Economic and Marketing Information
FOR INDIANA  FARMERS
Prepared by the Agricultural Staff of Purdue University, Lafayette, Indiana  
June 30,  1967
Cooperative Bargaining
-a case study in the tomato processing industry
by S. A. Belden and E. M. Babb, Agricultural Economics
Bargaining for better prices and
terms of trade has aroused much interest among farmers and farm organizations. Although farm organizations
have been bargaining for years, surprisingly little research is available and
little is known about the process. In
1966 a study was conducted to examine
the bargaining process in the tomato
processing industry in Ohio and Indiana. The purpose of this study was to
investigate cooperative bargaining to
gain insights which might prove useful
to the tomato industry as well as other
industries which are interested in bargaining as a means of establishing
terms of trade.
Bargaining Activity in 1966
In Indiana and Ohio, bargaining
over terms of trade for tomatoes has
been conducted between processors and
the particular state affiliate of the
American Agricultural Marketing
Association. In both states the negotiations are conducted around an individual processor. A local bargaining
committee of the Association is responsible for negotiating with this
processor. This local bargaining committee is elected from the total local
Association membership selling to the
processor. All negotiations within a
state are conducted under the guidance
of the state Association.
The first step for both processor and
grower representatives is to formulate
their objectives for the contract. Once
these have been formulated, they are
ready to bargain. Typically the bargaining committee makes the initial
contact with the processor. Once the
initial contact has been made, the negotiation follows a typical pattern consisting of three stages.
Stage one is the recognition stage
and involves the recognition by the
processor,  of  the  Association  as  the
bargaining agent for its member growers. The processor is under no legal
obligation to recognize the Association
and may at any time refuse to deal
with it.
Stage two is the announcement of
objectives for the contract. This stage
signals the beginning of direct bargaining.
Stage three is the attempt to resolve
differences and negotiate a contract.
This stage continues until agreement
on a contract or until either side withdraws from the negotiation. During
this period either side may attempt to
influence the other's position through
the use of various strategies.
Factors Determining
Bargaining Objectives
To determine the most important
factors influencing contract objectives,
processors and grower representatives
were asked to indicate which factors they considered and which were
most important. For processors, the
following factors appeared to be most
important: other raw tomato contracts
being offered, method of grading raw
tomatoes, alternative sources of supply, the size of the finished product
carryover, and growers' average costs.
The variation in response among the
processors seemed to be largely due to
whether they were national canners or
local canners.
The grower representatives felt the
following factors were most important
in influencing their objectives: their
strength around a processor, other raw
tomato contracts being established,
growers' average costs, the method of
grading, processor's alternatives to
utilizing growers' tomatoes, growers'
alternatives to dealing with the processor and the processor's tendency to
overcontract. Thus, both grower representatives   and   processors   considered
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INDIANA  FARMERS
only factors relating to their power,
other contracts, and the raw tomato
market as being of major importance
in formulating objectives.
Attitudes Toward Bargaining and
the Bargaining Association
Processors and grower representatives were asked to rank three sets of
items pertaining to the bargaining
process: (1) factors contributing to
their respective bargaining power, (2)
factors affecting the prospects of reaching agreement on a contract, and (3)
considerations desired from the opposite party. With respect to the factors
determining bargaining power, both
groups felt that the control over the
supply of tomatoes was the most important consideration. Both groups
attached relatively low weights to the
ability of one side to offer advantages
to the other for accepting its proposal
and to the skill of the respective negotiators.
In evaluating the factors affecting
the prospects of reaching agreement
on a contract, both processors and
grower representatives attached the
most importance to the information
which each side possesses. Both sides
attached relatively little importance to
the compatability of people doing the
negotiating and the results of previous
negotiations.
In comparing the responses of the
two groups concerning considerations
desired from the opposite side, the difference in the importance of price
seems significant. The grower representatives felt that price was the most
important consideration, while processors felt it was least important. The
processors attached the greatest importance to quality considerations
while this received relatively low priority from the grower representatives.