Improving dairy farmers’ welfare in Indonesia: Does cooperative membership matter?

Abstract

Dairy farmers in developing countries face numerous challenges, including price instability, limited credit access, outdated technology adoption, market barriers, and poverty. Cooperatives offer promising solutions to farmers’ problems and help them enhance their agricultural sustainability. Although the impact of cooperative membership has been widely investigated, little evidence is found in dairy farming households. This study estimates the impact of cooperative membership on dairy farmers’ household incomes, net returns, and profits from dairy products (processed and fresh milk). The cross‐sectional data were collected from 300 dairy farmers in East Java, Indonesia. Inverse probability weighting with regression adjustment (IPWRA) and two‐stage predictor substitution (2SPS) were used in the analysis to address the selection bias in the estimation. The findings are corroborated by a robustness check using propensity score matching. The results show that dairy farmers’ decisions to join a cooperative are positively and significantly influenced by farming experience, transportation ownership, number of cattle owned, and involvement in social activities and are negatively influenced by age. Cooperative membership significantly improves farmers’ welfare by increasing their household incomes, net returns, and profits from fresh milk products. However, the membership reduces profits from processed milk products. These findings suggest that the government should encourage farmers to participate actively in cooperatives.