Cooperative Liquidation Under Competitive Stress
Posted: 24 Nov 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
Suggested Citation: Suggested Citation