United States

Department of

Agriculture

Rural BusinessCooperative

Service

Service

Report 55
-

National Committee of Cooperative Agricultural

Bargaining and Marketing Associations

President Directors

John Welty William Ferriera

California Tomato Growers Association Apricot Producers of California

P.O. Box 7398 2 125 Wylie Drive, Suite 2A

Stockton, CA 95267-0398 Modesto, CA 95355

Vice President

Adin Hester

Olive Growers Council of California

121 E. Main Street, Suite 4

Visalia, CA 93291

Vaughn Koligian

Raisin Bargaining Association

3425 N. First, Suite 209

Fresno, CA 93726-68 19

Treasurer

Ronald A. Schuler

California Canning Peach Association

P. 0. Box 7001

Lafayette, CA 94549-7010

Vernon DeLong

Agricultural Bargaining Council

744 Main Street, Suite 6

Presque Isle, ME 04769

Secretary

Michael Klein

Hazelnut Growers Bargaining Association

8 10 1 SW Nyberg Road, #20 1

Tualatin, OR 97062

John Mumford

Ontario Vegetable Growers’ Marketing Board

435 Consortium Court

London, Ontario CANADA N6E 2S8

Assistant Secretary

Andrew A. Jermolowicz

USDA/RBS

STOP 3252

1400 Independence Ave., SW

Washington, DC 20250-3252
Preface These proceedings are published by the Cooperative Services program

of USDA’s Rural Business-Cooperative Service (RBS) at the request of the bargaining and marketing cooperatives. This 42nd National Bargaining

Conference was combined with the Pacific Coast Bargaining Conference Dec.

4-6, 1997, at Portland, OR.

Proceedings include speeches delivered at the conference and related

information. Opinions expressed reflect views of participants. The proceedings

should not be viewed as representing the policies of the United States

Department of Agriculture. Use of commercial names does not constitute

endorsement.

Copies of the proceedings may be obtained from RBS-Cooperative

Services, STOP 3250, 1400 Independence Ave., SW, Washington, DC 20250-

3250.

September 1998

Price: Domestic $5; foreign $6
Contents Cooperative Bargaining in the Next Millennium

Randall E. Torgerson, Deputy Administrator, USDA/RBS . . . . . . . . . . . . . .l

California Producer’s Lien

Ronald C. Peterson and Stephen B. Peck

Hanson, Bridget-t, Marcus, Vlahos & Rudy Attorneys at Law . . . . . . . . . . .5

Oregon Agricultural Liens

Gerald G. Watson

Churchill, Leonard, Brown, Lodine & Hendrie, LLP . . . . . . . . . . . . . . . . .10

New Crops Development: Building R&D Funding Justification

Dr. Gary Jolliff, Oregon State University . . . . . . . . . . . . . . . . . . . . . . . . . .12

Food Quality Protection Act

Dr. Janet L. Andersen, U.S. Environmental Protection Agency . . . . . . . . .16

AttendanceRoster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...18

Opinions expressed are those of the authors and do not necessarily represent

policies or opinions of the United States Department of Agriculture.
Cooperative

Bargaining in the Next

Millennium

Randall E. Torgerson, Deputy Administrator

Rural Business-Cooperative Service

W

hile it’s typical to talk about issues forthcoming in the new decade, we seldom have the

opportunity to talk about the new millennium! That task can overwhelm one as being challenging,

overbearing, and awesome. We are reminded, however,

that past is prologue, even in these fast changing times.

As this millennium closes, we can observe that a strong

foundation has been laid through laws for supporting

group action in agriculture. The Capper-Volstead Act of

1922, Cooperative Marketing Act of 1926, Agricultural

Marketing Act of 1929, Agricultural Marketing

Agreements Act of 1937, and the Agricultural Fair

Practices Act of 1967 (AFPA) have each provided

growers with certain tools to advance their position in

the marketplace.

