Marketing Orders and Horticultural Products

AEC 317

December 5, 2014

Unit 4

Mandated Marketing Programs Marketing Orders: Ag Marketing

Agreement Act of 1937 See

http://www.ams.usda.gov/fv/ for a pdf version of the full 33pg Act

Grower organizations are established to coordinate production and maintain “orderly” marketing.Federal legislation – binds nation

or region○ http://www.blueberry.org/

State legislation – binds only state○ http://www.calstrawberry.com/

Covers many kinds of commodities Milk Fruits Nuts Tobacco

Production quota – (Until recently)

Vegetables Hops Honey bees

Peanuts Potatoes Caneberries

List of Federal Marketing Orders

Marketing Orders

Orderly marketing with perennial crops.

Not as common in annual enterprises where short-term adjustments are easier.

Mandated Marketing Programs Quality Control Provisions

Packaging, sizes, color, minimum maturity

Quantity Control ProvisionsReserve pools, quotas, production

allocation

Market-Facilitating ProvisionsPromotion, market entryInternational market developmentCountry-of-origin labeling

ResearchGrower-funded research on

production issues

Quantity ControlsCanned fruits and vegetables (cherries) – reservepools managed supply and price fluctuations

Potatoes – Acreage buyouts limit overproductionand chronic low prices.

Cranberries – 10 state grower allotment supplyControls (quota)

Quantity Controls

Spearmint – Supply controls in 5 major states83% US production, 50% of world production

Source: Far West Spearmint Oil Administrative Committee, 2011

Quality Controls

Handling requirements for peaches (California only)

Size requirements for grapefruit (FL)

Demand and Promotion Demand expansion, export

promotion, product development, merchandisingUS Highbush Blueberry Council

Washington Apple Commission

Research Florida Tomato Growers Apples, cherries Disease, food safety, pest

management, product development, market research

“…give the pecan industry…marketing muscle to better quantify their crop and research funding”

Mandated Marketing Programs Assessment rates set by growers Subject to periodic review and

grower/handler referendums USDA oversight A note on “commissions” (or

sometimies referred to as “councils”) – used exclusively for research promotion and advertising;Cannot be used for volume or quality

controlsWashington Apple CommissionHighbush Blueberry Council

Georgia Vidalia Onions 10 ¢ per 40 pound carton Order authorizes

Production researchMarket research & developmentPromotions and paid advertising

Governed by 8 producer members

“……programs are active and are designed to improve the marketing, distribution, consumption, or efficient production of Vidalia onions. The order does not authorize grade, size, quality, container, or pack regulations. “

Vidalia Onions

Objectives of mandatory marketing mechanisms

• Maintain farm-level season-average returns above levels that would otherwise prevail

• provide price floors in years of large supplies

• Create seasonal and interseasonal price stability

• Provide quality assurance and consistent packaging to buyers

• Facilitate financing of research and generic promotion

• Facilitate the collection and dissemination of marketing information

Arguments against mandatory marketing mechanisms

• Contributes to food price inflation

• Causes inefficient resource allocation (the subsidy problem)

• Reduces price competition among handlers (low prices weeds inefficient growers)

• Restricts growth and progressiveness

• Penalizes low-income consumers

• Penalizes foreign suppliers (promotion)

• Lead to inadequate public oversight

• Permits inequitable or undemocratic representation of interested parties

U.S. Mushroom Council

Supreme Court Challenge to Mandated Orders

What are the possible outcomes?ReversalConsolidationVoluntary

Orders?Int’l Orders

Washington Apple Commission

Program thrustBrand development - $500 million

spent in building the brandResearchNew market development,

especially exports Order ruled unconstitutional Commission disbanding,

replaced by much smaller promotion efforts by individual shippers.