This report provides the overall conclusions of the full study. It was carried out by a European research consortium during 2011 and 2012. Data gathered in all 27 Member States have been presented and analysed in separate country reports. The data collected were also used in preparing eight sector reports, focusing on the role of cooperatives in each of these sectors. At the EU level a number of analyses were performed, studying aspects such as the institutional environment, internal governance, and the position of cooperatives in food supply chains

Bijman, J.

Gijselinckx, C.

Hagedorn, K.

Hanisch, M.

Hendrikse, G.W.J.

Iliopoulos, C.

Kühl, R.

Ollila, P.

Poppe, K.J.

Pyykkönen, P.

Sangen, G., van der

van der Sangen, G.

NARCIS 

Support for Farmers' Cooperatives : synthetic summary

Name not available

Wageningen Yield 

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
Support for 
Farmers' 
Cooperatives  
Synthetic 
Summary  
Jos Bijman 
Constantine Iliopoulos 
Krijn J. Poppe 
Caroline Gijselinckx 
Konrad Hagedorn 
Markus Hanisch 
George W.J. Hendrikse 
Rainer Kühl 
Petri Ollila 
Perttu Pyykkönen 
Ger van der Sangen 
  PAGE 1 
 
 
Synthetic Summary 
 
Background 
 
Given the imbalances in bargaining power between contracting parties along the food supply 
chain, the European Commission (DG Agriculture and Rural Development) has launched a large 
study to gain better insights into the policies that could help farmers to organise themselves in 
cooperatives as a means of strengthening their market position and so generate a solid market 
income. The specific objectives of this study were 1) to provide a comprehensive description of 
the current level of development of cooperatives in the EU, 2) to identify laws and regulations 
that enable or constrain cooperative development, and 3) to identify specific support measures, 
which have proved to be effective and efficient in promoting cooperatives and, more generally, 
producer organisations.  
 
This report provides the overall conclusions of the full study. It was carried out by a European 
research consortium during 2011 and 2012. Data gathered in all 27 Member States have been 
presented and analysed in separate country reports. The data collected were also used in 
preparing eight sector reports, focusing on the role of cooperatives in each of these sectors. At 
the EU level a number of analyses were performed, studying aspects such as the institutional 
environment, internal governance, and the position of cooperatives in food supply chains. In 
addition, 34 cases studies have been carried out, and the situation in selected non-EU, OECD 
countries has been investigated. These background reports on countries, sectors and cases, as 
well as the EU-wide analysis, provide farmers, cooperatives and policy makers with useful 
insights into the market orientation and organisation of cooperatives and producer 
organisations. 
 
Main findings 
 
Farmers’ cooperatives play an important role in helping farmers to capture a higher share of the 
value added in the food supply chain in all Member States. The key functions of all marketing 
cooperatives are improving the bargaining power of their members and letting members benefit 
from economies of scale. In addition, cooperatives are reducing market risks, reducing 
transaction costs, providing access to resources, and strengthening their competitive position 
through product innovation and guaranteeing food quality and safety. A large number of 
cooperatives have expanded their activities in downstream stages of the food chain, thus 
strengthening their customer and consumer orientation. 
 
As most chains are characterised by bargaining imbalances between farmers and their upstream 
and downstream partners, cooperatives play a key role in strengthening bargaining power. 
However, generally the countervailing power of cooperatives in relation to their retail customers 
is limited. The need for further strengthening bargaining power will most likely lead to more 
(international) mergers among cooperatives, while such mergers are also induced by the need to 
gain economies of scope in R&D and branding. To support farmers in this trend, legal definitions 
of producer organisations and support measures should not discriminate against large 
cooperatives. As this (international) growth process is often accompanied by changes in the 
internal governance, it holds the risk of a loss of member control over the cooperative firm. 
 
We found that a large market share for cooperatives in a particular sector and country can 
increase the price level and reduce the price volatility, as is currently the case in the dairy sector. 
Also other farmers in this sector benefit from the large market share of the cooperatives. These 
non-member farmers may even benefit more, as IOF competitors generally pay higher prices. 
 
PAGE 2 
 
These findings are in line with the competitive yardstick theory. Cooperatives also continue to 
be important for reducing market risks for farmers, notably the risk of receiving payment for the 
deliveries. 
 
Bargaining associations promote farmers’ interests and are also a valuable partner for food 
processors, wholesalers and retailers, as they coordinate the supply of large volumes of products 
of homogeneous quality. Unlike marketing cooperatives, bargaining associations do not own 
assets and, usually, do not assume ownership of their members’ produce at any stage of 
production or marketing. These associations are mainly active in the dairy and fruit & vegetable 
sectors. In Germany, they are also active in selling cattle and pigs. 
 
A number of cooperatives and producer organisations perceive legal uncertainty in competition 
law and report high legal costs. They see a lack of coherence between the agricultural policy that 
promotes bundling under the Common Market Organisation (CMO), and competition policy that 
seems to prohibit information sharing and other forms of collaboration. Some other OECD 
countries (e.g. USA) have more – albeit under strict conditions – exemptions for cooperatives in 
competition law to rebalance market power. 
 
