Simulation of Farm Bargaining Board Policies in the Western Late Potato System

The National Agricultural Bargaining Act of 1968 proposed creation of farm bargaining boards at the request of and referendum approval by producers of a given commodity. This proposal provided the legal framework assumed in this analysis of a bargaining board in a commodity system. The objective of bargaining boards as proposed is to provide producers with more effective bargaining power as a means of negotiating more favorable terms of trade. Theoretical sources of bargaining gains under a board were specified in the research, and control of total production and allocation of production into different uses were selected as the most promising sources of bargaining gains. To test the results of implementing a bargaining board in a commodity system, the western late potato system was chosen for analysis. Results of several economic studies dealing only with portions of the potato production-marketing system were examined. Due to their inadequacies, an economic model of the complete potato system was developed and the interrelationships estimated statistically. A simulation model of the economic system was constructed. The simulation model consisted of a production sector composed of five production units and a marketing sector incorporating five alternative uses for potatoes. A Fortran program of the simulation model was used in computer tests of alternative bargaining board policies in the western late potato system. Operational goals for a bargaining board were specified and evaluated on the basis of effects on the average level of variables important to the western late potato industry. Of the policies tested, the acreage increase policy and the gross revenue increase policy gave results most favorable to western late potato producers. The results obtained imply that establishing a bargaining board in the western late potato industry could result in higher gross returns per unit of potatoes produced compared to the results of the system as it currently operates. The gains would come at the cost of restricting resource use in the system. Assuming that the western late potato system is representative of commodity systems possessing characteristics conducive to bargaining board gains, the conclusion is reached that bargaining boards offer a policy tool which can lead to results more desirable for producers than those obtained under the system operating without interference. The types of bargaining board actions and the extent of gains are limited by the supply and demand characteristics of the particular commodity system. The costs of operating a bargaining board need to be researched to allow evaluation of the net effect of establishing a bargaining board. A decision to implement bargaining boards as a policy tool for U. S. agriculture should be based on additional research into some of the noneconomic factors affecting the assumptions upon which this analysis is based.