We consider how to organize the processing and marketing of an agricultural product when farming costs are known only by the individual farmers. We show that when marginal costs are un-correlated, the market for
nal goods is competitive, and the market for processing is non-competitive, the socially optimal production levels are sustained by a cooperative and a cooperative only. We show also that the cooperative form is particularly useful when the cost uncertainty is large and the net average revenue product is small.
