An Agriculture Department task force reviewing the nation's system of marketing orders for fruits and vegetables has concluded that the orders "can impose inefficiencies on the industries affected and reduce consumer welfare."
However, the task force also concluded that the orders have potential "for increasing economic efficiency by stabilizing returns for growers and providing buyers quality assurance."
Under laws passed during the Depression, growers and processors of certain fruits and vegetables, as well as dairymen, were authorized to band together under marketing orders to control the flow of produce to market and improve their products.
There are now marketing orders for 47 fruits and vegetables and dairy products, affecting about 140,000 farmers in 30 states with an annual production of $5.2 billion.
After marketing orders were targeted for review by the Vice President's Task Force on Regulatory Relief, Agriculture Secretary John R. Block set up the five-member USDA task force to take a look at the system. Block said in a speech Wednesday that, while the department will not make abrupt changes in the system, the produce industry must be alerted to the possibility of change.
"I don't predict that they're marketing orders all wrong, they're all bad or they're all good," Block said. But he said he did have some concerns, which he would outline to Vice President Bush.
Block said he would look at producer allotments that "restrict entry into production" and provisions that specify the maximum amount a handler may ship to market within a specific time period.
Also under scrutiny, he said, will be reserve pools that transfer excess production to secondary markets or non-food uses and provisions that ensure that products are of uniform high quality.
Block also said the quality provisions can act as non-tariff barriers to trade if inappropriately applied.
The departmental study found that in recent years orders for hops and spearmint oil, California and Arizona navel oranges, Valencia oranges, lemons and possibly walnuts and filberts "seem to have been used in ways that result in significant resource misallocation."
Earlier this year marketing orders came under fire when millions of navel oranges were fed to cattle in California or were left to rot in the sun because their sale would have violated the terms of the order.
The report said that marketing order provisions that allocate products to markets or regulate the flow of crops have little positive effect on economic efficiency and may have a negative impact.
However, it said, these provisions, if used infrequently, "may be justified as a 'safety valve' to protect growers from disastrously low prices."
The study analyzed a range of policy options from eliminating the orders to continuing them intact. It said that consumers' prices for some products would be lowered temporarily if the orders were terminated, but that some growers would be forced out of business if they were.