Each winter, the fields in the northwestern Mexican province of Sinaloa turn lush with vegetables. The farms—many of them relatively big spreads of more than 1,000 acres—grow a wide range of crops: squash, bell peppers, eggplants, cucumbers. Above all, though, they grow tomatoes. Almost 70,000 acres in Sinaloa are given over to them, and in a typical year they produce half a million metric tons. Most of those tomatoes have a single destination: Nogales, Arizona. Once they have crossed into the United States, they’ll eventually end up in supermarkets throughout the western part of the country.
Mexican farms have been exporting vegetables to the U.S. since the 1920s. But in the past decade, the importance of Mexican produce to what’s known as the winter market has changed dramatically. Since 1993, exports to the U.S. have risen in value by 60 percent, and Americans now spend $500 million a year on Mexican tomatoes alone.
This has made it easier to find good, cheap produce even in the winter months. But it has been bad for American farmers, and in particular for Florida tomato farmers. Historically, Florida was the primary source of winter produce for the United States. But in the space of just a few years, Mexican imports eclipsed domestic varieties, leaving Florida with little more than a third of the market. And the competition kept prices lower, too. Tomato revenues plummeted, and so did profits.
There were a number of reasons for this shift. Over the years, Sinaloan agriculture—thanks in part to being forced to compete in the U.S.—became more efficient. (Today, the average yield per acre in the region is close to what it is in America.) In the mid-1990s, Mexico’s economic woes forced the government to devalue its currency. That made Mexican goods cheaper for Americans to buy. And then there was NAFTA, the free-trade agreement between the U.S., Mexico, and Canada. Before NAFTA, Mexican tomatoes were subject to a tariff, which kept the price of Mexican tomatoes higher than it would otherwise have been. For Florida farmers, this was a valuable cushion, insulating them from the impact of Mexico’s lower labor costs. But NAFTA got rid of the protection, phasing out all tariffs on fruits and vegetables. The tomato tariff was cut for the first time in 1994, and again in 1995, and last February it was eliminated completely.
As the Florida farmers saw their livelihoods threatened, they responded in a variety of ways. They tried to cut costs and make their farms more efficient. They encouraged customers to “Buy American,” and promoted Florida tomatoes—which are picked in a mature-green state for shipping and then gassed with the hormone ethylene to ripen them—as better tasting. Some just closed up shop. (Between 1994 and 1996, half of the state’s 230 tomato farms shut down.) But the most effective strategy the Florida farmers came up with was simple: Ask the government for help.
In 1996, Florida tomato growers went to the Clinton administration complaining that Mexican farmers were “dumping” tomatoes—selling them below cost—in America. The evidence wasn’t clear, but the administration listened. Within a few months, U.S. trade negotiators threatened to impose hefty tariffs on all Mexican tomatoes unless the Mexican growers acquiesced to a deal that would help protect Florida farmers. Given no alternative, the Mexican farmers essentially agreed to a price floor. Suddenly, price competition was no longer a problem. Mexican shipments hit a plateau. American consumers had to pay a few cents more a pound for tomatoes. And the Florida farmers’ profits, if not as high as they were in the days before Sinaloa became a real competitor, returned.
At first glance, the fact that the Florida tomato farmers got the U.S. government to save their business from foreign competition seems rather remarkable. After all, the U.S. prides itself on having a free-market economy. In fact, we pride ourselves on it so much that we’ve spent the past few decades preaching the virtue of competition—and the vice of government interference in the economy—to the rest of the world. But somehow, when it came to winter tomatoes, the government was willing not just to interfere in the workings of the economy, but actually to broker what amounted to a price-fixing agreement. In many industries, this would be unthinkable. (It’s hard to imagine, for instance, the government declaring that no television sets could be sold for less than $150.) But in the topsy-turvy world of agricultural economics, it was not just thinkable, it was business as usual. There are any number of American industries—the steel and aluminum industries, for instance—that rely on the government’s help to stay in business. But no industry gets as much help as agriculture does.
The most obvious—and notorious—examples of government tinkering are subsidies and price supports. The U.S. now spends billions of dollars a year doing things like keeping milk prices artificially high and offering grain farmers a guaranteed minimum income. It also supports peanut and tobacco farmers, and protects the sugar industry from foreign competition. And it hands out “emergency” subsidies, too, like the one that continues to prop up the American honey industry.
Subsidies and price supports get a lot of attention, mainly because they come with a hefty price tag, and because they’re a classic example of pork-barrel politics. But what’s striking is that even when it’s not intervening in such high-profile ways, the government is often shaping the course of agriculture. The produce business, in fact, is a perfect example. Unlike grain or dairy farmers, produce farmers rarely get direct payments from the government—and no official price supports, either. Instead, they have to rely on less obvious mechanisms.
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.
Even so, it’s not clear that doing away with marketing orders—at least where produce is concerned—will necessarily help small farmers, either. In fact, many defenders of local farming—like the Minnesota-based Institute for Agriculture and Trade Policy—are also for production controls and, in some cases, price supports. Like the New Dealers, some small-farm advocates believe that individual competition is a recipe not for innovation and productivity, but rather for destruction. The trick, perhaps, would be to craft a federal farm policy that actually helped family and local farms without also offering a giveaway to agribusiness. If there is a way of doing this, the government hasn’t found it yet. (And the agribusiness lobby will no doubt make sure it never does.)
Of course, there is one answer to the perils of competition that doesn’t require any government help, and that is for farmers to grow a crop that isn’t like everything else on the market. In the case of tomatoes, for instance, even as the Florida and Sinaloan farmers were fighting over the vine-ripe market, other farmers were cultivating cluster tomatoes and greenhouse tomatoes, which both sell at a much higher price than vine-ripened ones. Farmers markets place a premium on freshness and quality, and their numbers grew 63 percent between 1994 and 2000. Today, organic crops are the fastest-growing segment of the entire agriculture business.
Relative to the size of U.S. agriculture as a whole, these are all small innovations. But they do suggest that the choice between overproduction and low prices on the one hand and government assistance on the other is sometimes a false choice. Sometimes, it seems, farmers can thrive even without the help of marketing orders or tariffs or price supports. Sometimes, quality really does pay.