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Agricultural cooperatives in post-socialistic countries often fail to justify their purpose. Lack of trust and social capital are plausible reasons. The aim of this paper is to map the relationship structure of farmers in region where operational cooperative exists. The Social network analysis demonstrates low levels of social capital however, the cooperative acts as valuable information provider for its members, serving as information mediator to the rural development program’s resources, required for farmers’ investment initiatives. This is a positive evidence for small-scale farmers and a step forward in motivating changes of farmer’s attitudes towards cooperation and re-establishment of agricultural cooperatives.

Forming and using cooperatives as marketing channel is usually advised to African smallholder farmers for overcoming the constraint of market access. However, limited evidence of cooperative behavior in marketing has been observed. In this paper, we estimate a two-stage model of commitment to cooperatives by cashew nut farmers in Benin, West Africa. In the first stage, we use data on 109 non-members and 168 members and estimate a binary Logit model of farmer’s discrete choice with respect to committing to membership. In the second stage, we use the members’ data to estimate a Tobit model of the proportion of produce delivered to the cooperative, after controlling for the endogeneity of the proportion of presales. Empirical results reveal that the commitment to membership depends on the assessment of prices offered by the marketing channels, the farmer’s preferences for the specific attributes of the channels, the total farm size, and some psycho-sociological factors; the commitment to business depends on prices and transaction costs in the channels. Our findings call cooperatives for improving commitment by considering the subjective and economic reasoning of the farmers, and setting formal contracts between members and their organization.

While mergers, both horizontal and vertical, have been shaping the landscape of the agri-food industry in Europe, the implications of the changing market structure on the level of innovation has not been studied yet. In this paper we deal with the link between innovation and market structure using the empirical example of the Danish agri-food industry. The purpose of this paper is two-fold. First we test for the importance of vertical integration on innovation. While there exist several studies on this linkage, to our knowledge, this is the first that deals with the agri-food industry. Secondly, we examine both product proliferation and innovation. To our knowledge, there are no other similar studies that examine both aspects using the same data set. We follow the hypothesis put forward by Armour and Teece (1980) that vertical integration enhances technological innovation, mainly because vertical integration may resolve hold-up problems. Our paper is related also to recent work by Weiss and Witkopp (2005) on the German food industry, although their work is mostly related to the role of the retail sector. We are able to examine both innovation (measured as investment on R&D) as well as product proliferation (measured as number of new products). We also examine the effects of network relationships and the importance of countervailing power. We use data from an extensive survey of 444 Danish firms over two years, 2000 and 2005 to estimate two different models: a bootstrapped zero-inflated Poisson regression and a robust Heckman sample selection model. The results verify the hypotheses formulated for both models with various degrees of significance.

We apply a formal theoretical model of adaptation to two empirical settings within the agri-food industry: specialized pig production and food safety in Denmark. The objective is to allocate decision rights ex ante so that actual decisions taken ex post will optimize the profit accruing to the two parties in a contractual or integrative relation. Two applications are presented in this paper: First an actual partnership between two pork producers in Denmark. Based on detailed budgets we develop detailed schedules for the “reneging temptations” of the two partners- These are the temptations to renege on the contract during the evolution of the partnership. Using a model developed by Baker, Gibbons and Murphy (2006) we calculate equilibria using the Folk theorem in order to determine which is the best allocation of decision rights. We find that the existing allocation of decision rights in the case we examine is efficient in the sense that it results into a second best allocation. Using the same modelling approach we present a second application on salmonella control related to end-feeding, that is, salmonella contamination of pork due to filled bellies of pigs fed for the last 12 hours before delivery. Based on appropriate assumptions, the parties should give the decision right (whether to end-feed or not) to the slaughterhouse in order to reach the firstbest solution which, given the assumptions, is feasible

The organization of primary agriculture is dependent upon whether the institutions of a country allow for reverse franchising by farmers. If the transaction costs of managing a farm can be minimized by farmers conducting a form of collective action, such as cooperatives, then the size of farms will be smaller. If farms have to make the products in the firm, which are subject to very large economies of scale than super farms will be the result. The key is the existence of institutions, such as collective action and property rights, that allow for the minimization of costs. For this reason the organization of primary agriculture is, among other things, a public policy issue. In this paper we develop this argument, we sketch a theoretical framework based on a model of adaptive relational contracts, and we present two illustrative examples: the Danish cooperative system, and the Canadian Wheat Board.

In the competition between supply chains, governance structure and coordination mechanisms can be as important as cost-efficiency. Flexible and non-committing contracts among upstream suppliers in cooperative alliances may lead to lower chain surplus through internal competition and renders the coordinator's position vulnerable for hostile take-overs. Cooperative supply chains are found in e.g. food industry, banking services, lawfirms and brokerage. The downstream processing or brand is owned collectively by the suppliers or service-providers. The supplier are linked to the chain by strong delivery (channel) rights and volume-based revenue-sharing schemes. The governance is flexible, promotes entry and market expansion. However, the decentralized decision making comes at a cost in terms of chain performance and resilience. A dynamic two-chain model with a captive and competitive market addresses the particular situation where the competing chain aggressor has a cooperative governance structure. The overt aggression at merger may have more to do with shortcomings in the managerial incentive structure than with the pursuit of market power. The results from the dynamic game is illustrated with empirical findings among dairy cooperatives in Denmark.

In the competition between supply chains, governance structure and coordination mechanisms can be as important as cost-efficiency. Flexible and non-committing contracts among upstream suppliers in cooperative alliances may lead to lower chain surplus through internal competition and renders the coordinator's position vulnerable for hostile take-overs. Cooperative supply chains are found in e.g. food industry, banking services, lawfirms and brokerage. The downstream processing or brand is owned collectively by the suppliers or service-providers. The supplier are linked to the chain by strong delivery (channel) rights and volume-based revenue-sharing schemes. The governance is flexible, promotes entry and market expansion. However, the decentralized decision making comes at a cost in terms of chain performance and resilience. A dynamic two-chain model with a captive and competitive market addresses the particular situation where the competing chain aggressor has a cooperative governance structure. The overt aggression at merger may have more to do with shortcomings in the managerial incentive structure than with the pursuit of market power. The results from the dynamic game is illustrated with empirical findings among dairy cooperatives in Denmark.

Since March 1999 the two largest dairy cooperatives of Denmark, MD FOODS and KLOVER MAELK have merged after a long relationship ranging from joint ventures (such as the P-AMBA and M-AMBA companies) to various alleged price wars. We point out that the main reasons for merger from the point of view of MD FOODS were: (i) to establish monopoly power on the domestic market, (ii) to pursue an international growth strategy, (iii) to exploit rationality and coordination gains in the operations. Further, the merger counters the threat of (iv) an alleged foreign take-over of KLOVER, (v) further pressure by the Danish Competition Authority, and (vi) the increased concentration through mergers taking place in the dairy and retail industries in Europe. The post-merger period exhibits some signs of price increases, mainly in the fermented milk market, whereas the price of fresh milk is still to catch up. Questions still remain as to the long term implications of the merger: Will the retailers react by importing milk and dairy products from Germany, The Netherlands, Sweden or elsewhere? General questions still remain as to the governance problems in large cooperative organisations. Relations between farmer-members and management went through a critical test. Since MD FOODS is now openly flirting with yet another merger, this time with Swedish ARLA, these problems may perpetuate. In addition, it is not certain whether this time they will overcome as easily as they have up to now European and national anti-trust regulation.