Chapter 12 Marketing by Farmer Groups: Collective Action

 By acting jointly, farmers can achieve marketing objectives they cannot achieve by acting separately  Goals: –To improve demand –To regulate supplies and qualities more in keeping with demand –To improve competitiveness and efficiency in the marketing channel –To gain more channel control and leadership

Generic Promotion  Promotion of a particular commodity financed collectively by producers  Includes advertising and other activities to increase demand  Purpose: to change demand and raise price

Possible Short- and Long-Term Impacts of Generic Promotion

Program for Generic Promotion  Clear, measurable objectives  A strategy fitting commodity, marketing system, buyers’ attitudes  Use of professional advertising agency  Sufficient money to achieve objectives  A program to evaluate results

Marketing Cooperatives  Cooperative: a user-owned and controlled business from which benefits are derived and distributed equally on the basis of use  Differ from investor-owned firm (IOF)  Types of cooperatives: –Federated –Centralized –A combination of federated and centralized

Top 10 Cooperatives, by Revenue

Goals of Marketing Cooperatives  Provide efficient marketing outlets  Expand demand for members’ commodities  Provide better coordination between production and consumption  Provide more dependable market outlets  Achieve channel leadership, including vertical integration

Societal License to Marketing Cooperatives  Continues to evolve, but main features cast by Capper-Volstead Act of 1922  Fairly exempt from antitrust legislation –Secretary of agriculture empowered to intervene with any coop he finds to be raising prices unduly  Income tax laws recognize unique non- profit nature of cooperatives

Problems of Managing a Coop  Raising capital  Recognizing that patron-owners may make management challenging  Distinguishing duties of directors and managers  Managing competition with other cooperatives

Criteria for Successful Marketing Coop  Requirements: –Run a viable business –Keep producers in control of the board –Keep board in control of coop  Expected accomplishments: –Increased demand at farm level for the marketed commodity –Assurance for members that they have dependable market access, power and influence in marketing channel that they can protect in the future

New Generation Cooperatives  Distinct business from traditional coop  Principles of new generation coops: –Closed membership –Upfront equity position by members –Delivery rights in proportion to equity position –Transferability of delivery rights and existence of market for delivery rights –Possibility of immediate return of profit to members

Farmers’ Bargaining Groups  Bargaining association: coop that represents its members by collectively negotiating terms of trade but does not engage in physical aspects of marketing  Association has most clout when in control of commodity  Processors may resist dealing with associations

Societal License to Farmer Bargaining  Basically same as for cooperatives  Agricultural Fair Practices Act of 1967 (S.109), intended to win solid protection for farmers, was weakened by strong processor lobbying  Farmer bargaining purely voluntary on both sides (farmers and processors)

Class Exercise  For assigned commodity, provide an example of how producers are working collectively to market or add value to the commodity