Although solid use has been made of these sanctions,

they have neither been pushed to their ultimate in

degree of organization by producers nor in the pricing

of products to the market. One factor limiting the latter

is that when independent production decisions are made

by growers, an unintended outcome is the potential for

overproducing markets and thereby depressing prices,

even when bargaining associations and/or marketing

cooperatives exist.

This factor has been the Achilles’ heel of the agricultural production industry for many years. Developments

helping to address these weaknesses include increasing

use of contractual arrangements, particularly in the fruit

Talk presented to the National and Pacific Coast Bargaining

Conference, Portland, Oregon, Dec. 5,1997.

and vegetable industries, and the organization of socalled “new generation” cooperatives which attempt to

tailor members’ production to effective demand. A third

development is the unique and important relationship

between growers’ professional associations working

closely with marketing cooperatives to further growers’

interests in the marketplace and in political circles. But

even these factors do not address the changes in production levels that occur naturally among tree crops, or the

vagaries of weather and disease that can affect production from season to season and year to year.

For these reasons extensive use of State and Federal

marketing orders, Section 32 purchases, tree pulls,

reserve pools, and other means have been used to manage inventories and to develop market demand for crops

and their products, including budding export markets.

Looking ahead, it is likely that the need for negotiated

pricing will increase in dealing with production and

marketing of identity-preserved products and increased

use of contracting for production and services in both

the crop and livestock sectors. There are some basics of

the bargaining process that need to be protected and

enhanced as the institutional framework for bargaining

continues to develop. While associations in some States

like California are reasonably happy with achievements

under State law, associations in many other areas of the

country, like potato growers in Idaho, Oregon, and

Washington, experience deficiencies. So they continue

to look at developing a national statute with more teeth

in it.

An important factor in determining the success of bargaining in coming years will be the mechanisms and

institutional arrangements provided for in Federal and

State laws that support it. Next spring we will mark the

30th anniversary of the Agricultural Fair Practices Act

(AFPA). For the first time in nearly two decades,

amendments to the Act are being considered. What, if

any, changes are made is an important issue for all producers.

As you may remember, the American Farm Bureau

Federation, with the help of leaders from this conference like Ralph Bunje, drafted and had introduced in

Congress in May 1964, legislation to protect bargaining

1
associations from discrimination. The AFPA of April

1968 applied anti-discrimination provisions to producer

associations as well as processors, protected certain

processor practices, and contained a diluted enforcement provision.

The most damaging change to the Farm Bureau proposal was the addition of a disclaimer of intention to prohibit normal dealing. It provides that nothing in the Act

shall:

Prevent handlers and producers from selecting their

customers and suppliers for any reason other than a

producer’s membership in or contract with a producer

association, or

Require a handler to deal with an association of producers.

Weaknesses in the Agricultural Fair

Practices Act

As producers began to live under the AFPA, several

weakness became apparent. The most obvious was the

Disclaimer Provision. The language permitting processors to refuse to do business with a producer for any

reason other than membership in a producer association

leaves association leaders and members vulnerable to

discrimination, disguised as legitimate reasons to refuse

to deal.

The phrase stating processors aren’t required to deal

with producer associations gives processors justification

to totally disregard a producer association, or to go

through the motions of negotiating and then, at some

critical period when producers are under the greatest

pressure, walk away from the table and offer growers

take-it-or-leave-it contracts.

A second weakness in the Act is that it doesn’t provide

an inducement for handlers to negotiate with producers.

There is no requirement that handlers bargain in good

faith with producer associations. Nor is there any mechanism to resolve disputes during negotiation. Thus, even

if honest bargaining occurs, there is no assurance that a

contract is likely in time for orderly marketing of the

farmers’ production.

A third weakness is the lack of sufficient penalties for

handlers who violate the Act. The only penalty that can

be assessed in a suit by the Government is an order

against further illegal conduct. As a result, there is little

motivation for Government prosecutors to accept AFPA

cases or for handlers to fear meaningful sanctions if the

Government brings a lawsuit.

The most a private litigator can realize is damages and

attorney’s fees. If a violator pays only damages when

discovered and successfully sued, there is little incentive to follow the law.

