Apple industry study shows value
of producer bargaining associations
By Shelly Grow, Henry A.
Wallace Center; Amy Guptill,
Cornell University; Thomas A.
Lyson, Cornell University; and
Rick Welsh, Clarkson
University
Editor’s note: This article is based on
“The Effect of Laws That Foster Agricultural
Bargaining: The Case of Apple
Growers in Michigan and New York
State,” available electronically at
www.winrock.org/GENERAL/Publications/
AgBargfinal.pdf. For a printed copy,
contact the Wallace Center, (703) 525-
9430, ext. 675. The study was funded by a
grant from the Rural Business-Cooperative
Service of USDA Rural Development.
n agricultural bargaining
association can provide
better prices and other
important benefits to its
members, according to a
new study of apple growers in two states.
The study was conducted by researchers
at the Henry A. Wallace Center for
Agricultural & Environmental Policy at
Winrock International, Cornell University
and Clarkson University.
Apple grower-members of the
Michigan Agricultural Cooperative
Marketing Association (MACMA), a
bargaining cooperative, indicate higher
levels of satisfaction compared to non-MACMA members and to New York
growers, which does not have a state
collective bargaining law. The study
found that MACMA, on average, has
negotiated higher apple prices for
Michigan growers. This price differential,
however, appears to be diminishing
over time due to intense competition,
particularly from international
markets.
Mich., N.Y. laws contrast
sharply
To establish a starting
point for understanding the
potential impacts of strong
cooperative bargaining laws
at the federal level, this
research examines the
impact bargaining can have
on prices producers receive
for their products, as well as
other economic and social
benefits bargaining can provide.
Apple growers in
Michigan and New York were selected
for study for these reasons:
- Michigan has a strong law in support
of bargaining associations that
requires binding arbitration and good
faith bargaining. New York has no
such law.
- Michigan has a functioning bargaining
cooperative for apples while
New York has none (a previously
formed cooperative in New York is
now defunct).
- Apples are an important crop in
both states. Michigan ranks No. 3 in the
United States in apple production, while
New York ranks No. 2. Both states
process a significant portion of their
apple harvest and use similar processing
methods (canning, juice, freezing).
- The apple commodity system fits
the criteria outlined by earlier studies
for potentially successful associations:
limited ability for short-term entry into
the industry (perennial fruit crop) and a
concentrated processing sector. In
addition, while Michigan and New
York are distinct markets for apples,
growers in the two states share processors.
This reduces the chance that New
York farmers may fear extreme
reprisals from processors should they
form a bargaining association, as these
processors have demonstrated their
willingness to work with a bargaining
association in Michigan.
Impact of price
The effect of bargaining on prices
received by producers was measured by
comparing actual prices received by
growers, according to processing type,
from 1969 to 2001. Data were examined
for growers in Michigan, New
York and nationwide. All prices were
converted into January 2002 dollars.
This analysis shows that prices in
Michigan for canned, juice and frozen
apples were on average higher than the
prices in New York and the overall U.S.
price. This validates the importance
bargaining plays in creating higher farm
prices. But the data also reveal that: (1)
real apple prices declined steadily for all
growers over the time period studied
and that (2) the price differential
between Michigan and both New York
and the nation has diminished.
Growers blame imported apples and
apple concentrate from China for
falling U.S. apple prices and the erosion
of MACMA’s ability to favorably
affect prices. This suggests that globalization
of agricultural markets poses a
significant challenge to domestic-only
bargaining associations.
Other benefits
Benefits other than price received,
particularly the degree of uniformity
and quality of contract terms, are in
many ways the most important measure
of the success of bargaining associations.
However, these fringe benefits
are not easily quantifiable.
