Agricultural Co-operatives and the Rationale behind Their Existence: Australian Perspective

Abstract

Though modern co-operatives have long history in contributing to low income group workers, producers and consumers, they are overlooked by the mainstream economic literature. The rationality of these business organizations had been questioned especially during the deregulation of the economy. On the other hand, there has been renewed interest on the co-operative business model since the Global Financial Crisis (GFC). Desktop review approach is used to collect both quantitative and qualitative data from Australian dairy industry and analyze the rationality of the co-operative business model in the industry. Whilst global picture of dairy industry shows a strong involvement of co-operatives in the market, the Australian situation is different. The dairy co-operatives in Australia have lost its dominance in the market to just about 5% since the deregulation of the market in the 1990s. This confirms the rationality of co-operatives is misunderstood in the industry. However, experiences from Murray Goulburn co-operative indicates that co-operatives have the rationality to exist in the business. For instance Murray Goulburns’s farmgate milk price has been 17.7% above the Victorian average milk prices between 2006 and 2012 which indicates that co-operatives can still have enough space in the dairy industry. This is on top of the dividend distribution made by the co-operative, supply of farm inputs to members at competitive price and supply of milk without quota.

Keywords: Co-operatives, business model, rationality, Murray Goulburn, Australia