Food Manufacturing Activities of the Largest Agricultural Cooperatives:

Market Power and Strategic Behavior Implications
 

          Agricultural cooperatives are often described as vertical extensions of the farm enterprise. Their primary purpose is to provide services to their member-users on a nonprofit basis. These services range from the provision ofproduction inputs through the entire set of assembling, processing, and marketing services required to deliver their agricultural products to final consumers. Of course, cooperatives are not the only providers of either farm inputs or marketing services. Typically they compete with noncooperative firms and in some cases with other cooperatives.
          The Capper-Volstead Act granted agricultural marketing cooperatives limited exem ption from the antitrust laws. As some agricultural cooperatives have evolved into large organizations that hold important market positions, there have been periodic challenges of the justification for this exemption (Jesse). The National Commission for the Review of Antitrust laws and Procedures specifically considered the antitrust treatment of agricultural cooperatives (Mueller). The Commission concluded "that the threat of monopoly by some cooperatives is now substantial" (Vol. I, p. 259). The Commission recommended: "The antitrust treatment of (agricultural) cooperatives once formed ...should be similar to that of ordinary business corporations. Specifically,mergers, marketing agencies in common, and similar agreements among cooperativesshould be allowed only if no substantial lessening of competition results"
(p. 253). The Commission, however, recognized that the unique characteristics of cooperatives warranted more lenient standards for mergers and agreements among cooperatives than among investor-Dwned firms.

Originally published in  journal of agricultural cooperation   Volume 5, 1990