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Successful cooperation among smallholders requires a close match between their existing experience and financial capacity and the types of cooperation required by any joint activity. It is often built on previous cooperative experience. A common-sense observation, but one frequently overlooked by many donors in practice, is that the demands one places on farmer groups should not exceed their current group management skills. This paper highlights the characteristics of successful farmer cooperation as well as some of the common mistakes made in trying to promote farmer groups. The analysis indicates that though groups have a role to play, group approaches do not provide an easy institutional response to the new pressures facing smallholders in a liberalised economy. Nor should farmer cooperation be viewed as a panacea for the development of rural areas.