Farmers have multiple options to organise the internal governance of their cooperative. In many 
cooperatives, however, there is room for strengthening management and supervision capacities. 
Most national laws provide sufficient flexibility for cooperatives to choose an internal 
governance model that fits the strategy of the cooperative, although such flexibility may not 
always be accompanied with the much-needed guidance. In some countries there is a need to 
pay attention to the ability of farmer-members to effectively control both the board of directors 
and the professional management, e.g., by strengthening the capacities of the supervisory board 
and by also having outside experts participating in boards of directors and supervisory boards. 
 
More than 300 European, national and regional policy measures were identified. Cooperative 
legislation, competition rules, and financial inducements were among those observed most 
often. There are considerable differences between Member States, in terms of policy measures 
adopted. There are no clearly established links between the (current) support measures for 
farmers’ cooperatives and the market share of these organisations. Also in other OECD countries 
it is hard to find an unambiguous link between legislation and cooperative performance. 
 
Many support measures could potentially benefit cooperatives. Cooperatives particularly benefit 
from a flexible cooperative law, single taxation, and clearly defined competition rules. In some 
sectors producer organisations and cooperatives have benefited from the CAP and some of its 
reforms (such as in the wine and F&V industries). We recommend that governments at the 
national and EU levels develop policies and measures to support capacity building and technical 
(organisational) assistance, especially for small and start-up cooperatives. This is particularly 
true for the New Member States, where self-organisation is hampered by a lack of social and 
human capital. 
 
The links between cooperatives and rural development are manifold. Cooperatives are often 
important employers and contributors to the regional economy. They contribute to public policy 
objectives such as the development of human capital, the improvement of competitiveness, and 
environmental sustainability. Quite a number of cooperatives build their strategy on regional 
characteristics, like in developing and marketing regional specialties. 
 
Additional findings 
 
All Member States have a cooperative tradition, although its origin and intensity differs. In some 
countries, the cooperatives are directly linked to market failure in large agricultural transitions 
at the end of the 19th century (Denmark, the Netherlands), or a movement for independence 
  PAGE 3 
 
(Finland), others have seen periods were cooperatives were not politically correct (Portugal), or 
where the cooperative was not based anymore on self-organisation principles but was used as a 
socialist planning tool instead (New Member States). Consequently, the label “cooperative” has 
different connotations in different regions. 
 
The marginal role played by cooperatives in some countries (and especially in the New Member 
States) has an important social background: the low level of self-organisation and networking is 
not only a barrier to cooperative development but represents a persisting societal characteristic 
with far broader implications. 
 
Professional structures and policies regarding board composition and member participation 
affect the performance of cooperatives. Proportional voting rights, professional management, 
supervision by outsiders, and selection of directors based on expertise or product 
representation and not regional origin, all have a positive effect on cooperative performance. 
 
Several cooperatives have evolved into hybrid forms. This hybridisation refers both to adopting 
organisational structures similar to those of investor-owned firms (IOFs) and to the 
development of non-user ownership structures. Cooperatives with hybrid ownership structures 
are still majority-owned by farmers, but not necessarily by farmers as users of the services of the 
cooperative but as members of a farmers’ organisation. In these cases, one or more farmer 
organisations are among the owners of the cooperative. In addition, cooperatives with hybrid 
ownership structure may have allocated ownership rights to investors from outside the 
agricultural sector.  
 
In addition there are many producer organisations that follow cooperative principles in their 
structure and operations but are not cooperatives as defined by national cooperative legislation. 
Whether farmers choose the cooperative (legal) form to strengthen their market position and 
bargaining power is usually driven by practical and not by ideological arguments, and depends 
very much on the institutional context, including legal, social and cultural aspects. 
 
We found 46 transnational cooperatives (i.e., cooperatives with members in more than one 
Member State). They can be found mainly in the dairy and fruit & vegetables sectors in 
northwest Europe. They often have foreign subsidiaries that source from non-member suppliers, 
like the 45 international cooperatives that we also found. Most cooperatives prefer to 
internationalise by acquiring or setting up foreign IOFs, and not by merging with other 
cooperatives or inviting foreign farmers to become members. Avoiding the dilution of ownership 
(income and control rights) is cited as the main reason for this development. There are no 
dissuasive legal barriers in merging across borders.  
 
The situation in the New Member States is diverse and contrasting due to differences in 
historical backgrounds, pre-collectivisation land reforms, post-collectivisation transformation 
laws, cooperative traditions and collective memories, policy streams and social and cultural 
contexts. However, all cases have in common that the impact of the communist legacy persists, 
as low trust is an obstacle to cooperative development. Building trust and coping with free rider 
problems, often in poor regions with vulnerable rural communities, reflect pioneer activities 
that resemble early stages of the cooperative movement in Western Europe. This calls for 
trustworthy and skilful leaderships. 
 
 
 
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