Livestock Research for Rural Development 29 (8) 2017 Guide for preparation of papers LRRD Newsletter

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Cooperativism as a sheep industry organization strategy in Paraná state, Brazil

E C Debortoli, A L G Monteiro1 and A H Gameiro2

Department of Animal Science of the Federal Institute of Rio Grande do Sul, Sertão, Rio Grande do Sul, Brazil
1 Department of Animal Science of the Federal University of Paraná, Curitiba, Paraná, Brazil
2 School of Veterinary Medicine and Animal Science, University of São Paulo, Pirassununga, São Paulo, Brazil


Sheep breeding is an activity that has many bioeconomics and social benefits, being a meat production alternative to farmers based on integrated production systems. This study aimed to identify, describe and analyze the role of agricultural cooperatives as strategic agents raising sheep for meat production in the state of Paraná, Brazil. To achieve the proposed aim, an exploratory qualitative study of the four cooperatives operating in the sheep meat production chain in the State of Paraná in the year 2016 was done. Managers of these cooperatives and production chain experts were interviewed. For the analysis of results, cooperatives were classified into two groups: those which engage in various agro-industrial activities, and those which work exclusively in the sheep industry.

The results obtained showed that there is not a single sheep production technological standard in the State of Paraná, and that cooperatives already worked in other agribusiness segments, the sheep industry being an additional activity in the portfolio of these companies, which seem to achieve better results by including this activity, involving higher expectations of expansion and seeking strategies to overcome major challenges, especially those related to animal slaughter and meat/meat by-product processing.

Keywords: agricultural cooperatives, organizational structure, sheep breeding, sheep meat


Sheep production has undergone several changes in recent decades in Brazil. The Brazilian sheep herd consists of approximately 17.8 million heads (IBGE 2012) and increased by approximately 16% between 2004 and 2014 (FAOSTAT 2015). Although the expansion of this activity has been observed in the Southeast, Midwest and North, the largest herds are concentrated in the Northeast (57%) and South (29%) of the country (IBGE 2012). In the Northeast, sheep raising is predominantly a livelihood activity of family-based farmers, as a rule associated to other agricultural activities. In the South, after successive wool production crises in the late twentieth century, the sheep industry has been stimulated by entrepreneurial initiatives focused on meat production.

The trend towards monoculture is worrying, since the land structure and economic and social profile of Southern Brazil are not compatible with this type of activity, i.e. the competitiveness and reduced profitability of agricultural activities, mainly due to the economic liberalization and globalization, demand the use of tools and initiatives to allow economic and financial viability of projects. Among these initiatives, the diversification of activities aiming at risk reduction and dilution should be emphasized. In this context, the sheep industry has proved to be a promising diversification alternative for agricultural production systems, as its annual cycle provides greater liquidity to pasture-based meat production systems, and allows a quick return of invested funds.

The sheep industry is considered a socializing practice since, besides requiring low initial investment, it also absorbs family labor force and fits into small and medium-sized property production profiles. The duration of the sheep meat production cycle is approximately one third of that required for beef production; thus, the sheep industry is an important alternative to farmers for meat production based on pasture or agriculture-cattle raining integrated systems.

Given this scenario, the government of the State of Paraná launched the Goat and Sheep Production Chain Structuring Program in 2004 to encourage farmer groups to start their own organizations, gradually increasing lamb production and enabling the slaughter and marketing of animals, even on a local scale. For such, there was the need to choose an organizational structure for the development of the program.

The aim of this study was to identify, describe and analyze the role of agricultural cooperatives as strategic organizations in sheep meat production in the state of Paraná. This article has been divided into five sections: this introductory section, followed by the theoretical framework that addresses the concepts of business and cooperative strategies, a third section which describes the methodology of the study, a fourth section, which presents the results, in a fifth and last section with the conclusion. Finally, there is a reference list.

