Agricultural Bargaining and Marketing Associations
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United States Agricultural Rural Development Administration Bargaining: Cooperative Services Service Report 42 In a Competitive World Proceedings: 38th National and Pacific Coast Bargaining Cooperative Conference December 2-4, 1993 Portland. OR NATIONAL COMMITTEE OF COOPERATIVE AGRICULTURAL BARGAINING AND MARKETING ASSOCIATIONS PRESIDENT OTHER DIRECTORS Tom Butler William Ferriera Michigan Processing Apricot Producers of California Apple Growers (MACMA) 064 Woodland Avenue, Suite E P. 0. Box 30960 Modesto, CA 95351 Lansing, MI 48909 Vaughn Koligan VICE PRESIDENT Raisin Bargaining Association 3425 N. First, Suite 209 Vernon DeLong Fresno, CA 93726 Agricultural Bargaining Council 744 Main Street, Suite 1 Ken Lindauer Presque Isle, ME 04769 Prune Bargaining Association 335 Teegarden Avenue, No. B TREASURER Yuba City, CA 95991-4525 Ronald A. Schuler, President John Welty California Canning California Tomato Growers Association Peach Association P. 0. Box 7398 P.O. Box 7001 Stockton, CA 95267-0398 Lafayette, CA 94549 ASSISTANT SECRETARY SECRETARY Andrew A. Jermolowicz Adin Hester, Manager USDA/ RDA-Cooperative Services Olive Growers Council of California Ag Box 3252 121 E. Main Street, Suite 8 Washington, DC 20250-3252 Visalia, CA 93291 Preface These proceedings are published by USDA’s Rural Development Admininstration-Cooperative Services at the request of the bargaining and- marketing cooperatives. This 38th National Bargaining Conference was com- bined with the Pacific Coast Bargaining Conference Dec. 2-4, 1993 at Portland, OR. Proceedings include speeches delivered at the conference and related information. Opinions expressed reflect views of participants. The proceedings should not be viewed as representing the policies of the United States Department of Agriculture. Use of commercial names does not constitute endorsement. Copies of the proceedings may be obtained from RDA-Cooperative Services, Ag Box 3255, Washington, DC 20250-3255. Price: Domestic $5; Foreign: $5.50. Service Report 42 July 1994 Contents Where Bargaining Associations Fit Dr. Mahlon Lang, Center for Cooperatives University of California-Davis . 1 Director Responsibilities Chuck Swank, CPA-Grove, Mueller, Hall, & Swank, P. C . 7 Donald K. Franklin, Attorney, Franklin & Bersin . 10 What Does the Future Portend for Bargaining Associations? Dr. Randall Torgerson, Asst. Administrator, USDA/RDA-Cooperative Services . 14 Price Discovery and Field Price Determination John Welty, California Tomato Growers Association . 18 Attendance Roster . 22 Where Bargaining Associations Fit Mahlon G. Lang Growers must learn to show how they, on their farms and through their cooperatives, con- Editor’s Note: Mahlon G. Lang is the director of the tribute to the creation and maintenance of the Center for Cooperatives at the University of Calzfornia- world’s finest food system. A first step in telling Davis. This presentation was used to set up a workshop your story is to learn for yourself why ours is a with participants at the National Bargaining Conference superior food system and what you do to make it in Portland, OR, Dec. 2, 1993. As such, it does not that way. Discover your value to the food-consum- reflect extensive discussion or conclusions by workshop ing public. That’s who the food system exists to participants. serve. Producers need to recognize that they are not You’re good. Thanks in large part to American evaluated in terms of how hard they work, how farmers, the United States has the world’s best food much they risk, how uncertain their livelihood, or system. Not everybody knows that. And, to com- how good they are. And this probably makes sense. plicate matters, farmers, who produce the basic Instead, we are, and should be evaluated in terms food commodities, are increasingly isolated---eco- of how much we contribute to the food system. nomically, politically, and socially. This workshop is designed to help us take the first Economically, producers are challenged by steps in learning how to tell our story industry concentration, global competition, vertical For these reasons, the questions “What is a integration, and continued downward pressure on good cooperative? N and “What is a good bargaining commodity prices. Politically, agricultural produc- association? “ cannot be separated from “What is a ers continue to account for an increasingly smaller good food sys tern? V percentage of the total U.S. population. In California, the leading agricultural State, What is a food system?