Transcript Objectives of mandatory marketing mechanisms

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

Peanuts
 Potatoes
 Caneberries

 Production
quota – (Until
recently)
Vegetables
 Hops
 Honey bees

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 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
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)
Quantity Controls
Spearmint – Supply controls in 5 major states
83% 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, merchandising
 US 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
controls
 Washington Apple Commission
 Highbush Blueberry Council
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
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?
 Reversal
 Consolidation
 Voluntary
Orders?
 Int’l Orders
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.