Theoretical Structure Strategy

The term strategy was coined by the ancient Greeks and, though it has been for long used by the military, its concept has been perfected and adapted, and was introduced in the business context in the early twentieth century. Its evolution has stimulated strategic thinking in the business domain (Ghemawat 2000). It is a way of directing organization towards the use of available resources, and a guiding tool towards reaching different goals (Ribeiro 2012). It is also the organization´s response to its own environment, associating all available resources to the challenges and risks presented by the external environment (Storner 1985). A strategy can be developed both explicitly through a process and implicitly by activities of functional departments of the enterprise (Porter, 2004).

According to Mintzberg et al (2006), there is not a single definition for strategy; rather, it is essential to recognize its multiple settings. For these authors, strategy can be defined as plan, ploy, pattern, position and perspective - the so-called five P's for strategy. As plan, strategy is the course of a consciously intended action, a guideline for dealing with a situation; as ploy, it is a maneuver to overcome an obstacle; as pattern, it encompasses consistency of the intended behavior; as position, it is a means of fitting an organization into the environment; as perspective, it is the fixed way through which an organization sees the world. Furthermore, a new recognized standard that generates a formal behavior within a general perspective is another emerging strategy concept.

Strategy's essence relies on the ability to use available resources in the most effective way possible. However, the development of capabilities involves complex coordination patterns between people and resources (Grant 1991).

The establishment of a strategy involves intuitive vision and learning, individual cognition, social interaction, cooperation and conflict, directed towards the company's goals (Mintzberg et al 2000).

Organizations and their managers should pay greater attention and allocate more time to constant adaptation and reformulation of strategies as a competitive edge in today's world, since by doing so, they can take control over their own destinies, see where opportunities are more clearly, turn threats into opportunities, define new directions for the organization, learn long-term thinking channel resources towards a common goal and make the necessary changes (Ribeiro 2012).

Organizations are fundamental to society, once they add productivity to knowledge. As a destabilizing factor, an organization 'unleashes knowledge' through tools, processes and products that need to be organized for constant change (Drucker 1997).

Strategy is essential to the success of an organization, since it defines the kind of company the organization is or should be, thus determining the reference framework for business activities and providing guidelines to coordinate them (Besanko et al 2006).

The development of a competitive strategy consists in the development of a broad formula that approaches the way a company will compete, what its goals should be, and which policies are needed to achieve them, i.e., companies operating different businesses can achieve economies like those of scale, once they are able to share operations or functions. Thus, diversification of operations or functions can remove volume restrictions imposed by the company's size, and the benefits of sharing are particularly powerful if there are joint costs (Porter 2004).

Considering internal and external aspects, organizations may adopt different policy responses. The theories on the subject matter differ in terms of focus and level of analysis. There is ample theoretical diversity to explain business strategies and this strategy-inherent complexity favors the explanation of phenomena from different perspectives (Lueders and Matitz 2016). The use of strategic alliances could reduce competition between Brazilian agricultural cooperatives through partnerships to maximize results, allowing competition to occur in more complex and challenging markets (Guimarães et al 2015).

Among competition strategies, product differentiation and market segmentation are coordinating strategies aiming at reducing costs and opening markets, that is, they develop improved product marketing mechanisms (Azevedo 2000). Differentiation of an available product or service can occur through technology, brand, peculiarities, assistance, the supply chain, or even other dimensions (Porter 2004). Differentiation is beneficial to the organizational structure of the company, but there should be integration between sectors. The lack of integration can cause the loss of benefits obtained by the range of activities in a company (Besanko et al 2006).


The cooperative system as an activity carried out in the interests of its members based on its governing principles, having a universal nature (Oliveira 2008) and is essentially democratic (Souza 2008). In addition, cooperative principles include open and voluntary membership, political and religious neutrality, the promotion of cooperative education, the distribution of operational surpluses and the intention to change the economic order (Bialoskorski Neto 2006).

The cooperative doctrine aims to solve social problems as well as to establish a society made up and run by an association of users who meet on equal rights with the aim of developing economic activity or providing services without in-betweens (Sandroni 2003).

For long cooperatives had restrictions on capital market and fundraising activities; however, because of demands of agricultural organizations in the United States in the 1920s, cooperatives expanded their scope of action and were given exemptions to participate in these sectors so as to channel their resources to activities that could add value to marketed products and reduce inescapable negotiation asymmetries between economic actors (Azevedo 2008).

