Each of the two large firms considers that a contract price of &25 

 a ton for first grade tomatoes is to its benefit and should, there- 

 fore, be the price offered growers. The farmers, on the other hand, 

 desire to receive a contract price of 28 a ton for i5Jo 1 tomatoes. 

 Under this assumption firms could pay more and still make a reason- 

 able profit and not be forced to raise their wholesale price of the 

 canned product © 



The several smaller independent plants have been in the habit of 

 accepting the price leadership of the two larger ''irmSo Some of them 

 would like to increase the contract r^rice to the growers in order to 

 attract more volume, but they are unable to because they would then 

 be paying a price above that of the larger firms, and this would place 

 them at a competitive disadvantage in selling their product. Hence, 

 the small firms accept the price leadership of company A and B. 



In the face of such a market situation, the tomato growers as indi- 

 viduals are quite helpless to pet their prices raised. It may occur 

 to a number of them that they could refuse to grow tomatoes and shift 

 their land to something else. However, they are experienced at 

 growing tomatoes and because of certain factors of immobility it is 

 somewhat difficult for them to shift to a crop that would return them 

 as much money per acre. They are relatively far from consuming 

 markets for fresh tomatoes so they are limited as to alternative 

 outlets. Also, the farmers are not united and the few that did reduce 

 acreage would have small effect on the total production in the area. 



Here then, is an example where an effective price bargaining associa- 

 tion could be of significant aid to its members. l7 ith the majority 

 of growers united under a strong organization, the association 

 leaders could go to the canning companies early enough in the year and 

 lay down their needs and demands for a better price for tomatoes. 

 Since the companies could actually pay -23, the rise in the contract 

 price for raw products would have no appreciable effect on the whole- 

 sale and retail price. The profits of the canning companies would 

 be reduced some, but not enough to force hardship on any of them. 

 The farmers could benefit materially by uniting their efforts in a 

 bargaining association and negotiating with c-nners for a better 

 price for their product. 



On the other hand, let us assume that in this particular area there 

 are only two canning plants and that they have about the same costs, 

 and that 25 a ton is all that the two companies can possibly pay 

 under the existing market conditions. If, through its control of 

 supoly, the farmers' bargaining association brings pressure upon the 

 companies and forces them to pay more they will fail. If the canners 

 go broke and the plants close, the farmers cannot grow tomatoes for 

 canning and consequently an industry with a local payroll is lost to 