A fourth weakness is the ease with which growers who

aren’t members of a bargaining association can freeload

on the successes of the cooperative. Nonmembers

almost always receive prices and other terms of trade at

least as favorable as those of association members. Yet,

they pay no fees to support negotiation. This serves as a

disincentive for producers to join the association and

reduces the association’s power at the bargaining table.

State Laws

Producers in a number of States have convinced their

legislature to provide support for agricultural bargaining. While no two State laws are identical, common provisions do appear among the jurisdictions.

A. A statement of unfair or prohibited practices, based

on the prohibited practices section of AFPA (California,

Maine, Michigan, Minnesota, New Jersey, Ohio,

Oregon, and Washington).

B. A requirement that handlers bargain in good faith

with producer groups (California, Maine, Michigan,

Minnesota, Ohio, and Washington).

C. A program to facilitate settling disputes between

producers and handlers through mediation (California,

Michigan, and Minnesota) or binding arbitration (Maine

and Michigan).

D. A requirement that handlers, when asked, deduct

fees from checks for product to grower-members and

send the funds to the bargaining association (California,

Idaho, Maine, and New Jersey).
Supreme Court and Pre-Emption

In 1984, the U.S. Supreme Court invoked the supremacy clause of the constitution to find two provisions of

Michigan’s bargaining law invalid because they were

pre-empted by provisions of AFPA (Michigan

Canners h Freezers Ass ‘n v. Agricultural

Marketing and Bargaining Board, 467 U.S. 461).

The Michigan law did not require a producer to join an

association. However, a nonmember could be compelled

to honor an association’s contract with a processor and

to pay fees to an association. The court found this had

the same effect as coercing the nonmember (1) to join

an association, a violation of the Federal Act (AFPA),

and (2) to enter into a marketing agreement with an

association, also a violation of the Federal Act.

This case could cast a cloud of uncertainty over any

State laws that provide producer protections beyond

those in the Federal Act.

Possible Changes to Existing Federal Legislation

Over the years, often as part of this conference, bargaining association leaders and advisers have discussed a

menu of amendments to the Federal Act. These ideas

have appeared to have the most support.

Repeal of All or Part of the Disclaimer

Provision-The U.S. Supreme Court has ruled that the

Federal Act pre-empts conflicting State laws. Thus, the

last portion of the Disclaimer clause, stating processors

need not deal with producer associations, places in jeopardy existing State laws that provide for good faith bargaining and third-party assistance (mediation, conciliation, and arbitration) in resolving negotiation impasses.

Repeal of the entire disclaimer would also delete the

connotation that processors are free to refuse to do business with association members or leaders if they can

come up with’any other possibly defensible reason to

discriminate other than association participation.

Require Good Faith Bargaining-Designating

failure to bargain in good faith a prohibited practice

under the Federal Act, coupled with repeal of the last

portion of the Disclaimer, would give bargaining associations leverage to compel negotiations. Such a change

would likely spur bargaining as a means of counterbalancing processor economic power.

Dispute Resolution Mechanism-Disinterested

third-party participation in the bargaining process has

proven useful in getting a negotiated contract.

Mediation and conciliation encourage settlement without disrupting the marketplace by forcing parties to

accept contract terms against their will.

Adoption of good faith bargaining and a dispute resolution mechanism at the Federal level would put producers and processors in the same relative position across

the country. If a private mediation service is used, such

as the American Arbitration Association, with the parties sharing the costs (as is done in California), these

changes should have little budget impact.

USDA Civil Enforcement Authority--Giving the

Secretary of Agriculture the power to assess civil penalties for violation of the Act would likely improve compliance. It would place responsibility for reviewing

potential violations in the hands of those persons most

familiar with the intent of the law and who possess the

expertise to evaluate whether punitive action is appropriate.

Proposals for New Bargaining Legislation

The USDA Report on Concentration in Agriculture contained recommendations for modifying the AFPA

enforcement provisions. It also emphasized the important role of the Capper-Volstead Act of 1922 that

encourages cooperative marketing. Finally, it recognized the difficult circumstances encountered by growers operating under piece-wage contracts-like contract

broiler and hog growers-and urged improvements in

their ability to negotiate with corporate integrators.