In the agribusiness context, the cooperative system is an organizational model capable of reconciling market requirements with social protection and economic growth of producers, seeking to associate those willing to fit market needs into their production processes. It is vital that cooperatives can maintain differentiated and distinctive dynamics for the various producers and their structures (Firetti and Ribeiro 2001).

In addition to this social significance, cooperatives have to be equally efficient from an economic point of view, like other companies, and follow the principles of: freedom, equality, fraternity and solidarity (Bialoskorski Neto 2007).

Cooperative societies have a distinct advantage in coordinating process chains in a business environment which is constantly changing, as is the case of agricultural cooperatives. An important strategy of these cooperatives should be the exploitation of advantages related to direct contact with the producer and their greater ability to coordinate the supply chain, which is usually the focus of processing and distribution companies (Bialoskorski Neto 2006).

The cooperative system, when properly conducted, offers conditions to turn cooperative enterprises into efficient economic agents, increasing the possibility of reducing production costs, and providing its members with social benefits and profit sharing. According to the structure of farmer organizations, and their willingness to seek active participation in different social organization processes, cooperatives are a viable alternative for producers, who alone would face difficulties to optimize their work, or market and add value to their final products (Firetti and Ribeiro 2001).

The cooperative movement in Brazil

Cooperativism in Brazil started in the State of Rio Grande do Sul in 1902, inspired by the German model of Friedrich Wilhelm Raiffeisen (1818-1888). It was a credit union of farmers in rural communities. In the early 1930s, the Italian cooperative model developed by Luigi Luzzati (1841-1927) arrived in Brazil. The latter differed from the German model because of the need for an initial capital injection upon admission of members, and because it aimed at public employees, artisans and small entrepreneurs, traders and industries. In the 1960s, during the military dictatorship, cooperatives lost part of their operating conditions and only in the 1980s did cooperatives resurface in all their strength, at first as credit unions (OCB 2016).

Cooperatives in Brazil are represented by the Organização das Cooperativas Brasileiras - OCB (Organization of Brazilian Cooperatives) nationwide as well as by state organizations (OCES) in the different federation units. By the end of 2015, 6,600 cooperatives were registered at OCB in the country. Exports of the cooperative sector totaled US $ 5.3 billion in 2015 and revenues of the 300 largest Brazilian cooperative organizations amounted to US $ 2.9 trillion. In the agribusiness sector, 50% of Brazilian agricultural production goes through one of the 1,543 cooperative organizations registered in this business branch, generating approximately 180,900 direct jobs (OCB 2016).

To better meet its representative cooperative function, OCB established cooperative branches based on different operational areas in 1993. This division facilitated the vertical organization of cooperatives into confederations, federations and unions. The branches established were: agriculture, education, credit, health, infrastructure, housing, transport, tourism and leisure, production, special, mineral, consumption and work. The agriculture and livestock sector includes rural, agro-pastoral and fishery cooperatives whose means of production belong to their members. They are characterized by the services provided to members, such as receiving or marketing of joint production, storage and industrialization, besides technical, educational and social assistance (OCB 2014).

Agricultural cooperatives emerged from the union of farmers who sought economic advantages through cooperative practice, as opposed to individual actions as scattered economic agents. Such organizations require the formulation of policies that clearly inform cooperative members of the advantages of cooperative work continuity, including the contemplation of different interests derived from membership heterogeneity (Barreiros et al 2008).

Despite the crisis and financial instability scenario in Brazil in 2015, cooperatives in Paraná State grew 19% as compared to the previous year. Sales of Paraná cooperatives reached almost 16 billion dollars in 2015, with the participation of 1.3 million members, having generated 82,000 direct jobs. The sector involves 30% of the state population in cooperative actions. In the agricultural sector, Paraná cooperatives exported $ 2.2 billion in 2015 (OCEPAR 2015).

By applying the SWOT analysis to business strategies that add value to Brazilian agribusiness, Soares and Jacometti (2015) found that cooperativism and production diversification are agribusiness strengths. For these authors, the cooperative movement strategically provides more competitiveness for members.

