Agricultural cooperatives are a hugely beneficial method of organizing a sector that remains largely unorganized in underdeveloped and developing countries. While this system isn’t perfect by any means, it can be a steady and reliable method for farmers to reduce the uncertainties related to their profession.
In the following article, we discuss the specifics of agricultural cooperatives, take a look at its major subcategories, and highlight its many benefits.
Agricultural cooperatives are a collection of producers, traders, or suppliers in the agricultural sector, coming together to work with a common motive and agenda. Their primary aim involves maximizing profits, capturing greater market shares, and accessing higher volumes of supplies.
There is real strength in numbers when it comes to agricultural cooperatives. The more individuals within a given segment come together, the greater the levels of success usually achieved by the group. When a large group of traders, for example, come together to form an agricultural cooperative, they stand a better chance of competing with massive industrial corporations in their region.
There are four major principles followed by agricultural cooperatives that set them apart from other business models. This includes:
Some of the various types of agricultural co-ops include:
There are many advantages to be gained for members belonging to agricultural cooperatives. Some of the most notable ones are mentioned below:
Unlike most for-profit organizations around the world, the primary purpose of agricultural cooperatives isn’t centered around the motive of profit maximization. Instead, the attention is firmly set on the members and providing them with as many benefits as possible. Specifically, the benefits stem from the various services provided by not just members within the cooperative, but from neighboring cooperatives as well.
It becomes easier for members to secure important elements such as materials and products at a reasonable price when working with a large co-op. It also helps members access larger segments of markets that would otherwise be closed off to them
Members of agricultural co-ops have the freedom and authority to elect anyone they deem fit to represent them in the board of directors. They can also stand for elections if they believe they are the ideal candidate for a given role. Once elected, they often have to take on the responsibility to ensure the smooth functioning of the cooperative in the short and long run.
Elections are often held annually in agricultural co-ops to ensure that the ideal candidates always take the right post and there is ample circulation within the working members. They also have the option of assigning a CEO to further facilitate the smooth functioning of the organization.
By law, it is a guarantee that agricultural sectors can operate independently from both private and public sectors. Most countries also provide these co-ops the benefit of receiving exemption from antitrust laws. Technically speaking, this ensures that governments do not hold any sway when it comes to the administrative and economic functioning of co-ops. This allows them to operate freely and independently, and to pass policies that always uphold their best interests.
Agricultural co-ops also have the authority to deny membership to certain individuals and groups if they believe that the new members will not be able to operate keeping in mind the best interest of the larger group. This ensures that the overall vision and planning of the co-op is never diluted.
The patronage is essentially the share of the overall profits achieved by the agricultural cooperative across the year. The division of this patronage is always done proportionally, keeping in mind the input, effort, and activity offered by each member during the given time frame.
Plainly speaking, if all the farmers put in the same amount of effort through the year, they reap equal dividends from their work. Conversely, if one individual or set of individuals has contributed greater amounts in any parameter, they are also due to receive a greater amount of patronage.
The idea of one for all and all for one really stands true when it comes to cooperatives. As all the members are in the same boat, they attempt to work with the highest levels of integrity and look out for the best interest of the larger group. This level of dedication, coupled with diluting risks among a large number of individuals, ensures that the overall risk of being a farmer is greatly mitigated.
There are a few negatives to consider as well before one becomes a part of an agricultural cooperative. One of the most notable disadvantages involves the financial structure of this module. As all the investments going into the functioning of a co-op comes from the members, the flipside is that members are also liable to share all the losses if things don’t pan out according to plan.
The agricultural sector has been unorganized for a majority of our collective history, but cooperatives are an excellent method of providing greater levels of security and control to farmers. When farmers unite for their cause, they are capable of achieving truly incredible results. With a greater level of support and assistance from governments, cooperatives can stand up to the larger corporations and support themselves independent of outside intervention.