Cooperation or Single Farm Action

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Cooperation or Single Farm Action

Module Contents

Introduction

Some farm or water management activities can be faced individually or in cooperation with third parties. This module describes and compares both solutions, showing some examples.

The aim is to identify the main cooperation instruments so that the farmer can choose the option that best suits his needs. The approach is simple, straightforward and comparative.

Thus, we will analyse instruments such as cooperatives, irrigation communities or participatory financing.

Basic aspects of cooperation

What is cooperation?

Two or more actors agree (through a formal or informal deal) to do something (i.e. share information, support technical and management training, provide capital and/or market information). Both parties get a mutual benefit, and no one has a dominant position in the deal

Cooperation among farmers and other rural development actors allows, for example:

  • Integrating production processes (i.e. cultivation and processing of products).
  • Storing products.
  • Sharing management of machinery and investments (irrigation ponds, pipes, etc.).
  • Common marketing strategies to promote products and their quality.
  • Common sale of products on the market.
  • To obtain and commercialise new products.
  • Access to better grants.

Formal cooperation(a written agreement or contract among the parties defines the objects, rules and obligations of cooperation; companies, cooperatives, consortia or other economic entities can even be set up) and informal cooperation (without a contract).

Cooperations range from the simplest (sharing and combining work capacity, land, plants, machinery, irrigation infrastructure, optimising production processes) to establishing a standard service structure to share the costs of activities that cannot be managed individually (large infrastructures, consultancy, quality certification, training, standard sale of products, etc.).

Barriers to collaboration

  • Mindset of farmers.
  • Attachment to land ownership.
  • Succession/inheritance issues.
  • Lack of information and advice.
  • Fears regarding CAP payments.
  • Worries about loss of control/insecurity.
  • Lack of experience in working with others.
  • Lack of business skills.

How to deal with cooperative work

Traditionally, what makes cooperation so different from any other business activity is the principles they are based on. If we consider the principles established in cooperatives as the desirable basis for any cooperation, these principles define and guide the cooperative instruments, ensuring:

  • Democratic self-ownership.
  • Tolerance (lack of discrimination).
  • Open membership.
  • Independence from the government.
  • Equal economic responsibilities distributed among the members.

Four traditional general principles distinguish cooperative instruments from any other type of business:

  • Service At Cost. The ultimate goal of any farming cooperation is to unite individual small businesses to reach scale economies. The lower cost of services, products, and materials is another primary consideration when forming a cooperative association.
  • Financial Obligations And Benefits Proportional To Use. Benefits for the cooperation participants are proportional to their input. Similarly, all the members share the economic responsibilities, risks, and losses equally and proportionally.
  • Limited Return On Equity Capital. Higher added value and higher quality of products and services at a lower cost attract people to cooperate. Therefore, the return on investment is limited. Often, the profit can be reinvested in the cooperative to meet its future needs.
  • Democratic Control-Cooperative Structure. The basic idea behind the membership in a cooperative is the good old principle of “one member, one vote.”

The application of the following six steps can prevent the weakening of cooperative forms:

  • Securing entry. The participants in the cooperation should associate voluntarily and consensually, maintaining an alignment of objectives and mutual trust.
  • Ensuring exit. It is not usually considered in the initial stages, but in case of disagreement, the way to dissolve the potential cooperation and liquidate common assets/liabilities must be established.
  • Democratic structure. The members of the cooperation should seek internal consensus and external advice to define the constitution and the rules by which they will be governed in a way that avoids potential differences and conflicts.

Voluntary and negotiable investments. The partners should be able to choose the investments to make through voluntary purchasing under the principle of consensus. It should be possible to assign an individualised value proportional to the degree of participation of each member.

Vision vs. Participation. In the form of grants, subsidies, credits and investments, external incentives may induce members to reduce their rights depending on their degree of participation. This must be anticipated through preventive and effective communication to continue to justify, motivate, and reinforce the collective interest.

Generate added value. Once a cooperative satisfies the members’ initial and most urgent needs, it should start generating additional added value. Cooperative forms created and designed only to meet short-term needs have difficulties adding value over time.

Advantages and disadvantages of cooperation and single farm action.

Benefits of working in cooperation

Main economic benefits of cooperation in agriculture

  • Increased scale of business and activities.
  • Achievement of economies of scale.
  • Increased purchasing power.
  • Lower costs through exchange of tools (services, machinery).
  • Sharing of labour.
  • Reduced capital expenditure for investment.
  • More efficient management.
  • Tax benefits.
  • More opportunity to access financial support.
  • Better market entry due to higher product volume and better product quality.
  • Greater sales power.
  • Higher added margins.

Main social benefits of cooperation in agriculture:

  • Quality of life, more free time, less work stress.
  • Reduced isolation, exchange with other family farmers.
  • Increased satisfaction from farming.
  • Less problems due to illness or not being able to work.
  • Increased exchange of knowledge.
  • Creation of local communities.
  • Increased social cohesion.
  • Opportunity for social inclusion (social farming).

Why is better to cooperate

  • You have partners who share your goals and help you to face difficulties: you are not alone.
  • You can take on actions for which you would not have the capacity on your own (complex investments, high budgets, etc.).
  • The approach is generally more holistic and diverse, because it incorporates the different points of view of the partners.
  • You can share tasks and delegate responsibilities among the partners.
  • Cost reduction (economies of scale) on buying inputs and sharing some services.
  • You can obtaining better prices, by having a stronger position in the market.

