College of Agriculture 
 Agricultural Experiment Station 
 Berkeley, California 
 
 ECONOMIC AND LEGAL ASPECTS OF COMPULSORY PRORATION 
 IN AGRICULTURAL MARKETING 
 
 E. A. Stokdyk 
 March, 1933 
 
 w* UNIVERSITY OF CALIFORNIA 
 
 I % ; LIBRARY 
 
 ' BRANCH OF THE 
 
 Contribution from the 
 
 Giannini Foundation of Agricultural Economics 
 
 (Preliminary report) 
 LIBRARY 
 
 UNIVERSITY OF CALIFORNIA 
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TABLE OF CONTENTS 
 
 Page 
 
 Introduction 1 
 
 Purpose of study . 1 
 
 Proposals for effecting proration 3 
 
 Probable legal status of proration in agricultural marketing 5 
 
 The rule of reason 5 
 
 Legal status of cooperatives and trade restraint . » , , 6 
 
 Proration in oil reviewed by courts ..... 8 
 
 Legistic theories justifying proration .... 10 
 
 Proration and interstate commerce .... 12 
 
 Proration and price fixing ..... 12 
 
 Attempts to increase returns through voluntary prorate programs .... 12 
 
 Proration of lemon shipments ......... 14 
 
 Valencia orange proration .... 15 
 
 Tokay grape prorate . 16 
 
 Lettuce proration 16 
 
 Cantaloupe proration 17 
 
 Watsonville apple prorate .... ... 17 
 
 Canning peach limitation program 17 
 
 California Grape Control Board operations 18 
 
 Summary of proration attempts . 18 
 
 Problems of administration of compulsory prorate programs 19 
 
 Determining an industry's desire for proration 19 
 
 Determining the extent to prorate ..... 19 
 
 Distribution of benefits and burdens 19 
 
 Enforcement 21 
 
 Financing 21 
 
 Appraisal of the desirability and feasibility of prorate programs ... 21 
 
 Summary 25 
 
ECONOMIC AND LEGAL ASPECTS OF COMPULSORY PRORATION 
 IN AGRICULTURAL MARKETING 
 
 E. A, Stokdyk fyty 
 INTRODUCTION 
 
 Purpose of Study.-- The purpose of this study is to appraise the desir- 
 ability and feasibility of compulsory proration programs as a means of increasing 
 returns to the producers of some California agricultural commodities. 
 
 The primary question which arises with reference to compulsory proration 
 is its legality, that is, whether or not it is constitutional. It was endeavored 
 to ascertain the probable legal status through an analysis of legislative acts 
 and court decisions that seemed pertinent to the problem. At the same time, the 
 economic possibilities of the plan were considered. This was done through a sur- 
 vey of the attempts of several groups of California producers to prorate the 
 marketing of their crops and by summarizing some of the studies made by the 
 Giannini Foundation of Agricultural Economics on the factors affecting the prices 
 of soecific crops. 
 
 This study was made at the request of the California State Farm Bureau 
 Federation and the California State Chamber of Commerce. Their request was an 
 expression of the fact that numerous farmers have reached the point where they 
 are willing to recognize and enforce the "right of the lot" . This is not a new 
 philosophy; it was manifested in the practices of the early English merchant and 
 craft guilds. These were associations of persons enjoying a charter by public 
 authority which endowed them with an exclusive right to practice their craft in 
 the community. Through it the "right of the lot" was recognized and enforced. 
 Since there was a narrow outlet available for the wares, each member of a guild 
 was held to a "stint" or a prorated allotment of the common market opportunity 
 of the guild. \/ To sell more than a specified allotment or "stint" was forbidden. 
 There was also a prohibition against employing more than a specified number of 
 journeymen and apprentices. Thus the guildsmen by means of group control made 
 sure of a common disposal of economic opportunity. 
 
 Americans, surrounded on all sides by an abundance of natural resources 
 and expanding markets, have been slow in adopting the philosophy that the indi- 
 vidual needs to be controlled or restrained by his fellows in the common interest 
 and for his own protection. They have held tenaciously to a philosophy of un- 
 limited competition. It was believed that free access to production and free 
 competition could be relied upon to guarantee remunerative returns to producers. 
 
 v/ Preliminary report. Giannini Foundation of Agricultural Economics. March 
 30, 1933. 
 
 2/ Associate Professor of Agricultural Economics, Associate Agricultural Econ- 
 omist on the Giannini Foundation, and Associate Agricultural Economist in the 
 Experiment Station. 
 
 Mr . Spencer Sparks, Technical Assistant, aided in collecting and assembling 
 the data presented. 
 
 4/Perlman, Selig. A theory of the labor movement, p. 254-261, Macmillan 
 Company, 1928. 
 
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2. 
 
 The philosophy of unlimited competition contributed to the rapid develop- 
 ment of a growing nation. Many who have appraised it believe that it was well 
 adapted to pioneer conditions.^ Now, however, that the United States has attain- 
 ed a complex industrial structure and a specialized agriculture, problems of un- 
 balanced oroduction are becoming more acute, and a number of groups have found, 
 particularly in periods of violent economic disturbances, that the remunerative 
 outlets for production are limited. Under these conditions the practicability of 
 the philosophy of unlimited competition is challenged. There is a call for con- 
 trol of competition with administration by groups as in the period of the guilds 
 in England. The trend toward this philosophy, although not readily distinguish- 
 able until the post-war period, is now unmistakable.^ 
 
 A few farmers' cooperative marketing agencies, although not primarily 
 organized for such a purpose, have endeavored to limit competition by restricting 
 the volume marketed in the primary channels of trade through a "growers' contract" 
 in which the individual grower agrees to further his own and group interest 
 through taking part in such action. Other groups of farmers have endeavored to 
 accomplish the same objective by forming "control" organizations which include 
 all or most marketing agencies both cooperative and proprietary. See pages 12 
 to 19 for a summary of some attempts. 
 
 Pound, Roscoe. The spirit of the common law. Marshall Jones Co. Boston. 
 
 1921. 
 
 s/ Justice Brandeis in New State Ice Co. vs. Liebmann (52 SC + 371 - 1932) sets 
 forth this trend in philosophy clearly in the following words: "The people of 
 the United States are now confronted with an emergency more serious than war. 
 Misery is wide-spread, in a time, not of scarcity but of overabundance. The 
 long-continued depression has brought unprecedented unemployment, a catastrophic 
 fall in commodity prices and a volume of economic losses which threatens our 
 financial institutions. Some people believe that the existing conditions 
 threaten even the stability of our capitalistic system. Economists are search- 
 ing for the cause of this disorder and are reexamining the bases of our indus- 
 trial structure. Business men are seeking possible remedies. Most of them real- 
 ize that failure to distribute widely the profits of industry has been a prime 
 cause of our present plight. But rightly or wrongly, many persons think that one 
 of the major contributing causes has been unbridled competition. Increasingly, 
 doubt is expressed whether it is economically wise or morally right, that men 
 should be permitted to add to the producing facilities of an industry which is 
 already suffering from over-capacity. In justification of that doubt, men point 
 to the excess capacity of our productive facilities resulting from their vast ex- 
 pansion without corresponding increase in the consumptive capacity of the people. 
 They assert that through improved methods of manufacture, made possible by ad- 
 vances in science and invention and vast accumulation of capital, our industries 
 had become capable of producing from thirty to one hundred per cent more than was 
 consumed even in the days of vaunted prosperity: and that the present capacity 
 will, for a long time, exceed the needs of business. All agree that irregularity 
 in employment -- the greatest of our evils — cannot be overcome unless produc- 
 tion and consumption are more nearly balanced. Many insist there must be some 
 form of economic control." 
 
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 One of the fundamental weaknesses of voluntary action in restricting the 
 quantity placed in the primary channels of trade is that non-participating indi- 
 viduals derive the benefits of such action without bearing any of the burdens. 
 Such individuals usually consider only their own self interest and do not con- 
 sider the possibility of loss to themselves as well as to the industry as a whole 
 if their lack of participation results in the demoralization and failure of 
 industry-wide restriction programs. Experience has shown, that it takes only a 
 small number of non-participating growers to greatly impair programs which aim 
 to limit or curtail production or shipments. The failure of a few to participate 
 induces other growers to desert the programs or at least to lose some of their 
 enthusiasm. Therefore, it has been suggested that in order to obtain the desired 
 control in curtailment programs, that benefits and costs be prorated equitably 
 among all growers in the industry by making participation in a restriction pro- 
 gram compulsory if two-thirds or more of the growers desire to engage in such 
 action and if such compulsion is essential to the welfare of the industry. 
 
 PROPOSALS FOR EFFECTING PRORATION 
 
 Three possible administrative set-ups for making supply limitation effec- 
 tive have been mentioned and considered by persons interested in production or 
 marketing restrictions. First, the production and marketing of certain agricul- 
 tural crops might be made public utilities; that is, it might be shown that 
 public welfare was sufficiently involved to justify the fixing of the prices, the 
 volume of production, and the number of producers and handlers, and the maximum 
 profits in the same manner as the gas and electric and railroad companies and 
 other public utilities are regulated. Second, it might be made mandatory for all 
 producers to market through one marketing agency, this agency to be grower owned 
 and controlled. The products would then be sold through one organization which 
 would have authority, in periods of excessive supplies, to divert a part to by- 
 products or allow a part to remain unharvested. At the end of the marketing 
 season the proceeds from the quantity sold would be divided among the growers on 
 an equitable basis. Third, it has been suggested that a governmental agency be 
 set up to determine the quantity to be placed in the primary channels of trade 
 and that this quantity be prorated among all the growers in a fair manner; par- 
 ticipation in the proration to be compulsory if two-thirds of the producers of a 
 specified commodity desired to participate in such action. 
 
