The ruling, which overturned lower court decisions, stated that the beef promotion messages were government speech that is not subject to certain First Amendment challenges. This newest ruling is expected to settle pending litigation for several generic promotion programs and increase producer interest in promotional programs. Issues still remain; for example, in 2005 Paramount Farms, California’s largest pistachio producer, filed a lawsuit against the California Pistachio Commission charging that its generic promotion program is ineffective. Then in 2007, the California Pistachio Commission was terminated by a referendum vote of the growers. Program expenditures increasing Budgeted expenditures for California marketing programs have increased significantly over time. Lee et al. estimated total budgets of $71.35 million in 1985 and $112.94 million in 1992. The estimated total for 2002–2003 was just over $208 million , increasing to over $226 million for 2004–2005 . A number of factors have contributed to the observed increase, including participation by more crops , the effects of inflation, and growth in the importance of individual crops. Tables 2A, 2B and 2C provide details on California mandated marketing programs and expenditures in the broad categories of administration, promotion, inspection and research. These are the most recent budget data available, covering annual budget periods that include months in 2004 in the case of federal marketing orders, to fiscal years that begin in 2005 and early 2006 for some state programs. Note that most programs include only the direct costs attributable to promotion, inspection or research in each of these three categories, with all other expenses in the administration cost category. Overall, the 63 California programs allocated 68.1% of their total budgets for advertising and promotion, 11.0% for research, 3.9% for inspection programs and the remainder for administration. California marketing orders and agreements accounted for 44.6% of total expenditures,gallon pot followed by state commodity commissions , federal marketing orders and councils .
California commodity producer groups spent over $154 million on generic advertising and promotion programs during 2004–2005 . These programs ranged from high-profile TV advertising such as “Real California Cheese” and “Got Milk?” to more common media messages in magazines, newspapers, radio and billboards, and public relations campaigns. Research has documented significant increases in product demand and prices as a result of commodity advertising and promotion programs, with the net monetary benefits to producers being much greater than costs . For example, promotions led to statistically significant increases in demand and price in case studies for eight California crops and benefit-cost estimates for four national check-off programs . Kaiser et al. wrote that “the overwhelming conclusion . . . is that mandated commodity marketing programs have been very profitable for California’s agricultural producers. In every case, the evidence suggests that one can be reasonably confident that the benefits have well exceeded the costs and that it would have been profitable for producers to have increased expenditures on the programs.” Tables 2A, 2B and 2C do not include all funding for California commodity promotion or assessments paid by California producers. For example, USDA’s Market Access Program awarded $23.95 million to California trade organizations and marketing programs in 2005. These federal dollar-for-dollar matching funds are used for market development activities in export markets. California producers also contribute to the majority of the 17 national check-off promotion programs, including those for blueberries, beef, cotton, dairy, eggs, fluid milk, honey, lamb, mushrooms, pork, potatoes and watermelons. None of the assessments for national check-off programs, which totaled an estimated $765 million for all U.S. producers for 2005 , are included in tables 2A and 2B. There were 28 California programs with research expenditures totaling almost $8.5 million in 1992 ; this increased to 45 programs with expenditures of over $21.2 million in 2003–2004 , and further to 48 programs with expenditures over $25 million in 2004–2005 .
The share of total program expenditures dedicated to research increased from about 7.5% in 1992 to about 11% in 2004–2005. Historically, research funded by California marketing programs was focused on production problems and issues. A sampling of research topics includes new variety development, insect and pest management, irrigation and water management, disease control, pollination, harvest methods/machinery, crop management and post harvest quality control. More recently, California marketing programs have also funded nutrition and health research. There are numerous examples of the benefits to producers from research expenditures by mandated marketing programs. Research has resulted in cost savings from the reduced use of inputs and changes in the input mix, yield increases, reductions in post harvest losses, improved crop characteristics and new management techniques. Several California commodity groups have funded research at UC that has helped them become the most efficient producers in the United States and world. Included are almonds, walnuts, pistachios, strawberries, lettuce and grapes . California producers have gained a short- to intermediate-term competitive edge from these research-enabling improvements and, over time, benefits have flowed to consumers in the form of increased supply and availability, improved quality and lower prices.The purpose of minimum quality standards is to maintain or enhance demand for a commodity by keeping inferior products off the market. They are used to prevent a market failure known as the “lemons” problem, which occurs when a product has unobservable characteristics for which the seller has much better information than the buyer. The best example is early-season sales of immature fruit, which can look good but taste sour. While the individual producer obtains a high price for this fruit, consumer dissatisfaction can adversely affect prices and subsequent sales of high-quality product by other producers later in the season. Provisions for grades and minimum quality standards are included in all 11 current federal marketing orders for California fruits, vegetables and nuts.
