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 Division of Agricultural Sciences 
 
 UNIVERSITY OF CALIFORNIA 
 
 ECONOMIC OBJECTIVES AND 
 OPERATIONS OF CALIFORNIA 
 AGRICULTURAL MARKETING ORDERS 
 
 Sidney Hoos 
 
 CALIFORNIA AGRICULTURAL EXPERIMENT STATION 
 GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS 
 
 Mimeographed Report No. 196 
 
 May 1957 
 
ECONOMIC OBJECTIVES AND OPERATIONS OF 
 CALIFORNIA AGRICULTURAL MARKETING ORDERS 
 
 by 
 
 Sidney Eoo^ 
 Table of Contents 
 
 Page 
 
 Introduction and Setting 1 
 
 Attributes and Functions of Marketing Orders k 
 
 Economic Implications and Inferences 13 
 
 Some Observations 25 
 
 Selected Bibliography on Marketing Orders 36 
 
 List of Tables 
 
 Table 
 
 I Characteristics of California Agricultural 
 
 Marketing Programs Operating in 1956 32 
 
 II Provisions of California Agricultural 
 
 Marketing Programs Operating in 1956 3^ 
 
 l/ Professor of Agricultural Economics and Agricultural Economist 
 in the Experiment Station and on the Giannini Foundation. 
 
ECONOMIC OBJECTIVES AND OPERATIONS OF CALIFORNIA 
 AGRICULTURAL MARKETING ORDERS, MARCH, 1957i/ 
 
 Introduction and Setting 
 
 "Economic conditions are constantly changing, and each generation looks 
 at its own problems in its own way." So Alfred Marshall began the "Preface" 
 to the first edition of his Principles of Economics , a book which is secure 
 in the history of economic thought but which is honored more in our day by 
 reverence than by study. Yet, the changing economic conditions with which 
 Marshall was familiar are in many respects similar to those of our generation 
 as are many of the basic economic ideas with which we work in our continuous 
 struggle to understand the operation of our contemporary economic system. 
 Marshall's belief in what he referred to as the "principle of continuity" is, 
 among other places, embodied in his statement: "The new doctrines have sup- 
 plemented the older, have extended, developed, and sometimes corrected them, 
 and often have given them a different tone by a new distribution of emphasis; 
 but very seldom have subverted them. " 
 
 One may wonder why Alfred Marshall is brought into a discussion of ag- 
 ricultural marketing orders. The reason is to note with emphasis that, in 
 terms of the basic economic ideas underlying marketing orders, our generation 
 of economists draws heavily upon the system of thought commonly referred to as 
 Marshallian partial equilibrium analysis. One might venture the view that, if 
 Marshall were to participate in a discussion of marketing orders, he would-- 
 after a brief explanation of certain terms — be able to enter and contribute to 
 
 1/ A section of a study on Economics of Agricultural Marketing Programs. 
 A summary version of this section was presented at the joint annual meetings 
 of the American Farm Economic Association and the Western Farm Economics Asso- 
 ciation, August 27-29, 1956, Asilomar, California, and published in the Jour - 
 nal of Farm Economics , vol. 58, no. 5, December, 1956, pp. l679-l691» 
 
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 the discussion meaningfully and constructively. This is to dispel the notion 
 that the economics of marketing orders involves some new, unique, and all- 
 powerful system of economics. As to whether Marshall would approve the intro- 
 duction and operation of marketing orders, one can judge that from what he 
 writes in the Principles he would likely look askance at them; yet, from what 
 he advised his government at various times, as recorded in his reports to Royal 
 Commissions, one can surmise that he would favor the use of marketing orders 
 under certain circumstances and conditions. But such circumstances and condi- 
 tions would be sporadic and unique rather than continuous and general as are 
 mo6t of the marketing orders currently in operation. 
 
 The continuous operation of state and federal marketing orders is in sharp 
 contrast to their original intent when first introduced during the depression 
 years of the 1930' s. Then, their originators and sponsors in the main looked 
 upon marketing agreements and orders as devices to handle depression-induced 
 situations in particular commodities. Yet, over the following two -and -a -half 
 decades, with an interruption in the war years, marketing orders have become 
 entrenched and interwoven in the institutional fabric of a substantial number 
 of agricultural products. As is the case in much of the economic -social legis- 
 lation enacted and developed during the years of the early 1930' s, marketing 
 orders may be characterized by the phrase, "depression bred and prosperity fed." 
 
 What are the distinctive features and objectives of marketing orders which 
 account for their popularity with and use by various commodity groups? What 
 is the economic rationale underlying marketing orders which, in essence, are 
 legislative administrative institutions that operate and survive only as politi- 
 c ally accepted or tolerated? What economic inferences and implications can 
 be deduced from the experience accumulated over a period of more than two dec- 
 ades? These questions suggest the terrain around which one may survey the eco- 
 nomic rationale and results of marketing orders. But before going forward with 
 
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such a survey, it is necessary to dust the lens of our telescope, adjust our 
 transit, and delineate our territory. 
 
 So far we have used the phrase "marketing orders" in a generic sense. But 
 in legislative and administrative aspects, there are distinctions between "mar- 
 keting agreements" and "marketing orders." A "marketing agreement" is a volun- 
 tary arrangement between the federal or state government and individual producers 
 or handlers of a particular commodity, and its terms are binding on only those 
 individuals who sign the agreement. In contrast, a "marketing order," once made 
 effective under legislatively specified procedures and standards, is binding on 
 and uniformly applicable to all producers and handlers of the product for which 
 the order has been instituted. Although marketing agreements historically pre- 
 ceded marketing orders, the latter now heavily dominate because experience in- 
 dicated that industry-wide compliance was necessary if the intent of the program 
 was to be achieved. 
 
 Both the federal government and certain states operate marketing orders 
 and agreements. The differences between the federal and state programs involve 
 standards and administrative procedures, and there are differences among state 
 orders. For example, under California legislation, any agricultural product 
 is eligible to have a marketing order; but under federal legislation, a mar- 
 keting order is permissive for only a clearly specified list of products. 
 Federal orders are oriented toward volume control and quality regulation, while 
 the California orders may also include provisions for advertising and promotion, 
 research, prohibition of unfair trade practices, and regulation of grades and 
 standards. Orders permissive under the state of Washington legislation (Wash- 
 ington Agricultural Enabling Act) are limited to advertising and sales promo- 
 tion, research, labeling requirements, and unfair trade practices; volume 
 control provisions are prohibited. The New York state legislature has recently 
 approved legislation authorizing marketing orders which are comprehensive in 
 
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scope as are the California orders and which similarly provide for volume 
 regulation along with provisions for sales promotion, research, and grades 
 and standards. 
 
 Another difference pertains to fluid milk and cream. There, also, the 
 federal government and certain states have marketing programs. Milk programs, 
 however, are different in important respects from the marketing orders con- 
 sidered here. In general, fluid milk programs establish minimum prices to 
 producers, distributors, and at retail. The administrators of such milk pro- 
 grams deal directly with and manipulate the price level and price structure. 
 In sharp contrast, the marketing orders for products other than milk deal with 
 price only indirectly; those orders deal with and directly affect flow and 
 stock variables which affect prices. Such distinction is significant for 
 analytical purposes as well as administrative procedures. Thus, we shall not 
 consider fluid milk marketing programs. Our terrain to be surveyed will be 
 limited to marketing orders, primarily California orders, although most of the 
 observations and inferences can be also interpreted as being pertinent to fed- 
 eral marketing orders. 
 
 Attributes and Functions of Marketing Order s 
 
 In searching into the history of economic and institutional ideas, it is 
 helpful to pin point with precision their embryonic origin. So it is with the 
 basic ideas underlying marketing orders. Earlier it was noted that, in terms 
 of chronology, marketing orders emerged as a result of problems engendered by 
 the "great depression." That is in part true; but the economic structure of 
 orders were, however, in fact gradually and experimentally developed by cer- 
 tain cooperative marketing associations during the 1920' s. They were faced 
 with seasonal "surpluses," quality standards, and unfair trade practices; and 
 they endeavored to organize commoditywise on an industry-wide basis. The 
 
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 trials and tribulations of those problems need not be recited here; yet, those 
 marketing associations became convinced that their own devices were not fully 
 adequate to achieve the goals envisaged. New legislation and limited govern- 
 ment participation were deemed to be essential adjuncts. 
 
