Associative Systems in U.S. Agriculture: A Necessary Evil?
Beef -- It’s What’s for Dinner.
Cotton -- The Fabric of Our Lives.
These familiar slogans arose from peculiar advertising campaigns. Instead of promoting a specific product or brand, these slogans encourage consumers to purchase a commodity, sourced from any of the nation’s thousands of producers.
Each of these advertising campaigns is connected to a commodity check-off program, which collects fees from the producers of a particular commodity and uses it to advertise the commodity and conduct related research. Although some of these programs are voluntary, many are mandatory and require producers to donate funds proportional to their scale of production.
In addition to the check-off programs for milk, beef, and cotton, the U.S. also has programs for pork, eggs, Hass avocados, peanuts, and about a dozen other commodities. The rationale for these programs is that producers of homogenous commodities would have a hard time persuading consumers to purchase milk or cotton from a particular producer, so the check-off programs aim to increase collective demand for these products.
Another peculiarity in the agriculture industry is the existence of federal marketing agreements and orders, which were established in 1937 to prevent the flooding of agricultural markets after the Great Depression. Marketing orders and agreements allow the Secretary of Agriculture, in consultation with commodity producer associations, to regulate commodity prices and production quotas. They also standardize the packaging for certain commodities and establish reserve pools for less perishable commodities. The goal of these programs is to stabilize agricultural markets and ensure that farmers receive sufficiently high prices for their goods.
Necessary Collaboration -- or Collusion?
Both check-off programs and federal marketing agreements are examples of associative systems. In a normal price system, producers are isolated actors seeking individual gain. However, these associative programs allow them to band together for mutual gain. Every producer of a specific commodity contributes to (and is governed by) these programs, and the hope is that all of them will benefit from the actions of the collective.
Biggart and Delbridge (2004) noted that these associative systems often give rise to vertical or horizontal networks of economic actors. In this case, we can see clear horizontal networks in the form of commodity producer associations (e.g. The American Egg Board, the National Pork Board, and the Mushroom Council).
It is curious that in any other industry, these associate programs might be viewed as collusion and struck down by anti-trust laws. Many people believe that a reliable food supply is so important for national security that we should tolerate associative programs in the agricultural industry. However, others believe that the agricultural industry should be subject to the same laws that govern other industries.
Indeed, several people have challenged the legitimacy of these programs in court. In 2001, the U.S. Supreme Court ruled that the mushroom check-off program violated the free speech clause in the First Amendment. However, the Supreme Court ruled in 2005 that the beef check-off program is constitutional, giving hope to supporters of the program.
The Agricultural Marketing Agreement Act was also challenged in the Supreme Court in 1943, but the Court upheld the constitutionality of the act and determined that it did not violate federal anti-trust laws. It remains to be seen whether either of these programs will see additional judicial challenges. Image by Mike Mozart.
National Agricultural Law Center. (2003). Checkoff Programs. Retrieved from http://www.nationalaglawcenter.org/readingrooms/checkoff.
USDA Agricultural Marketing Service. (2011). Marketing Orders and Agreements. Retrieved from http://www.ams.usda.gov/AMSv1.0/ams.fetchTemplateData.do?template=TemplateA&navID=MarketingOrders&leftNav=MarketingOrders&page=MarketingOrders&acct=AMSPW.
Biggart, Nicole and Rick Delbridge. (2004). “Systems of Exchange.” Academy of Management Review 29(1): pp. 38-39.
United States v. United Foods, Inc. 533 U.S. 405 (2001).
Johanns v. Livestock Marketing Assn. 03-1164. (2005).
Parker v. Brown. 317 U.S. 341 (1943).