Since this report was issued, two significant developments have occurred. One is that USDA is supporting

amendments to the AFPA to strengthen enforcement

provisions. Secondly, a more comprehensive bargaining

bill has been introduced by Congresswoman Marcy

Kaptur of Ohio on behalf of the National Contract

Poultry Growers Association.

Specifically, USDA’s amendments would provide it with

3
administrative enforcement authority instead of having

to take complaints through the Department of Justice for

enforcement. It is believed that civil penalty authority

will provide a deterrent against violations of the AFPA.

Similarly, stronger enforcement provisions of AFPA

could encourage more producers to form new associations or join existing associations, and increase their

confidence that they will be treated fairly.

This proposed change in AFPA is significant because no

budget has been granted previously to the Agricultural

Marketing Service (AMS) for enforcing provisions of

the Act. The amendments would provide for an administrative hearing procedure and authority to levy a civil

penalty of not more than $5,000 for each violation of

the Act.

Kaptur’s bill is known as H.R. 2738, the “Family

Farmer Cooperative Marketing Amendments Act of

1997.” It would protect contract poultry and other growers by further developing an institutional framework for

negotiated pricing of goods and services. Under provisions of the bill, (I) the Secretary of Agriculture establishes an accreditation system for bargaining associations, (2) good faith bargaining is provided, (3) mediation is specified as a dispute resolution mechanism, and

(4) investigative and enforcement authority is given to

the Secretary. These provisions follow fairly closely

those found in the Michigan Bargaining Act.

Other National Organizational Events

You have all experienced a certain amount of mergers,

acquisitions, and alliances among the processors and

distributors in your particular sector of the fruit, vegetable, and nut industries. The restructuring of Tri

Valley Growers and purchase of German-owned hazelnut company here in Oregon by Sun Diamond Growers

are just two recent examples.

What is happening in the dairy and cherry sectors is of

great national interest to producers of all commodities.

In dairy, four of the nation’s largest dairy cooperatives

have consolidated-Mid America Dairymen, Southern

region of Associated Milk Producers, Milk Marketing,

Inc., and Western Dairymen’s Cooperative. The new

organization, Dairy Farmers of America, has 22,000

producers from California to the East Coast and from

Texas to Minnesota. The new chief executive officer is

Gary Hanman, formerly chief executive offtcer of MidAmerica Dairymen. It represents the horizontal combination of producers of a perishable product on a national

scale. Motivating factors were the demise of Federal

price support and possibly the Federal order programs, a

reduced number of producers, and a desire for more

influence over dairymen’s incomes through greater et%-

ciencies in handling milk, greater orientation to export

markets, and more influence in negotiating with national

purchasers of raw milk and milk products.

Some of you have member relations problems or issues

in your own associations. Just think of the enormity of

the task of communicating and keeping 22,000 farmers

involved in a national marketing organization covering

territory with different market characteristics! We

should also carefully consider the lessons to be learned

from organizing over an entire commodity sector. It’s

possible that cooperative bargaining associations or

marketing cooperatives will attempt to do it in some of

the crops grown over wide geographical areas.

In the cherry sector, a new Federal marketing order has

been achieved and producer groups led by Randy

Harmson of Michigan Agricultural Cooperative

Marketing Association have organized a national marketing agency called CherCo.

Summary

There is a lot of dynamic organizational change occurring at the farm and ranch, marketing, and distribution

levels of the food channel. Cooperative bargaining association leaders are adapting to this change in many

ways, but need to constantly remind themselves about

the principal reason they were initially organized. In this

respect, modifications to existing Federal law will be

essential to helping secure that organizational role in the

future. The USDA has recommended some preliminary

steps in this direction, but it will be up to the associations represented at this conference to make it happen.

4
CALIFORNIA

PRODUCER’S LIEN

Ronald C. Peterson and Stephen B. Peck

Hanson, Bridget-t, Marcus, Vlahos & Rudy

San Francisco, CA

I. Background

California agriculture is a multi-billion-dollar industry

and a major component of the State’s economy.

