The key features of co-operative businesses offer people distinct advantages in addressing a variety of market situations and issues. Agricultural co-operatives enable producers to realize economic benefits which they could not otherwise achieve alone. Some of the reasons why producers form co-operative businesses include:

To improve bargaining power.

Co-operatives can provide groups of producers with marketing power more comparable to that held by processors and other market players. Co-ops do this by gathering market information and sharing that information with their members or by acting as a bargaining agent on producers' behalf.

To reduce costs.

Pooling capital and resources through co-op enterprises can enable producers to access services, such as marketing expertise, that they could otherwise not afford alone.

To achieve economies of scale.

By handling large volumes of product, co-operatives can reduce the per-unit cost of marketing and processing for producers. Similarly, the cost of inputs and services can also frequently be lowered if larger volumes are ordered through a central agency. Co-ops allow producers to focus on producing goods, rather than on finding buyers and suppliers.

To increase returns

Because the surpluses generated by co-operative businesses are returned to producers on the basis of patronage, co-operatives allow producers to capture additional profits beyond the farm gate.

To improve product and service quality.

Co-operatives can allow producers to coordinate the timing of the delivery of commodities to markets. Co-ops can also enable producers to implement grading systems and standards. These activities can improve the services provided to retail and wholesale outlets and the quality of product available to consumers.

To reduce risk.

Agricultural commodity prices often fluctuate considerably throughout the year. Co-operatives allow farmers to pool their production with that of other farmers to minimize price and market risk.

To obtain needed products or services.

Often producers require certain services or products which privately owned companies are reluctant to provide due to the small potential sales volume or uncertain profits. Such producers may join together to form a co-operative to assure the availability of vital products and services.

Agricultural co-operatives can allow farmers to address common problems, develop new market opportunities or expand existing markets. A co-operative can give producers access to a larger share of the earnings generated from business activities and can also keep these earnings circulating in the local economy. However, co-operatives are not a panacea-they require a group of individuals who are committed to working together to address a common economic goal or need. If this commitment is not there, a different business structure may be more suitable.