 There are several important differences between the three proposals. Under 
 a compulsory proration program the marketing of the products is left in the hands 
 of existing agencies. Growers may sell their crops through any agency they wish, 
 at any place, and for any price that they care to accept. The only restriction, 
 except with some perishable commodities the production of which is highly seasonal 
 and where the time of shipment or delivery would be regulated, is on the volume of 
 shipments or deliveries with the view of receiving a greater net return for the 
 whole industry than by marketing the entire quantity produced. On the other hand, 
 a compulsory marketing program would mean that a single marketing agency would 
 have complete authority over all phases of the elementary marketing process. 
 Under public utility status, the number of producers or the number of handlers of 
 specific commodities or both the number of producers and handlers would be re- 
 stricted, the prices to be charged would be fixed and profits limited. 
 
 It is doubtful whether at the present time either the application of public 
 utility status to producers and handlers of agricultural commodities or compulsory 
 
Digitized by the Internet Archive 
 
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 https://archive.org/details/economiclegalasp22stok 
 
4. 
 
 marketing would be held constitutional. Recent decisions indicate that the 
 courts are not favorable toward broadening the field of industries to be classed 
 as public utilities.^ A case that arose in Oklahoma shows their present position. 
 The state of Oklahoma, in 1925, enacted a statute which forbade any person en- 
 gaging in the ice business without first obtaining a license from the Corporation 
 Commission. The Commission was specifically authorized to deny applications for 
 a license if the existing licensed facilities were sufficient to meet the public 
 needs. The Corporation Commission was further authorized to determine the prices 
 at which ice might be offered for sale. The Supreme Court held the Oklahoma 
 statute unconstitutional under the 14th Amendment of the Federal Constitution. 
 The court said (in part), "There is nothing in the product that we can perceive 
 on which to rest a distinction, in respect of this attempted control, from other 
 products in common use which enter into free competition, subject, of course, to 
 reasonable regulation prescribed for the protection of the public and applied 
 with appropriate impartiality."^ 
 
 Aside from the opposition of the courts toward the extension of the field 
 of public utilities, a question arises as to the feasibility of accomplishing the 
 objective of shipment restriction under public utility regulation unless such 
 regulation were accompanied by authority for proration. For example, even though 
 the acreage and the number of producers of vine and tree crops were limited, 
 climatic variations from year to year would cause variations in production. Then 
 in years of large crops or low consumer purchasing power, prices would be low un- 
 less there was restriction on the quantity marketed. In addition, public utility 
 regulation of production would raise numerous complex administrative problems. 
 
 Compulsory marketing through a single agency or under the direction of a 
 governmental agency has been undertaken in several countries including England, 
 Australia and South Africa, all of which have a constitutional organization that 
 permits such legislation without raising the question of constitutionality. In 
 Canada, however, where governmental structure is similar to that of the United 
 States, compulsory marketing has been held unconstitutional. The Canadian courts 
 in February, 1931 declared the "Produce Marketing Act" to be ultra vires (un- 
 constitutional) of the Provincial Legislature. Under the Produce Marketing Act, 
 as amended in 1930, all shippers, proprietary or cooperative, were obliged to 
 turn over to the committee of direction copies of all invoices for fruit sold. 
 
 \/ New State Ice Co. vs. Liebmann — 52 S C f 371 - 1932; a like decision in 
 Bourland Ice Co. vs. Franklin Utilities Co. 22 S W (2d) 993. 1929. 
 
 ^Numerous other cases show that the courts are opposed to extending the field 
 of public utilities. 
 
 Williams vs. Standard Oil of Louisiana. 278 U S 239. 1929. 
 
 Chas. Wolff Packing Co. vs. Court of Industrial Relations. 262 US 522. 
 
 1923. 
 
 John F. Jelke vs. Emery. 193 Wis. 311. 1927. 
 Fairmont Creamery Co. vs. Minnesota. 274 U S 1. 1927. 
 Adams vs. Turner. 244 U S 590. 1917. 
 
5. 
 
 It was intended that the prices received for all fruit of the same grade and 
 variety should be averaged and all expenses for freight, storage, and special 
 packing for foreign shipments be deducted from the pool. Each grower contri- 
 buting the same grade of fruit in the pools would be paid the same amount for 
 his fruit regardless of whether it was sold on the domestic or foreign market, 
 or was sold in season or after storage. 
 
 Although compulsory marketing through one agency has not been attempted 
 in this country, the nearest analogy indicates that it would not be upheld by 
 the courts. The United States Supreme Court held the Oregon Compulsory Edu- 
 cation Act, which when practically construed required all normal children be- 
 tween the ages of 8 and 16 to attend public schools, to be in violation of the 
 14th Amendment of the Federal Constitution in that it deprived parents and 
 children of their rights in the matter of the selection of schools. Such an 
 act might be looked upon as compulsory education through a single agency. If 
 such action is contrary to the Federal Constitution, it is probable that com- 
 pulsory marketing of agricultural products through one agency would likewise be 
 held unconstitutional whether enacted by state or federal statute. 
 
 In view of the foregoing decisions concerning the status of public util- 
 ity regulation and compulsory marketing and the fact (as is shown below) that 
 compulsory proration has been considered more favorably by the courts, attention 
 from this point will be centered upon it. 
 
 During the oast seven years (1925-1932) the producers of several specialty 
 crops have undertaken voluntary proration in marketing. The lemon growers, the 
 Imperial Valley lettuce and cantaloupe growers, the Watsonville apple growers, 
 and the Valencia orange growers have attempted voluntary proration in shipments. 
 The cling peach growers and the grape growers, through the California Grape Con- 
 trol Board, have attempted other methods in restricting the volume marketed in 
 the primary channels of trade. A summary of these attempts is made in pages 12 
 to 19. 
 
 PROBABLE LEGAL STATUS OF PRORATION IN AGRICULTURAL MARKETING 
 
 The R ule of Reason .-- Although it is impossible to forecast a decision of 
 the courts on a specific proposal, such as compulsory proration of the shioments 
 of agricultural products, one may ascertain the attitude of the courts toward the 
 control of economic activities through a review of their decisions. 
 
 As far as we know there has been no judicial review in which the legality 
 of the proration of the marketing of agricultural products entered into volun- 
 tarily by growers has been a specific point, but we may infer that, if such 
 practices do not enhance prices beyond a reasonable return to the producer and 
 if they are temporary measures in the face of economic necessity for the well- 
 being of an industry, they would be considered within the rule of reason by the 
 
 </ Pierce vs. Society of Sisters. 268 U S 510. 1927. 
 
6. 
 
 courts. The Standard Oil vs. United States case^z throws some light on this 
 point. Here the language of the Supreme Court, in discussing limitations of 
 competitive practices, is as follows: "It is equally true to say that the sur- 
 vey of the legislation in this country on this subject from the beginning will 
 show, depending as it did, upon the economic conceptions which obtained at that 
 time when the legislation was adopted or judicial decision was rendered, that 
 contracts or acts were at one time deemed to be of such character as to justify 
 the inference of wrongful intent which at another period was thought not to be 
 of that character. But this again, as we have seen, simply follows the line of 
 development of the law of England." 
 
 Professor John R. Commons'^ i.n his Legal F oundations of Capitalism shows 
 that the foregoing language of the court is an "outgrowth of the influence of 
 economic forces on judicial opinion. He also shows that, in turn, the courts 
 have modified or changed their views toward attempts to control economic activi- 
 ties through their interpretation of what is reasonable. In this connection 
 Professor Commons remarks: "From the court decisions it seemed that anything 
 ' reasonable i would be sustained, and so we had to use the words reasonable value, 
 reasonable safety, reasonable wage and fix up reasonable conduct for public 
 officials and private citizens, whether we knew what it meant or not." 
 
 Legal S tatus of Coop eratives and Trade Restrai nt. -- Although proration in 
 agricultural marketing, either voluntary or compulsory, is distinctly different 
 from cooperative marketing, the attitude of the courts toward agricultural cooper 
 ative marketing organizations may be of aid in appraising their probable position 
 on proration.- Their present position on cooperative marketing is that a group of 
 producers may bind themselves together to maintain their own selling agency if 
 they do not unduly enhance prices. At the same time, the courts hold that collec 
 tive bargaining by agricultural producers is not contrary to public policy. The 
 development of collective bargaining privileges by labor unions no doubt aided in 
 gaining its acceptance in agriculture. 
 
 The trend in the cooperative marketing of agricultural products has been 
 toward organizations of a larger scope and to more complete control over the mem- 
 ber and his product. Commodity contro lianas tended to develop out of commodity 
 
 IP' Standard Oil vs. United States. 221 U S 1 - 1911. In this case an 
 elaborate argument was made in the opinion to show that according to the "rule 
 of reason" the act (Sherman Anti-Trust Act) as passed by Congress should be in- 
 terpreted as if it contained the word "unreasonable" or the word "undue". 
 
 ^3/Commons, John R. Legal foundations of capitalism. Macmillan. New York. 
 Preface. 1924. 
 
 marketing organization with control of a large percentage (70 per cent or 
 more) of the commodity produced may be said to have commodity control. An agency 
 with such control can distribute supplies among market areas to put equal pres- 
 sure in all areas. It can also exert considerable influence on prices through 
 its bargaining strength. Furthermore, it can often operate at a low cost per 
 unit of product handled. In shipment restriction programs, however, it is essen- 
 tial that 90 per cent or more of the commodity be within such a program. 
 
7. 
 
 marketing since the emphasis has been on making the quantity of the product 
 handled large enough to constitute a significant factor in the determination of 
 the price. Obviously, commodity control was, and is definitely intended to be, 
 a restraint on unlimited competition. The position of the agricultural cooper- 
 ative with commodity control has been clearly established as a legitimate form 
 of business organization . 
 
