Abstract

The Swedish dairy industry is struggling to adjust to disruptive changes in the political economy of agriculture. In 1990 the government abolished its long-standing protective support of agriculture. The process of liberalization was, however, interrupted after a couple of years as Sweden applied for membership in the European Community. In 1995, with very little educational and organizational preparation that might have eased the transition, the nation and its agricultural sector were joined into the Community, then labeled the European Union. The dairy sector, completely dominated by a few cooperatives, experienced problems of unsatisfactory competitiveness in relation to producers in other EU member states. Consequently, the cooperatives are trying to discover more effective ways to serve their members in this disturbed economic context. This paper focuses on one small dairy cooperative that is trying to invent a new organizational form that would be in better accordance with the demands of the new market conditions. To set the stage for discussing the rationale for the new organizational model of this dairy cooperative we begin by overviewing some of the challenges that must be dealt with and some of the choices available to the largest dairy producer cooperatives. After a brief presentation of the Swedish dairy industry, we explore the situation facing the small dairy producer cooperative, and what its alternatives are for gaining market strength. The cooperative's current economic problems follow from the fact that it is presently organized in accordance with an organizational model that is more suitable for the conditions prevailing during the former national agricultural policy. Hence, this organizational model as well as optional models, considered by the cooperative, are being scrutinized. The particular cooperative has settled for a new model, the core of which is the introduction of a type of shares which the members are invited to buy voluntarily and which gives the members the right to the profits from the cooperative's value-added operations. These shares should be freely tradable within the membership at a market price whereby the members get an incentive for long-term considerations. At the same time all members are permitted to sell as much milk as they want to the cooperative, but for these volumes the price paid is only the true market price, i.e., the intervention price paid by the European Commission. This organizational model is very innovative. There is nothing like it in any other cooperative. Still, it is interesting as it could probably be copied by other cooperatives in a similar situation, especially in the dairy industry.

Published in

Research in Rural Sociology and Development
2000, number: 8, pages: 325-353
Title: Dairy Industry Restructuring
ISBN: 978-0-76230-474-5
Publisher: JAI Press Inc./Elsevier

SLU Authors

• Nilsson, Jerker

  • Department of Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Business Administration


Publication identifier

DOI: https://doi.org/10.1016/S1057-1922(00)80017-7

Permanent link to this page (URI)

https://res.slu.se/id/publ/77228