In production systems, such as sheep meat production, the impacts and business opportunities need to be brought forward so that intervention strategies can be planned. However, achieving strategic goals in the sheep meat chain is still a challenging task to organizations and work must begin with the most urgent challenge – the sheep breeders' union. Some successful cooperative-based initiatives have been identified in the States of Rio Grande do Sul, Paraná and Sao Paulo, that is, cooperativism is an alternative and viable group work tool for reaching a reasonable financial and organizational outcome for all individuals involved (Alves et al 2014).


This is a qualitative study, classified as exploratory and descriptive (Gil 2009) which seeks to identify the nature of phenomena by a variable occurrence survey and their characterization to point out essential study characteristics (Köche 2006).

As for technical procedures, a multiple case study was chosen Case study provides tools for researchers studying complex phenomena within their contexts (Baxter and Jack 2008), and an empirical investigation of a contemporary phenomenon that enables the preservation of holistic and meaningful characteristics of real events (Yin 2005).

The study was submitted to the Ethics Committee on Human Research (CEP/SD-PB) of the Federal University of Paraná (UFPR), under Protocol 1.604.916 and was approved on June 24, 2016. The survey was conducted in the state of Paraná. Among several cooperatives of various areas in the State, six cooperatives operating in the sheep meat production and/or marketing areas were identified. However, two of them were not operational and were excluded during the review of this article.

Data were collected in July and August 2016 through a semi-structured interview based on a previously studied and planned script following literature review and the study aim. Cooperative representatives operating in the segment under analysis as well as sheep chain production experts in the State of Paraná from the regions where the cooperatives are located (Figure 1.), totaling eight respondents, were interviewed.

Figure 1. Location of cooperatives of sheep farmers in the State of Paraná, Brazil

Collected data were analyzed descriptively and the results were interpreted and discussed with the support of a theoretical framework, seeking to deepen the knowledge on the sheep meat production performance of agricultural cooperatives in the State.


The Goat and Sheep Production Chain Structuring Program in Paraná State has sought to bring people and institutions with common interests into associations and cooperatives. For the creators of the program, it was necessary to establish production lines, thus facilitating the consolidation of these chains.

Due to the history of success of agricultural cooperatives in Paraná, the State government has sought to encourage sheep production in some existing cooperatives as an additional activity within their agri-food production portfolio, in addition to stimulating the creation of new sheep farmer cooperatives. One example of this State policy is the acquisition and distribution of matrices to producers organized in representative bodies. However, breeders' associations had legal restrictions, particularly market-related ones. In this sense, cooperative organization could contemplate production, processing and marketing promotion. Between 2004 and 2007, five cooperatives started their activities with sheep production in Paraná, one of which was closed in 2015. A sixth cooperative was founded in July 2016 and has not started its production activities yet. In other words, four cooperatives currently operate in the sheep meat production chain in the state of Paraná.

The production of sheep for meat is an agricultural activity that is gaining momentum in Paraná. In the last decade, there was a significant increase in the State sheep flock focused on the production of lambs for slaughter, with the adoption of more intensive production systems and cooperative organization (Pires et al 2014).

The Figure 2 is a flowchart that represents sheep production in integrated crop livestock systems predominant in the Cooperatives of the State of Paraná, Brazil.

Figure 2. Flowchart of sheep production for integrated crop livestock systems.

For a better description of results, the analysis of Paraná sheep meat production cooperatives will be divided into two groups: group 1, made up by cooperatives that already worked in other agribusiness segments, being the sheep industry just another activity in their portfolios; and Group 2, consisting of sheep farmer cooperatives that have been established exclusively to work in fostering the production, processing and marketing of sheep meat. To preserve company privacy, they will be simply referred to as A, B, C and D.

Group 1. Cooperatives A and B

Cooperative A operates in the production, processing and marketing of plant (soybeans, wheat, triticale, oats, ryegrass and potatoes) and animal (milk, pork and lamb) products and was founded in 1951. Cooperative B develops activities focused on the production of beef and sheep meat and was founded in 2007.