 When experience with marketing agreements showed that their signees were 
 "holding the umbrella" for the nonsigners, and the growing gales and rains 
 made the umbrella less effective or even ineffective, thoughts turned to a 
 device whereby everyone in the industry concerned would be required to support 
 the umbrella. Thus emerged marketing orders with their uniform and industry- 
 wide application to all producers or handlers of the product concerned. Such 
 industry-wide application of marketing orders, however, has often been mis- 
 interpreted. It does not mean that the industry has no choice as to whether 
 an order will be introduced; it does not mean that the industry is powerless 
 to change or even eliminate the order; nor does it mean that the industry, 
 with its order, can operate only as the industry desires. 
 
 Legislation clearly sets forth the procedural and administrative criteria 
 to be followed. Briefly, they include discussions between the industry repre- 
 sentatives interested in an order and officials of the state (or federal) De- 
 partment of Agriculture; the drafting of a proposed order; the holding of an 
 announced public hearing at which the proponents and opponents of the proposed 
 order present their views; a review of the accumulated evidence and testimony 
 by the staff of the Department; the mailing of the proposed order to all di- 
 rectly affected and eligible to vote for their assent or dissent; the necessary 
 requirement of majority approval; and the final approval by the Director (or 
 Secretary) of the Department who specifies its issuance and effective date. 
 
 The many important details of such procedures need not be discussed here 
 since we are only interested in setting the background for discussing certain 
 economic questions. But several significant points must be underlined. First, 
 
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 a majority of the industry, specific criteria for which are written in the 
 legislation, must approve an order before it can be effective. Second, the 
 Director (or Secretary) is required to determine whether the available evidence 
 indicates the need for an order and that the proposed order meets that need. 
 Furthermore, the Director has the authority to terminate the procedure at any 
 of the steps mentioned earlier or to terminate an order which is in operation 
 if, in his judgment, it is no longer consistent with the legislative standards. 
 In essence, the California Director of Agriculture bears the burden of primary 
 responsibility, and he holds the authority to make final decision as to whether 
 an industry-assented order becomes effective. Thus, in addition to following 
 certain administrative and procedural matters, the Director is required to 
 consider and judge a proposed order in light of legislatively specified eco- 
 nomic standards. These standards are nonquantitative and are set in a definite 
 legal-philosophic framework and expressed in gobbledygook as "To enable agri- 
 cultural producers [of California], with the aid of the state, more effectively 
 to correlate the marketing of their agricultural commodities with market demands 
 therefor . . . establish orderly marketing . . . provide for uniform grading . . . 
 [and] development of new markets ..." (California Agricultural Code, Section 
 1300.11) . For economic analysis, a more meaningful legislative standard, but 
 still one stated in rather loose language, is "... that such marketing 
 order or amendments thereto will tend to reestablish or maintain such level 
 of prices for such agricultural commodity as will provide a purchasing power 
 for such agricultural commodity which is adequate to maintain in the business 
 of producing such agricultural commodity such number of producers as is re- 
 quired to provide such supply of the quantities and qualities of such agri- 
 cultural commodity as is necessary to fulfill the normal requirements of con- 
 sumers thereof" (California Agricultural Code, Section 1300.1^) . The economic 
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later. But first we need to outline additional attributes and functions of 
 California marketing orders. 
 
 To assist him in operating a marketing order, the Director appoints an 
 advisory board from a list of industry nominations. If the order pertains to 
 producers only, the board is composed of producers; if the order pertains to 
 producers and handlers, the board is made up of both groups in equal numbers; 
 and if the order pertains to handlers only, the board is composed of handlers. 
 The advisory board may employ a manager and staff, and most boards do so. But 
 in all matters of any consequence, the board cannot make decisions and act 
 thereon. The board can only recommend to the Director, and he either approves 
 or disapproves. For all intents and purposes, the California Director of Agri- 
 culture is a real "economic czar" of the state's marketing orders. 
 
 The general goals of marketing orders, which operate under the authority 
 of the Director of Agriculture, are mainly oriented in the direction of improv- 
 ing the returns to producers. Although the Director is required to give con- 
 sideration to consumer interests as well as those of the industry at large, the 
 legislation is clear that its primary concern is with the economic welfare of 
 producers. This "economic welfare" of producers is measured in terms of "pur- 
 chasing power" which is suggestive of but not completely similar to the "parity 
 price" or "parity income" notions embodied in federal legislation. Rather than 
 referring to a specific per cent of some base, the California legislation ex- 
 presses its objective in terms of enough purchasing power to keep in business 
 a sufficient number of producers providing an adequate supply of the commodity 
 to meet the needs of consumers. Though one might question the economic validity 
 of such a standard, and we shall do so later, it can be stated that the state 
 criterion is less naive and less rigid than the federal parity price doctrine. 
 
 To attain the various objectives embodied in particular marketing orders, 
 a set or battery of provisions and tools has been developed over the years. 
 
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 Some of these provisions are of the more obvious nature and supplement the 
 type of marketing legislation prevalent in most states as well as in California. 
 Yet, others of the marketing order provisions are unique in that they operate 
 to any extent only because a marketing order is effective. For example, the 
 grading or inspection provisions of an order supplement the broader and more 
 general grading standards which are part of the state legislation independent 
 of marketing orders. But the promotion or volume-regulation provisions of an 
 order exist only because they are part of the order; without the order, no type 
 of collective promotion or volume regulation would be required by the state 
 legislation. This distinction between what might be called supplementary and 
 specific provisions can be noted as we set forth the major types of provisions 
 embodied in California marketing orders. 
 
 The major provisions or marketing tools, one or more of which are written 
 in the various orders, include: grade and/or size regulation; pack and con- 
 tainer regulation; mandatory inspection and/or certification; prohibition of 
 unfair trade practices; advertising and sales promotion; production, processing, 
 and/or marketing research; and volume regulation, with or without stabilization 
 pools and funds. Of these seven broad provisions, one might classify the first 
 four as supplementary and the remaining three as specific provisions. Although 
 such classification may in part be arbitrary, it does aid in directing attention 
 to the type of regulation which is entirely unique to a commodity having a mar- 
 keting order. In that respect, the specific provisions, particularly volume 
 control and sales promotion, have attracted most attention, discussion, and 
 attack . 
 
 At this point it is advisable to pause a moment and destroy a false notion 
 which is prevalent in the minds of many, including those who have a superficial 
 familiarity with California marketing orders. This false notion pertains to 
 the volume- restriction provision. Too often the unfounded thought is expressed 
 
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that marketing orders are synonymous with quantity restriction, and without 
 that provision there would be no orders. Such a view may be a throwback to 
 the early days of orders when quantity regulation was certainly the primary 
 although not the only reason orders were initiated. In recent years, however, 
 the situation is drastically different. Now, quantity control in any of 
 several forms, when it does occur in an order, is only one of the provisions; 
 and a large majority of the marketing orders have no quantity regulation 
 features . 
 
 Among the 28 marketing programs currently in effect under California 
 legislation, quantity control, as such, is incorporated in some 10 orders for 
 the following commodities: early apples, fresh asparagus, processing asparagus, 
 lemon products, dry-pack lettuce, standard Lima beans, cling peaches for can- 
 ning and freezing, fresh fall pears, winter pears, and delta white potatoes. 
 Thus, not only is volume regulation a part of only 10 out of the 28 California 
 programs but, even for those 10 orders, quantity restriction is permissive only 
 with the approval of the Director rather than being mandatory or automatic. 
 
 In view of the economic significance and implications of quantity re- 
 striction as a part of the marketing orders, however, we shall later consider 
 this topic again. Now, we continue with the other types of provisions. The 
 distribution of provisions among the 28 orders may be summarized as follows: 
 
 Marketing program provision 
 
 Grade and/or size regulation 
 
 Pack and/ or container regulation 
 
 Mandatory inspection and/or certification 
 
 Sales promotion and advertising 
 
 Production, processing and/ or marketing 
 research 
 
 Number of orders having 
 the respective provision 
 
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 22 
 
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 Quantity regulation, with or without 
 stabilization pool 
 
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 Several salient feature of this summary tabulation merit brief comment. 
 First, it may be noted that the most prevalent provisions include "sales pro- 
 motion and advertising," which is embodied in 23 of the orders, and "production 
 or marketing research," which is incorporated in 22 of the orders. "Grade or 
 size" regulation and "inspection or certification" are next in order of fre- 
 quency. Then comes "quantity regulation," followed by "pack or container" regu- 
 lation, with the "unfair trade practices" provision the least frequent. 
 