Financial problems in the industry, however, have been

evidenced, in particular, by the failure of many canned

fruit and vegetable processors over the years with

resulting losses to creditors, particularly farmers. In

response, California enacted a producer’s lien statute to

protect farmers from these losses.

II. Nature and Scope of Lien

The California law provides for a lien upon farm products sold by a farmer who produced the products to a

processor. No filing or recordation of the lien is

required. The lien arises, and attaches automatically,

when the products are delivered to the processor, except

where there are a series of deliveries under a contract in

which case perfection occurs from the date of the last

delivery. The lien is indefinite in duration. The lien

secures payment of the amount of the agreed price to be

paid for the product by the processor to the grower or

producer. If no price has been agreed upon, the lien

secures payment of an amount equal to the value of the

product at the time of delivery to the processor. The lien

extends to all products and to the product’s subsequent

processed or manufactured forms while in the possession of the processor, without segregation of the product. Any portion of the farm products, or the processed

or manufactured forms of such products, in excess of

the amount necessary to satisfy the amount of the lien,

however, is free and clear of the lien. It is arguable that

the lien continues in proceeds in the processor’s possession, although the statute does not specify whether it

extends to proceeds such as cash or accounts receivable,

and there is no case authority under which a determination has been made regarding this issue. The lien (to the

extent of the agreed price or value of product) has priority over all other liens and encumbrances with the

exception of certain claims for unpaid wages or salaries

and warehouseman’s liens under Division 7 of the

Uniform Commercial Code.

III. Release of Lien

The producer’s lien continues in effect until such time

as the agreed price or value of the product has been paid

or the lien is released. The processor may secure a

release by paying the agreed price or actual value of the

farm product (if there is no agreed price); by depositing

a surety bond or cash sum with the California Director

of Agriculture sufficient to pay the amount of all liens

released; or by designating, setting apart, and depositing

in a public warehouse a quantity of any processed farm

products and by endorsing over and delivering to the

Director of Agriculture the warehouse receipt for such

products for the purpose of guaranteeing, to the extent

of the value of such deposit, payment of the amount of

all lien claims. Alternatively, the grower or producer

may voluntarily release the lien “upon arrangements

being made for such payment which are satisfactory to

the producer.” Questions involving the voluntary release

or waiver of the producer’s lien by growers have been

the subject of some litigation as discussed later.

IV. Enforcement of Lien

A. Rights of Producers

The producer’s lien may be enforced by the farmer-producer through several alternatives. The farmer may initiate an action to foreclose the lien or maintain a personal action to recover the debt against the processor. Any

judgment obtained in such personal action does not

impair the lien right. In an action filed by the lien

claimant against a processor, if the processor files with

the court in which the action is pending a surety bond in

an amount sufficient to cover the demand in the complaint, including costs, the court may order the release

some or all of the product or processed product upon

which the lien has attached. The farmer-producer in this

may seek an injunction to restrain the processor from

taking actions designed to in effect remove any

processed product upon which the lien exists from the

possession or control of the processor or beyond the

process of the court.

5
B. Processor Prohibitions

The California statute also makes it unlawful for a

processor to remove from the State or beyond the

processor’s ownership or control, any farm product or

any processed form of the farm product to which the

lien has attached in excess of a quantity which is of a

value sufficient to satisfy all producer’s liens.

V. Enforceability of Lien in Bankruptcy

The enforceability of the producer’s lien in Federal

bankruptcy proceedings is vital to the protection which

the California producer’s lien law is intended to afford

growers and producers of farm products. Although lien

rights are generally protected in bankruptcy proceedings, special provisions of the Bankruptcy Code invalidate state statutory liens under some circumstances. For

example, section 545(l) of the Bankruptcy Code provides that a bankruptcy trustee may avoid a statutory

lien claim if the lien first becomes effective against the

debtor upon commencement of a bankruptcy proceeding

or upon the occurrence of certain events of insolvency.

