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The cost of joining forces: the impact of collective organizations on dairy prices and costs

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  • Vigani, Mauro
  • Curzi, Daniele

Abstract

The progressive reduction of CAP intervention and the abolition of milk quotas in 2015 is provoking a shift in the governance of milk supplies giving a greater role to supply chain arrangements. However, the unbalanced power within the supply chain reduces the negotiating power of individual farmers, exposing them to market risks and unfair trade practices. Collective organizations are considered a viable solution for increasing farmers protection within the supply chain. This paper analyses the impact of supply agreements between dairy farmers and collective organizations on milk prices, production costs and mark-up in England using survey data from 200 dairy farmers in Devon and Somerset. We use a coarsened exact matching model to estimate average treatment effects and logistic regressions to explain the differences in costs, prices and mark-up. Results show that UK farmers selling milk to collective organizations receive 4.4% lower prices and have 17% higher production costs. Farmers selling to collective organizations seek stable market access and protection and at this end they are willing to accept price volatility, higher costs and financial exposure which can be faced through higher predisposition in taking financial risks.

Suggested Citation

  • Vigani, Mauro & Curzi, Daniele, 2021. "The cost of joining forces: the impact of collective organizations on dairy prices and costs," 95th Annual Conference, March 29-30, 2021, Warwick, UK (Hybrid) 312055, Agricultural Economics Society - AES.
    • Handle: RePEc:ags:aesc21:312055
    DOI: 10.22004/ag.econ.312055
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    Cited by:

    1. Hyejin Lee & Johan Swinnen & Patrick Van Cayseele, 2021. "Market power and the volatility of markups in the food value chain: the role of Italian cooperatives," Working Papers of LICOS - Centre for Institutions and Economic Performance 674093, KU Leuven, Faculty of Economics and Business (FEB), LICOS - Centre for Institutions and Economic Performance.
    2. Federica Di Marcantonio & Enkelejda Havari & Liesbeth Colen & Pavel Ciaian, 2022. "Do producer organizations improve trading practices and negotiation power for dairy farms? Evidence from selected EU countries," Agricultural Economics, International Association of Agricultural Economists, vol. 53(S1), pages 121-137, November.
    3. repec:lic:licosd:42421 is not listed on IDEAS

    More about this item

    Keywords

    Demand and Price Analysis; Production Economics;

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