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European Review of Agricultural Economics Advance Access published online on October 19, 2009
European Review of Agricultural Economics, doi:10.1093/erae/jbp027
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© Oxford University Press and Foundation for the European Review of Agricultural Economics 2009; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org

Cooperative liquidation under competitive stress

Robin M. Cross, Steven T. Buccola and Enrique A. Thomann

Oregon State University, USA

Corresponding author: Robin M. Cross, Department of Agricultural and Resource Economics, Oregon State University, Corvallis, Oregon 97331, USA. E-mail: robin.cross{at}oregonstate.edu

Received January 2008; final version received August 2009

Competitive environments encourage cooperatives to liquidate by distributing equity to their members, often by raising the transfer prices paid for member raw product. We provide a method of detecting when such liquidation activity begins. In the process, we derive the arbitrage-free price bounds of a broad class of forward contracts typical of seasonal and speciality agricultural markets. The bounds are illustrated for the failed Tri-Valley Growers, once the largest fruit/vegetable cooperative in the USA. We show that Tri-Valley began liquidation years before it was detectable through conventional means. Implications are drawn for the expanding competitive pressures accompanying EU enlargement.

Keywords: agricultural cooperatives, arbitrage price bounds, cooperative finance, EU enlargement

JEL classification:: G12, G33, L11, Q13

Review coordinated by Paolo Sckokai


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