The
concept of farm bargaining is not new. Agricultural producers have long been
concerned with developing legal foundations, organizations, and processes for
more effectively influencing price and other terms of trade in their dealings
with the handlers and processors of their products.
The Capper-Volstead
Act of 1922, the Agricultural Marketing Agreement Act of 1937, and the
Agricultural Fair Practices Act of 1967 are the major Federal laws related to
farm bargaining. All allow producers, within certain constraints, to seek equity
in the marketplace and protect themselves from specified unfair practices. A
number of States have also passed bargaining legislation to further facilitate
collective bargaining within their boundaries.
Most of the growth in
agricultural bargaining took place after World War II in response to the
dramatic changes that occurred in the food distribution system. Economic
integration, mergers, and acquisitions in the food industry stimulated renewed
interest in the idea of farm bargaining. In relation to their buyers, farmers
are small in size and large in number. Consequently, there is a significant
disparity in economic power between the two groups.
The bargaining
association is one way that farmers tried to adapt to the requirements of mass
marketing without sacrificing their own needs. Strong associations can serve as
effective price discovery vehicles. They can also promote uniform terms of trade
to the benefit of both the producer and the marketplace. Today, bargaining is
well established in the dairy, processed fruit and vegetable, and sugarbeet
industries.
Associations operate
in diverse ways. Marketing-type cooperatives usually take title to and pool the
commodities they represent. Most bargaining groups, however, do not take title
but do require their members to sign exclusive marketing agreements designating
the association as sole sales agent. Some associations merely provide market
supply and demand information to members. Such associations do not engage in
contract negotiations with buyers but may eventually evolve into full-fledged
bargaining associations.
Farm bargaining works
best when dealing with a single commodity. Bargaining associations often come
into existence whenever growers of a commodity receive prices that are below
their costs of production, are forced to accept adverse terms of trade, or must
deal with arrogant buyers of food companies.
Successful bargaining
associations have come into existence where four essentials were met before any
attempts to organize.
Need. - There
must be widespread need for a bargaining association and a genuine interest by
the producers of the commodity.
Understanding.
-Growers need to understand what bargaining can and cannot accomplish. Each
grower must make a commitment to the association and must understand that
bargaining may mean giving up certain freedoms in marketing. An economic
analysis should be made to determine what advantages can be expected to accrue
to the growers who join the association.
Leadership. -
The quality of the leadership is a central factor in successfully organizing an
association. The leaders must include most of the recognized and respected
leaders in the area.
Allies.
-Organizing a new association requires the assistance and good will of many
allies. Support of existing farm organizations can be valuable. Particularly if
prices are poor, suppliers, financial institutions, implement dealers, and
others doing business with the growers may be enlisted for support.
Controversial organizations should be avoided.
When an association
negotiates price and terms of trade with buyers and handlers, the association's
initial preparation and fact finding are often as important as the negotiation
process itself. Without good preparation and reliable information, even a
skilled negotiator cannot perform satisfactorily. Some associations use a
"price book" that contains all the pertinent data that impinge on
price negotiations; yields, production, records, projection of acreage,
wholesale and retail sales data, price data, production and processing cost
data, and other data that might be
brought up in price negotiations. Once the data in the price book are accepted
as reliable by the buyer, the book can be updated from year to year.
A skilled and
knowledgeable negotiator is an important asset for any association. Having an
intimate knowledge of the marketing profile of the commodity and an almost daily
contact with the market is an essential asset of a good negotiator. Farm
bargaining associations use a number of different approaches to negotiation that
range from an individual negotiating committee for each processor to the single
negotiator. Most associations use modifications of the team approach where a
certain number of association directors participate in the negotiations.
The strategy of
negotiations must take account of the needs of the other side and how such needs
can be met. The common denominator of negotiation is dealing with the needs of
people and their organizations.
The timing of
negotiations can have a significant impact on the results, particularly when
perishable commodities are involved. Planting time, for example, puts pressure
on both the buyer and the association. The buyer wants assured supplies and
producers want to make their farming plans.
Establishing a
priority is a vital part of strategy planning. Good strategy is to negotiate the
nonprice terms before getting into price. Having reached agreement on the
nonprice terms, their value can then be incorporated into the final price
negotiations.
There is no one
perfect way for price negotiations to take place. Some associations negotiate in
a very formal manner; others bargain in an informal way. Some involve many
people, others just a few. The negotiating procedure in each case seems to have
a pattern that is influenced by the market for the commodity, the relative
strength of the buyer and the seller, the personalities of the people in the
industry, and the experience of the association.
If the negotiating
process cannot reach an agreement, the parties may resort to mediation. Under
mediation, a third party is brought in to identify potential areas of
compromise. A skilled mediator will have the ability to suggest compromises not
previously considered, provide moral suasion, and reduce tensions. Some
associations provide for mediation in their contracts. The problem is to find
mediators who are both knowledgeable and unbiased. Most associations see
mediation as a failure of the negotiating process rather than as a part of the
bargaining effort.
Final approval of the
association's price position is made by the board of directors, which may often
consist of a large number of farmers. This decision-making process involves
considerable bargaining among the members of the board of directors. The manager
of the association frequently finds himself in the role of mediator among
members of his own board.
Bargaining
associations of the future must fulfill a marketing service and be able to
demand and receive a price for such services that the market can afford. The
bargaining association of the future must perform the same functions of mass
assembly and coordination that a large corporation performs. If bargaining
associations can reduce inefficiencies, promote more stable raw product
supplies, and provide services that will complement the operations of the firms
they deal with, the food industry will give support and recognition to the
bargaining endeavor.