VARIATION IN FARM GATE MILK PRICES AND THE COOPERATIVE YARDSTICK REVISITED – PANEL EVIDENCE FROM THE EUROPEAN DAIRY SECTORS

With an average market share of about 57%, the European dairy industry is dominated by cooperatives. Large diversity exists in the importance of cooperatives across the EU-27. The cooperative yardstick school of thought suggests that agricultural cooperatives drive competition towards efficiency and “fair” prices. We revisit this argument by analyzing, whether the relative strength of cooperatives in dairy, as measured by market share, explains price variation in average national farm gate milk prices in the EU-27. Our panel data analysis shows that milk prices increase with member states´ market share of cooperatives, when controlling for GDP, fodder prices and new member states. We relate these findings to the policy debate on agricultural cooperatives and conclude that policies promoting cooperatives have the potential to increase farmer welfare