Cooperatives: a Tool for Family Farms
European Commission – FAO:
Kick off 2014 Year of the Family Farm
Brussels, November 2013
Krijn J. Poppe
Cooperatives add value in different ways:
Realise efficiency of scale (if owners don’t want to
merge): joint machines, cheese factory
Create a market
/ realise access to the market that is at
Increase market efficiency by competition with traders
with a high mark-up
Reduce transaction costs for the food industry by
standardising contracts, organising farmers and their
Manage risk for farmers (pooling)
Organise innovation e.g. in niche products
Main findings on European Cooperatives
Cooperatives create markets or give farmers a better
access to them and improve efficiency.
Structures of cooperatives are changing: room for
management, internationalisation, new structures
Cooperatives have three key characteristics: userowned, user-controlled and user-benefitting.
Various hybrid business entities, look-alike of IOFs, often
majority owned by farmers’ organisations.
Cooperatives do not always represent the optimal
organisational form; the choice is not an ideological but
a practical one.
Some succesful examples
The Santo Wine Cooperative, Santorini, Greece
● Successful, vertically integrated 2nd tier (federated)
● High quality food products
● From economies of scale (2nd tier) to collaboration
with IOF on the brand name of Santo
OVISO, sheep cooperative in Extremadura
● Fast growing market share, based on brands
● 2nd tier cooperative that sells the lambs and sheep
● But also has intensive professional services
(veterinary etc.) to members
● Strong internal quality management
Role in the food chain
supply chains cooperatives play a role in maximizing
their members’ share of the value added.
Countervailing power is limited: even the largest
transnational cooperatives lack market power
In the new food economy organising production to
private standards and consumer niches is important
Cooperative yard stick theory: a large market share for
cooperatives in a region can increase the price level and
reduce volatility (dairy)
● In countries where cooperateve market share is 2050%, the milk price is 4,5 to 6 euro per kg higher
compared to < 20% (2008-2010 data).
● Market share > 50%: 2,5 – 4,5 euro/100 kg.
● IoF pay even 10% more (for their specialities)
The importance of trust and governance
Farmers have many options in organising their
cooperative’s internal governance optimally.
In many cooperatives there is room for further
professionalization (checks and balances, professionals)
Cooperation works as people identify with groups and
that influences their behaviour (Elinor Ostrom)
Cooperative behaviour is very context specific !
Communication, cohesion and “culture” (lack of social
and human capital) are important
Reputation builds trusts that creates collaboration,
directly or via reciprocity
Outside support can strengthen or corrupt collaboration
Thank you for