Question

A tomato processing plant is the only one in the area and collects the entire supply of fresh tomatoes from local farmers. The processed product is sold in a competitive market. Suppose that 1 ton of fresh tomatoes makes 1 ton of processed tomatoes.

5.1. On a diagram, indicate the price paid to farmers and the total quantity delivered to the plant. 5.2. Suppose now that the farmers establish a marketing cooperative and acquire the processing plant: on the same graph used for question 5.1, indicate the changes in price and quantity. Do you think that the farmers will be better off after the change? 5.3. How would the price paid to farmers change if there were some extra costs for the cooperative besides unit production costs for fresh tomatoes? Indicate the change on the diagram previously drawn.

Answer 1

5.1 & 5.2

5.2

Cooperative marketing is the concept in which the persons voluntarily associate together to promote their economic interests. In collective marketing the cooperatives buy the produce of the members and market it. This system will help the farmer to protect his economic interest.

Benefits the farmers get

1. Increases the bargaining power of the farmer
2. Direct dealings with consumers.
3. Farmers can access the market outside the local area.
4. Better understanding for farmers about the market price, demand and supply, and other related information on the market.
5. Can influence the market price.
6. Storage availability for the farmers.

5.3

In collective marketing, the cooperatives can add value to the produce they own. The extra services given will cost additional. So this investment is based on the cost-benefit analysis only. But the value-added products can negotiate more price from the end buyers.