European Commission backs co-operatives for farmers

07 Mar 2013

​The European Commission is encouraging farmers to form themselves into co-operatives.

A report has been launched by the Commission to provide farmers with the knowledge of organising into co-operatives; and it also summarised the current level of co-operative development across the 27 EU member states. The report takes into account various aspects such as: economic and fiscal incentives, the relationship between co-operatives and other entities active in the food chain, or the internal governance of co-operatives.

According to the document, there are three main factors that determine the success of co-operatives in food chains: the position in the food chain, internal governance and the institutional environment.

The report reads: “Farmers’ co-operatives 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.

“As agrifood supply chains are generally characterised by bargaining imbalances between farmers and their upstream and downstream partners, co-operatives play a key role in strengthening bargaining power and thus maximizing their members’ share of the value added.”

According to the same report, co-operatives are also reducing market risks and transaction costs, providing access to resources, and strengthening their competitive position by guaranteeing food quality and safety.

The study also shows that a large market share for co-operatives in a particular sector and country can increase the price level and reduce the price volatility. This is currently the case with the dairy sector.

Concerns are also raised over a lack of coherence between the agricultural policy that promotes building under the Common Market Organisation and competition policy that seems to prohibit sharing and other forms of collaboration.

Furthermore, although most national laws provide sufficient flexibility for co-operatives to choose an internal governance model that fits their strategies, such flexibility may not always be accompanied by the appropriate guidance.

Co-operatives benefit from flexible co-operative law, single taxation, and clearly defined competition rules. According to the report, co-ops are also important employers and contributors to the regional economy.

The report reveals that the situation in the new member states is diverse and contrasting due to differences in historical backgrounds, co-operative traditions or 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 co-operative development.

The study was carried out between 2011-2012 by a European research consortium, but contributions have also been made by national co-operative experts in all of the 27 member states of the EU.

Photo: European farmers and agri-co-operatives debating the European Commission's proposal to reform the Common Agricultural Policy, Brussels, 6 February 2013.