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ABSTRACTWhile the capital structure irrelevance proposition is the point of departure in corporate finance, it is unknown if debt‐or‐equity decisions matter to farm producer organizations. To inform decisions of capital acquisition, a panel study is conducted to estimate the relationships of different types of debt (current, long‐term) and equity (allocated, unallocated) to the financial performance of 707 farm producer organizations in the United States during the 2005–2011 period. Using 3,120 observations, the panel analysis indicates net sales in period t is increased by $1.97, $9.59, and $4.01 with an addition of $1 in current debt, allocated equity, or unallocated equity in period t‐1. Furthermore, the magnitude of the positive relationship of an additional dollar of allocated (unallocated) equity to net income is estimated at $0.32 ($0.14). We thus reject the notion managers and directors of farm producer organizations should decide to use debt or equity with a coin toss.

AbstractEmpirical evidence of the benefit of farm producer organizations (FPOs) in the developing world is mounting. There is, however, no work in South America on the relationship between FPO membership and farm‐level performance. We address the gap by estimating the treatment effect of FPO membership with respect to three outcomes: quantity produced, quantity sold, and price received. The empirical application focuses on the Peruvian coffee sector, where FPOs may have played an important role during the recent price crisis. A sample of approximately 9,000 survey responses from Peruvian coffee producers during the 2015–19 period is used in the analysis. Results show a positive treatment effect of FPO membership on all three farm‐level outcomes. Compared to non‐FPO members, FPO members produced 120–295 kg/ha more, sold 118–296 kg/ha more, and received 0.42–1.53 PEN/kg more. We also find evidence of heterogeneity in the estimated effect of FPO membership across time, farm size, and membership probability. The findings yield novel implications in terms of policy support for FPOs.

ABSTRACTA new organizational form, the new generation cooperative (NGC), emerged in the United States during the 1990s as farm producers came together to collectively add value to raw farm commodities. As compared to the traditional cooperative, the NGC facilitates a strong market orientation by defining membership and requiring high supply and equity capital commitments. Approximately 100 such value‐added ventures formed during a period called 'cooperative fever', but public and producer interest dissipated in the 2000s. With secondary data collected from print media publications, we conclude that many of the original NGCs exited by means of bankruptcy or liquidation because of challenges common to most business organizations. However, other failures and conversions of large, successful NGCs also indicate an inherent equity and liquidity constraint, suggesting a limited ability of the organizational form to drive complex and capital‐intensive value‐added ventures. We conclude by raising possible conditions for the future viability of producer‐owned business organizations in the value‐added agri‐food industry.

ABSTRACTThe empirical literature on farmer cooperatives is now fast emerging and developing in the areas of performance, ownership and governance, finance, and member attitude. We discuss 56 peer‐reviewed publications to illustrate the main findings and conclusions while outlining challenges and opportunities for future research. Generally, cooperative membership is found to positively impact price, yield, input adoption, income, and other indicators of member performance, yet there is growing evidence of an uneven distribution of benefits for small and large producers. In terms of structure, evidence of a causal relationship of ownership and governance to performance has been elusive, yet there are now many findings of inherent equity and long‐term debt constraints, often in the context of consolidation to drive scale and scope economies. Further inefficiency is observed to be driven by increased heterogeneity in member attitudes and objectives, in particular in terms of commitment and participation. Thus, overall, empirical work portrays farmer cooperatives as flawed and complex business organizations which nonetheless have a strong positive impact on its members. While applied research may progress in various directions, a general improvement in empirical methodologies is needed to allow robust analysis of mixed objectives in dynamic environments.

Common property institutions in natural resource management are often analysed by means of Ostrom's framework of design principles. Recently, the design principles have been generalised to study human groups in other collective action scenarios, including farm producers who collectively buy inputs or sell outputs. Several case studies have conceptualised farmer cooperatives as common property institutions to study how various collective action scenarios have been approached. We contribute to the scarce literature with a field study in the Upper West Region of Ghana, using Ostrom's framework to compare the design principles of active and inactive farmer cooperatives. Using the mean group comparison method, we find numerous significant differences as active farmer cooperatives have clearer boundaries, require more capital investments, have more active board directors and managers, receive more governmental support, and have more locations. However, not all design principles are significantly different for active and inactive cooperatives (e.g. sanctions, legal rights). Considering our results, we perceive opportunities to formalise the conceptualisation of farmer cooperatives as common property institutions with both internal and external design principles. Our results also have policy implications in terms of top-down initiatives to spur collective action by Ghanaian farm producers.

AbstractThe study describes the ownership and governance characteristics and the challenges of farmer‐based cooperative societies from three districts in the Upper West Region of Ghana. Primary data were obtained from 59 active and 14 inactive cooperatives in the selected districts. The study concludes that Ghanaian cooperatives in the sample bear much resemblance to the traditional form which emerged in Europe and North America in the late 19th and early 20th centuries. Generally, such cooperatives have relatively small memberships from local communities who use a democratic governance system and do not delegate control to outsiders. While the cost of owning and transacting is limited with such characteristics, many traditional cooperatives lack the specific knowledge, economic efficiency, and resource endowment necessary to become or remain competitive. Indeed, the active cooperatives listed finance, access to inputs, tractor services and poor leadership as key challenges, while inactive cooperatives blamed poor member commitment as the primary culprit for their inactivity. Efforts aimed at promoting and supporting farmer cooperatives should focus on addressing these key challenges. Also, financial and technical support should probably be conditional on group performance and not group formation itself.

AbstractThere are few empirical explanations for the decreasing number of cooperatives in the agricultural sector. To address the gap in the literature, we investigate the incidence of mergers and acquisitions (M&As) and liquidations and dissolutions (L&Ds) among more than 1000 farmer cooperatives in the United States for the 2010–2020 period by means of survival analysis within a competing risk framework. According to our novel results, M&As are more common than L&Ds, corresponding to exit strategies of larger farmer cooperatives to achieve scale and scope economies. The incidence of L&Ds is almost entirely driven by size as relatively small cooperatives are more at risk. Implications and future research directions are discussed in the conclusion.

AbstractIn many countries, farmer cooperatives have been successful at facilitating access to markets in conditions of imperfect competition for a long time. However, modern farmer cooperatives have only been operational in Romania since 2005, and their development is slowed by several internal and external conditions. In the absence of empirical evidence of possible explanations for alleged shortcomings in the growth of farmer cooperatives in Romania, applied research is necessary to inform recommendations for practitioners, policymakers, and other stakeholders. Using financial data from 1,426 farmer cooperatives in Romania for the 2017–21 period, we estimate a double hurdle panel model of the probability and the intensity commercial activity with annual revenue as the variable of interest. All else equal, annual revenue increased in 2020 and 2021 relative to 2017, which to some extent refutes observations of underdevelopment. Although the membership size of farmer cooperatives in Romania is relatively small, its relationship to the probability and the intensity of commercial activity is positive. The relationship of age to the probability and the intensity of commercial activity is ∩‐shaped, which may imply a relatively short lifespan for farmer cooperatives in Romania. Possible explanations are member opportunism and double taxation misunderstandings, but further research is necessary to generate more insights.