 The Capper-Volstead Act, passed February 18, 1922, broadened and supple- 
 mented the Clayton Anti-Trust Act in the excepting of agricultural associations 
 of a particular type from anti-trust restrictions. This act removes agricul- 
 tural associations from the original jurisdiction of the Department of Justice 
 and places them under the original jurisdiction of the Secretary of Agriculture. 
 The act also charges the Secretary of Agriculture with the responsibility of 
 protecting agricultural cooperatives from unwarranted prosecution on the charge 
 of enhancing prices as might be brought against them for the purpose of handi- 
 capping them in carrying on their business. The Federal Trade Commission, how- 
 ever, may review the action of a cooperative the same as any other business 
 organization if there is evidence that they have engaged in unfair trade practi- 
 ces or exercised an unreasonable restraint of trade. To the present time no 
 cases involving the Clayton Act or the Capper-Volstead Act in their application 
 to cooperatives have come in review of the Supreme Court. Other federal acts 
 also have made an exception of agricultural cooperatives .^y For example, the 
 Food Control Act of 1914 made strong prohibitions against any action tending to 
 raise the price of food, but made special exception of the action of farmers. 
 Various appropriation bills, from 1914 forward, in setting aside certain funds 
 for the use of the Attorney General to Drosecute violators of the Anti-Trust 
 laws, expressly stipulated that none of these funds should be used for the 
 prosecution of producers of farm products and associations of farmers who co- 
 operate and organize in an effort and for the purpose of obtaining a fair and 
 reasonable price for their products. 
 
 State legislatures have also authorized the formation of cooperatives 
 which enable groups of producers to gain a substantial degree of control of the 
 marketing of their commodities. Furthermore, the attempt has been made in many 
 instances not merely to pass an enabling act covering associations of the cooper- 
 ative type, but also to declare it to be a matter of public policy that such 
 associations be set up and operated and to recognize in advance certain methods 
 of operation such as collective bargaining, pooling, exclusive contracts, and 
 special enforcement devices as a necessary and proper part of their machinery. 
 For example, the California Anti-Trust law was amended in 1909 to providei^ 
 "That no agreement, combination or association shall be deemed to be unlawful 
 or within the provisions of this act, the object or business of which is to con- 
 duct its operations at a reasonable profit or to market at a reasonable profit 
 those products which cannot be otherwise marketed." In the Liberty 'Warehouse vs. 
 
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 s7 Nourse , Edwin G. The legal status of agricultural cooperation, p. 249 
 Macmillan Company. 1927. 
 
 i$s Calif. Stat. 1909. Ch. 26. 
 
8. 
 
 Bur ley Tobacco Growers case >J^ the United States Supreme Court said: "Certainly 
 the statute (Kentucky Cooperative Marketing Act) impaired no right of the ware- 
 house company guaranteed by the 14th Amendment by merely authorizing corpor- 
 ations with membership limited to agriculturists and permitting contracts for 
 ourchase and resale of farm products. This is also true of the declaration that 
 such associations shall not be deemed monopolies, combinations or conspiracies 
 in restraint of trade and that contracts with members shall not be illegal." 
 In this same decision the court went further in declaring its attitude toward 
 collective action of farmers by saying: "If restrictions on production are to 
 be accomplished by voluntary agreements entered into pursuant to statutes author- 
 izing them there would be no objection thereto from a state or a federal stand- 
 point unless a state statute was construed as authorizing what was forbidden by 
 a federal act. A state or federal government is undoubtedly free to declare what 
 its public policy shall be in matters of this kind." 
 
 17 
 
 The lower courts./ in passing upon the same case summarized succinctly the 
 present attitude of the courts toward group effort on the part of agricultural 
 producers in the following: "public policy does not ask those who till the soil 
 to take less than a fair return for their labor. Public policy safeguards 
 society from oppression; it is not an instrument of oppression." 
 
 Proration in Oil Revie wed by Courts.-- Several decisions involving com- 
 pulsory proration of oil indicate that the compulsory proration of agricultural 
 products would be looked upon favorably by the courts. In the states of Okla- 
 homa and Texas compulsory proration of oil production has been in effect for 
 several years. The legality of this procedure was tested in the lower courts 
 and came before the United States Supreme Court in the Champlin Refining Co. vs. 
 
 xZLiberty Warehouse Co. vs. Burley Tobacco Growers Cooperative Assn. 276 
 U S 71. 1927. 
 
 VySee also Rifle Potato Growers vs. Smith (78 Colo. 171)., 1925, giving agri- 
 culturists right to make contracts for cooperative marketing: held not violative 
 of the Constitution as class legislation. "The legislature may reasonably 
 classify for the purpose of legislation, and a law is not local or special when 
 it is general and uniform in its operation upon all in a like situation." 
 
 An interesting contrast in the present and earlier attitude of the courts 
 tov-iard cooperative marketing organizations will be obtained by comparing the 
 foregoing decision with Georgia Fruit Exchange vs. Turnipseed (1910), 9 Ala. App. 
 123; 62 So. 542 where it was held that an agreement to take a share of stock in 
 an association to market fruit which contemplated handling at least sixty per 
 cent of the fruit grown in the state was invalid. 
 
 ij' Liberty Warehouse Co. vs. Burley Tobacco Growers Cooperative Assn. (Ky. 
 1925) 2 71 S W 695. 
 
the Corporation Commission of Oklahoma in May, 1932. 
 
 The Supreme Court upheld the statute of the state of Oklahoma under which 
 the Corporation Commission was given the power to prorate the amount of oil that 
 each producer from a given field might take therefrom in order to prevent un- 
 necessary loss and waste. A few of the restricted oil companies contended that 
 they had been deprived of their legal rights without due process of law and 
 therefore such production limitations by the state were unconstitutional. How- 
 ever, the proration activities by these states have been upheld by the courts on 
 the grounds that the public has sufficient interest to justify reasonable legis- 
 lation under the "police power". ^ The court said: "It is common knowledge 
 that petroleum products have become indispensible not only to railroads but also 
 to automobile travel. Inhabitants of the cities are dependent upon natural gas 
 for fuel. Also a large acreage of land set aside for educational purposes con- 
 tains large oil deposits. In addition, taxes derived from oil production now 
 constitute a large part of the state's revenue. These facts emphasize the im- 
 portance of conservation of these resources for the general welfare of the 
 people ." 
 
 It must be recognized, however, that the courts have pointed out in their 
 decisions concerning oil proration that the purpose of curtailment was not to 
 unduly enhance the market price of oil, but to conserve a natural resource. In 
 the case of the MacMillan vs. the Railroad Commission of Texas20/the court said: 
 "The policy of artificial forcing of prices by government action in cooperation 
 with the oil industry by either stimulating demand or keeping supply in bounds 
 has never been attempted by the legislature itself and has been forbidden by 
 positive penal laws...." 
 
 At the same time, however, the courts recognized the effect of curtailment 
 on prices by stating that although the curtailment of production tended incident- 
 ally to enhance the price of petroleum, it was not sufficient evidence to invali- 
 date the proration order. The language of the court in the Danziger oil case 
 emphasizes this point: "The Commission has no authority to issue an order which 
 had for its purpose the control or regulation of economic conditions, or which 
 was designed to affect prices or to prevent economic waste but such limitation 
 is not a denial to the Commission of the power to take into consideration an 
 economic standard, or economic conditions, if such conditions bear a direct or 
 reasonable relationship to physical waste." The court in the Champlin Refining 
 case-xValso pointed out: "If the statute enforced as it has been by the com- 
 
 Champlin Refining Co. vs. Corporation Commission of Oklahoma. 286 U S 210. 
 
 1932. 
 
 •ix Danziger Oil and Refining Co. vs. Texas R. R. Commission. 49 S W (2d) 837. 
 1932. 
 
 §9^ MacMillan vs. Railroad Commission of Texas 51 F (2d) 400, 1931. See also 
 Peoples Petroleum Co. vs. Smith. 1. Fed. Sup. 400, 1932. Sterling vs. 
 Constantin 53 S W 190. 1932. 
 
 Champlin Refining Co. vs. Corporation Commission of Oklahoma. 286 U S 210. 
 
 1932. 
 
10. 
 
 mission strictly in accordance with legislative intent has incidentally tended 
 to promote the prosperity of the oil industry in Oklahoma, or of the state 
 generally, or to prevent economic demoralization, it is not to be condemned but 
 rather upheld for that reason." 
 
 The foregoing decision would seem to put the court on record as justify- 
 ing proration from the standpoint of preventing physical waste; however, there 
 is definite recognition of the fact that it is desirable to prevent economic 
 waste. One may inquire concerning the difference between physical and economic 
 waste whereupon he encounters the difficulty of drawing a fine distinction. 
 There are several forms of waste, i.e., waste in consumption (vice, crime, harm- 
 ful drugs), waste of man power (unemployment), waste in the technique of pro- 
 duction and distribution, and waste of produced and natural resources. They all 
 involve economic waste and physical waste. The degree of physical waste or the 
 degree of economic waste in each case is incalculable, yet either one may appear 
 more important than the other at a particular time or place. For example, 
 certain timber which rots and decays in the forests is looked upon as a physical 
 waste at the point of oroduction. In cities this same timber would be valuable 
 for fuel, if for nothing else, and it would be considered an economic waste to 
 allow the timber to rot there. The principal reason for the change in point of 
 view is that at the point of production the timber is valueless but in the cities 
 it has a definite value. 
 
