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The Advantages and Disadvantages of Collective Farming

Collectivization of agriculture is not a new idea. In 1909, the first kibbutz was created on the premise of collective ownership and labor. In the 1930s, Stalin introduced state-owned collective farming in Russia.
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Collective farming is not a new idea; in 1909, the first kibbutz was founded in what is now Israel on the premise of collective ownership and labor. In the 1930s, Stalin introduced state-owned collective farming in Russia. The land was owned by the state, but labor, produce, and profits were shared amongst the collective’s residents. However, private farmers didn’t really have a choice of participating, and reluctant farmers were evicted and sent to work camps or worse. 

While the central idea of collective farming remains the same—collective ownership, work, and profit-sharing—today’s collective farms are egalitarian and sustainable. They operate on a cooperative basis, pooling land, labor, and resources and sharing the profits and risks. 

Let’s look at the advantages and disadvantages of a collective farming operation

Advantages of Collective Farming

Today’s collectives run as businesses, with a careful division of labor, resources, and profits. Let’s look at the advantages of collective farming operations.

Costs

The members of a collective farming agreement share all the costs. Capital expenses like land, equipment, buildings, and supplies can be prohibitively expensive for a small farmer to manage, and pooling the costs is a major advantage. 

Shared Labor

Farming is tough, year-round work. Animals don’t care if you are sick, it’s a holiday or family event or the weather is bad, they still need to be fed and cared for. Farming is dependent on the vagaries of weather. Planting and harvesting cannot wait if the fields are dry. A pool of labor who have vested interests in the success of the farm operation ensures the work gets done when it needs to.

Economies of Scale

Small farmers face a constant challenge. In order to get the best price, it is often cheaper to purchase in bulk, but then they face problems of storage or spoiled or expired products. Cooperative arrangements allow farmers to make bulk purchases, taking advantage of cost savings while ensuring they are not creating bigger issues for themselves. 

Collectives can often buy better quality materials and supplies than they otherwise could afford.

Credit

Farmers rely on various short and long-term means of credit to run and finance their operations. Whether they need to build a new structure, purchase a new combine tractor, buy livestock, seed or feed, the funds are often financed and repaid from proceeds. Collective farming provides increased creditworthiness, as the risk is spread amongst all the partners. 

Shared Expertise

When you are a solo operation, all the various administrative tasks, including bill payments, ordering supplies, marketing, taxes, and other duties fall to the farmer and family.

When there is a collective, there are more hands to share the work, and labor can be divided around skillset. Generally, there are people within the collective who prefer to do some tasks over others, and the workload sorts itself out. 

Collectives often choose to hire a farm manager to oversee the day-to-day operations, allowing farmers to concentrate more on the farm and less on the paperwork. 

In addition, collectives can bring new ideas and energy to the operation, allowing it to branch into directions that were not possible as a solo enterprise. 

Increased Income and Profits

A collective farm arrangement can provide increased income and profits. Farmers can run larger operations, producing larger yields and larger collective profits and income. In turn, that allows for faster loan repayments, reinvestment in the operation, and future scaling to further streamline and enhance productivity. 

As all members of the collective benefit, there is a vested interest in the operation performing well so that all may reap the benefits of the hard work. 

Disadvantages

While it is undeniable that collective farming arrangements have many benefits, they also come with downsides.

Loss of Autonomy

When you are a solo enterprise, you have complete control over how to run your operation. When you become part of a collective, the majority rules. That can lead to a loss of control and autonomy and decisions that are against your better judgment or personal priorities.

Like any situation with a variety of personalities, the stronger, louder voices can overshadow the quieter ones. Collective farming depends on the contributions of all participants and requires a delicate balancing act to ensure that all wishes and opinions are heard and considered.

The other downside is there may be strong opinions that are not backed up by expertise, especially if those opinions are held by a member more comfortable with traditional ways of farming and leery of technology or innovation. 

Credit Risk

Just as there are advantages with multiple partners in a collective farming arrangement, there are also risks. If a partner in the farming arrangement decides to leave, the other partners could be left with a level of debt they were not anticipating or prepared for. 

And what if a partner dies suddenly? Whose responsibility will their share of the debt fall to? What if their family does not want to continue?

That’s why it’s essential that there is a detailed collective farming agreement of rights and responsibilities in place, preferably created by a lawyer so that it provides guidance if a partner wants to terminate the arrangement, by whatever means.

Competing Priorities for Capital

Similar to credit risk, members could deal with competing priorities over capital and how to spend it. One member may need to purchase new equipment, while another needs to repair or replace a building. There could be disagreements over when or how much to expand, how much to take as profit, and how much to reinvest. 

Lack of Managerial Skills

One of the most important jobs in a collective is the role of a farm manager who can keep all the various priorities in order. If the person appointed lacks the experience or skill to manage both jobs and personalities, then the collective will suffer as a result. 

The manager needs to be skilled at handling strong personalities, have farm management expertise, and have organizational skills. Without that mix, the organization will suffer.

Collective farming operations are an old idea seeing a resurgence as a way for smaller farm operations to continue in today’s economy. While there are limitations and downsides, there are a number of advantages for the right collective group of people to succeed.

November 14, 2022

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