-A food system producers account for about one-fourth of 1 per- (Figure 1) includes all agricultural supply, food cent of the State’s population. Socially, producers production, food processing, further processing, are isolated because few people even know them, distribution, and retailing, plus all the intermediate let alone know enough about agriculture to devel- steps between the supplier and the consumer. op an informed opinion regarding public issues The tasks of coordinating agricultural sup- affecting it. plies, production, processing, distribution, and This makes it important that we learn to tell retailing are complex. Coordination must provide your story. It isn’t enough to be good, right, or use- for market signals (prices and other terms of trade) ful. Increasingly, as growers and marketers of agri- that create incentives to produce food, keep inven- cultural products, you will be called on to demon- tories, process food, distribute food, and reward strate your value to the public, consumers, those who do so. taxpayers, and any group that shapes the future of agriculture, cooperatives, or bargaining associations. What is a good food system?-Some will question my claim that ours is the world’s best Figure 1. The Food System ( D;.,.,;,. > (FURT;,R PRO~SS~NG) PROCESSING COORDINATION AT EACH LEVEL 1 t IN THE SYSTEM FIRST HANDLER I . PRODUCT . TIME . FORM 1 t . QUALITY l LOCATION PRODUCER AGRICULTURAL SUPPLY 2 food system. It is not perfect by any measure. have shown how bargaining associations can Measuring the performance of any food system is improve vertical coordination by stabilizing sup- ply, creating handling efficiencies, enhancing price what is meant by a “good” food system. In this stability, and improving other facets of market case, it is defined as “good” if it provides an abun- information. dant, stable supply of safe, nutritious, high-quality Operating cooperatives, bargaining associa- food and does so at a reasonabletions, andprice. investor-owned-firms (IOFs) vary great- In these terms, ours is an excellent food sys- ly in terms of how they enhance food system per- tem. It rewards participants for responding to an formance. They simply bring different strengths to enormous range of consumer thepreferences. marketplace. These include highly processed, nationally branded, con- sistent-quality products, “natural” and “organic” Contributions of Marketing Institutions foods, as well as a host of intermediate products. It Leaders representing each kind of marketing total income. organization recognize the need for market disci- pline, market information, market sensitivity, and a How do marketing institutions improve food system of rewards that keeps them all in balance. system performance?-Growers, as well as non- In asking where bargaining associations fit, it may farm food system participants, do much more than be worth asking if some institutions are better produce raw agricultural products. Besides assess- designed than others to play some of these roles. ing final consumer preferences, the food industry Each kind of marketing institution-operating must match food production with consumer cooperatives, bargaining associations, and IOFs- demands in terms of time, form, quantity, and loca- makes a unique contribution to the performance of tion at many intermediate steps along the line from the U.S. food system. production supplier to final consumer. The system must provide incentives . Operating cooperatives feature grower (rewards/profits) to all participants in ways that ownership at both the production and the market- keep them in long-term production while avoiding ing levels. overproduction. Inadequate rewards for produc- . Bargaining associations may, more than tion and marketing activities destabilize the food other organizations, provide detailed information system just as excessive rewards do. Market infor- on pricing and other terms of trade. mation, marketing incentives, and market disci- . IOFs are largely driven by the need to pline are all required to avoid either extreme and to return earnings gained by responding to con- make our food system work as well as it does. sumers’ market preferences. Given these basic differences (see Figure 2), What do bargaining associations con- to what degree are the following statements valid: tribute?-Members are most likely to think of operating cooperatives and bargaining associations - Grower-owners of operating coopera- as a way to increase their income--and they do so. tives have more market discipline than others But to survive, these organizations, as all other because they have equity positions both as produc- marketing businesses, can succeed in the long term ers and handlers. only by adding value or cutting costs in the market. - In the course of negotiating for their Bargaining associations bring unique members, bargaining associations develop substan- strengths to the market. They specialize in provid- tial market information to match supply and ing information about pricing and other terms of demand. trade