 Next, it may be noted that there is no fixed or standard formula setting 
 forth which particular provisions are to be incorporated. Each separate mar- 
 keting order is tailored to meet the considered needs of the commodity concerned, 
 and there is complete flexibility as to which provisions are excluded or included 
 as long as they are consistent with the legislation authorizing and underlying 
 marketing orders. An order for a particular commodity may have most of the 
 available provisions as do cling peaches and lemon products; or an order may 
 provide for only promotion and research activities as do a number of programs 
 including those for bush berries, one of the orders for Bartlett pears, dried 
 prunes, raisins, strawberries, one of the orders for turkeys, and wine. Table II 
 attached summarizes the provisions included in the 28 current orders. 
 
 Various combinations of marketing tools may be drawn upon in the develop- 
 ment of orders. Also, a single commodity may have more than one order in opera- 
 tion simultaneously. For example, both asparagus and fall and winter pears 
 have separate orders for the fresh and processed utilizations; Bartlett pears 
 have two orders, one of which is for promotion and research; and turkeys have 
 two orders, one for disease control and eradication and a second order for 
 sales promotion and advertising. Another variation is suggested by the potato 
 orders: the long white potatoes order includes grade, size, inspection, promo- 
 tion, and research provisions, while the delta white potatoes order includes 
 those provisions plus quantity regulation. Still another variation available 
 
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 is that, although an order may include certain provisions, it need not be uti- 
 lized by the industry. An example of this type is the order for extracted honey 
 which includes provisions for "unfair practices/' advertising and sales promotion, 
 and research. But since March, 1952, when the honey order was made effective, 
 its operations have, in fact, been limited to requiring price posting by handlers 
 and promotion activities. Many other examples can be cited, but the several 
 mentioned clearly indicate the high degree of flexibility permissible in the 
 organizational structure and operational objectives of California marketing 
 orders . 
 
 It is important to recognize that neither by legislative criteria nor by 
 administrative procedures need the provisions or operational objectives of 
 marketing orders be static or unchanging over time. As long as the broad, general 
 criteria written in the state legislation are met, and the Director makes a find- 
 ing to that effect, a proposed order or an amendment to an existing order may be 
 approved by him. Such flexibility has been taken advantage of by the various 
 industries having marketing orders. As with a biological organism, the insti- 
 tutional organism of a marketing order undergoes mutational and evolutional 
 changes. As an example may be cited the program for canning and freezing cling 
 peaches which started two decades ago as a simple state order providing for grade 
 and size regulations, inspection of intrastate shipments, and unfair trade prac- 
 tices. Advertising and promotion were included in the original order but dropped 
 shortly thereafter, although such activities were again included in 19^5- The 
 original state cling peach order of 1937 operated only one year; in 1938 the 
 cling peach order was not favorably voted upon by the industry and, thus, did 
 not become effective. But in the following year, 1939, an order was approved 
 and continued on through 19^2. The years 19k3-kk had no cling peach orders 
 because again they were not approved by the industry. But an order did operate 
 beginning with I9I46 and was enlarged to include grade and size control, inspection, 
 
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12. 
 
 advertising, promotion, and research. In 1952 provisions were added for a 
 stabilization fund and diversion to other peach-using products. In 1950 a 
 distinctive volume- control provision was added--the "green dropping" of immature 
 cling peaches. Thus, over the years, the cling peach order has changed its 
 character. In this case, the order became more comprehensive and "stronger" 
 as it developed; but as in biological evolution, some limbs and senses can 
 wither while others develop and strengthen. 
 
 As one studies the evolution of marketing orders and surveys their changing 
 objectives and emphasis, he sees a moving picture of institutional development. 
 Each order has its own special existence as does each individual in a population. 
 But the societal group gradually takes on new characteristics as the older ones 
 change emphasis and form. The process of institutional mutation and evolution 
 may with considerable articulation be identified in the history and development 
 of marketing orders. In what may be termed the early days of marketing orders, 
 the depression years of the middle 1930' s, the primary provisions of marketing 
 orders pertained to quantity control and regulation which in practice meant 
 volume restriction. In later years provisions for grade and size regulation and 
 mandatory inspection and certif ication- -aspects dealing with quality control-- 
 assumed increased relative importance. And still later, sales promotion and 
 advertising, along with the sponsorship of research, received relatively increased 
 attention. This does not mean that the older provisions were necessarily dropped 
 as new ones were adopted; rather, it means a change in relative emphasis and 
 balance. The development of marketing orders fits in well with Marshall's state- 
 ment: "Economic conditions are constantly changing, and each generation looks 
 at its own problems in its own way." 
 
 One may question how extensively used are the California marketing programs 
 by the state's agricultural industries. Whether the answer is "considerably" or 
 "little" depends upon the yardstick of comparison. It can be noted that since 
 
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13. 
 
 1933* when the so-called "self-help" marketing programs were first instituted, 
 some 70 different programs have at one time or another been in operation. A 
 number of the programs were effective for only a single season, and others 
 have operated in some form for as long as 20 years. The average length of 
 life of those 70 programs is about six years, although that figure cannot be 
 actuarially interpreted as an index of life expectancy. 
 
 In 1956 some 28 different marketing programs were in active operation 
 under the authority of California legislation. These 28 programs reflected 
 an average length of life of nine years, with individual programs ranging 
 from lees than a ysar old to over two decades of active operation. But a 
 figure of 28 programs may not be impressive when compared with a total of 
 over 200 commercial crops and products marketed by the state's agricultural 
 industries. Such comparison, however, may be misleading. A more meaningful 
 set of indicators of the role of marketing orders in the state's agricultural 
 economy may be that in 1955 the total farm value of all commodities having 
 state orders amounted to $390,000,000, some 15 per cent of the state's total 
 cash receipts from farm marketings or 23 per cent of the cash receipts from 
 crops. This latter figure- -23 per cent- -is the more pertinent because all of 
 the currently effective orders, except three, apply to crops. Another statis- 
 tic is that close to 35,000 producers, 33 per cent of the state's farmers or 
 ranchers, were directly affected by those orders, and a substantially larger 
 number were affected indirectly. These figures are cited to set in proper 
 perspective and balance the economic position and role of marketing programs. 
 
 Economic Implications and Inferences 
 
 To finance the 28 marketing programs, the producers and handlers-directly 
 concerned with those programs provided all of the necessary funds. .This amounted 
 in 1955 to about $6,900,000 divided as follows: 
 
fix 
 
Ik. 
 
 Administration 
 
 $ 932,800 
 
 13.5 per cent 
 
 Inspection 
 
 1,009,600 
 
 1^.6 per cent 
 
 Promotion 
 
 ^,635,300 
 
 67.2 per cent 
 
 Research 
 
 321,300 
 $6,899,200 
 
 4.7 per cent 
 
 Total 
 
 100.0 per cent 
 
 Whether returns to the industries justified those expenditures is not an issue 
 considered here. An essential point is that the expenditures were entirely 
 borne by the industries through assessments on the participating producers and 
 handlers or processors. That is one of the reasons why the types of programs 
 we here discuss are often referred to as "self-help" marketing programs. But 
 the phrase "self-help" has often been misinterpreted and, in fact, may even be 
 misleading. A more appropriate descriptive phrase would be "self-f inanced, " and 
 even there the phrase would refer to direct immediate expenditures; for if the 
 programs are successful, over a period of time they presumably yield sufficiently 
 increased returns to at least offset their direct costs to the industries. 
 
 This question about the phrase "self-help" is raised here not only because 
 of clarity in nomenclature. There is also the important issue of joint partici- 
 pation between the state represented by the Director of Agriculture and the in- 
 dustries concerned represented by their respective advisory boards whose function 
 is to assist, recommend to, and advise the Director. The industries presumably 
 initiate the promulgation of the programs; but once such action is taken, from 
 then on the state assumes definite functions and has certain heavy responsibili- 
 ties. Aside from the matter of direct financial costs, the state is definitely 
 one of the necessary parties. 
 
 To suggest the heavy responsibilities borne by the Director, the following 
 sections from the Agricultural Code, state of California, are cited. 
 
 "3183. With respect to an agreement or order containing provisions 
 for correlating the supply of the agricultural commodity with market 
 demand therefor by restricting and allocating the total quantity of the 
 
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15 
 
 commodity which may be marketed during any marketing season and which re- 
 stricted portion of the commodity might otherwise be marketed in compliance 
 with other laws of this State or of the United States, the director shall 
 not issue such agreement or order for the written assent of producers or 
 handlers unless he finds after public hearing that all of the following 
 are true: 
 
 "(a) The supply of the commodity available for marketing exceeds or 
 is likely to exceed the demand therefor at prices which will provide 
 a reasonable return to producers of the commodity. 
 
 "(b) The return to producers of the commodity will tend to be increased 
 through the operation of the proposed marketing plan. 
 