 In numerous California agricultural industries there is likely to be a 
 high degree of physical waste as well as economic waste whether or not some de- 
 gree of control is exercised over the volume marketed. During the past year 
 (1932) a considerable volume of several specialty crops was unharvested because 
 prices at the point of production were so low that it would not pay to harvest 
 them. In fact, producers of several crops found themselves indebted to trans- 
 portation agencies at the end of the marketing season because their products did 
 not sell for enough in terminal markets to pay the freight. The uncertainty 
 caused by such a situation probably resulted in both a larger physical and econ- 
 omic waste than would have occurred if definite steps had been taken to market 
 limited quantities during each week of the shioping season and prorate such 
 marketings among all producers. When no restriction is placed upon marketings 
 each individual hopes to market as much as possible before a drastic fall in 
 prices occurs. When the inevitable crash comes nearly all growers cease market- 
 ing. Prices again recover and then shipments are again forwarded in excessive 
 volume and another price decline ensues when they reach destination. In the 
 meantime, considerable quantities go out of condition or spoil, both at the point 
 of production and in terminal markets. 
 
 Legistic Theories Justifying Proration .-- The legistic theory upon which 
 the proration of oil came before the courts in the Champlin Refining case was 
 under the police power which reserves to the government the right to exercise 
 restrictions upon individuals or groups in the welfare of society as a whole. 
 The proration of oil has also been reviewed by the courts under the legistic con- 
 ception of the protection of the co-relative rights of individuals within a group. 
 
 In Bandini Oil Co. vs. Superior Courts it was held that the state could 
 
 <X72 Law ed. 246, 1932. 
 
11. 
 
 regulate and adjust the coexisting rights of the surface owners of underlying 
 oil and gas. This is recognition of the principle adopted by the guilds (pages 
 1 and 2) of restricting the activities of individuals in the interest of the 
 group. Similar measures to restrict the action of individuals to protect the 
 opportunities of a group have come before the courts in situations somewhat 
 analagous. A city government may establish zones. Individuals within the zones 
 may not construct buildings (market their property) which will destroy the value 
 of surrounding property. Irrigation or reclamation districts have been granted 
 authority to compel individual conformity to the group desire. In fact, in a 
 California case^^the court xvent so far as to hold that all land within an irri- 
 gation district need not be directly benefited by irrigation in order to come 
 under the regulations of the district. A California act^'also provides for the 
 growing of one variety of cotton and prohibits growing any other variety or 
 species with the purpose of benefiting the California cotton industry. 
 
 The most drastic action to protect the group from the individual we have 
 seen is the recent restriction on the withdrawal of deposits from banks. It be- 
 came necessary to prorate the amount which each depositor could withdraw from 
 his economic reserve in order to protect the co-relative rights of all deposi- 
 tors. Mr. Chester Rowe 11, ^/"commenting on the withdrawal restrictions, put the 
 case of unrestricted individual action versus the interest of the group clearly 
 in the following: 
 
 "It is all a question of 'I' or 'we'. If there is danger of other 
 people drawing their money out of banks, ' I ' would be better off if 'I' drew 
 all my money out first and put it in a box. But if 'we' try that, we cannot 
 get our money, and it would do infinitely more harm if we did. So laws have 
 to be passed to prevent each of us from trying to do separately -what it would 
 be self-destructive for all of us to do together. 
 
 "Similarly, among banks themselves. If one bank is in a specially 
 fortunate position of liquidity or location, it might be an advantage to it 
 separately to grant its depositors more privileges than banks generally 
 should give. It might thereby, if it were the only bank, secure advertising 
 by which it could later get business for itself, away from other banks. But 
 if one bank is permitted to do this, competition will compel others to try 
 it, and then none can do it. So again, a law has to be passed to prevent any 
 bank from doing separately what it would be destructive for all to do together. 
 
 23, Euclid vs. Amber Realty Co. 272 U S 365. 1926. See also Baker vs. Walker 
 204 U S 311. 1904. 
 
 v 2 j^Fallbrook Irrigation District vs. Bradley. 164 U S 112. 1896. See also 
 Noble State Bank vs. Haskell. 219 US 104. 1911. Statute of State of Oklahoma 
 upheld under which the banks of that state were subject to assessments for a de- 
 positor's guarantee fund for paying the depositors of insolvent banks. 
 
 -^California Stats, p. 491. 1925. 
 
 2 6 
 
 ■s/Rowell, Chester. World cornment. The San Francisco Chronicle, March 7, 1933. 
 
12. 
 
 "...looking beyond this emergency to the permanent conditions to 
 follow, it should be recognized that the age of ' I • is gone and the age of 
 'we' has come. The slogans of individualism no longer fit the facts. It 
 was once true that if each of us did what was best for himself the sum of 
 these separate goods was the common good. Competition was the life of 
 trade, and individual initiative, in the hope of personal gain, was the 
 stimulus. Small business sought to grow large and each ambitious employee 
 hoped to 'go into business for himself. Because these things were once 
 true, our fathers formulated them into phrases, which we still echo." 
 
 Proration and Interstate Commerce.-- A question arises as to whether pro- 
 ration would be invalid because it interfered with interstate commerce. The 
 Champlin Refining case^ throws some light on this point: "To conflict with con- 
 gressional power to regulate interstate commerce, there must be a direct burden 
 thereon .... Congressional power to regulate interstate commerce attaches only 
 when interstate transportation has begun." One may infer from this statement 
 that prorate programs would not be considered interference with interstate com- 
 merce if such measures were effected before products were loaded. 
 
 Pr oration and Pr ice Fixing.-- The primary motive in proration is to in- 
 fluence prices by restricting the quantity marketed in the primary channels of 
 trade. This method of influencing prices differs, however, from collusion among 
 producers or marketing agencies to name a going or prevailing price. Under pro- 
 ration programs there is a flexibility of prices by reason of the competition 
 of various marketing agencies which market the products. 
 
 The courts have generally held that agreement among competitors as to 
 prices to be charged for the articles manufactured by them is a violation of the 
 Sherman Anti-Trust Act. On the other hand, the oil proration programs were 
 not considered price fixing although it was recognized that prices would be in- 
 fluenced by them. The court said: "... the fact that such orders tend to pre- 
 vent the oversupply of gas and oil in excess of market demand and indirectly 
 affect prices thereof, does not make them price fixing in character and for that 
 reason invalid . "29/" 
 
 ATTEMPTS TO INCREASE RETURNS THROUGH VOLUNTARY PRORATE PROGRAMS 
 The experience of numerous groups of agricultural producers in California 
 
 ^J' Champ 1 in Refining Co. vs. Corporation Commission of Oklahoma. 286 U S 210, 
 1932. 
 
 §j^Addyston Pipe and Steel Co. vs. United States. 175 U S 211. 1899. 
 United States vs. Keystone Watch Case Co. 218 F 502. 1915. 
 
 Champlin Refining Co. vs. Corporation Commission of Oklahoma. 51 F 823. 
 
 1931. 
 
13. 
 
 has been that a greater output will not compensate for a lower price per unit. 
 For example, as shown in column 7 of table 1, returns to Tokay grape growers 
 under conditions prevailing in 1932 would decrease as the volume of shipments 
 increased . 
 
 TABLE 1 
 
 Probable Prices for Tokay Grapes and Probable Total 
 Returns by Shipping Varying Quantities in 1932* 
 
 Shipments 
 
 of Tokays 
 
 Probable 
 . annual 
 ue j.i vereu 
 auction 
 price 
 
 Price after 
 deducting 7 
 
 per cent; 
 
 selling 
 charge 
 
 Price after 
 deducting 
 
 <jj>U .DO 
 
 freight and 
 icing 
 
 1 
 
 Price after de- 
 ducting ^0.30 
 
 iUI pXCK-JLIlg, 
 
 packing, load- 
 ing, 'and hauling 
 
 Probable 
 total re- 
 
 O U.I lib UI1 
 
 the vines 
 
 Carloads 
 882 lugs 
 
 ! 
 I 
 
 Packages 
 31 pounds 
 
 1 
 
 2 
 
 3 
 
 4 
 
 S 
 
 6_ 
 
 7_ 
 
 3,500 
 
 3,087,000 
 
 11.54 
 
 $1,432 
 
 #0.782 
 
 |0.482 
 
 #1,567,934 
 
 4,000 
 
 3,528,000 
 
 1.38 
 
 1.273 
 
 0.623 
 
 0.323 
 
 1,139,544 
 
 4,500 
 
 3,969,000 
 
 1.26 
 
 1.172 
 
 0.522 
 
 0.222 
 
 981,118 
 
 5,000 
 
 4,410,000 
 
 1.15 
 
 1.069 
 
 0.419 
 
 0.119 
 
 524,790 
 
 5,500 
 
 4,851,000 
 
 1.06 
 
 0.986 
 
 0.336 
 
 0.036 
 
 174,636 
 
 6,000 
 
 5,292,000 
 
 0.98 
 
 0.911 
 
 0.261 
 
 -0.029 
 
 -153,468 
 
 6,500 
 
 5, 733,000 
 
 0.90 
 
 0.837 
 
 0.187 
 
 -0.113 
 
 -647.829 
 
 7,000 
 
 6, 174,000 
 
 0.83 
 
 0.772 
 
 0.122 
 
 -0.178 
 
 -1,098,972 
 
 * Assuming shipments of California table grapes (other than Tokays and Emperors) 
 at 11,000 carloads and the index of wholesale prices at 65. 
 
 Source of data: Study of the marketing of Tokay grapes. Giannini Foundation. 
 Unpublished . 
 
 The returns which might have been expected by shipping the quantities 
 shown in column 2 were calculated as follows. An analysis of the factors affect- 
 ing annual delivered prices for Tokay grapes was made.^9-'' From this analysis an 
 estimate was made of the probable average annual delivered price for Tokay grapes 
 in 1932 with the shipment of quantities shown in column 2. Deductions were made 
 from the delivered selling price for harvesting, packing, transportation, and 
 selling costs as shown in columns 4, 5, and 6. The prices shown in column 6 are 
 then the net prices for grapes on the vines which growers might have expected by 
 marketing the quantities shown in column 2. 
 
