Farmer Cooperation in the Context of Agro-clusters

The geographical concentration of farming activities can promote institutional innovations for farmers. Sharing resources, knowledge, and markets in clustered regions lead to the income improvements of farmers. We explore such advantages for smallholder farmers in West Java of Indonesia by accounting for their behaviors toward horizontal cooperation. The study distinguishes farmers from two major groups, namely the group of farmers who will and neglect to cooperate and the group of cooperating and non-cooperating farmers. These groups allow us to investigate potential factors that enable farmers to build such cooperation and to examine the effects of such cooperation on farmers’ income level. We carry out a double hurdle model to analyze these objectives and utilize the Heckman two-step model to attain more robust result. Our analysis is based on survey data from about 1,151 respondents. The analysis reveals a positive association between agricultural income and participation in cooperation. The attitudes of farmers toward cooperation are highly related to gender, the number of household members and asset values. Furthermore, the age of farmers, the number of working hours and cultivated crops and frequency of face-to-face meetings are associated with increased likelihoods of establishing farmer cooperation. Agro-clusters allow smallholders to obtain benefits from cooperation alongside decreased costs and risks due to such cooperative productions. The findings imply that strengthening the ability of farmers to coordinate in agricultural production and marketing through vibrant farmer organizations could be a policy option.