 "(c) The proposed agreement cr order may be administered without per- 
 mitting unreasonable profits to producers of the commodity and with- 
 out unreasonably enhancing prices of the commodity to consumers. 
 
 "(d) The proposed agreement or order will tend to prevent disorderly 
 marketing of agricultural products within the State. 
 
 "(e) The proposed agreement or order will tend to establish or main- 
 tain such relationship between the quantity of the particular agri- 
 cultural commodity marketed and the demands of the market for the 
 commodity as will tend to continue in production such volume of the 
 commodity as is probable will be needed over a reasonably long period 
 of time to supply the requirements of the commodity and to provide an 
 adequate standard of living to the farm operator and his family. 
 
 "318^. If the agreement or order contains provisions only for the 
 purpose of regulating the flow of the commodity or any grade, size, or 
 condition thereof to market without directly restricting the total quan- 
 tity which may be marketed during the marketing season or if the order 
 contains provisions only for the establishment of grade classifications 
 or minimum grade, size, quality or condition specifications and uniform 
 grading and inspection for the purpose of improving the quality of the 
 product marketed, or the elimination of unfair trade practices, the di- 
 rector may issue such order if he finds all the following are true: 
 
 "(a) That the order is reasonably calculated to attain the objectives 
 in the order. 
 
 "(b) That the order is in conformity with the provisions of this 
 chapter and will tend to effectuate the declared purposes and poli- 
 cies of this chapter. 
 
 "(c) That the interests of consumers of the commodity are protected 
 in that the powers of this chapter are being exercised only to the 
 extent necessary to attain such objectives." 
 
 The criteria just cited are, in essence, economic standards to be followed 
 
 by the Director in behalf of the state. From those economic standards, however, 
 
 flow various economic implications and inferences. First, it may be noted that 
 
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 {*){**; 
 
16. 
 
 nowhere are the economic standards expressed in precise numerical or quantita- 
 tive terms. No specific percentages of some sort of "parity price" or "parity 
 income" are directed. The Director is not bound either to a simple or a com- 
 plicated numerical formula. On the contrary, the legislation imposes upon him 
 a tremendous burden in the exercise of judicious wisdom compounded with economic 
 thought . 
 
 The economic standards are saturated with normative and ethical prescrip- 
 tions. Examples include phrases as "reasonable returns to producers," "unrea- 
 sonable profits to producers, " "unreasonably enhancing prices of the product 
 to consumers," "disorderly marketing," "more stable and adequate supply," "re- 
 lationship between the quantity — marketed and the demands of the market — as 
 will tend to continue in production such volume as is probable will be needed 
 over a reasonably long period of time to supply the requirements of the com- 
 modity and to provide an adequate standard of living to the farm operator and 
 his family. ..." 
 
 In the judgment of what are "reasonable" and "unreasonable" returns to 
 producers, in the definition of what is "orderly" and what is "disorderly mar- 
 keting, " in the determination of "unreasonably enhancing prices--to consumers," 
 in the specification of "such volume as is probable will be needed over a rea- 
 sonably long period of time, " and in the measurement of "an adequate standard 
 of living to the farm operator," the Director is given no guide in the legis- 
 lation. One must admit with candor, moreover, that the economic science we 
 have at hand can help in only a limited way in interpreting such normative 
 concepts, particularly for an economic system that is characterized by growth, 
 change, dynamic structural variations, uncertainties, and the vicissitudes of 
 various degrees of hot and cold wars. Only restraint, supported by naive pre- 
 conceptions, deters one from suggesting that perhaps the Director might consider 
 
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17. 
 
 supplementing his staff of administrators, economists, and lawyers with a bold 
 and articulate philosopher. 
 
 These questions about the Director's responsibilities with respect to 
 volume restriction cannot be dismissed lightly or cavalierly. Although weighted 
 with normative values, the standards certainly involve economic relationships, 
 and for that reason alone we must be concerned with the economic implications 
 and inferences. The standards are based in large part although not entirely 
 on a conventional static and partial equilibrium setting where, for each of the 
 products, the demand functions facing consumers and producers, the short- and 
 long-run supply functions of producers, and the rest of the Marshallian kit of 
 analytical tools, concepts, and functions are known or can be estimated suf- 
 ficiently accurately to serve as operational devices. 
 
 The point is that, on the premise there are marketing orders with economic 
 standards of the type briefly indicated earlier, the Director or a comparable 
 administrator can obtain from economists only part of the economic information 
 he should have in order to do his job as set forth in the legislation. Of 
 course, this point can be countered with the view that there should not be mar- 
 keting orders of that type and thus solve the economist's problem as did the 
 physician who cured the patient by amputation at the neck. Yet, one should 
 not be overwhelmed with doubt and pessimism. Economists can and do contribute 
 in the consideration and operation of programs as marketing orders. Economists 
 may not contribute as heavily as they would like, and they certainly do not 
 contribute as much as administrators may expect; but one may venture to say 
 that the economist's role is a necessary if not a sufficient one. Further, one 
 may venture to say that, without what the economist can honestly offer, both the 
 Director and industries would err more often and to a greater extent; in other 
 words, economists do help them to make smaller and fewer mistakes. 
 
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 fa ■ . . . - ■ 
 
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18. 
 
 In addition to the economic implications and inferences flowing from the 
 legislative standards which guide the Director, there are other economic con- 
 siderations involved in marketing orders. These may conveniently be considered 
 in terms of the major functional activities which take place in the operation 
 of the orders. Aside from administration, which is of concern to political 
 scientists and social psychologists, the activities are grouped under inspec- 
 tion, promotion, and research. 
 
 The activities related to the generic term "inspection" are generally 
 thought of as being physical or noneconomic. Yet, they are carried on for 
 economic reasons and have economic effects. Aside from questions of health 
 and sanitation, inspection involves the segregation and separation of stocks 
 having differential price and market impacts. The effective operation of mar- 
 keting systems utilizing grade, size, and maturity differentiations, for exam- 
 ple, is dependent upon some procedure of inspection with criteria of acceptance 
 or rejection. From the economic view, inspection is that phase of marketing 
 which separates the total crop into segments, each with different demand func- 
 tions, supply functions, elasticities, and cross elasticities. 
 
 Although objective sampling is beginning to assume importance in grading, 
 sizing, maturity, and quality inspection of some agricultural products, there 
 is considerably more latitude for the introduction of economics. The criteria 
 for inspection acceptance or rejection are still largely devoid of explicit 
 economic analysis, aside from intuitive and subjective notions. Conceptually, 
 at least, one can argue that, since inspection activities have economic effects, 
 an inspection procedure with its criteria for differentiation should logically 
 reflect economic influences. Rather than establishing No. 1, No. 2, and No. 3 
 grades based on only physical attributes of size, firmness, and coloring of, 
 say, a certain fruit, an alternative would be to include price or income in- 
 fluences. The development of such an alternative would involve knowledge of 
 
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19. 
 
 differential price elasticities of various possible grades. One may surmise 
 that by a combination of discriminant-function analysis with demand studies, 
 grades could be established which would be more meaningful in terms of eco- 
 nomic effects, which would reflect consumer preferences, and which would pro- 
 vide a more rational basis for industry marketing policy. 
 
 Whereas "inspection" provisions are included in half of the California 
 marketing programs now in operation, "promotion" provisions are part of 23 
 of the 28 currently effective programs. The term "promotion" includes adver- 
 tising, trade and consumer "education," the employment of fieldmen for retail 
 point-of-sale displays, and similar activities. In addition to the large pro- 
 portion of programs which use promotion provisions, another indicator of their 
 role in California marketing programs is that about 67 per cent of the total 
 expenditures for all activities under all programs is classified under "pro- 
 motion." The range of such promotion expenditures varied widely- -from $300 
 for early apples and $500 for delta white potatoes to $1,000,000 for cling 
 peaches and $2,000,000 for wine. 
 
 In terms of economics, sales promotion and advertising are carried on to 
 influence consumer demand affecting the derived demands at the handler and 
 producer levels. In conventional economic analysis, consumer demand is gen- 
 erated by the interaction of consumer utility surfaces, income, and prices. 
 Advertising attempts to change the structure of the consumer's preferences 
 thereby altering in certain directions his utility surface. Although we now 
 hear much about depth interviews, hidden desires, and impulse buying, and ad- 
 vertising experts talk in terms borrowed from social psychology and group 
 dynamics, the objective of advertising remains one of shifting demand upward 
 by affecting the consumer's utility preference system. 
 
