Cooperatives are established to improve farmers’ production conditions, to increase their bargaining power and to enable them to benefit from modern value chains. In China, farmers are members of a cooperative for multiple reasons. Little is known on whether and how cooperative membership affects farmers’ choice of marketing channels. This paper examines determinants of farmers’ choice of marketing channels, especially how cooperative membership impacts upon this choice. Our analysis is based on survey data collected in 2015 among 625 apple growing farm households in the provinces Shaanxi and Shandong. We employ endogenous switching probit models to deal with potential endogeneity of membership in estimating the determinants of marketing channel choices. We find that cooperative membership has a positive impact on selling to wholesalers and a negative impact on selling to small dealers, but no significant impact on selling to the cooperative itself. As products sold through cooperatives generally comply with relatively stringent food quality and safety standards, these results imply that policies promoting cooperative members to sell their products through cooperatives are likely to have a significant impact on food quality and food safety in China.

Introduction

Recent structural changes in agro-food markets are characterised by increasing public concern about food quality and food safety in both developed and developing countries. Demand for better quality food and for stricter safety standards is growing, mainly due to the increasing purchasing power of consumers (Narrod et al., 2009). These changes can be both opportunities and challenges to smallholder farmers. On the one hand, the changes allow farmers to benefit from opportunities arising from export markets, local supermarkets and new processing firms (Bijman, 2016). On the other hand, these new markets in turn require compliance with higher production and food safety standards and the stronger coordination of sequential activities in the value chain (Abebe et al., 2013). The high costs of compliance with these standards can exclude smallholder farmers from these new markets. Cooperatives can facilitate smallholder farmers to access markets and strengthen their economic position. Firstly, cooperatives enable farmers to bargain collectively with both sellers of inputs and buyers of farm products (Bijman and Iliopoulos, 2014). Secondly, cooperatives can support the information flow between farmers and the market and thus help farmers to meet the specific requirements of high-value added food markets (Wollni and Zeller, 2007). In addition, cooperatives can help realize food traceability (Moustier et al., 2010), thereby contributing to food safety. The Chinese land tenure reform in the late 1970s turned the farm household into the basic unit of agricultural production. The land reform provided most farmers with an adequate basis for their livelihoods. However, the reform also resulted in land fragmentation and small-scale agriculture, which have become an obstacle to develop modern agriculture (Tan et al., 2008). Like smallholder farmers in other developing countries, Chinese farmers often have difficulties in accessing high-value agricultural markets.