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Journal of Agricultural & Food Industrial Organization

Ed. by Azzam, Azzeddine

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The Cooperative Yardstick Revisited: Panel Evidence from the European Dairy Sectors

Markus Hanisch
  • Division of Cooperative Sciences, Department of Agricultural Economics, Humboldt-Universität zu Berlin, Berlin 10099, Germany
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/ Jens Rommel
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  • Division of Resource Economics, Department of Agricultural Economics, Humboldt-Universität zu Berlin, Berlin 10099, Germany; Leibniz Institute of Agricultural Development in Central and Eastern Europe, Halle, Germany
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/ Malte Müller
  • Division of Cooperative Sciences, Department of Agricultural Economics, Humboldt-Universität zu Berlin, Berlin 10099, Germany
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Published Online: 2013-12-03 | DOI: https://doi.org/10.1515/jafio-2013-0015

Abstract

Milk is an important agricultural product that has traditionally been processed by cooperatives. Across member states of the EU-27, however, large variation exists between the national market shares of cooperatives in dairy processing. Theoretical models suggest that a strong cooperative sector secures competitive regional prices for agricultural produce. Empirical studies which seek to quantify these effects are rare though. We use panel data to study the impact of cooperative strength – measured by market shares – on national farm gate milk prices in the EU-27 for the period from 2000 to 2010. Our results reveal a positive effect of cooperative market share on price that is relatively large and robust over different specifications of the econometric model. We conclude that dairy cooperatives have a pro-competitive effect and that exemptions for cooperatives from anti-trust regulation may be justified.

Keywords: EU-27; common agricultural policy; competition; cooperative yardstick; dairy farming

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About the article

Published Online: 2013-12-03


In the following, we use the terms “cooperative yardstick” or “cooperative yardstick effect” for referring to the set of theoretical contributions holding that cooperatives have a pro-competitive effect on prices in markets with imperfect competition. Most commonly, the terms “competitive yardstick”, “competitive yardstick effect”, or “competitive yardstick school of cooperative thought” are used in the literature (cf. Fousekis 2011; Sexton 1990; Staatz 1989; Cotterill 1984, 1987). Some authors (e.g. Fowler 1948) have also used the shorter “cooperative yardstick” when describing the phenomenon with regard to agricultural or consumer cooperatives.

The variable was calculated the same way for all member states. Additional information on calculation of this variable at the level of member states is available in the Handbook for EU Agricultural Price Statistics (Eurostat 2008). Summary statistics on variation across states and years are available from the authors on request.

One drawback of our approach is that these data were available only for 2010. We have thus implicitly assumed that the market share of cooperatives has been historically determined and stable over time.

Within this project, a national report on agricultural cooperatives was written for each of the 27 member states by academic experts. As part of these reports, experts were asked to provide information on the market shares of major agricultural sectors, including dairy, for 2010. Through discussions within the project, it turned out that for two countries – Belgium and the United Kingdom – the country experts provided very low estimates. After checking these figures with respective national cooperative umbrella organizations, they were subsequently corrected.


Citation Information: Journal of Agricultural & Food Industrial Organization, ISSN (Online) 1542-0485, ISSN (Print) 2194-5896, DOI: https://doi.org/10.1515/jafio-2013-0015.

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