Because the producer’s lien becomes effective upon

delivery, the lien is frequently avoidable under section

545(l). The bankruptcy trustee, however, also may

avoid a statutory lien under section 545(2) of the

Bankruptcy Code where the lien is not perfected and

enforceable at the time the bankruptcy proceeding

began against a bona fide purchaser, whether or not such

purchaser exists. The question of whether a producer’s

lien is enforceable against a bona fide purchaser is

determined under principles of State law.

VI. Bankruptcy Litigation Involving Producer’s

Lien

The efficacy of the California producer’s lien has been

tested in relatively recent Federal bankruptcy proceedings. Two cases, In re Loretto Winery Ltd. and In re

T.H. Richards Processing Co., have reached the United

States Court of Appeals for the Ninth Circuit.

I

A. Enforceability Against Bona Fide Purchaser

In re Loretto Winery Ltd. involved the validity of the

producer’s lien asserted by growers who sold and delivered their grapes to a winery for processing into wine

and wine products. A series of grape deliveries were

made under contract during the course of the 1985 harvest. Eight days after the producers’ last delivery,

Loretto Winery filed a Chapter I I proceeding. The

bankruptcy case was subsequently converted to a

Chapter 7 proceeding, and the trustee brought an adversary proceeding in bankruptcy court, seeking to avoid

the producer’s lien under the Bankruptcy Code section

545(2). If the lien were avoided, the grape-grower farmers would become general unsecured creditors. The

bankruptcy court granted summary judgment in favor of

the trustee. It was affirmed by the appellate panel.

The grape growers appealed to the Ninth Circuit arguing that the producer’s lien is not subject to avoidance

under section 545(2) because, under California law, the

producer’s lien is enforceable against a bona fide purchaser where the debtor had possession of the product at

the time of the bankruptcy filing. The Chapter 7 trustee

argued that a fundamental bankruptcy policy is frustrated if producers are given a priority over other creditors

by virtue of California’s producer’s lien law. The Ninth

Circuit, in reversing the decision of the bankruptcy

appellate panel and upholding the producer’s lien, concluded that the filing of bankruptcy proceeding did not

result in a physical transfer of the products from the

debtor to the trustee as a hypothetical bona fide purchaser which would otherwise invalidate the lien under

California law. In reaching its decision, the Ninth

Circuit observed that a dilferent result would allow a

trustee in a Chapter 7 proceeding to avoid the lien

whereas a debtor-in-possession in a Chapter I I proceeding could not avoid the lien even under identical circumstances.

The Ninth Circuit further noted that the California producer’s lien statute makes it unlawful for a processor to

remove, from beyond the State of California or beyond

the processor’s ownership and control, any farm product

or any processed form of the product to which the lien

has attached. Such a violation not only subjects a

processor to suspension or revocation of its processor’s

license and civil penalties, but also constitutes a misdemeanor punishable by fines and imprisonment in the

county jail. Accordingly, the court concluded that any

contract that would permit sale of a product to which

the lien has attached to a bona fide purchaser without

payment of the producer’s lien would be void under

California law.
B. Waiver

In re T.H. Richards Processing Co. involved tomato,

peach, and pear growers, who asserted producers’ liens

against T.H. Richards Processing Co., a debtor in bankruptcy. The issue in this case was not avoidance of the

producer’s lien under Bankruptcy Code section 545, but

whether the producers had waived their statutory lien

rights when agreeing to a 1 -year deferred payment plan.

The growers’ contracts with the processor, in a section

entitled “Release of Producer’s Lien,” which purported

to effect a release of the producer’s lien, provided for a

payment schedule to be concluded 1 year after delivery,

without interest. The bankruptcy court, afftrmed by the

Federal district court, determined that the growers had

released their lien under the applicable release provisions of the California statute. The Ninth Circuit

reversed, holding that such deferred payment plans did

not, as a matter of law, constitute “arrangements being

made for such payments which are satisfactory to the

producer” that would effect a release.

C. Subordination

In re GVF Cannery, Inc. is a third processor bankruptcy

court case involving the California producer’s lien.

