2000s Archive

The Price Is Right

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Take, for instance, cranberries. In 1999, the cranberry market in America collapsed as a result of overproduction—even though cranberry production is largely controlled by Ocean Spray, the powerful growers’ cooperative. Prices plummeted, and scores of growers were driven out of business. In response, the cranberry industry instituted what amounted to a production quota for the years 2000 and 2001. Before each season, every grower was allotted a fixed number; he could sell that many cranberries in the U.S., but no more. The hope was that if the supply were limited, prices would rise.

Or consider kiwis. Today, no one can sell a California kiwi that doesn’t conform to certain minimum standards. In particular, a kiwi has to pass a sweetness test—which measures something called its Brix level—before it can be sold. If the kiwi doesn’t have a Brix level of at least 6.5 percent at the time it’s inspected, it can’t be sold.

Finally, look at the ad campaigns for things like Vidalia onions or Texas grapefruit. These are paid for, unsurprisingly enough, by trade groups representing the growers of those products. What’s interesting, though, is that individual growers in those regions don’t ultimately have any choice about whether to pay for the campaigns or not. Instead, government regulations state that if two thirds of the growers in a region want to fund a marketing campaign, every grower in the region has to help pay for it.

The three strategies outlined above—supply quotas, quality standards, and marketing campaigns—might seem to have little to do with one another. But, in fact, all three are attempts to solve the farmer’s basic problem: keeping supply in balance with demand. Just as important, all three are collective strategies, which are only possible because of what the government calls “marketing orders.”

Practically speaking, a marketing order is a set of rules that applies to all the growers in a particular region. Right now, there are 35 or so marketing orders regulating produce in the U.S. The orders are administered by the USDA. But what’s distinctive about them is that they are initiated by the growers themselves. The cranberry quotas, for instance, were proposed by representatives of the cranberry industry and approved by the Secretary of Agriculture. That meant they became, as far as cranberry growers were concerned, law.

Marketing orders were introduced in 1937, during the New Deal, when food prices were tumbling and farmers were struggling to stay afloat. They’re based on a simple idea: Farmers do better when they are allowed to consult with each other on what to produce, how much to produce, and how to sell it. Now, in most parts of the economy we frown on this kind of collusion. We want competitors to compete, not to cooperate. But the New Dealers who invented marketing orders thought that competition was ruinous for farmers. Once a marketing order is instituted, we not only allow farmers in a particular region to cooperate. We require it.

Marketing orders, tariffs, and supply quotas all interfere with the market, and all keep prices higher for consumers. So why do we follow these policies?

One reason is that food has a cultural and psychological importance that most other products simply don’t have. The idea that a nation should be able to feed itself is a deep-seated one, which is why analysts talk about food security in the same way they talk about national security. As U.S. Representative Bernie Sanders of Vermont put it, “How vulnerable will we be if we become dependent on foreign nations for our food?” We may feel okay about getting a majority of our memory chips from Asia, but getting too much of our food from abroad makes us uneasy. (Though, as the example of Mexican tomatoes suggests, not uneasy enough for consumers to stop buying foreign produce if it’s cheap.)

Coupled with this is the mythology of the yeoman farmer, whom Thomas Jefferson imagined as the quintessential American. Although we have long since left the days when family farmers produced most of our food, the idea of the farm retains a powerful hold on the national imagination. One result of this is that in most developed countries, farmers wield political influence out of all proportion to their actual numbers. In 2001, developed nations handed out $233 billion in agricultural subsidies, even though in most of these countries farmers make up less than 5 percent of the population. In America, the farm lobby is also enormously powerful. In the case of the Florida tomato farmers, for instance, the Clinton administration’s decision to force Mexico to cut a deal no doubt had something to do with the fact that 1996 was an election year, and that Florida’s 25 electoral votes were too important to risk. What’s amazing is that even though there were fewer than 150 tomato farmers in the entire state, they had enough influence to permanently alter American trade policy and make consumers all over the country pay a little more for tomatoes.

But farm policy isn’t just about naked interest-group politics. At its core, it still depends on that New Deal idea that if farmers compete, they’ll end up broke. So all farmers have a collective interest in limiting production.

The real paradox of U.S. farm policy, though, is that even though its origins lie in the New Deal and the desire to protect the family farm, today its main beneficiaries are the large corporations that dominate U.S. agriculture. In the past two decades, there has been a massive consolidation in the agriculture business, so that today 8 percent of farms account for 72 percent of all food sales. And agribusinesses, because of their size and their diversification, have more control over production. Yet U.S. farm policy is predicated on the idea that they need help to survive. Subsidies, in particular, tend to help giant fence-to-fence corporate farms, and they have, in fact, made it easier for agribusinesses to buy out small farms. Three quarters of all rice farms, for instance, are now tenant farms. That kind of consolidation is less characteristic of the produce business, where growers’ cooperatives—like Ocean Spray and Sunkist—play a more important role. But even in the produce business, there are questions about whether marketing orders can be controlled by big producers to protect their interests against smaller farmers.

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