In this study, a short mail survey was
sent to all known apple growers in
Michigan and New York. Just over half
the Michigan growers and just under half
of the New York growers returned valid
surveys. The responses were divided into
three groups: (1) MACMA members;
(2) growers in Michigan who are not
MACMA members and (3) growers in
New York. Analysis focuses on both
actual services available and the satisfaction
of growers with their marketing
opportunities. The responses reveal:
- MACMA growers were more
likely to believe they have some influence
on the prices received for their
processed apple crop. For this group,
26 percent either agreed or strongly
agreed with this view. Only 7 percent
of Michigan non-MACMA and 8 percent
of New York growers agreed or
strongly agreed with this view. In addition,
18 percent of MACMA growers,
10 percent of Michigan non-MACMA
growers and 8 percent of New York
growers agreed or strongly agreed that
they had some influence on the terms
of trade for their processed apple crop.
Clearly, more MACMA growers perceive
they have some input into important
aspects of the processed-apple
contracts than other growers.
- MACMA growers were also more
likely to believe they had input into
public policy that might affect them.
Almost 30 percent of MACMA growers
agreed or strongly agreed with the
statement that they had input into
such state government policies. Less
than 20 percent of the Michigan non-
MACMA growers and about 25 percent
of New York growers agreed with
the statement. Regarding input into
federal policies, 22 percent of MACMA
growers, 17 percent of Michigan
non-MACMA growers and 14 percent
of New York growers at least agreed
that they had input.
- MACMA growers were also more
likely than the other two grower
groups to at least agree that they were
generally satisfied with their marketing
arrangements.
- Almost 70 percent of MACMA
growers support a new federal law that
requires processing firms to bargain
with accredited grower bargaining
cooperatives or associations. However,
49 percent of Michigan non-MACMA
and 56 percent of New York growers
agreed with the statement.
- Over 50 percent of MACMA
growers agree or strongly agree with
the statement that they could find marketing
assistance if they needed it,
compared to only 17 percent of non-
MAMCA Michigan growers and 13
percent of New York growers.
- Over 80 percent of MACMA
growers and more than 50 percent of
the growers in the other two groups
believe that grower bargaining units
raise prices for all growers.
Satisfaction index
To further investigate the potential
impact of membership in MACMA on
attitudes and perceptions, researchers
constructed a “satisfaction” index
from the six survey items discussed
above. A statistical regression analysis
was performed using responses to
other survey questions to ensure the
findings were valid.
The results indicate that membership
in MACMA brings with it more
satisfaction as measured by the items in
the index. MACMA members: (1) feel
generally satisfied with marketing
arrangements; (2) feel they can receive
help in finding apple markets and (3)
feel that they have input into contract
terms and price, as well as input into
state and federal policies.
These results are not surprising considering
that MACMA actively lobbies
on behalf of its member growers, represents
them in contract negotiations
with processors and maintains a marketing
desk that will find outlets for
members’ apples as needed. The importance
of these findings is that the members
surveyed realize such efforts are
being made on their behalf, and their
perceptions differ from those of
growers not in the organization.
Other factors that were found to
generate grower satisfaction include
higher numbers of processing firms
available as buyers, lower percentages
of the apple crop sold as processed
apples, fewer times selling to processing
firms without an agreed-upon
price, lower percentage of the fresh
apple crop from packing house culls
and membership in an apple processing
cooperative that meets members’
marketing needs.
Conclusion
The histories of the New York and
Michigan apple industries indicate that
state legislation that protects growers’
ability to organize is essential for establishing
viable bargaining cooperatives.
It is also clear that the presence of a
bargaining cooperative has enhanced
the welfare of Michigan growers, especially
MACMA members.
Comparisons of apple prices in
Michigan, New York and the United
States as a whole from 1969 to 2002
show that Michigan growers received
higher prices for their apples through
most of this period. The price benefit
appears to be shrinking, however.
Apple growers assign blame for falling
U.S. apple prices to imported apples
and apple concentrate from China.
The results of the mail survey indicate
that MACMA members tend to be
more satisfied than non-members.
Holding a number of control variables
constant, the survey analysis showed
that MACMA members appear to reap
substantial fringe benefits from their
membership in the bargaining cooperative.
These benefits include having
input into contract terms and public
policy that affects them, as well as finding
marketing assistance if needed.
Overall, the researchers conclude that
strong laws that enable the establishment
of bargaining cooperatives, although not
panaceas, help growers to maintain their
operations in the face of structural
change in the apple industry
