A tomato grower with a quarter of a hectare harvests every few days for several weeks and must sell each picking almost at once. The buyer is usually a village trader or a commission agent in the nearest wholesale market, who handles the produce of hundreds of such growers, knows the day's prices in more than one town and can decline a lot without much loss. The grower cannot. Fresh produce deteriorates quickly after harvest, and physical losses between farm and consumer are large wherever cooling and careful handling are absent (Kader, 2005). The imbalance between the two sides of this transaction is the starting point for most arguments in favour of organising farmers.

Farmer producer organisations, a term that covers cooperatives, associations and producer companies, are expected to redress the imbalance by pooling the output of many small sellers. Governments and donors have invested heavily in forming them. India amended its company law in 2002 to create the producer company as a legal form, issued national guidelines for promoting farmer producer organisations (SFAC, 2013) and later adopted a central scheme to form and support ten thousand of them. Comparable programmes exist across eastern and southern Africa and Latin America.

The premise that collective selling confers bargaining power is intuitive, but it is a claim about market structure that needs examining, and perishable vegetables are a hard case for it. This review considers what theory predicts and what the published evidence shows.

The article is a narrative review of the published literature. It combines three bodies of work: the economic theory of bargaining, transaction costs and cooperatives; empirical studies of collective marketing by smallholders in low- and middle-income countries, with preference for those dealing with fruit and vegetables; and writing on producer companies in India. Studies of staples and export crops are used where they establish a mechanism that carries over. The selection is not exhaustive and no formal search protocol was followed. Bargaining power is used here in a specific sense: the capacity of the seller to obtain a larger share of the surplus from a transaction, as distinct from gains that arise because the transaction itself has become cheaper or the product better.

In the bargaining model of Nash (1950), the division of the gains from a trade depends on what each party would get if no agreement were reached. For a grower holding ripe vegetables, the alternative to selling today is a product worth less tomorrow and perhaps nothing the day after. The trader's alternative is to buy from the next grower. Perishability thus lowers the seller's fallback position directly, and it does so most at the moment of sale, after the costs of production and often of transport to market have already been sunk.

Transaction cost economics describes the same situation as a hold-up problem. Once produce has been harvested and carried to a particular market, it is committed to that place and time, and the buyer can revise the terms knowing that the seller has little choice (Williamson, 1985). Studies of wholesale markets confirm that the institutional setting compounds the problem. In Indian fruit and vegetable markets, commission agents commonly advance credit to growers and receive their produce in return, which ties the sale to the loan (Minten et al., 2012). Where farmers are far from any alternative market, traders face little competition, and the prices farmers receive rise with the number of markets within reach (Chatterjee, 2023).

Information alone does not correct the imbalance. In an experiment with potato farmers in West Bengal, giving growers daily wholesale prices did not raise the average price they received from traders, a result the authors interpreted as bargaining after harvest in which farmers lacked a credible outside option (Mitra et al., 2018). Growers with small quantities are also the least able to carry a load to a second market, since the cost of the journey is fixed and the lot is small.

Three theoretical traditions bear on whether a producer organisation can change this picture, and they do not all point in the same direction.

Reviews of smallholder collective action reach a measured conclusion. Introducing a set of studies on the subject, Markelova et al. (2009) found that farmer groups improved market access under identifiable conditions relating to the group, the product and the market, and that the case was stronger for high-value and perishable products than for staples, since the transaction costs to be saved are larger. Shiferaw et al. (2011) reached a similar view for sub-Saharan Africa while stressing that many organisations lack the management capacity and capital to perform marketing functions well.

The Indian producer company was conceived as a hybrid, combining cooperative principles of member ownership with the legal framework and managerial freedom of a company (Singh, 2008). Early assessments described a form with promise and a high dependence on promoting agencies. Trebbin and Hassler (2012) documented producer companies that gave small farmers access to inputs, technology and new buyers, and noted that most relied on external funding and expertise. Attempts to connect such companies to organised retail met obstacles on both sides: retailers wanted volumes and consistency that young companies could not guarantee, and companies found the terms offered unattractive (Trebbin, 2014).

Shah (2016) offered a sharper critique, arguing that many producer companies were formed to meet promotion targets, with too little member capital and too little business with their own members to matter in those members' livelihoods. The comparison he drew was with the dairy cooperatives, whose strength rests on daily transactions with every member and on ownership of processing. Vegetables share the daily rhythm of milk but lack an equivalent processing stage that absorbs the whole supply, which is why Figure 1 treats the capacity to wait, to walk away and to commit as separate requirements.

The literature leaves several questions open. Few studies observe the prices that producer organisations obtain for vegetables against a credible comparison, so that price effects are usually inferred from income. Studies that track the same organisations over several years are rare, although survival and continued member patronage are the outcomes on which any bargaining gain depends. Side-selling is widely reported and seldom measured. Little is known about how the gains within an organisation are divided between larger and smaller members, or between men and women. Finally, the spread of digital trading platforms and direct procurement by retailers and processors changes the set of buyers within reach, and its effect on the position of organised and unorganised growers has yet to be studied carefully.

Organising vegetable growers does not by itself alter the fact that their product cannot wait. The reviewed evidence suggests that producer organisations help their members mainly by reducing the cost of transacting and by opening routes to buyers who pay for grade and reliability. Bargaining power in the strict sense appears where the organisation has changed the seller's alternatives, through storage, a choice of outlets or its own trading and processing, and where members sell through it consistently enough for its commitments to be believed. Programmes that count organisations formed, without asking whether these capabilities exist, are measuring the wrong thing. Support directed at cold chains, working capital and management is more likely to shift the terms of trade than registration alone.

To be declared by the author(s) before publication.

To be declared by the author(s) before publication.