GVF Cannery filed a Chapter 11 bankruptcy proceeding

in 199 1 which was later converted to a Chapter 7 proceeding. A commercial bank held a security interest in

GVF Cannery’s inventory and other assets and received

relief from the Bankruptcy Code automatic stay

enabling the bank to foreclose on its inventory and other

assets subject to its security interest. The Chapter 7

trustee abandoned the inventory. Pursuant to a stipulation (approved by the bankruptcy court) between a

tomato grower who claimed a producer’s lien in the

inventory, the bank was permitted to sell the inventory

to reduce the processor’s debt to the bank, subject to the

condition that the bank would reimburse the grower in

full if the grower prevailed in his litigation in the bankruptcy adversarial proceeding with the bank.

The principal issue in the case was whether the grower

had subordinated his producer’s lien to the security

interest of the bank. A standard subordination clause

was included in the grower’s contract with GVF

Cannery as required by the bank in providing its working capital credit facility to the processor and was in a

form prescribed by the bank. The bank was a third-party

beneficiary to the contract between the grower and the

processor. The grower, among other things, argued that

the subordination constituted a waiver of the producer’s

lien which was ineffective under California law.

The bankruptcy court, in a 1995 decision upholding the

priority of the grower, held that, under the facts of the

case, the subordination agreement did not, as a matter of

law, constitute an effective waiver, because it did not

impart sufficient information to enable a waiving party

to form a full understanding of the effect of subordinating a producer’s lien. The bankruptcy court noted that

the subordination agreement did not even state the magnitude of the existing debt owed to the bank at the time

of executing the subordination, let alone the relationship

of the debt to the value of the collateral, so that a person

signing the subordination would be apprised by the document itself of what is being waived by the act of subordination.

The bankruptcy court concluded that the subordination

of the producer’s lien priority could only be accomplished after disclosure that is sufficient to support an

informed relinquishment of priority by the subordinating party.

The bank appealed the decision of the bankruptcy court

to the Federal district court. The court in an unreported

decision aftirmed the bankruptcy court in part, reversed

the bankruptcy court in part, and remanded the case for

further proceedings, holding that although the grower’s

subordination was properly subject to a waiver analysis,

the bankruptcy court had applied too stringent a waiver

test.

The Federal district court concluded that all that was

required was that the grower be informed that (1) he had

a statutory first priority lien; (2) by subordinating he

was giving up his right to first priority; (3) his subordination or waiver would place him behind the creditor

bank; and (4) if the processor went bankrupt and the

processor’s assets were not suficient to cover its debt to

the creditor bank, the grower would not receive any

payment. On remand, the bankruptcy court has not yet

reached a decision under the standard prescribed by the

Federal district court.

7
VII. Is the Producer’s Lien a Secret Lien?

The California producer’s lien has been criticized as a

secret lien which is perfected without any notice or filing requirements. This criticism may be somewhat of a

mischaracterization. In reality, most California lenders

are aware of the lien. Indeed, both In re T.H. Richards

Processing Co. and In re GVF Cannery, Inc. were cases

which involved commercial lenders who attempted to

obtain priority status of their security interests through

waivers or subordinations of the producer’s lien. The

California producer’s lien should be examined in the

perspective of the policy consideration of affording protection to California farmers. As the Ninth Circuit has

noted in the In re Loretto Winery Ltd. case, the clear

legislative intention and purpose behind the lien statute

is that producers of farm products be assured full payment for their products and that other creditors should

not be allowed to benefit from the pockets of laborers

and suppliers who have increased the value of the

debtor’s estate or, indeed, have created it.