However, only 11 of the 29 California state marketing orders and agreements include quality standards and inspection provisions, and just seven of them actively use the provisions. Minimum quality standards typically include a minimum size, to keep small product off the market. Depending on the commodity, they may also specify minimum sweetness , a minimum degree of maturity , acceptable color and/or amount of discoloration, shape, amount of insect damage or cosmetic defects allowable, and maximum mechanical damage such as bruises, cuts or missing stems. While empirical analyses of the economic impact of such standards are limited, those available indicate that it is probably relatively small . However, some minimum quality standards have been controversial, with charges that they: are an inefficient form of supply control because they divert product to nonfood uses such as animal feed; are defacto price discrimination because they divert product to the less-price-sensitive processing market outlet; waste edible fruit with the primary impact being on the poorest consumers; and are sometimes inequitable because of regional variations in production conditions.A group that controls all or most production of a commodity can gain a measure of monopoly power and enhance short-run returns through restricting the supply placed on the market or practicing price discrimination between markets. However, such monopoly pricing reduces consumer welfare by increasing prices for a smaller amount of product and distorts resource allocation decisions, while producers face all of the problems of maintaining a cartel. A key feature of marketing orders is that volume controls apply only to the quantity placed on the market — they do not control the amount of product produced. Thus, reduced risk from price stabilization and improved average returns from effective price discrimination can be expected to shift the long-run supply curve to the right, increasing production of the marketing order commodity and increasing required product diversions. Over time, producers discover that they are subject to onerous controls and that returns are no better than before the program. The use of quantity control provisions has decreased significantly over time as longer-run economic impacts and administrative problems became evident. Six federal marketing orders for California commodities and two state marketing orders have quantity control provisions but, among these eight, only the federal marketing order for raisins has used these provisions during the last 5 years. In addition,gallon nursery pot government approval of a new marketing program with supply control provisions is now difficult to obtain. Assuring food safety is the newest use of minimum quality standards and inspection in marketing programs. The purpose of these standards is to enhance product demand by reducing the chances of a food safety incident, thereby increasing consumer confidence and preventing the costs of product recall or rejection. There are three California marketing programs currently stressing food safety: the Leafy Greens Products Handler Marketing Agreement, and the federal marketing orders for pistachios and almonds. The main provisions of the federal marketing order for pistachios set standards and require testing for quality and aflatoxin, a cancer-causing mold that can contaminate many nuts and grains. Producers’ concerns about the possible negative effects of an aflatoxin poisoning event were the major factor leading to the creation and adoption of the marketing order for pistachios, with support by more than 90% of the growers in a 2004 vote . Similarly, the California almond industry is currently developing treatment standards and plans for the pasteurization of all raw, natural almonds as a result of two similar food safety events. In 2001, a Salmonella outbreak in Canada was traced back to raw almonds from three orchards in California.
Then in spring 2004, food borne illnesses in Oregon from Salmonella were traced to raw almonds purchased from a retailer who obtained all supplies from one handler. The handler initiated a voluntary recall that involved approximately 15 million pounds of almonds. The California almond industry determined that additional steps were required to ensure that a third such incident does not occur. In summer 2004, the Almond Board of California’s board of directors unanimously approved an action plan calling for the pasteurization of 100% raw, natural almonds entering the food distribution system. The proposed new quality standard submitted to USDA will be effective when it has been determined that pasteurization technologies and capacity are sufficient to process all California production. The almond board’s target dates for voluntary implementation are during the 2006–2007 production/marketing year, with mandatory implementation for all North American shipments on Aug. 1, 2007, and mandatory implementation for 100% of almond shipments, including exports, on Aug. 1, 2008. Several California commodity groups are funding health and nutrition research on their products and using promotion programs to disseminate the results. During the last 5 years, more than $8.1 million was spent on research concerning the health and nutrition benefits of almonds, avocados, strawberries and walnuts; these four commodity groups also spent more than $19 million during the 2004–2005 marketing year on promotion using nutrition/health messages. Other commodity groups funding such programs include apples, blueberries, cranberries, kiwifruit, milk and table grapes. In 1990, the California Walnut Commission became the first California mandated marketing program to specifically fund health and nutrition research, when it contracted with Loma Linda University for research on the protective effects of walnut consumption on the risk of coronary heart disease. The motivation for walnut nutrition research was to counter the popular perception that walnut consumption was unhealthy because of their high oil content. Likewise, the Almond Board of California initiated a Nutrition Research Program and established a Nutrition Subcommittee in 1995. In 1997, the California Avocado Commission made a strategic change to proactively communicate the nutritional benefits of avocados through national public relations and outreach efforts. In 2003, the California Strawberry Commission began funding nutrition research proposals. These four commodities each have developed analyses detailing their chemical and nutritional composition, including the amount and type of fat, calories, vitamins, phytochemicals, antioxidants and minerals. The presence of particular components, already associated with favorable health outcomes, has helped focus research on important health topics. Each commodity group has or is seeking evidence that consuming their product may reduce the risk of heart disease and all have evidence that product components may help to lower the risk of certain cancers. In addition, each of the commodities contains antioxidants known to slow the aging process and protect against heart disease and various forms of cancer. Almonds, avocados and walnuts can be a component of diets to control weight gain and each can be part of a healthy diet for managing and controlling diabetes .