26
R. F. Barreiros et al.
their interests, or sought the achievement of the cooperative objectives, as an organization acting independently of its members, having the vision of collective interests,
not always convergent with all individual interests.
Staatz (1989) states that Stephen Enke started a different discussion, but perfectly
adherent to real conditions, when he said that on the day-to-day of a cooperative, its
administration is faced with situations in which decisions must be made, based on
choices often antagonistic with each other, of what should be maximized between
the interests of the members and the own cooperative’s needs. From this discussion
arose studies based on the approach of cooperatives as independent organizations
with their own goals and as variants of IOFs.
Enke’s model emphasized that the cooperative’s management would have to
balance the benefits received from two different sources to maximize the result of
the members. Initially, the benefits received by members, derived from its operations with the cooperative, as it can provide lower prices for purchased inputs and
higher prices for products sold by members. In addition to these primary benefits
that are pursued initially by the members, another type of interest should be considered, derived from the adding value process provided by the cooperative for products
delivered by the members. That is, benefiting the products delivered and operating
in market conditions, the cooperative would offer financial returns derived from a
lucrative business in different markets (Staatz 1989).
Prioritizing benefits focusing on just one of these financial sources of return would
tend to reduce the overall returns for the members. That is, focusing only on the
returns derived from the operations of the members with the cooperative, could limit
the cooperative’s capitalization in the long term, with effects on competitiveness and
future returns for its members. On the other hand, focusing only on the strengthening of the cooperative at the expense of short-term economic advantages for the
members could significantly compromise the return of individual members’ farms.
Enke, therefore, emphasized a crucial specific implication of cooperative organizations: the need to balance the benefits of members as users and as owners of the
cooperative (Staatz 1989).
Another important concept related to cooperatives is their ability to regulate prices
in imperfect markets. This concept in literature is defined as the competitive yardstick,
which benefits the whole market, both cooperative and non-cooperative members.
Hoffman and Royer (1997) state that:
Farmer cooperatives have benefited from favorable public policies because they generally
are perceived as procompetitive forces that improve the performance of imperfect markets
and increase general economic welfare (Sexton and Iskow). Central to this notion is the
“competitive yardstick” concept, which maintains that the existence of a cooperative in a
market will force profit-maximizing firms to behave more competitively. The logic behind
the yardstick is that the cooperative will offer farmers more favorable prices because of
its practice of providing members service at cost price. Competing firms must match the
cooperative’s performance to avoid losing patrons to it. Consequently, the market will move
toward competitive equilibrium.
R. F. Barreiros et al.
their interests, or sought the achievement of the cooperative objectives, as an organization acting independently of its members, having the vision of collective interests,
not always convergent with all individual interests.
Staatz (1989) states that Stephen Enke started a different discussion, but perfectly
adherent to real conditions, when he said that on the day-to-day of a cooperative, its
administration is faced with situations in which decisions must be made, based on
choices often antagonistic with each other, of what should be maximized between
the interests of the members and the own cooperative’s needs. From this discussion
arose studies based on the approach of cooperatives as independent organizations
with their own goals and as variants of IOFs.
Enke’s model emphasized that the cooperative’s management would have to
balance the benefits received from two different sources to maximize the result of
the members. Initially, the benefits received by members, derived from its operations with the cooperative, as it can provide lower prices for purchased inputs and
higher prices for products sold by members. In addition to these primary benefits
that are pursued initially by the members, another type of interest should be considered, derived from the adding value process provided by the cooperative for products
delivered by the members. That is, benefiting the products delivered and operating
in market conditions, the cooperative would offer financial returns derived from a
lucrative business in different markets (Staatz 1989).
Prioritizing benefits focusing on just one of these financial sources of return would
tend to reduce the overall returns for the members. That is, focusing only on the
returns derived from the operations of the members with the cooperative, could limit
the cooperative’s capitalization in the long term, with effects on competitiveness and
future returns for its members. On the other hand, focusing only on the strengthening of the cooperative at the expense of short-term economic advantages for the
members could significantly compromise the return of individual members’ farms.
Enke, therefore, emphasized a crucial specific implication of cooperative organizations: the need to balance the benefits of members as users and as owners of the
cooperative (Staatz 1989).
Another important concept related to cooperatives is their ability to regulate prices
in imperfect markets. This concept in literature is defined as the competitive yardstick,
which benefits the whole market, both cooperative and non-cooperative members.
Hoffman and Royer (1997) state that:
Farmer cooperatives have benefited from favorable public policies because they generally
are perceived as procompetitive forces that improve the performance of imperfect markets
and increase general economic welfare (Sexton and Iskow). Central to this notion is the
“competitive yardstick” concept, which maintains that the existence of a cooperative in a
market will force profit-maximizing firms to behave more competitively. The logic behind
the yardstick is that the cooperative will offer farmers more favorable prices because of
its practice of providing members service at cost price. Competing firms must match the
cooperative’s performance to avoid losing patrons to it. Consequently, the market will move
toward competitive equilibrium.