Promoting cooperation amongst farmers

Agriculture across the EU is facing many challenges. Extreme weather, intensified by climate change, is causing annual average losses to EU agriculture totalling EUR 28.3 billion. Uncertainties around global trade, market fluctuations and supply chain disruptions are leading to rising operating costs. Varying expectations throughout the value chain towards more sustainable production are creating complexities around data, reporting, assurance, marketing, etc., placing more administrative, upskilling and investment demands on businesses.

The 2023-2027 CAP sets out how agriculture and land management across the EU should be supported to address these pressures. Cooperation, in particular, is a cross-cutting principle under the CAP (e.g. Recital 83) aimed at strengthening the farmers’ position as it is a powerful tool for unlocking opportunities and outcomes that individuals may not be able to achieve on their own.

Cooperation can be horizontal, when farmers and/or farm businesses agree to cooperate with each other in some way, or vertical, such as when different actors (farmers, public institutions, businesses, researchers, consumers, or other rural stakeholders) agree to collaborate to achieve common goals. Cooperation can also be formal, such as business structures like Producer Organisations (POs) or joint ventures at the farm level between individuals, or it can be informal, in the form of mutual training, resources and support.

The CAP incorporates specific cooperation measures with a view to achieving the specific objectives, encompassing collective environmental and climate action (Art. 70(5)), short supply chains and local markets, EIP operational groups, LEADER, POs and other forms of cooperation (Art. 77). Through these measures, the CAP recognises that cooperation is something to be encouraged so that farm businesses work together to improve productivity, reduce costs, and increase access to markets. Below are some examples of ways that cooperation is playing out across the EU and how it could be further promoted.

Broad-scale uptake of different practices at the individual farm level will be needed to achieve the European Green Deal commitment to enhance agriculture’s sustainability and achieve climate-neutral agriculture by 2050.

Producer Organisations, a type of formal cooperation mechanism under the Regulation establishing a common market organisation of agricultural products (CMO), coordinate supply, jointly market products and aim to capture more value through enhanced bargaining power, optimised shared costs, processing, distribution and product sales for the farms within the organisation. Although market advantage is the focus of the cooperation, POs are also required to allocate at least 15% of their operational programme expenditure toward environment and climate-related actions, thus promoting broad-scale action toward the overarching commitment.

In addition, different forms of cooperation that aim to jointly deliver environmental outcomes can increase the scope and coordination of solutions, such as collective implementation of agri-environment-climate measures (AECM) under the CAP.

The Dutch national approach to agri-environment-climate implementation, for example, established in 2016 the principle that collectives would act as the sole beneficiary for local AECM contracts and that this entity would then liaise with and issue contracts to individual farmers to deliver the coordinated activities across the landscape (i.e. front door-back door principle). This approach was carried forward into the current CAP Strategic Plan (CSP) and has shown benefits beyond environmental for the farms, e.g. improved cost-effectiveness, efficiency, crop yields, as well as viability and resilience of the agroecosystem.

Similarly, the recent EU CAP Network Thematic Group on Unlocking the Potential of Cooperation highlighted how other Member States are exploring the way policy mechanisms could incentivise cooperation by farmers to enhance the delivery of public goods. For example, in Germany, the MoNaKo project (Modell Naturschutz Kooperativen) is exploring how four Federal States (Länder) may drive AECM implementation under their CSPs through nature conservation cooperatives.

Strong farming businesses must foster the natural capital (e.g. land) that underpins their operations for enhanced resilience and long-term productivity, but piecemeal actions on the ground may not accomplish the meaningful transition needed to protect biodiversity, restore habitats and combat climate change. Instead, AECM implementation at the landscape scale, achieved through cooperation, offers Member States the opportunity to streamline and maximise public investment in agri-environmental outcomes. It also increases the potential for additional value to be captured from the private sector for proven benefits beyond the AECM contracted activities, such as value chain projects, green financing, or carbon farming under the Carbon Removals Certification Framework.

To be competitive, farms rely on multiple assets within the scope of their businesses, but accessing additional capital to make changes or to take on new opportunities presents challenges.

For alternative forms of management, there is a significant financing gap within EU agriculture due to not just loan rejection, but also discouragement (not applying due to fear of rejection) and refusal (not accepting the offer due to unfavourable terms). The problem is exacerbated by the limited availability of data demonstrating direct economic benefits and clear risks from different practices (e.g. cover crops) in different locations, particularly over a longer term, compared to conventional systems, making it difficult for funders to extend credit due to internal barriers (see the ReGeNL project tackling this topic).

Financial instruments encouraged by the CAP offer the potential for CSPs to enable more farmers to access financing by mitigating the risk to private financial institutions, e.g. with public guarantees. Cooperatives may play the role of an intermediary which administers such risk mitigation instruments to individual members.

Streamlining public investment through cooperative entities reduces transaction costs as well as administrative burden for individual farmers, and it may also lead to better returns on investment than direct payments. Cooperatives may offer support for planning, implementation, mentoring and financial monitoring that leads to more successful, resilient farm businesses from those that have accessed the financial instruments.

Young farmers and new entrants also struggle to access credit, which is needed to ensure the continuity of farm businesses and innovation advancement. The EU Strategy for Generational Renewal in Agriculture aims to highlight these types of issues and the need for Member States to incorporate support for young farmers in their CSPs, as well as additional provisions to support generational renewal through cooperation. Examples of individual-level cooperative arrangements, e.g. between new farmers and older farmers to share labour and machinery, develop new enterprises and transfer assets, were also highlighted in the EU CAP Network TG on Cooperation, offering examples of successful generational renewal where the successor came from outside the farm family. These types of joint ventures can not only enable the business to continue rather than decline or have stranded assets due to lack of interest from heirs, but can also support entry for individuals from non-farming backgrounds without significant capital or assets upfront.

Another key message emerging from the EU CAP Network Thematic Group on Unlocking the Potential of Cooperation was the need for support in the form of training and development around cooperative formation and operation.

Advisor training on all aspects of cooperation should be prioritised, covering topics such as financial aspects, governance, conflict management, soft skills and competencies on building trust and culture within the cooperative. Such foundational support is necessary to ensure farmers are aware of the different forms of cooperation possible, the pros and cons of the various options and what skills and capacities they may need to develop to participate fully and effectively.