Evaluating a New Payment System for a Processing Cooperative

This paper examines the potential benefits of introducing a new payment scheme in a sugarcane processing cooperative. Findings suggest that a use-value payment system would increase individual and total members’ net returns significantly over a sugar-based system. The proposed payment system would change the incentive structure so varieties with higher processing quality would become more appealing. In addition, the cooperative plant would be used more uniformly throughout the processing season and payments to members would be more consistent with their contribution to cooperative surplus.