Why is better to do it yourself

  • No profit sharing.
  • No need to find other producers with common interests or needs.
  • No conflicts with partners, no need for consensus on actions: you have full control over decisions.
  • The producer sets his own pace of work. Faster decision-making.
  • No need to suffer the consequences of the mistakes of others. Everything is on your own responsibility.

Strengths

  • Recognition of the potential of collaborative arrangements.
  • Improves the quality of life and incomes of those involved.
  • Facilitated growth and achievement of scale.
  • Improved efficiency and economies of scale (reduction in production costs; marketing; distribution).
  • Increased productivity for some farms which were in decline.
  • More options for new entrants to become established in farming.
  • Intergenerational and inter-farmer transfer of knowledge and experience.
  • Number of options for collaboration being explored and developed.
  • Social orientation.
  • Improvement in market access.
  • Enables collective acquisition of equipment and services.

Opportunities

  • Significant potential for further growth in cooperation.
  • New structures being developed.
  • Expansion into other sectors.
  • Potential to grow and prosper through political incentives & measures (rural development programme).
  • Enhanced professionalization (business management, technical operations, digital technologies).
  • Promotion of innovation and searching for new markets (internationalization).
  • Collaboration among cooperatives.

Weaknesses

  • Limited vision or failure to inspire.
  • Lack of clear purpose or inconsistent understanding of purpose.
  • Competition between partners for the lead or domination by one partner.
  • Unequal and/or unacceptable balance of power and control.
  • Key stakeholders missing from the partnership.
  • Lack of commitment and unwilling participants.
  • Lack of support from organizations with decision-making power in the partnership.

Threats

  • Differences in philosophies or work styles.
  • Inadequate understanding of roles and responsibilities.
  • Hidden agendas.
  • Failure to communicate.
  • Failure to learn.
  • Lack of evaluation of monitoring systems.
  • Financial and time commitments outweigh potential benefits.

BONUS: Factors that support and encourage cooperation

  • Tradition, culture, history.
  • Social and economic environment.
  • Policy supports (on agriculture and international trading).
  • Legal framework.
  • Taxation policies.
  • Support structures (advisory services, research, public agencies, NGO, volunteer­ing, etc.).
  • Human resources.
  • Knowledge and skills transfer (formal and non formal education and training).
  • Unforeseen factors that motivate collaboration in crisis situations.
  • Innovative business models (new products, new processes, etc.).

Some examples on cooperation in water management on agriculture.

Some examples on farming cooperation

“Inside the farm gate” collaboration

  • Agrarian associations for production.
  • Supply cooperation.
  • Cooperation for common usage of the land (where the productive resources such as land and machinery are held in common by the cooperative).
  • Associated Work Cooperation.
  • Cooperation for the use of agricultural machinery.
  • Leasing.
  • Sharecropping.
  • Irrigation communities.
  • Farm management groups (associations whose purpose is the provision of farm management services).

“Outside the farm gate” collaboration

  • Agrarian associations for product transformation.
  • Agrarian associations for agricultural marketing.
  • Agricultural producer groups and organizations (cooperatives or associations with a special objective, such as origin certification).

Additional collaboration

  • Inter-professional associations (vertical integration).
  • Professional, trade union or representative associations (e.g. agricultural workers’ unions).
  • Credit cooperatives (to finance the payment of labour and for investments).

An example on water cooperation

Torre Álamo Brujuelo (case study ES09) is an irrigation community located in Jaén (Spain), constituted in 1999, which groups together more than 100 farms and almost 1,500 ha of olive groves. These legal figures are an important cooperative tool for financing, organising, managing and controlling, protected by the Spanish Water Law, which allows important investments in infrastructures to be made collectively, which could not be undertaken individually. Their fundamental function is to facilitate access to irrigation water to the farmers in a region.

Irrigation ponds are artificial water storage systems built by excavating the ground, usually accompanied by the erection of perimeter walls. Their primary purpose is to cover the needs during periods of water shortage, storing them during periods of abundance. The uses of the ponds are very diverse, but they are mainly used for agricultural activity (to supply crop irrigation) and livestock farming. The regulating action of the irrigation ponds in times of low rainfall is vital for irrigated agriculture, and they benefit many farmers.

References and Links

AGRIWATER Project Case Studies. https://learning.agriwater.eu/case-studies

B.C. Ministry of Agriculture (2018): Agricultural Co-operatives: A start-up guide. https://www2.gov.bc.ca/assets/gov/farming-natural-resources-and-industry/agriculture-and-seafood/business-and-market-development/6877_agricultural_co-op_start_up_guide_web.pdf

Cooperatives Europe. https://coopseurope.coop/

FAO (1998). Agricultural Cooperative Development. A manual for trainers. http://www.fao.org/3/a-x0475e.pdf

USDA (2011): Understanding Cooperatives: How to Start A Cooperative. https://www.rd.usda.gov/files/CIR45-14.pdf

AGRIWATER project has been funded with the support from the European Commission, with the reference number 2020-1-CZ01-KA204-078212. The content of this website reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

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