 A comparison of columns 1 and 7 shows that under 1932 conditions the total 
 returns to growers would decrease as the volume of shipments increased- It also 
 shows that the shipment of a quantity in excess of 5,500 carloads would be likely 
 
 x/ Stokdyk, E. A. Factors affecting annual Tokay grape prices. Blue Anchor. 
 9:7:2. July, 1932. 
 
14. 
 
 to result in losses from marketing. In other words, growers would not receive 
 harvesting and marketing costs. The last two items in' column 7 may appear ex- 
 treme for it may be argued that growers would not continue to harvest and market 
 their grapes if the costs incurred in these operations were not recovered. It 
 is probable that growers would cease harvesting if delivered prices were con- 
 stantly low; however, delivered prices during the season fluctuate considerably. 
 A period of 10 days to two weeks elapses before shipments from California reach 
 eastern markets. Prevailing prices often induce growers to ship heavily but 
 when the shipments reach destination, severe price declines are experienced. 
 The result is that at times growers do not recover harvesting and marketing costs 
 and in some cases not enough to cover transportation expenses. 
 
 Studies of the relationships between shipments and prices of several other 
 California commodities show a similar situation, namely that a greater output 
 will not compensate for a lower price per unit, and that in some cases the market 
 ing of the entire quantity produced results in direct losses to growers, prevails 
 in several California agricultural industries .^V 
 
 The foregoing situation has led to attempts on the part of growers to re- 
 strict the total quantity marketed in the primary channels of trade. In order, 
 hOY/ever, to exert much influence on the quantity marketed in these channels there 
 must be a control of a large part, if not the whole, of the supply. Such control 
 is possible in the case of many California products, because numerous crops are 
 produced almost exclusively within the state. 
 
 The possibility of increasing total returns by restricting supplies varies 
 however, from commodity to commodity. The perishability of the product, the size 
 of the market area, the probability of substitutes taking the place of the com- 
 modity in question, the probability of production expanding in other areas, and 
 the elasticity of demand are factors which influence it. It is not the purpose 
 of this study to analyze these factors in detail. Such factors usually have been 
 given careful consideration before prorate programs were undertaken. The follow- 
 ing record of voluntary prorate programs will show the influence of some of them 
 and bring out some of the problems involved in such programs. 
 
 Pror ation of Lemon Shipments .-- California lemon producers have pioneered 
 in shipment proration. As early as 1925 the quantity of lemons produced in re- 
 lation to the existing demand was such that if all the crop were marketed fresh, 
 prices would be unremunerative to the majority of the growers. In several years 
 since then, a quantity of lemons has been diverted from the fresh market to by- 
 products with the result that total returns to growers have been increased. At 
 the present time, about 25 per cent of the crop is so diverted. This procedure 
 
 v / Shear, S. W. California Bartlett pear situation. Giannini Foundation of 
 Agricultural Economics. Mimeo. Dec. 15, 1932. Also Wellman, H. R. Some 
 aspects of surplus control with particular reference to the summer orange indus- 
 try of California. Giannini Foundation of Agricultural Economics. Mimeo. 
 January, 1933. 
 
15. 
 
 is possible because lemon growers market approximately 90 per cent of the crop 
 through one selling agency, The California Fruit Growers Exchange, which holds 
 contracts with its members to apportion the quantity each is to sell in the pri- 
 mary channels of trade. Each week of the marketing season an estimate is made 
 of the number of carloads of lemons to be shipped which will result in a reason- 
 able price to the producers and consumers. Each member of the Exchange is then 
 allotted his proportion of the total number of carloads on the basis of the 
 quantity of lemons he has in his packing and storage sheds. The principal diffi- 
 culties encountered are (l) the unrestricted shipments of non-members of the Ex- 
 change, and (2) the problem of forecasting the quantity to be marketed each week 
 which will result in reasonable prices. The first difficulty is one which is 
 inherent in all voluntary restriction programs. It is a difficulty which com- 
 pulsory proration aims to overcome. Non-participating growers who ship the en- 
 tire quantity which they produce in the primary channels of trade gain benefits 
 from the restriction program at the expense of the participating members; they 
 take more than an equitable share of the market opportunity. The second diffi- 
 culty is one which would be encountered in compulsory prorate programs as well 
 as voluntary prorate programs. This can be and is being met by an analysis of 
 the factors affecting seasonal prices and by combining the experience and judg- 
 ment of experienced dealers and handlers. It is important to remember that this 
 difficulty will always be present. There will be conflict of opinion concerning 
 the exact quantity to be marketed, mistakes will be made, and those who are not 
 in sympathy with proration programs or the administration of such programs will 
 emphasize mistakes of such a nature. 
 
 Valencia Orange Proration.-- Unlike lemons, the supply of Valencia 
 oranges in relation to existing demand has usually resulted in prices remuner- 
 ative to the majority of the producers. However, early in 1932 indications were 
 that the California Valencia orange crop in relation to the low purchasing pov^er 
 of consumers was such that if all the crop were marketed fresh, prices to growers 
 would be extremely low.££'' A Valencia orange proration agreement among the grow- 
 ers selling through the seven largest shipping organizations was prepared and 
 effected on June 19, 1932. It was agreed to determine from week to week the num- 
 ber of carloads of Valencia oranges during the 1932 Valencia shipping season 
 which could be sold at reasonable prices and to prorate between the parties to 
 the agreement this total number of cars on the basis that the percentage of fruit 
 controlled by each signer of the agreement bore to the total amount of the fruit 
 yet to be shipped as of the date June 15, 1932. 
 
 This agreement was in effect approximately thirty days. The prices of 
 oranges in auction markets advanced steadily throughout the time the agreement 
 was in effect and when the prorate ended prices were 55 cents a box higher than 
 when the prorate started. 
 
 However, after operating for a month, the agreement was terminated because 
 
 s*/ Valencia proration agreement fails. Orange County Farm Bureau News. 15: 8. 
 August, 1932. 
 
16. 
 
 of the withdrawal of two of the shipping organizations. It has been estimated 
 that if this plan had remained in operation the remainder of the season and if 
 the price during the last week of the program had been maintained, the returns 
 to Valencia growers would have been increased by approximately $4, 000, 000. The 
 withdrawal of two shipping organizations led to its abandonment. This action 
 destroyed the limited market opportunity for the whole group. The majority of 
 the producers were willing to conduct the program but a minority were responsi- 
 ble for its cessation. 
 
 Tokay Grape Prorate.-" The growers of Tokay grape s^^" in San Joaquin 
 County, California, conducted a voluntary proration program in 1932. They had 
 witnessed a crop of 7,670 carloads sell for an average delivered price of $1 .14 
 per package in 1930 while in 1931, a year of low production, 4,109 carloads were 
 shipped with a resulting price of $1.59 per package. This meant that the large 
 crop of 7,670 carloads in 1930 netted the growers approximately .|750,000, while 
 the much smaller crop in 1931 netted more than $2,000,000. The 1932 season 
 promised to be another large crop year and the purchasing power of the consumers 
 was known to be less than in the two previous years. The analysis presented in 
 table 1 indicated that the shipment of the entire crop of Tokays would result in 
 marketing losses. The growers and shippers realizing the seriousness of the 
 situation organized a shipment restriction plan. The plan adopted was that of 
 rating the productive capacity of each grower's vineyard and allotting shipments 
 on the basis of the percentage that each grower's rating was of the total rated 
 capacity of all vineyards. 
 
 The Tokay proration program was conducted without contracts with growers 
 or marketing agencies. It was in effect for four weeks, then abandoned because 
 non-participating growers and shippers marketed increasing quantities as the 
 participating growers and shippers restricted the quantities they marketed. The 
 Tokay prorate demonstrated, however, that prices for this variety of grape would 
 respond to the volume marketed and that returns to growers could be increased by 
 restricting the quantity marketed. 
 
 Lettuce P roration. — The Imperial Valley lettuce growers have at times 
 prorated their shipments since 1929. This valley furnishes a very large part of 
 the winter lettuce for the United States and this lettuce is grown by about 70 
 firms or individuals who plant all the way from 50 to 3,500 acres each. The pro- 
 ration of shipments is conducted under the direction of a clearing house associ- 
 ation. Each shipper signs an agreement giving the secretary of the clearing 
 house authority to order empty cars from the railroad. By so doing the clearing 
 house can regulate the number of carloads that are to be shipped from the 
 Imperial Valley on a given day. The proration is based on the acreage the ship- 
 per has, the number of carloads he has shipped up to the time the prorate goes 
 into effect and the yield per acre. Proration of lettuce shipments is not oper- 
 
 33/ Report of the Valencia Prorate Committee. California Citrograph, 17: 10. 
 August, 1932. 
 
 Wellman, H. R. Factors affecting orange prices and economics of surplus 
 control. California Citrograph, 17: 7. May, 1932. 
 
 Stokdyk,. E. A. An experiment in surplus control. Blue Anchor. 10: 1: 6. 
 January, 1933. 
 
... • j 
 
17. 
 
 ative, however, until it is apparent that the volume of shipments is likely to 
 be such as will result in extremely low prices. 
 
 The lettuce proration programs have been conducted with little friction 
 through voluntary action. The area is small, the number of growers comparatively 
 few, and the growers are mostly grower-dealers who have had wide experience in 
 the growing and handling of the crop. However, some difficulty is encountered in 
 effecting the prorate programs with growers who are inexperienced. 
 
 Cantaloupe P ro ratio n.-- In 1932-O'the Imperial Valley cantaloupe gro?«/ers 
 were confronted with a' large crop and low consumer purchasing power. A clearing 
 house comparable to that of the lettuce growers was organized. The clearing 
 house limited shipments by prorating on the basis of each shipper's daily pack- 
 ings in relation to the total quantity which the clearing house decided should 
 be marketed. The results of this program were that large losses were avoided 
 which would have been incurred if the entire crop had been marketed. 
 
