Economic and Marketing Information
FOR INDIANA  FARMERS
Prepared by the Agricultural Staff of Purdue University, Lafayette, Indiana  
March   31,   1966
Can Cooperative Bargaining Associations Succeed?
by R.  L.  Kohls,  Agricultural Economics
Can Bargaining Cooperatives Succeed? If by "succeed" we mean the usual interpretation of forcing higher
prices from processors and handlers than farmers are
receiving now with no changes on the part of farmers,
I think that the answer is "no." If on the other hand,
by "succeed" we mean the performance of other more
specific and limited activities from which there might
be improved profits, then the answer may be a qualified
"yes."
The Changing Market
The farmer's role in food marketing is receiving a
1-2-3 punch from the modern food industry. What are
these punches that are being aimed at the farmer by
modern marketing developments?
1. The growing breakdown of the pricing system for
farm products.
2. The rapid technological revolution in processing
and distribution which is forcing greater coordination
between farm and marketing agencies.
3. The growing size of the food processing and retailing firms serving regional and, in many instances,
nationwide  markets.
How do these developments in the marketing system
affect farmers?
The Pricing Problem
The breakdown of this country's farm product pricing
system is becoming apparent. The statements often heard
that "one cannot violate the law of supply and demand"
or that "one cannot have prices higher than the true
market" are technically true. But, they are often cliches
used to hide the real problems. There is no special section
of heaven where angels of supply and angels of demand
get together to establish prices which are then sent down
to the markets of Podunk, Fresno, or Indianapolis.
Prices of commodities are made by men, using whatever
information they have and trying to get the best possible
deal at the moment in time and at the place they find
themselves.
The question of what is the going price of a particular
product at a particular time and place is no longer a
simple one. With the increasing decentralization of the
marketing channel, with the increasing use of agreements, special grades and standards, discounts and pre
miums, and other detailed arrangements between growers
and their individual buyers, the actual going price is
very difficult to ascertain. The use of the large terminal
markets to establish prices still exists—but is this use
for good or evil purposes in the actual price determination by buyers and sellers in the countryside?
The equality of availability of information has long
been considered important. The growing problem, however, is one not simply of equal availability of information—it is actually collecting the right information,
evaluating its meaning and getting it disseminated in
time to be useful in the pricing process.
What is the pertinent information? What is the right
price? These questions can be asked honestly by all
parties in food marketing. Herein, then, lies one of the
possible  roles  that   a   farm  group  can  play.
The Coordination Problem
The growing integration of farm production with marketing agencies through contracts is a direct result of
the second punch being delivered by the marketing system—that of the rapid technological revolution in food
processing and distribution.
Each new and different food product developed by
our processing industries and distributed on our supermarket shelves usually implies more processing. Additional processing generally requires products of specific
qualities, at specific times and specific amounts and at
specific places. The processor that can profitably accept
whatever is available and then sort it in the best possible
manner is rapidly disappearing. How can coordination
between farm production and marketing be improved?
And, who is going to control the coordinating mechanism? These vital questions suggest another possible
service that farm groups may provide.
The Power Problem
The growing size of processing and distributing firms
and their increasing participation in a national market
is an extension of an age-old problem. For a long time
it has been acceptable to characterize the situation as
one of small disorganized farming units that must sell
to larger and more powerful units in the market place.
And when such a situation occurs, there always can be
some doubt concerning the equity of the outcome of the