 Promotion and advertising activities, as such, are not unique to industry 
 government marketing programs. Private advertising has a long history, and I 
 
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20. 
 
 am aware of no evidence suggesting that, because of sales promotion under mar- 
 keting orders, there has been a decrease in advertising by individual firms. 
 The intent of advertising through marketing programs is to supplement private 
 advertising rather than displace it. Yet, one may ask, what is gained by mar- 
 keting program sales promotion since advertising can and is done by many private 
 firms and organizations? The answer involves a basic feature of marketing or- 
 ders noted earlier: If sales promotion is carried on under the authority of 
 a marketing order, everyone in the industry must contribute to the financial 
 support of the advertising, and each participant's contribution is proportional 
 to the volume he markets. If the advertising is effective, each participant 
 gains in a sense corresponding to the benefits a firm derives from the influence 
 of Marshallian net external economies. Although Marshallian economies and dis- 
 economies are generally associated with long-period cost and supply functions, 
 corresponding effects on the revenue and demand functions can be considered to 
 flow from influences external to the firm and yield benefits which are common 
 to all firms in the industry. 
 
 Marketing order advertising programs generate nonprice competition among 
 products. If fresh peaches and fresh pears, for example, are substitutable and 
 competitive in demand, an advertising program in one is likely to bring forth 
 an advertising program in the other. Similar situations can be envisaged in 
 other commodities as canned peaches and canned pears or dried figs and prunes. 
 Since, in the short run at least, the "human stomach is inelastic" and the total 
 consumption of a group of products closely related in demand is relatively fixed, 
 a situation can develop where industries believe they must advertise if only to 
 hold their historical share of the market. In such a case, advertising is re- 
 sorted to as a buttress against the industry's demand function shifting downward. 
 
 For reasons we need not pursue here, most producers and handlers seem to 
 have an immeasurable amount of faith in the effectiveness of promotion and 
 
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21. 
 
 advertising expenditures. Yet, objective and substantive results to support 
 such faith are extremely difficult to develop. The disentangling of short-run 
 and long-run consequences, temporary and lasting results, and single and cumu- 
 lative reactions, as well as multiplier effects, raise tremendous analytical 
 problems. To answer simple questions often asked by industries, such as, 
 "should we advertise" or "how much should we spend on advertising," requires 
 the audacity, boldness, confidence, and daring of an advertising account ex- 
 ecutive. The economists might reply in terms of short-run and long-run net 
 marginal revenues and net marginal costs of advertising; but unless those func- 
 tions can be operationally specified for the industry, it is helped very little. 
 For such reasons, economists play only a meager role in the promotion and ad- 
 vertising provisions of marketing programs. \/ 
 
 The third major category of provisions to be considered is that of research. 
 In terms of frequency of appearance in currently effective programs, research 
 ranks about equal with sales promotion and advertising. But in terms of total 
 funds expended, research accounts for only k per cent, compared with 67 per cent 
 for promotion. Such comparison is misleading, however, as an indicator of the 
 relative importance of research in the operation of marketing programs. A very 
 substantial amount of research is drawn upon by the marketing program indus- 
 tries from the state university and for which no cost account is reflected in 
 the figures cited. 
 
 It is pertinent to note that the commodity marketing programs do not have 
 their own research staffs. Rather they utilize other organizations. In addi- 
 tion to the state university, they purchase research services from private firms 
 engaged in such business. At times they participate jointly with the govern- 
 ment under provisions of or similar to the Federal Research and Marketing Act. 
 The point to be emphasized is that many marketing program administrations are 
 
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 , . gtifcJsJfteM bar. <!«*$.•'• AirtsbdU- oi&fc.'O* •io4/i'KSa«'*io; lo.' &n& < c.«vv^?f..^ f *^ i W*'- , ' i!? .?? 1 
 
22. 
 
 "re search- minded"; and some seem to have almost as much faith in the effective- 
 ness of research as in that of sales promotion. 
 
 The research activities in which marketing programs are interested or 
 which they sponsor not only are economic in nature but often are technological, 
 although the latter have economic implications. Technological research proj- 
 ects include, for example, improved processing methods for canned fruits, dis- 
 ease and pest control, improved varieties, development of new utilizations, 
 improved equipment, and similar studies carried on by technical departments 
 and organizations. In terms of economic terminology and implications, many 
 of such engineering and "natural sciences" researches have the objective of 
 discovering and developing new production functions. As cost-reducing methods 
 of producing "old" products affect industry returns through the cost side of 
 the profit equation, methods of producing "new" products affect industry re- 
 turns through the revenue side of the profit equation. The industries with 
 marketing order provisions for research are well aware of the economic impli- 
 cations; and to them production, processing, or marketing research is a source 
 of increased profits or decreased losses . 
 
 Economic and statistical research is drawn upon by a number of the mar- 
 keting programs. This type of research ranges from the organization and devel- 
 opment of data reporting systems to econometric analyses of the operation and 
 effects of marketing programs. Of particular concern to those orders having 
 a volume-regulation provision are the economic characteristics of the demand 
 functions facing the industry. Knowledge concerning price and income elastici- 
 ties, for example, as well as measures of demand relationships among various 
 products is necessary for a rational operation of the volume- regulation pro- 
 visions. This is not to suggest that all orders have at hand, or seek to ac- 
 quire, such economic relationships. The range of "economic awareness" varies 
 among the programs; some, in fact, even ignore economics in its analytical 
 
; .... . ■ ' ■ . . ■ »A i ■ ■■ • ' 
 
 ' - ' - : '. : ' ' '• • ■ ■ ' • ■ ■ & 
 
 • ■ S1U.1 
 
 ' ■ ' .... . 
 
 • htm g. ■ ■ ■ ; ' . ' ' . ■' . • • •'• 
 
 . . . • ■ . ■ • 
 
 . ■ • ■ ■ •■• . . ■ ■ ■ - 
 
 ■■■ li'J . " • - ; ■ . • 
 
 ... . ... . 
 
23. 
 
 sense; some "play by ear" or "act intuitively"; but several orders reach for, 
 probe into, and consider rather sophisticated and technical economic relation- 
 ships . 
 
 To have current information on retail inventories, purchases, sales, and 
 prices-the type of data not available in reports of federal or state agencies- 
 some advisory boards contract with private marketing research agencies to ob- 
 tain such information. For those orders, there is being accumulated a fund 
 of economic knowledge concerning consumer and trade behavior that exceeds in 
 detail and scope that of other industries. 
 
 In addition to economic researches pointing to the demand side of the 
 market, increasing attention is being given to supply. For purposes of plan- 
 ning marketing policy, several of the orders-cling peaches, Bartlett pears, 
 and lemon products, for example-have helped to finance researches in objec- 
 tive preharvest sampling forecasts of the prospective supplies available for 
 marketing. Reliable and timely forecasts of supplies to be harvested are of 
 particular concern to the orders utilizing the volume- regulation provisions. 
 
 There are two major types of quantity control available under the volume- 
 regulation provisions. One is intertemporal distribution of the harvested crop 
 marketed within the season and a second is curtailment of the total crop to be 
 harvested and/or marketed for the season as a whole. In some instances, both 
 may be used. Intertemporal distribution within the season may have several 
 economic objectives, the primary one being the approaching of maximum returns 
 from the sale of the crop. Other but related objectives include dampening 
 of the seasonal patterns of prices and sales. Curtailment of the total crop 
 harvested and/or marketed also has the primary objective of increasing returns 
 from the sale of the crop. But in each case, the particular effects on prices 
 and returns depend upon the nature of the relevant supply and demand functions, 
 their price and income elasticities, their stability over time, and their 
 
■ 
 
 ■ 
 
 [d 
 
 Jul 
 
 ' ■ • ■ 
 
 ■ 
 
 ■ ■ 
 
 ! 
 
 - 
 
 y 
 
 ... ' 
 
2k. 
 
 sensitivity to developments in related products. The economic rationale, in 
 the most elementary case, involves price elasticity as an indicator of the 
 relationship between associated ohahges in volume and returns. The more com- 
 plicated bases involve economic theories of price discrimination, market seg- 
 mentation, and multiple products. 
 
 The problem of multiple products stems from the interaction of crops which 
 are competing in demand or which are produced and marketed in competing areas. 
 Interregional and interproduct competition cannot be ignored in the operation 
 of volume control. The economic inferences which can be drawn from the history 
 of marketing orders for asparagus or from the growing market struggle between 
 canned cling and freestone peaches, for example, are reasonably clear. A mar- 
 keting program which disregards the indirect as well as the direct economic 
 effects on competitive products or competitive regions is eventually likely to 
 find its objectives frustrated and its long-run relative market position af- 
 fected. 
 
