additional4 - Role of Cooperatives ! Competitive Yardstick !

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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 conditions. !Delivery Timing !Product Quality !Product Development ! Does traditional structure facilitate this? New Generation Cooperatives ! Closed membership ! Stricter requirements on producer !Quantity !Quality !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 in Common? ! Highly Perishable in raw form ! Extended lag between production decision and harvested output ! Highly specific assets 2 Crying over Spilled Milk… Market Characteristics of Perishable Goods ! Highly price-inelastic short run supply ! Hold-up problem !Potential exploitation by processors ! Weather induced volatility !Supply fluctuations !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 agricultural products ! Industry must petition Secretary of Agriculture and show evidence that: ! Marketing problems exist ! The proposed marketing order would help Characteristics of Marketing Orders ! 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 !Marketing allotments !Reserve pools for storable commodities !Reduce excess capacity ! Pooling returns to producers/handlers !Minimum prices !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 regulations – 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 countries ! Often export oriented ! Canadian Wheat Board – legal monopsony ! Accountability? ! Government appointed vs. producer run? ! Benefits to Producers or to Society? Impacts of Marketing Boards and Marketing Orders • Price stabilization = lower producer risk • Influence on demand – Quality expectation – Availability – 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.

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