The Study On Vertical Integration Of Farmers’ Cooperatives

Cooperatives serve for their members, who are famous among developed countries anddeveloping countries. Cooperatives kept remarkable achievements in the world economic crisisand has been developing vigorously for hundreds of years. Framer cooperatives are improvementand supplement of China’s the household contract responsibility system. Since the first law offarmer cooperatives was implemented in July1,2007, China’s farmer cooperative originationshave achieved rapid development. By the end of2013, there were88.4thousand framercooperatives and47.76million members in China, which drove61.3million non-members aswell. Farmer cooperatives have become an important carrier of the construction of modernagriculture, bringing along the richness to farmers drive a farmer and the management of ruralsociety. However, there is presently the ubiquity of the problems of ", narrow scope of businessand scales, running separately, lack of funds, the lack of talents and planning". In addition, theintenser competition of agricultural products, the more protuberant problem of Food security.The original running model cannot fully adapt to the new change of social situation. Farmerscooperatives needs to break through the traditional framework of vertical integrationdevelopment, through the expansion of the size of membership expanding sphere of, extendingthe industrial chain, reducing transaction costs to improver profitable space, enhance its marketcompetitiveness and play a better leading role for the farmers. Practice needs theoreticalguidance, but the domestic study on vertical integration of farmer cooperatives is not much, letalone systematic studies. This topic has strong significance in both theory and practice, which isextremely important in currently.This paper mainly carries out research from the following several aspects: first, analyzingthe current situation of vertical integration of farmer cooperatives from both foreign anddomestic perspectives. Second, measuring the vertical integration of farmer cooperatives. Basedon the research of305members from72planting farmer cooperatives in Shannxi province’s15countries, our research performed an analytic hierarchy process(AHP) analysis to measure thelevel of vertical integration of samples by19indicators including the vertical integration of thefirst and middle parts. Third, analyzing the interactive effect between vertical integration andeconomic performance of farmer cooperatives. On the basis of present research,this paperintroduce vertical integration indicators into farmer cooperatives economic performance evaluation system, building two metering model by Binary Logistic Analysis to analyze theinteractive effects among vertical integration factors (including first and middle parts) andcooperatives governance characteristics, external environment factors and cooperativeseconomic performance. Fourth, analyzing the influencing factors of vertical integration of farmercooperatives. Based on the perspective of cooperative organization, transaction costs, food safety,internal and external factors, this paper chose14indicators to investigate the influencing factorsof vertical integration of farmer cooperatives. Then, using Tobit to build four Econometricmodels to do the Empirical Analysis on influencing factors of vertical integration of farmercooperatives and factors of first and middle parts. Fifth, finding the influencing factors of joiningin vertical integration of cooperatives. Based on the perspective of members,18indexes wereselected to analyze the influencing factors of members’ joining willingness from the character ofpersonal and family members, information characteristics, production characteristics, joiningcharacteristics, awareness of food safety, transaction cost and village features. Finally, proposingthe principles of Vertical integration mode selection and discussing the boundary problem.Through the research, the conclusions drew by this paper are as follows: First, the overalllevel of vertical integration of farmer cooperatives is not high, but it does improve the economicperformance of farmer cooperatives obviously. Second, the governance of cooperatives are notstandardized, therefore, hindering the vertical integration of farmer cooperatives. Third, farmercooperatives haven’t established effective institutional mechanism to circumvent market risk.Fourth, Chairman of cooperative has not enough consciousness for expanding business flowindustral chain, it’s lack of long-term plan about vertical integration. Fifth, members of farmercooperatives must have known about their organization, which is help for them to take activitiesfrom cooperatives. Sixth, government’s funds support contribute for developing and expandingof farmer cooperatives, but its needed for improving assess condition of all level exemplarycooperatives. Seventh, supervision on agricultural product quality and food safety fromgovernment helps to improve the level of vertical integration on farmer cooperatives, but stillneed to strengthen supervise in the part of agricultural former and middle. Eighth, the businessscope of farmer cooperatives was rapid expansion driven by agricultural processing enterprises,but it need to improve the relationship of interest link between them. Ninth, it need toconsiderate about characteristics of agricultural product’s production and marketing and thecondition of farmer cooperatives, when select the model of vertical integration.