According to the answers of respondents on the sheep meat sector performance, the following observations could be made:

Cooperative A started working in the sheep industry in 2004, according to a demand of eight members who were already involved in other activities and were interested in developing sheep farming; there are currently 29 cooperative members engaged in the activity. These cooperative founders are farmers who started livestock production to get their children involved in the production process, as they believe that their affection for the property and rural work is not obtained by agricultural activities alone. Even though agricultural activities are likely to be more profitable, they do not suffice to stimulate the stay of the young in the rural area and run the family business, especially after these young people have been educated at an undergraduate level.

Cooperative B: began operations in 2007 from the union of 10 cattle and 25 sheep raisers seeking to solve market problems they were faced with when they were operating individually, such as low pay, default and product differentiation difficulties. It currently includes 41 cooperative members in the sheep industry segment. In eight years of operation, Cooperative B has shown a 283% growth in the sheep sector and predicts a growth of between 30% and 50 % per year for the next four years in the segment. The construction of an industrial plant for slaughter and meat product and by-product processing is the main investment of the Cooperative, which will expand its capacity 12-fold as compared to the current processing volume. Currently, processing is being performed by an outsourced company. For this group, the sheep industry is an important strategy for the diversification of rural properties and optimization of available resources, especially agricultural co-products and labor, which are becoming increasingly expensive and scarce in the State countryside.

Table 1 summarizes Cooperative Group 1 respondents’ answers.

Table 1. Summary of respondents' answers of group 1 cooperatives.




1. Perception on the sheep production chain in the State of Paraná

Needs to gain momentum and continue stimulating the cooperative system

Has evolved a lot, but there are still challenges to be overcome.

2. Role of cooperatives to the sheep industry.

Successful meat sheep production cases in Paraná are all linked to cooperativism.

It is the path to follow for sheep industry development in Paraná.

3. Role of government agencies in fostering sheep farming

Promote the acquisition of matrices;

Connect different producing regions of the state;

Promote sheep meat in prime meat environments.

Reliable data collection and strengthening of institutions working in the sector.

4. Perceptions on sheep meat demand

It is growing and tends to expand

Demand is still greater than supply.

5. Main advantages (in order of relevance) for members to participate in the cooperative

1st - Payment guarantee;

2nd - Purchasing Guarantee;

3rd - Competitive Price.

1st - Marketing Guarantee;

2nd - Payment guarantee;

3rd - Technical and input supply.

6. Mechanisms of technology transfer to members

Technical assistance;

Event organization;

Selection and distribution of genetically superior matrices.

Continuous and updated technical assistance;

Event organization;

Guidance on animal purchase;

Stimulus to ewe intra-group marketing.

7. Use of loyalty instruments

Control of volume produced and delivered to cooperative.

There are no loyalty instruments but rather the steady appreciation of cooperative principles.

8. Marketing strategies

Exploitation of marketing know-how of other products;

Added value through special cuts

Use of distribution logistics structure of other products;

Added brand and product quality value.

9. Areas to be improved

Genetic improvement (animal performance assessment);

Production Management;

Fixed cost reduction.

Reproductive efficiency;

Production management costs;

Product added value through special cuts;

10. Cooperative prospects for the future

Expand sheep breeding sector to a 10 % annual growth over the next five years;

Animal slaughter at a cooperative-owned slaughterhouse;

Animal slaughter at a cooperative-owned slaughterhouse;

Add new cooperative members;

Double production volume in four years.

Cooperative integration tends to bring obvious benefits to the economies involved such as a collection of technologically distinct operations so as to obtain greater efficiency in the production process; coordination economy by reducing control and transaction costs; information economy by facilitating important information access to decision-making processes in production and marketing; maintenance of stable relationships, enabling specialization of various production stages and allowing efficiency gains and product differentiation by brand and/or quality (Bialoskorski Neto 2007). Companies have a greater organizational capacity to innovate and develop capabilities related to adding value to their products, customer retention and attraction, and maintenance of good performance on the market (Biégas and Steiner Neto 2015).