 Associated with the types of economic inferences and implications briefly 
 touched upon above, there are various legal aspects which are not considered 
 here. It can be noted, however, that the legal validity of California marketing 
 programs has been established through findings in the courts. For example, court 
 rulings have established the principle that authorized actions initiated by and 
 properly administered under the authority of marketing order programs do not 
 violate the federal antitrust laws. That relief, in the legal sense, from 
 prosecution for combination or conspiracy further emphasizes the need for judi- 
 cious restraint in the application of marketing program provisions, particularly 
 those bearing upon volume regulation. 
 
 ■ 
 
* ' i"\f " ! ' *% * ' - " ' *I ' 'Vf »'.*»'/ '*' ^ f '* 1 -VI" '* ""'V 'V '" . V* '• . ».»-• «.v'^ V'l 
 
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 ; .. . • '. •.-.;::,. . - ■ ■ i ?. .■ fan ■ . . 
 
 njjgjfo 'y«x:sflm . ; ^al'?4Kidt(nsttEi*ilf> $r*.iag fo> *»s»n«»ti-' ^'iotqtMnis -5f«fia«il »aa»'s> Ji**tei>.Uq 
 
 . -." 5a fa • ' 
 
 . ■ \ ( ;i :';;: " Si. - i ' 
 
 •$*xo.t«i/i aai inoi2 ov»t6 two rto&aw :epDaf-i'M'rr^,;?cfeahr,^ *s'T . «. iQyxitaaD ' aaoJLvy:. .1© 
 
 — ICfH A . 'IBS \£.iQ/*jUOi$,R!i)*f 9~£ .t^iiSJiUSSJ? '"iT-.I .^fiStf&JB'Sq 9fl©aS , 9?1l TifVS Jj£IxJ;0 •wS.luXi'3 
 ■ ' - ' ' ' ; ' "' ' " ' ' ' "•' ' r -" 
 
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 Jisfc^Safloa -Joe *t& atolriv . atf-oogae JLq$»& •asotarjec-. aseslir v .sv;>f?i? raqgu .baii^c-t 
 ^ofc^sahtflfi .itijcrsolll^o So .vd-ikl-kay $42: j-.atttf W$apN0 . gg^-&ft «»fi..,as^ ••• 
 
 Jtexvc .iHpiili "W^!:- ..«*rcxwo arid" a4 asnian : n .fe-wipi :>?^4^<^i#-^iftf *p£i ^{tsii^lg 
 
 HlMl |i'«j> ii33sX-,?£f* ilJfc.' i^ISl 4»4J- • :.^sy^..#0^i^aB ji^Wl-;^ ^feBfcS^lV 
 
 I 
 
 ' ■■ , ■ ...... . ■. . . 
 
25. 
 
 Some Observations 
 
 The operation of California marketing programs, with their apparent "suc- 
 cess" in the opinions of many participants and observers, has attracted rather 
 widespread attention from various commodity groups in other states. In recent 
 months, particularly, many inquiries have been received asking for information. 
 Often the inquirers suggest that, if they "only could have a marketing program, " 
 their problems would be solved. Such expectations, however, may in some cases 
 be ill-founded. 
 
 Valid economic generalizations about Joint industry- state marketing pro- 
 grams are difficult, perhaps impossible, to formulate in meaningful and helpful 
 terms. There are so many different types of programs which can be developed, 
 and each commodity has its. own particular problems and circumstances. One 
 generalization, however, can be noted with some confidence. Joint industry- 
 state marketing programs of the type discussed here certainly are not a mysti- 
 cal and all-powerful curative of marketing problems. Rather, such programs 
 are institutional economic devices effective only for certain types of problems 
 under particular circumstances , As is common with most tools, their appropri- 
 ateness and effectiveness for dealing with a certain problem are functions of 
 the skill and know-how with which they are used. A delicate brain operation 
 requires a scalpel in the hands of a skillful surgeon, while the shoeing of a 
 spirited horse requires the competence of a blacksmith. So it is with market- 
 ing programs. They must be tailored to specific circumstances, and they require 
 skillful management blended with appreciation of the economic implications in- 
 volved . 
 
 Much too often marketing programs are viewed as acceptable substitutes 
 for necessary production adjustments. Where chronic and persistent "overpro- 
 duction" occurs, marketing programs are at best only a palliative to provide 
 
■ 
 
 o 6VX 
 
 I 
 
26. 
 
 time and aid for easing into the basically necessary production adjustments. 
 Where cyclically depressed demand imposes producer sales returns less than 
 out-of-pocket costs, marketing programs can help to retain productive capacity 
 appropriate for the time when the business cycle turns up again. In this re- 
 spect, an example is that of tree fruits from orchards representing capital 
 which can be reproduced only over a period of years. As a historical obser- 
 vation, it may be noted that the early marketing programs grew out of problems 
 faced by tree fruit industries as a result of depressed demand conditions in 
 the early 1930' s. 
 
 Although marketing programs were "depression bred," with the passage of 
 time they have become "prosperity fed." Of the 28 marketing programs cur- 
 rently effective in California, definite expiration dates now prevail for only 
 k programs, and they may be continued with reinstitution; the other 2h programs 
 have "continuous" terms of operation and continue on until a contrary decision 
 is made by the industry or the Director. It is clear that marketing programs 
 have become established as an integral part of our agricultural marketing in- 
 stitutions. 
 
 The characteristic of being "depression bred and prosperity fed," however, 
 is not unique to marketing programs. More or less similar degrees of metamor- 
 phosis are evident in many other of our economic and social institutions: un- 
 employment, old age, and survivor's insurance; federal and state employment 
 offices; bank and building and loan deposit insurance; home mortgage insurance; 
 labor-management legislation; and many others, including the federal loan and 
 storage price- support programs. But an important institutional difference be- 
 tween the California marketing programs and the federal price- support programs 
 is that the latter are the subject of political controversy in both the means and 
 immediate ends. California marketing orders, however, are not a subject of po- 
 litical debate in the state. They are viewed as nonpolitical and are biparti- 
 san in the conventional sense of party politics. This does not mean, however, 
 
■ 
 
 mm IB 
 
 ) no: 
 
 I 
 
27. 
 
 that they are completely noncontroversial. Conflict of interests often pre- 
 vail within an industry, and it is not unusual for producers and handlers or 
 even different groups of producers to take different positions on the accept- 
 ance of proposed marketing orders. But such conflicts of interest are in the 
 main economic and not political. 
 
 The conflict of economic interests between producers and handlers within 
 an industry can be resolved by the voting procedure. But the conflict of eco- 
 nomic interests among consumers, producers, and handlers cannot be resolved by 
 that procedure. Consumers, as such, have no direct vote in the acceptance or 
 rejection of marketing orders, although consumers do have a powerful and tell- 
 ing voice when they register their votes in terms of dollars and cents at the 
 cash registers of retail outlets. The legislation clearly specifies that con- 
 sumer interests are to be represented and safeguarded by the Director in his 
 consideration and administration of marketing programs. The proposal that 
 consumers be given an independent voice in the promulgation and operation of 
 marketing orders is not heard as frequently in recent years as in previous 
 ones. 
 
 Marketing order programs were not discovered in a social science labora- 
 tory, developed in a pilot economy, and brought into practical use only after 
 being tried and tested. On the contrary, the forerunners of the present mar- 
 keting programs were put together and into effect under the pressure of current 
 problems needing attention in a depression-ridden economy. Among early partici- 
 pants, the agricultural economists include: E. W. Braun, C. C. Davis, B. A. 
 Holt, W. J. Kuhrt, S. R. Smith, E. A. Stokdyk, J. Tapp, H. R. Tolley, F. V. 
 Waugh, H. R. Wellman, and F. R. Wilcox. During the following years, in consid- 
 erable part through trial and error, marketing orders were developed in their 
 economic, legal, and administrative dimensions into an articulate and flexible 
 institutional organism. 
 
Xoq $co. bad' slaoaons aiara 
 . - ■ 
 
 ■ 
 
 ^0 8*i©nriin&'i-- 1 srW ,vujji^rio5 arid' uO .f>9$f.5>l fcnjB f>£ii«t gnied 
 
 ■ 
 
28. 
 