 Watsonville Apple Prorate. — During the 1930-31 season the Watsonville 
 apple growers and shippers had such a quantity of apples in storage that if no 
 restriction were placed on the quantity withdrawn at a given time prices would 
 be extremely low throughout the marketing period. An agreement was made among 
 those having apples in storage to limit the quantity withdrawn from storage each 
 week and to prorate the quantity each grower and shipper was to market on the 
 relation which the quantity he held in storage bore to the total quantity in 
 storage at the beginning of the prorate period. This action resulted in an in- 
 crease in price of nearly $10 per ton. The following year, however, when a simi- 
 lar situation confronted the Watsonville growers and shippers, it was impossible 
 to obtain similar action because a few who had not participated in 1931 had re- 
 ceived benefits at the expense of the participants. 
 
 Canning Peach Limitation Prog ram. — The California cling peach growers 
 restricted the quantity canned in 1930 and 19 31 through a program whereby the 
 limited quantity canned was assessed to establish a fund to indemnify some pro- 
 ducers for not harvesting their crops. The unharvested crop was appraised for 
 quantity and quality and growers were compensated accordingly. This procedure 
 was effective in reducing the quantity canned to a point where canners were will- 
 ing to pay a small sum per ton for the portion canned. 
 
 The experiences of the 1930 and 1931 curtailment programs showed that some 
 savings could be made by appraising the crops that were to remain unharvested 
 early in the season and thus avoid the expense of bringing them to maturity. 
 
 In 1932-J3"' a plan was proposed which called for the buying of some fruit 
 at thinning time instead of at maturity and the reduction of acreage approximating 
 
 x3/ Jaekson, W. L. Controlling shipments helps cantaloupe deal. California 
 Cultivator. 79: 6. August 6, 1932. 
 
 36/ Slash peach production. Western Canner and Packer, p. 5. 24; 1. May, 
 1932. 
 
18. 
 
 20 per cent by tree removal. It was estimated that the earlier allotment of pro- 
 duction would save growers approximately $3 per ton in irrigation, care, and 
 thinning expense. In addition, growers who agreed to cut off or remove their 
 trees before the crop reached maturity were to be oaid $4 per ton based on the 
 average tonnage of number one peaches produced during the 1930 and 1931 seasons. 
 It was expected that such a payment would induce growers to remove a larger acre- 
 age than would be removed if no payments were made and that the cost of compen- 
 sating the growers would not exceed greatly the cost of buying the same fruit. 
 
 This plan failed to get the necessary support from all factors, hence 
 there was no planned limitation of the quantity canned in 1932. Although most 
 of the canners and growers were willing to participate in the curtailment program 
 and some growers marketed only half of their crops, a number of canners declined 
 to participate in the crop curtailment and certain groups of growers developed 
 their entire crop for delivery to such canners. These groups no doubt antici- 
 pated that they could market their full crop without carrying a share of the cur- 
 tailment. As a result, the curtailment program was not effected and gro¥\rers re- 
 ceived only $6.50 per ton (barely enough to cover their harvesting costs) for the 
 fruit delivered to canners and nothing for the portion which was unharvested, 
 whereas in 1931 growers received $14.50 a ton for fruit delivered to canneries 
 and $9.00 per ton for the unharvested tonnage. 
 
 California Grape Control Board Operations.-- Similar to that of the can- 
 ning peach limitation, a program was attempted by the California grape grov^ers 
 in 1930. The quantity marketed by growers signing the contracts was assessed 
 and the funds so received were used to purchase the quantities in excess of the 
 normal requirements. The control organization attempted to dispose of some of 
 the excess in the form of by-products. 
 
 The control was conducted during the 1930 and 1931 seasons but abandoned 
 in 1932. <§s Several factors brought on its abandonment. Some growers failed to 
 fulfill their contracts. Insufficient funds were available to purchase the 
 quantities of all varieties of grapes which were in excess of normal market re- 
 quirements. The by-products did not return as much as was originally antici- 
 pated. In addition, it was found that table, raisin, and juice grapes differed 
 so widely in use and in method of marketing that administrative problems were 
 extremely complicated. 
 
 Summary of Prorati on Attempts.-- The foregoing prorate programs have 
 demonstrated that with some commodities returns to producers can be increased by 
 restricting the quantities marketed in the primary channels of trade. At the 
 same time, it is significant that none of these restrictions has been attacked 
 as being contrary to public policy on the grounds that they unduly enhanced 
 prices to consumers. 
 
 37 
 
 Peach control fails. Western Canner and Packer, p. 16. 24: 4. Aug., 1932 
 California Canning Peach Growers -- Eleventh Annual Report. Dec. 6, 1932. 
 
 38/ In 1930 considerable quantities of grapes were unharvested and paid for as 
 in the cling peach control. In 1931 when the vine crops were small no control 
 of this kind was undertaken. 
 
19. 
 
 Each of the programs mentioned was undertaken only when it was obvious 
 that returns to growers would be extremely low or severe losses would be in- 
 curred in harvesting and marketing if all of the crops were marketed in the 
 primary channels of trade. It is doubtful whether growers would undertake pro- 
 rate programs if it were probable that returns would be sufficient to cover much 
 more than cash costs of production and marketing because of the fear that pro- 
 rate programs under such circumstances would be likely to stimulate plantings. 
 
 Each of the foregoing programs encountered the difficulty of obtaining 
 and maintaining participation by a large proportion of the growers. Numerous 
 growers who have participated in such programs recognize the economic gains to 
 the industry yet refuse to participate again unless all growers participate. 
 This situation has lead many to believe that it is desirable to make partici- 
 pation compulsory for all growers if two-thirds or more of the growers are will- 
 ing to conduct a restriction program. 
 
 PROBLEMS OF ADMINISTRATION OF COMPULSORY PRORATE PROGRAMS 
 
 The principal administrative problem in compulsory prorate programs would 
 be to adjust equitably benefits and burdens among all parties concerned. Other 
 problems would be: (l) determining an industry's desire for such a program, (2) 
 determining the extent to which to prorate or the volume to market, and (3) 
 financing and enforcing the program. 
 
 Determining an Industry's Desire for Proration.-- There would be a diffi- 
 culty, as is the case with any democratic expression of opinion, in ascertaining 
 the attitude of growers toward proration. Although the activities of a few en- 
 thusiastic individuals might seem to indicate that a prorate program had the sup- 
 port of the majority, there would be a possibility of unorganized opposition. 
 This difficulty could be overcome by submitting the question of compulsory pro- 
 ration to the qualified growers through election or by asking the sponsors to 
 obtain signatures to a petition. The positive endorsement of two-thirds of the 
 growers should be reasonable assurance of a desire on their part for a prorate 
 program. In this respect the action would follow precedent in matters of great 
 importance where more definite expression of opinion than a majority expression 
 was desired. The foregoing procedure might be conducted under the supervision 
 of a duly appointed commission. 
 
 Determining the Extent to Prorate.-- If the producers of a specified com- 
 modity were in favor of compulsory proration, the next problem which would arise 
 is that of determining the extent to which to prorate or the volume to market. 
 The commission referred to above might appoint representatives from within the 
 industry requesting compulsory proration to determine the quantity to be marketed 
 and to formulate the procedure for prorating this quantity among growers, the 
 actions of such representatives to be subject to the approval of the commission. 
 Such a procedure would give assurance that experienced judgment would be avail- 
 able when a specific program is undertaken. 
 
 Distribution of Benefits and Burdens .-- The determination of the method 
 of proration to distribute benefits and burdens equitably is a problem that 
 would need most careful consideration in each industry which contemplated such 
 action. 
 
20. 
 
 One of the principal factors which would influence the method of pro- 
 rating would be the possibility of disposing of the quantity which would not be 
 placed in the primary channels of trade. If it were possible to market this 
 quantity in the form of by-products at prices which would return harvesting ex- 
 penses, proration might be made on the basis of the total quantity delivered to 
 marketing agencies or on the quantity sold in secondary channels. On the other 
 hand, if harvesting costs could not be recouped on the quantity marketed as by- 
 products, proration might be made on the basis of each grower's normal produc- 
 tion. 
 
 Another factor which would influence the method of prorating of fruits 
 and vegetables would be the distribution of the production and the quantity of 
 various grades and sizes. The marketings in primary trade channels might be re- 
 stricted to first grades and/or larger sizes. Such a method might be feasible 
 and equitable if the production of the lower grades and sizes were fairly well 
 distributed among all growers and if the quantity in excess of the amount which 
 an industry desired to eliminate from the primary channels of trade coincided 
 with the quantity of lower grades and sizes. However, if there is wide vari- 
 ation in grades and sizes among producers and if the quantity which had to be 
 eliminated from the primary channels to obtain reasonable prices were far in 
 excess of the quantity of lower grades and sizes, such a method of proration 
 would be unlikely to gain the support of the majority of the producers. For ex- 
 ample, if it were apparent that only half of a specified crop (as was the case 
 with Tokay grapes in 1932) could be marketed at prices which would return more 
 than harvesting and marketing expenses, a considerable portion of the best quali- 
 ty would have to remain unharvested if shipments were restricted to one-half of 
 the crop. If a large portion of the growers were not producing crops at least 
 half of which were of best quality, they would oppose a restriction program which 
 would permit only the growers of the best quality to market any portion of their 
 crops . 
 
 A third factor would be the degree of perishability of the crop. If it 
 were possible to store the commodity, proration might be made on the quantity 
 packed and held in storage, whereas if the commodity were highly perishable it 
 would be impracticable to adopt such a method of prorating. 
 
