1. Marketing Orders and Horticultural Products AEC 317 December 5, 2014 Unit 4

2. 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 http://www.ams.usda.gov/fv/  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/

3. 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

4. Marketing Orders  Orderly marketing with perennial crops.  Not as common in annual enterprises where short-term adjustments are easier.

5. Mandated Marketing Programs  Quality Control Provisions Packaging, sizes, color, minimum maturity  Quantity Control Provisions Reserve pools, quotas, production allocation  Market-Facilitating Provisions Promotion, market entry International market development Country-of-origin labeling  Research Grower-funded research on production issues

6. Quantity Controls Canned fruits and vegetables (cherries) – reserve pools managed supply and price fluctuations Potatoes – Acreage buyouts limit overproduction and chronic low prices. Cranberries – 10 state grower allotment supply Controls (quota)

7. Quantity Controls Spearmint – Supply controls in 5 major states 83% US production, 50% of world production Source: Far West Spearmint Oil Administrative Committee, 2011

8. Quality Controls  Handling requirements for peaches (California only)  Size requirements for grapefruit (FL)

9. Demand and Promotion  Demand expansion, export promotion, product development, merchandising US Highbush Blueberry Council  Washington Apple Commission

10. 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”

11. 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 controls Washington Apple Commission Highbush Blueberry Council

12. Georgia Vidalia Onions  10 ¢ per 40 pound carton  Order authorizes Production research Market research & development Promotions 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

13. 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

14. 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

15. U.S. Mushroom Council  Supreme Court Challenge to Mandated Orders  What are the possible outcomes? Reversal Consolidation Voluntary Orders? Int’l Orders

16. Washington Apple Commission  Program thrust Brand development - $500 million spent in building the brand Research New market development, especially exports  Order ruled unconstitutional  Commission disbanding, replaced by much smaller promotion efforts by individual shippers.