The aim of this paper is to explore on a regional scale the potential role of producers' unions as a lever with which to enhance the bargaining power and the standard of living of small and middle size farmes as well as landless groups. This is done in relation to a basically conservative political environment (that of contemporary Sri Lanka) and in an economic sector traditionally dominated by merchant capital which is under a strong threat of a multinational corporation that could take control of the dairy industry. Such situations are not uncommon in Third World Countries. For a wide range of agricultural and livestock products both producers and factory workers in processing industries ultimately find themselves faced with the dictates of government of monopsonic buyers (and they are often tied resulting in a seriously curtailed bargaining power).