 A fourth factor would be the period of time covered by the prorate and 
 whether the crop were annual or perennial. The most feasible procedure with 
 perennial crops, v/here a prorate program was to apply for a period of three or 
 four years, might be to prorate on the basis of the average production for 
 previous years. Then each grower could abandon a portion of his acreage and not 
 incur the expense of bringing that portion of his acreage to maturity each year; 
 or he could remove a portion of his acreage from cultivation. On the other hand, 
 with some annual crops the proration might be made on an acreage basis in advance 
 of planting time. 
 
 In addition to the problem of the method of prorating, other problems 
 would arise in connection with distributing benefits and burdens equitably, such 
 as the extent to which restriction should be employed during short oeriods of 
 time, and, in the case of highly perishable commodities, the problem of whether 
 to prorate on the basis of the amount of the product remaining to be marketed 
 when the restriction becomes effective or on the basis of the total tonnage pro- 
 duced. For example, it might be advisable to restrict shipments to a greater 
 
21. 
 
 extent early in the season than late in the season because of seasonal changes 
 in demand. If so, the problem of making adjustments between those producers 
 whose crops were early and those whose crops were late would arise. On the other 
 hand, it might not be necessary to restrict shipments early in the season because 
 the volume available for marketing early might be small. Then the question arises 
 whether or not to count the early shipments as a portion of the individual grow- 
 er's allotment or to exclude them from individual proration calculations. 
 
 Each of the foregoing problems would have to be considered and decided in 
 the light of the circumstances peculiar to each industry. The experience and 
 judgment of those within the industry would have to be relied upon in this con- 
 nection. It is probable, however, that no matter what method of proration were 
 adopted or how equitably a proration program were conducted, some growers would 
 contend that they had been treated unequitably. This situation is inherent in 
 any attempts to restrict or regulate individuals in the interest of the entire 
 group; it is common to all phases of regulation. Growers should anticipate some 
 inequalities and weigh these against the probable returns they would receive if 
 there were no regulations. 
 
 Enforcement . — In order to facilitate enforcement of a prorate program, 
 certificates might be issued to each producer which stated the quantity^- and the 
 time each producer should market his proportion of the total quantity to be 
 marketed. It might also be made unlawful for any producer to deliver to any 
 dealer, or for any dealer or handler to have in his possession, within the state, 
 any commodity upon which a prorate program has been instituted without an ac- 
 companying certificate issued under authority of the prorate commission. 
 
 Any person xvho violated any provision of a prorate program might also be 
 enjoined in action brought in the superior court for the county in which the 
 violation is alleged to have occurred. 
 
 Financing . -- The financing of prorate programs might be accomplished by 
 collecting fees for the certificates referred to above. Some degree of assur- 
 ance that the expenses of conducting a specific prorate would not be excessive 
 would be given if each program were made self-sustaining; that is, if provision 
 were made that each would be financed by the industry requesting it. This re- 
 quirement would impel serious consideration on the part of those who sponsored a 
 program for a particular industry. In fact, the probable cost of administering 
 a prorate program might in some cases preclude its initiation. If a program were 
 under way, it would be in the interest of every participant to assist rather than 
 to hinder enforcement in order to keep the expense of administration at a minimum. 
 
 APPRAISAL OF THE DESIRABILITY AMD FEASIBILITY OF PRORATE PROGRAMS 
 
 The principal question which arises in connection with the desirability of 
 prorate programs is whether such action is preferable to allowing the long-time 
 
 \7 It is possible that in some situations the exact quantity each producer 
 would be entitled to market during a specific period of time could not be stated 
 on the certificates far in advance of the inauguration of a prorate program. 
 Certificates might show each producer's share as a percentage of the total quan- 
 tity to be marketed during designated periods. 
 
22. 
 
 effect of low returns to producers of certain commodities such as tree and vine 
 crops to bring about a reduction in production. The latter procedure is one to 
 which numerous persons subscribe. It is argued that in the long run the func- 
 tion of price is to control production: consequently attempts to restrict market- 
 ings go contrary to long-run forces and operate to destroy the tendency of econ- 
 omic forces to reach equilibrium. The first part of the argument is generally 
 accepted. However, there is serious question regarding the second part. If the 
 variations in prices of agricultural commodities were caused primarily by the 
 volume of production, the most economical way (assuming that costs of production 
 and marketing were at an irreducible minimum and that it was impracticable to 
 attempt to increase demand) to bring remunerative returns to growers of perennial 
 crops and at the same time assist in bringing about equilibrium of economic 
 forces would be to reduce the production of the crop in question. Since 1929 one 
 of the principal factors influencing prices has been the low purchasing power of 
 consumers. If it is agreed that their purchasing power will increase in the 
 future (as it has done after previous periods of depression), it would be un- 
 economical to reduce the production of many perennial crops to meet the present 
 low purchasing power conditions. Such a reduction of production would be carried 
 too far for periods of higher purchasing power and then plantings would be likely 
 to be unduly stimulated. The ultimate result would be large capital losses and 
 an unbalancing of economic forces. For this reason, it appears desirable to pro- 
 rate the marketings of some perennial crops to meet the situation which confronts 
 numerous California agricultural industries. 
 
 With annual crops, the production of which can be expanded or contracted 
 fairly easily through an increase or decrease in acreage, the logical procedure 
 is to attempt to adjust acreage to existing demand. A planned adjustment such 
 as the proration of acreage before planting has several advantages over un- 
 planned adjustment because experience has shown that the majority of producers 
 are influenced in their adjustments by prevailing prices rather than prospective 
 prices. 'I9' Adjustments of acreage prior to planting, whether planned or unplanned, 
 could not, however, bring about a perfect adjustment in production because the 
 volume of production is influenced by factors other than acreage. For this 
 reason it may be desirable to restrict the quantity marketed in primary channels, 
 as has been done in the Imperial Valley with lettuce and cantaloupes, in seasons 
 when supplies are excessive in relation to the existing demand. Such restriction 
 must, however, be exercised with extreme caution with annual crops because if 
 carried to a point where production is highly profitable in years of short crops 
 and where losses are avoided in such years, acreage is likely to increase rapidly. 
 
 That prorate programs to meet emergency situations are desirable has been 
 the concensus of opinion of numerous groups; this is evidenced by the several 
 voluntary attempts. The question of the desirability of making such programs 
 compulsory, in the event that a large proportion of the producers of a particular 
 commodity desires to engage in them, is another matter. The question brings to a 
 
 ii/Bean, L. H. The farmers' response to price. Journal of Farm Economics . 
 9:3:368-395. July, 1929. Also Smith, Bradford B. Forecasting the acreage of 
 cotton. Journal of American Statistical Association 20: 31-47. 1925. 
 
 Stokdyk, E. A. Some factors influencing the mid-season potato market. 
 Kansas State College of Agriculture and Applied Science. Tech. Bui. 28:26-28. 
 1931. 
 
23. 
 
 focus a subject of continual controversy in the history of the United States; 
 namely, the degree which it is desirable for the government to regulate and 
 control individuals in the interest of society as a whole. Strenuous arguments 
 are raised against the extension of governmental control. It is held by some 
 that governmental action impairs individual rights and is susceptible to undue 
 favoritism. It is also contended that there is the possibility of political 
 abuses.; furthermore, that it is difficult to ensure adequate supervision of 
 governmental regulations. 
 
 The foregoing difficulties are recognized by those who favor extension 
 of the activities of government. However, they show that the trend of legal and 
 economic thought has been toward control of individual economic activities be- 
 cause the well-being of groups is of general concern and the group interest 
 should, take precedence over the special interests of certain individuals. If 
 compulsory proration operates to bring about general economic stability by in- 
 creasing present returns to a particular industry without unduly enhancing prices 
 to consumers, it should be favored. The unlimited freedom of action of a small 
 minority is not sufficiently important to impair the progress of the whole group. 
 
 A program in which participation is made compulsory by an act of the state 
 legislature, organized for the purpose of limiting and prorating the quantity that 
 might be placed on the market at any time, is not an unwarranted restriction on 
 individual rights since it spreads the benefits and burdens on every grower in 
 the particular industry. At the same time, there is reason to believe that there 
 is sufficient public interest connected either directly or indirectly with the 
 economic well-being of a particular industry to sanction group control. 
 
 The long-run adjustment of agriculture will probably be left for the most 
 part to the operation of economic forces. We may, however, seek to guide the 
 operation of these forces in such a way as to minimize the hardships of the 
 transition to a new point of equilibrium. The physicist does not repeal natural 
 laws but has gone far in showing us how we can live with them in comfort. 
 Through wise group control the producers of agricultural products may also seek 
 to accommodate themselves to economic forces.^- 
 
 The feasibility of voluntary prorate programs has been clearly established 
 with some California agricultural commodities (see pages 12 to 19), and it is 
 probable that prorate programs would be feasible with numerous products produced 
 in California because many commodities are produced almost exclusively in this 
 state. It would be impracticable, however, for California producers alone to 
 attempt such programs with numerous products, such as wheat, cotton, barley, 
 hogs, cattle, and -eggs, because their production is widely scattered throughout 
 the United States and foreign countries. Similarly, it would be impracticable 
 to limit marketings of products a considerable portion of which was produced in 
 one or two other states without participation on the part of the producers in 
 
 . ^p/The court in the Danziger Refining case (page 9) pointed out that the 
 stability of a particular industry was of public interest. 
 
 43 t 
 
 \S The Farm Relief Bill before Congress is an attempt to plan production to 
 meet the existing situation in agriculture. 
 
24. 
 
 these states; for example, canning pears. 
 
 The feasibility of compulsory prorate programs has not been demonstrated 
 in agriculture but has been shown in certain areas in the oil industry. From 
 experience in the latter industry it may be inferred that such programs would be 
 feasible in the former industry. In fact, in some respects the administrative 
 problem of distributing the benefits and burdens of prorate programs would be 
 less complex in agriculture than in the oil industry. For example, the diffi- 
 culty of making adjustments in the allotments of individuals because of an under 
 ground flow of supply does not arise in agriculture. On the other hand, some 
 phases of administration in agriculture are likely to be more complex because of 
 the numerous trade channels through which the products move from producer to con 
 sumer. In our view, however, the problems of compulsory proration in agricultur 
 although complex, are not insurmountable. 
 