Group 2. Cooperatives C and D

Both Cooperatives (C and D) operate exclusively in the sheep meat sector. Cooperative C was founded in 2004 with 25 initial members and currently includes about 18 producers effectively delivering animals. Cooperative D was founded in 2007 with 53 members and now has 26, 16 of whom having greater involvement in the production and management of the organization. Cooperative D was planned with the technical support of the Serviço de Apoio à Micro e Pequenas EmpresasSebrae (Micro and Small Business Support Service) of Paraná, and was initially organized as an association of cattle raisers. After a regional herd survey and a market research study, the Cooperative was created. Cooperative C plans to increase its production volume in the coming years, but remains focused on the local market. Cooperative D is structured to make meat cuts and needs to increase its production scale to enable the maintenance of this processing structure. Both cooperatives are facing difficulties with the slaughter of animals. A Cooperative C CEO reported that the cost of slaughter corresponds to 15% of the carcass total price, which is the main challenge faced in processing. Similarly, a Cooperative D representative reported difficulties in the relationship with outsourced companies for the slaughter of animals.

Table 2. Summary of respondents' answers of Group 2 cooperatives.




1. Perception on the sheep production chain in the State of Paraná

Few State producers are linked to cooperatives and associations;

Regional peculiarities need to be further promoted.

Underwent retraction due to soybean competition;

The activity has been stimulated in the last five years, but there is still much room for growth.

2. Role of cooperatives to the sheep industry.

There was a need to evolve in terms of organization and the cooperative system was the best option;

Legal structure that allows the best benefits to adding value to agricultural production

3. Role of government agencies in fostering sheep farming

Resource transfer;

Technical assistance;

Educational campaigns on product features.

Resource transfer;

Training availability;

Motivation to set up new organizations.

4. Perceptions on sheep meat demand

You cannot even meet local demand;

Flexible growth potential.

Sebrae market research support;

Demand clearly greater than supply.

5. Main advantages (in order of relevance) for members to participate in the cooperative

1st - Adding marketing value;

2nd - Sale guarantee;

3rd - Activity organization.

1st - Marketing Guarantee;

2nd - Being the business owner in all production stages

3rd - Motivation for improvement

6. Mechanisms of technology transfer to members

Labor training;

Stimulus to the training of professionals specialized in sheep production;

Event organization;

Partnership with educational institutions for technical support;

7. Use of loyalty instruments

There are no loyalty instruments available, but they are to be introduced.

No loyalty instruments available and there is a lack of commitment from members.

8. Marketing strategies

Profit from a greater demand than supply situation;

Regulatory framework to enable small producers to access specific markets

Development of cuts and registration of products;

Exploitation of asymmetry between demand and supply;

Add value to brand.

9. Areas to be improved

Increase production scale;

Collective input purchase;

Guidance on animal purchase;

Intra-chain management.

Increase scale due to property distances;

Improvement of production indicators;

Aggregation of members.

10. Cooperative prospects for the future

It will be a successful activity;

There is room for growth.

The production volume has to be increased to enable maintenance of cooperative services.

Costa et al (2012), upon studying agricultural cooperatives in southern and southeastern Brazil, found that the State of Paraná concentrates cooperatives with the largest number of employees, highest earnings per company, broadest geographical reach and widest range of agro-industrial activity. For Moreira et al (2012), the success of the strategy to diversify agricultural activities by Paraná cooperatives is more closely related to rational (economic) rather than political (social) criteria; they also state that the decision-making process depends more on producers than on cooperative manager influence.

The focus on the market, such as business strategies, can keep up good cooperative performance, since the enterprise can provide economic return to its members. Management efficiency alone cannot maintain cooperative loyalty, which can also be achieved by a gradual and progressive reduction of competitive advantages in relation to other regional agribusiness actors, which can reduce cooperation stimulus and identity links. The information management improvement in monitoring activities undertaken by members, the creation of mechanisms that can consolidate their reputation in the community, the consolidation of management information showing transparency concern and providing increased credibility and trust are strategies that can improve cooperative behavior and loyalty (Gorga Neto 2006).



We would like to acknowledge CAPES and Federal Institute of Rio Grande do Sul for their financial support of the study. E C Debortoli is a CAPES-Planfor-IFRS Fellow.


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Received 16 December 2016; Accepted 17 July 2017; Published 1 August 2017

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