Cooperative farming
There are two primary types of agricultural service cooperatives, supply cooperative and marketing cooperative. An agricultural cooperative, also known as a farmers co-op, is a cooperative where farmers pool their resources in certain areas of activity. A broad typology of agricultural cooperatives distinguishes between agricultural service cooperatives, which provide various services to their individually farming members, and agricultural production cooperatives, where production resources (land, machinery) are pooled and members farm jointly.The first agricultural cooperatives were created in Europe in the second half of the nineteenth century. Over the last fifty years, the local sugar mills have played a crucial part in encouraging political participation and as a stepping stone for aspiring politicians.
Some became universal banks such as Crédit Agricole or Rabobank. . Farmers also widely rely on credit cooperatives as a source of financing for both working capital and investments. Cooperatives as a form of business organization are distinct from the more common investor-owned firms (IOFs). A practical motivation for the creation of agricultural cooperatives is sometimes described as overcoming the curse of smallness .
Three typical examples are a machinery pool, a marketing cooperative, and a credit union. Worker cooperatives provide an example of production cooperatives outside agriculture. The default meaning of agricultural cooperative in English is usually an agricultural service cooperative, which is the numerically dominant form in the world.
Supply cooperatives supply their members with inputs for agricultural production, including seeds, fertilizers, fuel, and machinery services. A small farm does not always have the means of transportation necessary for delivering its produce to the market, or else the small volume of its production may put it in an unfavorable negotiating position with respect to intermediaries and wholesalers; a cooperative will act as an integrator, collecting the output of its small members and delivering it in large aggregated quantities downstream through the marketing channels.
Marketing cooperatives are established by farmers to undertake transformation, packaging, distribution, and marketing of farm products (both crop and livestock). Some supply cooperatives operate machinery pools that provide mechanical field services (e.g., plowing, harvesting) to their members. Agricultural marketing cooperatives are cooperative businesses owned by farmers, to undertake transformation, packaging, distribution, and marketing of farm products (both crop and livestock.) In Canada, the most important cooperatives of this kind were the wheat pools.
The members of the society include all farmers, small and large, supplying sugarcane to the mill. A small farmer may be charged relatively high interest rates by commercial banks, which are mindful of high transaction costs on small loans, or may be refused credit altogether due to lack of collateral; a farmers credit union will be able to raise loan funds at advantageous rates from commercial banks because of its large associative size and will then distribute loans to its members on the strength of mutual or peer-pressure guarantees for repayment. Agricultural supply cooperatives aggregate purchases, storage, and distribution of farm inputs for their members.
Supply cooperatives provide inputs required for agricultural production including seeds, fertilizers, chemicals, fuel, and farm machinery. These farmer-owned cooperatives bought and transported grain throughout Western Canada.
By the 1990s, most had demutualized (privatized), and several mergers occurred. They were created in the same periods, with the initial purpose of offering farm loans.
A cooperative, being an association of a large number of small farmers, acts as a large business entity in the market, reaping the significant advantages of economies of scale that are not available to its members individually. Now all the former wheat pools are part of the Viterra corporation. Former wheat pools include: Other agricultural marketing cooperatives in Canada include: In India most of the sugar production takes place at mills owned by local cooperative societies.
They replaced the earlier privately and often foreign-owned grain buyers and came to dominate the market in the post-war period. Farmers also cooperated to form mutual farm insurance societies Also related are rural credit unions.
Agricultural production cooperatives are relatively rare in the world, and known examples are limited to collective farms in former socialist countries and the kibbutzim in Israel. They spread later to North America and the other continents.
They have become one of the tools of agricultural development in emerging countries. A family farm may be too small to justify the purchase of a tractor or another piece of farm machinery for its own use; a machinery pool is a cooperative that purchases the necessary equipment for the joint use of all its members as needed.
By taking advantage of volume discounts and utilizing other economies of scale, supply cooperatives bring down the cost of the inputs that the members purchase from the cooperative compared with direct purchases from commercial suppliers.