25 
 
 SUMMARY 
 
 The philosophy of proration is not new; it was manifested in the practices 
 of the earlv English merchant and craft guilds , Each member was held to a "stint" 
 or allotment to protect the limited market opportunity for all. 
 
 Although the philosophy of unlimited competition was dominant in the Unit- 
 ed States during the period of rapid development, now that we have developed a 
 complex industrial structure and a specialized agriculture this philosophy is 
 challenged. It is believed bv numerous persons that the new conditions call for 
 control of competition with administration by groups as in the period of the 
 guilds in England. 
 
 A number of groups of agricultural producers have endeavored to limit com- 
 petition bv restricting the volume marketed in the primary channels of trade in 
 periods of excessive supplies or low consumer purchasing power or both. One of 
 the fundamental weaknesses of their attem.pt s has been that non- participating pro- 
 ducers derived : ore than an equitable share of the benefits of such action. This 
 situation has caused abandonment of several of such programs, but has raised the 
 question of the desirability and feasibility of making participation in them com- 
 pulsory if the bulk of the producers desire to engage in shipment limitation and 
 if such compulsion is essential to the welfare of the industry* 
 
 Three distinct administrative set-ups have been proposed to make compul- 
 sory restriction of shipments effective: (1) placing the production and market- 
 ing of certain agricultural crops under public utility regulation, (2) making 
 marketing through one agency mandatory, and ( 3 ) giving a governmental agency the 
 power to administer proration programs. At the present time, it is probable 
 that the courts would consider the third proposal more favorably than either the 
 first or second. 
 
 Although it is impossible to forecast a decision of the courts on a speci- 
 fic proposal such as compulsory proration of the marketing of agricultural pro- 
 ducts, we may infer from previous decisions if such a procedure does not enhance 
 prices beyond a reasonable return to producers and if it is a temporary measure 
 in the face of economic necessity, it will be considered within the rule of reason 
 by the courts . 
 
 The present position of legislative bodies and the courts toward attempts 
 of farmers to improve their economic status is exceedingly liberal. Farmers' 
 associations are no longer looked upon as monopolies, combinations, or conspirac- 
 ies in restraint of trade and their contracts with members are binding. The 
 Supreme Court has also stated that if restrictions on production are to be accom- 
 plished bv voluntary agreements entered into pursuant to statutes authorizing 
 them there is no objection thereto from a state or a federal standpoint. This 
 court also declared that a state or federal government is free to declare what 
 its public policy shall be in matters of this kind. 
 
 Compulsory proration of oil production has been undertaken in Oklahoma and 
 Texas. This action has been upheld bv the courts as reasonable exercise of the 
 police power to conserve a natural resource. However, the court stated that if 
 such action tended to promote the prosperity of the oil industry or of the statsi 
 generally, or to prevent economic demoralization, it was not to be condemned but 
 
26. 
 
 rather upheld for that reason. This decision would seem to out the court on 
 record as iustifving proration from the standpoint of preventing physical waste; 
 however, it recognizes the desirability of preventing economic waste. 
 
 In numerous California industries there is likely to be a high degree of 
 physical waste as well as economic waste Whether or not some degree of control is 
 exercised over the volume marketed. During the past year (1932) a considerable 
 volume of several specialty crops was unharvested because prices at the point of 
 production were so low that it would not pay toharvest them. In fact, producers 
 of several crops found themselves indebted to transportation agencies at the end 
 of the marketing season because their products did not sell for enough in terminal 
 markets to pay the freight. The uncertainty caused by such a situation probably 
 resulted in both a larger physical and economic waste than would have occurred if 
 definite steps had been taken to market limited quantities during each week of 
 the shipping season and prorate such marketings among all producers. 
 
 The compulsorv proration of oil production has been reviewed by the courts 
 under the legistic conception of the protection of the co-relative rights of in- 
 dividuals within a group as well as under the theory of the proper exercise of the 
 police power to promote the welfare of society as a whole. This is recognition 
 of the principle, adopted b^ the guilds, of restrict 'ng the activities of individ- 
 uals in the interest of the group. Similar measures to restrict the action of 
 individuals to protect the opportunities of a group have come before the courts 
 in situations somewhat analagous, A citv government may establish nones and 
 place restrictions on the construction of buildings; irrigation and reclamation 
 districts have been granted authority to compel individual conformity to the 
 group desire; and in California it is illegal to plant other than one variety of 
 cotton in certain areas. 
 
 The most drastic acti on to protect the group from the individual we have 
 seen is the recent restriction on the withdrawal of deposits from, banks. It be- 
 came necessary to prorate the amount which each depositor could withdraw from his 
 economic reserve in order to protect the co-relative rights of all depositors. 
 
 Although the primary motive in proration is to influence prices bv restrict- 
 ing the quantity marketed in the primary channels of trade, this method of influ- 
 encing prices differs from collusion among producers or marketing agencies to name 
 a going or prevailing price. Under proration programs there is a flexibility of 
 prices by reason of the competition of various marketing agencies which market the 
 products . 
 
 Analyses of the factors affecting the prices of many California crops show 
 that these a re distinct possibilities of increasing the returns to the producers 
 of numerous California crops by limiting shipments in periods of excessive supplies 
 or low consumer purchasing power or both. 
 
 The possibility of increasing returns by restricting supplies varies, how- 
 ever, from commodity to commodity. The perishability of the product, the size of 
 the market area, the probability of substitutes taking the place of the commodity 
 in question, the probability of production expanding in other areas, and the 
 elasticity of demand are factors which influence it. These factors h-.ve usually 
 been given careful consideration before prorate programs were undertaken. 
 
27. 
 
 Among the groups of California growers who have undertaken to limit sup- 
 plies in the primary trade channels in periods of excessive supplies are the 
 lemon growers (1925-1932), the Valencia orange growers (1932), the Tokay grape 
 growers (193 2),. the Imperial Valley lettuce and cantaloupe growers (1929-1932), 
 the Wats onvi lie apple growers (1930-31), the canning peach growers (1930-1931), 
 and the raisin, table, and juice grape growers (1930). E r ch of these groups 
 demonstrated that returns to growers could be increased bv such action. Each 
 undertook such action only when it was obvious that returns would be extremely 
 low or severe losses would be incurred in harvesting and marketing if all of the 
 crops were marketed in the primary channels of trade. However, each frroup en- 
 countered the difficulty of obtaining and maintaining participation bv a large 
 proportion of the growers. 
 
 The principal administrative problem in compulsory prorate programs would 
 be to adjust equitably benefits and burdens among all parties concerned. Other 
 problems would be, (l) determining an industry's desire for such a program, (2) 
 determining the extent to which to prorate on the volume 1o market, and (3) financ- 
 ing and enforcing the program. 
 
 The method of distributing the burdens and benefits would depend upon sev- 
 eral factors including (1) the possibility of disposing of the quantity which would 
 not be placed in the primary channels of trade at prices which would return har- 
 vesting expenses, (2) in the case of fruits and vegetables, the distribution of 
 the production of and the quantity of first grades, and/or larger sizes, (3) the 
 degree of perishability of the product, and (4) the period of time over which the 
 prorate program would apply. 
 
 The determination of an industry's desire to conduct a compulsory prorate 
 program might be accomplished by submitting the proposal to qualified growers 
 through election or by petition under the direction of a duly appointed commiss- 
 ion. The extent of proration might be determined by a committee from within the 
 industry. The-' enforcement of prorate programs might be facilitated by the issu- 
 ance of certificates to each producer which stated the Quantity and the time each 
 should, market his proportion of the quantity to be placed in the primary channels 
 of trade. The financing of prorate programs might be accomplished bv collecting 
 fees for such certificates. 
 
 Under present conditions prorate programs are more desirable from both an 
 individual and social viewpoint than allowing the long-time effect of Itw returns 
 to producers of certain commodities such as tree and vine crops to bring about a 
 reduction in production. One of the principal factors influencing agricultural 
 prices since 1929 has been the low purchasing power of consumers. If sufficient 
 trees and vines were pulled to reduce production to meet the present 1 ow purchas- 
 ing power conditions, plantings would again be stimulated when periods of higher 
 purchasing power prevailed. The ultimate result would be large capital losses. 
 
 With annual crops the logical procedure is to attempt to adjust acreage to 
 existing demand. Such adjustment may not, however, bring about the necessary ad- 
 justment ifeproduction because the volume of production is influenced by factors 
 other than acreage. For this reason, it is desirable during seasons of excessive 
 supplies to restrict the quantity marketed in the primary channels *f trade. 
 
28. 
 
 The desirability of makinp participation in prorate programs compulsory 
 in the event a 'large proportion of the producers of a particular commodity desire 
 to engage in them brings to focus the question of the desirability of the exten- 
 sion of governmental control over individual economic activities., U ur view is 
 that if compulsory proration operates to bring about general economic stability 
 fr' increasing present returns to a particular industry, it should be favored. A 
 program in which participation is made compulsory is not an unwarranted restric- 
 tion on individuals' rights since it spreads the benefits and burdens on every 
 grower', in the particular industry. 
 
 The feasibility of voluntary prorate programs has been clearly establish- 
 ed with some California agriculture industries. Numerous products are produced 
 almost exclusively in this state. It would be impracticable, however, to attempt 
 such programs with many products without the cooperation of the producers in 
 other states. 
 
 The feasibility of compulsory prorate programs has not been demonstrated 
 in agriculture but has been shown in certain areas in the oil industry. Numerous 
 complex problems would arise in compulsory agricultural proration, yet in our 
 view these are not insurmountable.