 Although marketing order programs now have various types of provisions, 
 that of volume control has always attracted the most criticism. Yet, econo- 
 mists have continuously been aware of the double-edged features of volume con- 
 trol. Almost twenty years ago, H. R. Wellman stated, "... marketing control 
 schemes which have for their sole purpose the regulation of the flow of ship- 
 ments to market during the season and which do not involve actual limitation 
 of the total supply marketed are likely to prove beneficial to growers both in 
 the short run and in the long run." But he cautioned ". . .marketing control 
 schemes which are designed to limit the total supply marketed for the season 
 as a whole are in quite a different category. This type of control is essen- 
 tially a palliative and should be treated as such. It should be used only in 
 acute situations ... to go beyond that is to court disaster."— ^ 
 
 The preceding quotation distinguishes between intraseasonal and inter- 
 seasonal regulation of volume flows. The former, intraseasonal control of 
 quantity marketed, is generally used as a device to dampen the swings in ship- 
 ments and prices thereby attempting to attain a more even or uniform rate of 
 daily or weekly shipments and greater stability in short-run market prices and 
 returns within the season. In the minds of many growers and shippers, the 
 purpose of regulating intraseasonal volume is to prevent short -run "market gluts" 
 and associated sharp "price breaks." Buying attitudes of terminal -market re- 
 ceivers are presumably affected favorably in view of their confidence in an 
 "orderly flow" of shipments to market. With such confidence in the minds of 
 buyers, the presumption is that the season average price is higher than would 
 be if intraseasonal shipments were not "stabilized." 
 
 l/ Wellman, H. R., Controlled Marketing with Special Reference to California 
 Fruits a n d Vegetables (Eerkeley: University of California, College of Agri- 
 culture, Agricultural Experiment Station, November 16, 193$) > pp. 9 and 10. 
 Processed. 
 
k t . 
 
29. 
 
 Yet, it need not be that for all products, in all seasons and markets, 
 intraseasonal volume stabilization does yield higher season average prices. 
 The outcome depends on the nature of the price elasticities of the daily or 
 weekly market demand and supply functions and also how they shift during the 
 season. Further, if the objective is to obtain as large as possible total 
 returns for the season as a whole, which is a more rational objective for 
 growers and shippers than price stability in itself, the appropriate intra- 
 seasonal regulation calls for accepting the intraseasonal patterns of ship- 
 ments and prices which in combination result in maximum total returns. Such 
 intraseasonal patterns may but need not be consistent with more uniform rates 
 of daily or weekly shipments than would occur without intraseasonal volume regu- 
 lation. 
 
 The essential problem of using marketing order volume regulation of sea- 
 sonal total supply concerns the interaction of short-run and cumulative effects 
 on grower returns. If the seasonal total demand facing growers is of such 
 nature that restricting the season's total volume is associated with an increase 
 in total returns to growers, there is a short-run inducement to practice such 
 volume regulation. Such volume restriction can be rationalized in acute situa- 
 tions. But continued restriction, resulting in grower returns being increased 
 sufficiently and over a long enough period, can lead to expansion of growers' 
 productive capacity. Such induced expansion of productive capacities can, in 
 turn, bring a growth in total seasonal volume available for marketing at a rate 
 more rapid than is likely to be balanced by market demands consistent with 
 yielding reasonable returns to growers. Thus, the administration of seasonal 
 total supply regulation, under the authority of marketing orders, calls for 
 the application of the provisions of the order so that its short-term applica- 
 tions do not accumulate into long-term effects which aggravate the situation 
 which the order is Intended to alleviate. 
 
• V- 
 
 u 3« n 
 
 ■ 
 
 •mi a 
 
 ft- 
 
 ■ .. ■ . 
 
 m 
 
30. 
 
 Although California marketing orders may be used to control the within- 
 season or seasonal totals marketed, the orders are not effective in control- 
 ling the volume produced by growers. Growers retain freedom in expanding or 
 contracting their acreage or yield and thereby their total volume produced. 
 Despite the existence and operation of the marketing orders, free entry into 
 and exit from the industry remains. Established growers have freedom in ex- 
 panding their production capacities, and new growers can enter the industry in 
 response to anticipated relatively profitable operations. It is such long- 
 run flexibility in production which counteracts, at least in part, the short- 
 run impacts on grower prices and returns from volume control through marketing 
 orders . 
 
 Over the years various economists, counseling and working with industry 
 groups and government officials concerned with marketing order programs, have 
 attempted to introduce and develop rational economic consideration of long-run 
 as well as short-run impacts of the orders. But to understand fully the mar- 
 keting order institutions, economic analysis is necessary although not suffi- 
 cient. Also necessary are phases of statistical analysis, law, public admin- 
 istration, political science, social psychology, and perhaps a bit of psychiatry. 
 
 As commodity groups work with marketing orders, considering but not always 
 following the counsel of economists, the industry participants gradually learn 
 economic principles and come to appreciate economic analysis. In some orders, 
 the industry participants have accumulated a rather sophisticated understanding 
 of the economic principles involved. Such industry people may not use profes- 
 sional jargon, but they are learning the significant economic relationships. 
 It may well be that in the long run the spread of "economic literacy" will 
 prove to be the most significant result emerging from the institution of mar- 
 keting orders. In the meantime, commodity groups may derive a measure of 
 psychic income from the believe that their economic destiny rests in their own 
 
'J 
 
 ■ 
 
31. 
 
 hands. As Marshall has said: "Economic laws and reasonings in fact are merely 
 a part of the material which conscience and common- sense have to turn to account 
 in solving practical problems, and in laying down rules which may be a guide in 
 life." 
 
sea 
 
 :a. JLk>J-A: 
 
TABLE X. Characteristics of California 
 
 Marketing 
 programs 
 
 Early apples 
 
 Fresh asparagus 
 
 Processing asparagus 
 
 Standard Lima beans 
 
 Bush berries for processing 
 
 Cantaloupes 
 
 Dried figs 
 
 Extracted honey 
 
 Desert grapefruit 
 
 Lemon products 
 
 Dry-pack lettuce 
 
 Fresh peaches 
 
 Canning and freezing 
 cling peaches 
 
 Canning Bartlett pears 
 
 Fresh Bartlett pears 
 
 Sales promotion of fresh 
 Bartlett pears 
 
 Canning fall and winter pears 
 
 Fresh fall and winter pears 
 
 Hardy pears for canning (pro- 
 motion) 
 
 Fresh plums 
 
 Delta white potatoes 
 
 Long white potatoes 
 
 Poultry and turkey improvement 
 
 Dried prunes 
 
 Raisins 
 
 Strawberries 
 
 Turkeys (promotion) 
 
 Wine 
 
 Date 
 when 
 first 
 effective 
 
 6/28/48 
 
 3/12/5* 
 
 3/12/5* 
 
 3/10/51 
 
 9/15/5* 
 
 8/1/55 
 
 8A/55 
 
 3/1/52 
 
 5/12A1 
 
 3/10/51 
 6/ll/*2 
 
 3/25/50 
 
 8/1/36 
 
 5/25/38 
 
 7/8/37 
 
 6/27/50 
 
 8/6/*l 
 
 8/26/41 
 
 6/11/55 
 
 3/25/50 
 
 8/12/55 
 
 11/16/53 
 
 6/5/*5 
 
 9/3/37 
 
 10/1/37 
 
 7/7/55 
 7/9/52 
 
 8/2*/38 
 
 Term of 
 current 
 program 
 or expira- 
 tion date 
 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 
 9/30/58 
 
 Continuous 
 
 Continuous 
 
 6/30/57 
 
 Continuous 
 
 Continuous 
 
 Continuous 
 
 7/1*/ 57 
 Continuous 
 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 Continuous 
 
 6/30/57 
 
 ira] Marketing Programs Operating in 1956- 
 
 a/ 
 
 Number of 
 handlers 
 or proc- 
 essors 
 in 1955 
 
 202 
 0 
 26 
 18 
 48 
 56 
 9 
 57 
 19 
 37 
 10* 
 478 
 
 55 
 35 
 220 
 
 219 
 21 
 118 
 
 15 
 *31 
 
 21 
 129 
 0 
 
 18 
 
 27 
 50 
 183 
 295 
 
 
 
