Specialization of Agricultural Cooperatives and Prospects for the Development of Cooperative Relations

This paperanalyzes the function ofagricultural cooperatives in promoting farmers economic efficiencyand integration into markets. Using a two-stage analytical framework, the first stage involves estimation of farmers’ cooperative membership probability by logit regression model and second stage due to assessment of income following such membership is achieved by Ordinary Least Squares (OLS) regression. The results suggest that financial security, access of technological resources, exports profitability and knowledge about the benefits from cooperative participation positively influence the odds of being a member; while distrust negatively impacts them. The agricultural cooperatives in turn play their role in resource pooling, access to financial and technical resources; they could provide systemic arrangements for production and marketing activities, that would ultimately improve the competitive edge of the farmers within domestic as well as international markets. They conclude that being member to cooperatives might be linked to higher mechanization, growth in income and access to market. Both logit and OLS estimations confirm the argument that cooperatives are very essential institutional arrangements which serve as channel to integrate small- and medium-held farmers into wider market networks as well as part structures and agencies of development in support of sound socio-economic livelihood. Export participation, financial solvency and technical support emerged as leading factors of member livelihood growth. Therefore, the favorable environment that would encourage and guide the formation of agricultural coops should be a focal concern in our theory of agricultural policy. Furthermore, the analysis estimates that production efficiency could rise by 18–22%, and average incomes by approximately 30% if at least 60% of farmers in the agricultural sector become members. Membership in cooperatives also helps to reduce the risks that arise from logistics issues, quickens the process of exports and facilitates pre-pricing contracts on a contract basis all of this results in the reduction of economic risks for farmers. Agricultural cooperatives, on the whole, are indispensable for generating rural employment and maintaining economic sustainability, providing linkages to market and sustainable agricultural development through aggregating numerous fractured smallholdings into consolidated competitive market entities.