The cost of joining forces: collective organisations and the economic performance of dairy farms in England

Abstract

This note highlights the importance of sale agreements for the economic performance of dairy farms in England. The reduction in public intervention in milk supply governance led to market coordination through supply chain agreements (SCAs), resulting in unbalanced power dynamics that reduced farmers' bargaining power and made them vulnerable to unfair practices. Collective organisations are seen as a solution to protect farmers. Using Coarsened Exact Matching, the paper estimates the effect of collective organisation participation on selling prices, production costs, and markup in a sample of 200 farms in Somerset and Devon. The results show that collective organisations are associated with 7.8% higher production costs and 20 percentage points lower markup, mainly due to costs associated with milk collection, transport, storage, marketing, and adherence to strict quality standards. However, these costs are counterbalanced by secured market access, stronger negotiating power, and better alignment with market demand.