 Promotional 
 
 
 Adminis- 
 
 
 and adver- 
 
 Research 
 
 tiitive 
 
 Inspection 
 
 tising ex- 
 
 expendi- 
 
 CGCtS 
 
 costs 
 
 penditures 
 
 tures 
 
 in 1955 
 
 in 1955 
 
 in 1955 
 
 in 1955 
 
 19,000 
 
 10,000 
 
 23,000 
 28,000 
 
 11,000 
 
 12,000 
 40,000 
 
 16,000 
 
 15,000 
 85,000 
 
 20,000 
 60,000 
 
 130,000 
 45,000 
 15,000 
 
 20,000 
 13,000 
 6,000 
 
 800 
 22,000 
 6,000 
 80,000 
 
 55,000 
 32,000 
 43,000 
 16,000 
 30,000 
 
 80,000 
 
 dollars 
 
 8,000 
 
 300 
 
 0 
 
 0 
 
 3,500 
 
 0 
 
 0 
 
 17,000 
 
 0 j 
 
 0 
 
 135,000 
 
 7,000 
 
 0 
 
 15,000 
 
 500 
 
 5,000 
 
 0 
 
 0 
 
 0 
 
 66,000 
 
 0 
 
 0 
 
 17,000 
 
 3,500 
 
 12,000 
 
 0 
 
 0 
 
 0 
 
 1*5,000 
 
 7,000 
 
 19.000 
 
 0 
 
 0 
 
 18,000 
 
 18,000 
 
 1,000 
 
 onn C\C\C\ 
 jUU , uuu 
 
 JL , uuu , uuu 
 
 77 nnn 
 ( 1, uuu 
 
 130,000 
 
 lift AAA 
 
 110,000 
 
 45,000 
 
 11,000 
 
 0 
 
 1,000 
 
 600 
 
 140,000 
 
 0 
 
 15,000 
 
 0 
 
 0 
 
 oOO 
 
 2p,000 
 
 r\ h 
 \3 J 
 
 0 
 
 0 
 
 0 
 
 6, 00p/ 
 
 5,000 
 
 0 1 
 
 1/ 
 
 500 
 
 0 
 
 380,000 
 
 100,000 
 
 0 
 
 105,000 
 
 0 
 
 0 
 
 0 
 
 440,000 
 
 0 
 
 0 
 
 300,000 
 
 4,000 
 
 0 
 
 28,000 
 
 4,000 
 
 0 
 
 70,000 
 
 0 
 
 0 
 
 2,000,000 
 
 170,000 
 
 uo 
 
 (Continued on next page.) J° 
 
Table I continued. 
 
 a/ California Department of Agriculture, California Agricultural Marketing Programs (Sacramento: State Frint. Off., 
 ~ 1956), 31p. (Its Bulletin, vol. U5, no. 1, January-March, 1956, supplemented by current releases.) 
 
 b/ Inspection costs for delta white potatoes are paid by the handlers directly to the Bureau of Shipping Point In- 
 spection. For this reason, inspection costs for delta white potatoes are not financed through the marketing 
 order; corresponding assessments are not made on participants; nor are inspection expenditures made by the order 
 itself. 
 
TABLE II. Provisions of Calif orni 
 
 a Agricultural Marketing Programs Operating in 
 
 Commodity 
 
 Grade 
 and/ or 
 
 size 
 regula- 
 tion 
 
 Pack and 
 container 
 regulation 
 
 Mandatory 
 inspection 
 and/ or 
 certifi- 
 cation 
 
 Advertis- 
 ing and 
 sales 
 promotion 
 
 Production f 
 processing, 
 and/or mar- 
 keting re- 
 search and 
 surveys 
 
 Quantity 
 regula- 
 tion 
 
 oiiaDi— 
 lization 
 pool 
 
 and/ or 
 substand- 
 ard pool 
 
 Unfair 
 trade 
 prac- 
 tices 
 
 State 
 i una 
 
 X 
 
 X 
 
 X 
 
 X 
 
 X 
 
 X 
 
 
 
 ! 
 i 
 
 X 
 
 
 X 
 
 X 
 
 X 
 
 V" 
 A 
 
 
 
 
 
 
 
 X 
 
 X 
 
 X 
 
 
 
 
 
 
 
 X 
 
 X 
 
 
 
 
 
 X 
 
 X 
 
 X 
 
 
 
 
 
 
 
 X 
 
 
 X 
 
 X 
 
 X 
 
 
 X 
 
 X 
 
 
 X 
 
 X 
 
 X 
 
 X 
 
 
 
 
 
 
 
 
 
 X 
 
 X 
 
 
 
 V 
 A 
 
 
 X 
 
 
 X 
 
 X 
 
 X 
 
 X 
 
 V 
 A 
 
 V 
 A 
 
 
 X 
 
 
 X 
 
 
 X 
 
 X 
 
 
 
 
 X 
 
 
 X 
 
 X 
 
 X 
 
 X 
 
 
 
 
 X 
 
 
 
 X 
 
 X 
 
 X 
 
 
 A 
 
 v 
 A 
 
 X 
 
 X 
 
 X 
 
 X 
 
 X 
 
 
 
 
 
 X 
 
 X 
 
 
 
 
 
 
 
 
 
 
 
 X 
 
 X 
 
 
 
 
 
 X 
 
 
 X 
 
 
 
 
 
 
 
 X 
 
 X 
 
 
 X 
 
 
 X 
 
 
 
 
 
 
 
 X 
 
 X 
 
 
 
 
 
 X 
 
 X 
 
 X 
 
 X 
 
 X 
 
 
 
 
 
 v 
 A 
 
 
 v 
 
 A 
 
 Y 
 A 
 
 Y 
 
 A 
 
 x 
 
 
 
 
 x / 
 
 
 X 
 
 X 
 
 X 
 
 
 
 
 
 c/ 
 
 
 
 
 
 
 
 
 
 
 
 
 X 
 
 X 
 
 
 
 
 
 
 
 
 X 
 
 X 
 
 
 
 
 
 California Marketing Act of 
 
 1937 (As Amended) 
 
 Early apples 
 Fresh asparagus 
 Processing asparagus 
 Bush berries 
 Cantaloupes 
 
 Dried figs and dried fig 
 
 products 
 Grapefruit » 
 Extracted honey-' 
 Lemon products 
 Dry-pack lettuce 
 Standard Lima beans 
 Cling peaches 
 Fresh peaches 
 Fresh Bartlett pears 
 Bartlett pears (promotion) 
 Canning fall and winter pears 
 Fresh fall and winter pears 
 Hardy pears (promotion) 
 Fresh plums 
 Delta white potatoes 
 Long white potatoes 
 Poultry and turkey improvemen 
 Dried prunes 
 Raisins 
 
 (Continued on next pege 
 
 .) r 
 
— 
 
Table II continued. 
 
 Commodity 
 
 1 
 
 Grade 
 and/ or 
 
 size 
 regula- 
 tion 
 
 Pack and 
 container 
 regulation 
 
 Mandatory 
 inspection 
 and/ or 
 certifi- 
 cation 
 
 Advertis- 
 ing and 
 sales 
 promotion 
 
 Product ion j 
 processing, 
 and/ or mar- 
 keting re- 
 
 surveys 
 
 Quantity 
 
 Y"i^cni In* 
 
 tion 
 
 Stabi- 
 lization 
 pool 
 
 and/or 
 substand- 
 ard pool 
 
 Unfair 
 trade 
 prac- 
 tices 
 
 t 
 I 
 
 State 
 fund 
 
 California Marketing Act of 
 1937 (As Amended) 
 
 
 
 
 
 
 
 
 
 1 
 
 Strawberries 
 Turkey (promotion) 
 Wine 
 
 
 
 
 X 
 
 Y 
 A 
 
 X 
 
 X 
 
 A 
 
 X 
 
 
 
 
 
 Agricultural Producers 
 Marketing Law 
 
 
 
 
 
 
 
 
 
 
 Bartlett pears, canning 
 (Producers program) 
 
 X 
 
 
 X 
 
 X 
 
 X 
 
 
 
 
 
 a/ California Department of Agriculture, California Agricultural Marketing Programs (Sacramento: State Print. Off., 1956), 
 ~ 31p< ( Its Bulletin, vol. 45, no. 1, January-March, 1956, supplemented by current releases.) 
 
 b/ The order for extracted honey also includes a provision for price posting. 
 
 c/ Disease control phases of the National Poultry and Turkey Improvement Plans and turkey breeding phases of the National 
 Turkey Improvement Plan. 
 
 UJ 
 
36. 
 
 1/ 
 
 SELECTED BIBLIOGRAPHY OK MARKETING ORDERS-* 
 
 California Agricultural Prorate Commission, The Agricultural Prorate Act; an 
 Analysis and Explanation of the Statute (as ^^T ^H^^^^, 
 Pr ocedure by Pr fec^rTtQ-Tiki^a-ntaRe of Its Prov isions (R ev i s edtoj^cgft- 
 ber 1, 193(3 (Sacramento: State Print. Off., W8h 22P- (uainoraia Agri- 
 cultural Prorate Commission Bulletin No. h.) 
 
 California Department of Agriculture, California Agricultural Marketing^ro- 
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