The effect of farmers’ cooperatives on price stabilization in the dairy sector

The imbalances in bargaining power between the contracting parties in the food supply chain have drawn much attention, also from policy makers. The European Commission is committed to facilitate the restructuring of the sector by encouraging the creation of voluntary agricultural producer organisations. DG Agriculture and Rural Development has launched a large study, “Support for Farmers' Cooperatives”, that will provide the background knowledge that will help farmers organise themselves in cooperatives as a tool to consolidate their market orientation and so generate a solid market income. In the framework of this study, this report provides information on cooperatives’ ability to stabilise producer prices in order to avoid harmful effects from world market commodity price fluctuations into farm level. In this case study, the following research questions have been guiding the research. First, what is the nature of fluctuation in dairy prices in Europe? Second, how is the dairy market integrated horizontally, i.e. has the price fluctuation similar patterns in different EU countries? Third, how is the price fluctuation in the commodity market transmitted to producer prices? And finally and most importantly, have the cooperatives been successful in stabilizing producer prices and do the cooperatives behave differently from investor owned firms (IOF) when setting the producer price?