Understanding member characteristics and cooperative price effects: the case of the Argentinean dairy sector

Abstract

Since the 1990s, Argentinean dairy-processing cooperatives have lost considerable amounts of members and market share. We analyse their current role by investigating the characteristics of farmers who continue delivering to them and price differentials between cooperatives and investor-oriented firms (IOFs). A probit regression model applied to 917 farmers suggests that cooperative farmers are more disadvantaged than farmers delivering to IOFs in terms of education, farm size and productive technology. Moreover, t-tests applied to data representing 70 per cent of national volume indicate that farmers delivering to cooperatives are between 11 per cent and 29 per cent smaller than those delivering to IOFs, depending on province. A hierarchical multilevel regression model applied to 9,720 transactions among farmers and processors shows that, after controlling for quantity and quality, cooperatives pay lower (3.5%) but more stable prices than IOFs. In a context of rapid structural change, we observe a market in which larger farmers deliver to IOFs and smaller farmers deliver to cooperatives and conclude that, at the expense of paying lower prices, cooperatives may act as buyers of last resort for otherwise disadvantaged farmers.