On the Emergence of Growers' Associations

Abstract

Cooperatives in agricultural and horticultural markets have faced problems in responding to the increasing differentiation in demand as well as supply. One response is the emergence of growers' associations. They are not vertically integrated forward into a processor/retailer stage of production like cooperatives. This gives processors/retailers the freedom to invest in the direction they most like, given the increasing differentiation in demand. Growers' associations face on the supply side a trade off between self-selection and countervailing power regarding the increasing differentiation in supply. Heterogeneous growers' associations frustrate high quality growers due to the policy of uniform treatment of members, but they are strong in terms of countervailing power of the growers collectively. The opposite holds for homogeneous growers' associations.

Keywords: Growers' association, self-selection, market power, incomplete contracting

JEL Classification: M, M10, L2, L22