives under the Targeted Agricultural Modernisation Scheme (TAMS II) as eligible applicants for LESS equipment and for various machines under the tillage scheme.
How does a co-op operate?
In order to set up a co-operative, a group of at least 7 members must come together with a common purpose in mind. There are two documents required:
A machine specific sharing agreement.
The first critical document is a set of rules created by the members themselves for the purchase, usage and maintenance of the machine
The co-operative statutory rule book
The co-operative members must create a rule book to satisfy Irish and international regulations that govern co-operatives. The Irish co-operative Society (ICOS) have created a rule book specially tailored to the needs of machinery co-operatives. At the launch Darragh Walshe from ICOS said “The co-operative model in Ireland has experienced significant success in the agricultural sector and ICOS is constantly exploring ways in which the model can serve farmers. This work has become increasingly relevant amid the challenge of climate change and the co-operative model offers the agricultural sector the opportunity to meet a challenge such as climate change and maintain sustainable, self-sufficient livelihoods. Self-sufficiency and sustainability are at the heart of co-operative values and Comharcumann Gleann a Laoi machinery co-operative delivers on both of these metrics. Comharcumann Gleann a Laoi is a superb demonstration of the co-operative model’s capacity to provide solutions in a broad range of areas throughout the agriculture sector and beyond”.
Decision making. Decisions are made on the basis of a democratic voting process and each member has one vote in any decision regardless of the number of shares they own in the co-operative. A board must be formed and members of the co-operative must elect a chairman, secretary and treasurer to run the co-operative on an on-going basis while also implementing the rules of machinery sharing as created by the members.
A co-operative is registered with the Friendly Societies Register which is maintained by the Companies Registration Office. It is a corporate entity that enjoys limited liability in the same way as a limited company.
Based on the individual usage of the machine, the co-op will hire the machinery to the members. The members will contribute up to 20% of the machine purchase price as share capital. The capital is also proportionately divided based on usage. The remaining capital balance is financed with the bank.
The machine is then hired by the members who have invested share capital for a fixed fee per unit of measurement (per day, per hour, per load, per hectare). The rental fees ensure that the co-operative will have funds available to: repay bank loans; cover running costs including repairs and maintenance; depreciation of the machine and administration costs.
Donal Casey of Bank of Ireland stated that the bank were delighted to support the innovative Machinery Co-operative with its’ first investment. “The availability of Dairyflex through Dairygold enabled the Co-operative to access finance for the slurry tank at 3.55% unsecured. Dairyflex has now been extended to seven Co-ops nationally equating to greater than 50% of Dairy Farmers in Ireland. Investment in Low Emissions Slurry Equipment is one of many actions farmers can take in making their contribution to lowering emissions from agriculture and we are delighted to support any investment that improves the overall sustainability of food production”
Targeted Agricultural Modernisation Scheme (TAMS II)
Machinery co-operatives have been included as a business structure that is eligible to apply for grant aid in respect of LESS equipment and also under the tillage scheme. The application by the co-operative is made using a reference number that can be obtained from the TAMS II section of the Department of Agriculture, Food and the Marine (DAFM), Johnstown Castle, Co. Wexford.
Oliver Molloy from the Dept. of Agriculture said DAFM are pleased to be able to provided support to the Cumann Gleann an Laoi co-operative. Initiatives like this machinery co-operative can provide an important framework to help support collaborative farming structures. We would like to acknowledge the work and effort that the co-op members and Teagasc have committed to establishing the co-operative and hopefully it will provide inspiration for others to do likewise.
A step by step approach for starting a Machinery Sharing Co-operative
To set up a machinery co-operative, the following steps are required:
- Identify an existing discussion group (or a group of like-minded farmers) with at least 7 members who are committed to the formation of a machinery sharing co-operative.
- The farmers in the group must identify a common need in terms of machinery use
- Identify a key influencer within the group to drive the process forward.
- Start with one project – One machine
- Group defines a bespoke rulebook for use of the machine by members.
- Rules enforced by chairman of co-operative
- Complete the ICOS business plan template of for the co-operative.
- Create a financial plan based on usage of the machine.
- Projected Usage of the machine
- Unit of usage e.g. Hectares, volume, kilometres
- Estimated usage by each co-op member
- Share Capital Contribution
- Between 5-20% of purchase price.
- Total divided by proportional usage by members
- Projected co-operative income in rental fees
- Repairs & Maintenance costs
- Loan Repayments
- Admin Costs
- Engage with ICOS to create legal framework for the co-operative & register the co-operative with the Company’s Registration Office (CRO).
- 7 special members – co-operative board
- Election of a Chairman, Secretary & Treasurer
- Other Shareholders
- Legal rule book (ICOS)
- Engage an accountant to oversee taxation and preparation of annual accounts for the Companies Registration Office (CRO).
You can read more about Producer Groups and Farmer Cooperatives here