Factors Supporting the Development of Producer Organizations and their Impacts in the Light of Ongoing Changes in Food Supply Chains: A Literature Review

This report surveys the recent literature on producer organizations with a specific focus on factors affecting their establishment and their impact on farmers' market performance and welfare. The report also discusses producer organizations' role in improving farmers’ bargaining power and allowing them to respond to various challenges which result from dynamic changes characterizing commercial relations within the food supply chain. Key factors supporting the emergence and development of producer organizations include human and social capital, networking, interpersonal relationships between members (with an important role of trust) and the functioning of enforcement mechanism used to govern group behaviour. The existing literature provides also strong evidence that access to information and farming experience positively affect the emergence of producer organizations. There is also some evidence that larger farms are more likely to join collective action. The literature also clearly points that we are still far from reaching a consensus on who (private or public actors) should support promoting cooperation between farmers and what incentives should be provided to achieve this goal in the most efficient way. Although there are numerous studies pointing to positive effects of producer organizations on farm income or farm performance- in particular for high-value products – overall, the evidence is inconclusive and often mixed. For example, the existing literature often suggests that that the benefits of producer organizations in terms of improved farmer bargaining position in the food chain vary with time, place, technology, sector, scale of farming, and human and social capital available. An area where there is particularly little evidence on the impact of producer organizations concerns the nature and the dynamics of the contractual relationships at various stages of the food chain. Further research is also needed to improve our understanding of factors determining smallholders' participation in collective action, substitutability between formal and informal cooperation, determinants of power distribution throughout the food chain and the occurrence of unfair trading practices. Based on the surveyed evidence the report concludes with a set of policy recommendations.