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Unformatted text preview: Role of Cooperatives
! Competitive Yardstick
! Cartel/Bargaining Power
! Coordination Facilitator
! Assembly functions
! Marketing functions
! Historically, coop’s goal was to assemble and sell
whatever growers’ produced for highest possible price
! Still relevant? Build It and They will Come?
Or “Grow it and someone will buy it”
! Coordination focus has shifted toward
improving cooperatives’ response to market
!Product Development ! Does traditional structure facilitate this? New Generation Cooperatives
! Closed membership
! Stricter requirements on producer
!Production technique ! Members purchase stock for right to deliver
!Stock is “tradeable” 1 Common Reasons for Failure
! Clearly identified mission?
! Adequate volume of business?
! Adequate and reasonable financing?
! Efficient management? Willingness to pay
for efficient management?
! Prepared to meet competitive challenges? Food for Thought
!Is the New Generation Cooperative
still “worthy” of the special treatment
historically given to agricultural
cooperatives? What do Milk and Cherries have
! Highly Perishable in raw form
! Extended lag between production decision
and harvested output
! Highly specific assets 2 Crying over Spilled Milk…
Market Characteristics of
! Highly price-inelastic short run supply
! Hold-up problem
!Potential exploitation by processors ! Weather induced volatility
!Difficult to match supply with demand Industry Approach to Collective
Action: Marketing Orders
! Agricultural Marketing Agreement Act (1937)
! Catalyst: Coops struggling with volatile markets during
1920’s with no way to balance supply and demand ! Authorizes marketing orders for specific
! Industry must petition Secretary of Agriculture
and show evidence that:
! Marketing problems exist
! The proposed marketing order would help Characteristics of Marketing
! Self-regulation—solve market problems that
individual producers can’t solve alone
! Voluntary effort to stabilize market conditions
! Legally binding on all market participants within
defined geographical area
! No two marketing orders are alike
! NOT PERMANENT!
! Specified Time Period
! Farmers can vote it out
! Secretary of Agriculture can rescind it 3 Uses of Marketing Orders
! Regulate supply flow to market
!Reserve pools for storable commodities
!Reduce excess capacity ! Pooling returns to producers/handlers
!Blend prices It’s Not All About Price!
! Product quality
!Classify product according to use
!Product inspection, standardization
!Import grade, size, quality, maturity ! Standardize packages and containers
! Production research, market research and
development, and advertising
!BEEF – It’s what’s for dinner! The California Raisins
• Volume Control
• Minimum Grade & Size
• Promotion and Advertising
– California Raisins 1986-1994
– Currently only foreign advertising • Marketing Research and Development
• Assessment of $8.50/ton
• Minimum import standards 4 Idaho Potatoes
• Geographic area
– Idaho and Malheur County, Oregon • Grade, size, maturity, pack, and container
– For imported potatoes as well • Research and Promotion
– None authorized • Assessment: $0.0026/hundred pounds Marketing Boards
! All the functions of a marketing order plus more
explicit supply control
! Common in Canada, Europe, and some developing
! Often export oriented
! Canadian Wheat Board – legal monopsony
! Government appointed vs. producer run?
! Benefits to Producers or to Society? Impacts of Marketing Boards and
• Price stabilization = lower producer risk
• Influence on demand
– Quality expectation
– Price stabilization • Overall Social impacts? 5 ...
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This note was uploaded on 01/06/2011 for the course FDE 510 taught by Professor Prof.hamialpas during the Spring '09 term at Middle East Technical University.
- Spring '09