VIII. Farmer Cooperatives and the

Producer’s Lien

A. Cooperative Processors-Farmer cooperatives

are organized under California and other State laws to

allow farmers to combine their products and efforts in

marketing their farm products in both unprocessed and

processed form. Many farmer cooperatives process farm

products for marketing. Under California law, a member

who delivers the member’s product to the cooperative

for processing and marketing is not entitled to the protection of the California producer’s lien. Although the

statutory law on this question seems quite clear, this

issue was recently litigated in a case in which the bankruptcy court in an unreported decision held that cooperative members do not have the protection of a producer’s lien in products delivered to their cooperative. On

appeal, this decision has been affirmed by the Federal

district court. Since farmer cooperatives are formed and

operated for the common good of their members, it

seems only logical that members would have no producer’s lien in these circumstances. Farmers who sell their

products to cooperative processors but are not members

of the cooperative, on the other hand, are entitled to the

protection afforded by the producer’s lien.

B. Bargaining Cooperatives-The California producer’s lien statute empowers bargaining cooperatives

to assert the producer lien rights of their members

against a non-cooperative processor, thus facilitating the

enforcement of the producer’s lien of the members of

the bargaining cooperative.

IX. Proposed Legislation

A. ABA “Task Force”- This group has been working on amendments to Article 9 of the Uniform

Commercial Code that would make a number of

changes regarding security interests and liens. One possible amendment is to require all statutory liens to be

perfected by a Uniform Commercial Code filing with

the Secretary of State. If enacted into law in California,

this would require a Uniform Commercial Code filing to

perfect the producer’s lien.

ENDNOTES

1. Cal. Food & Agric. Code $95563 l-55653; see generally Dale Bratton, Note, “The California

Agricultural Producer’s Lien, Processing Company

Insolvencies, and Federal Bankruptcy Law: An

Evaluation and Alternative Methods of Protecting

Farmers,” 36 Hastings L.J. 609 (1985).

2. Cal. Food & Agric. Code $35563 I.

3. Cal. Food & Agric. Code $55635.

4. Cal. Food & Agric. Code $55636.

5. Cal. Food & Agric. Code $5563 I.

6. Cal. Food & Agric. Code $5563 I.

7. Cal. Food & Agric. Code $6 55631 and 55634.

8. Cal. Food & Agric. Code $5563 I.

9. Cal. Food & Agric. Code $55634.

10. Cal. Food & Agric. Code $55633.

11. Cal. Food & Agric. Code $555636 and 55637.

12. Cal. Food & Agric. Code $9 55637 and 55639.

13. Cal. Food & Agric. Code $55637.

14. In re T.H. Richards Processing Co., 910 F.2d 639

(9th Cir. 1990); In re GVF Cannery, Inc., 188 B.R.

651 (Bankruptcy N.D. Cal. 1995).

15. Cal. Food & Agric. Code $35647.

16. Cal. Food & Agric. Code $55647.

17. Cal. Food & Agric. Code $55648.

18. Cal. Food & Agric. Code $55649.
19. Cal. Food & Agric. Code $5565 1.

20. Cal. Food & Agric. Code $55638.

21. 11 U.S.C. §545( 1).

22. Cal. Food & Agric. Code $55635.

40.

41.

42.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37.

38.

39.

11 U.S.C. §545(2).

In re Loretto Winery Ltd., 898 F.2d 7 I5 (9th Cir.

1990).

In re Loretto Winery Ltd., 898 F.2d 7 I5 (9th Cir.

1990); and In re T.H. Richards Processing Co., 910

F.2d 639 (9th Cir. 1990).

Under Cal. Food & Agric. Code section 55634, the

lien remains on the products so long as the processor retains possession.

43.

44*

In re Loretto Winery Ltd., 898 F.2d at p. 721; see

Riley C. Walter, “A Case For Avoidance or Secret

Farmer Liens: The California Producer’s Lien,” 4

San Joaquin Agric. L.R. 37 (1994), for an analysis

and criticism of this decision.

Cal. Food & Agric. Code $9 55638 and 55872.

Cal. Food & Agric. Code $55841.

Cal. Food & Agric. Code 555922.29.

Cal. Food & Agric. Code $9 55901,55905 and

55906.

In re Loretto Winery Ltd., 898 F.2d at pp.722-

23.3 I.

In re T.H. Richards Processing Co., 910 F.2d at p.

647.

In re GVF Cannery, Inc., I88 B.R. 651

(Bankruptcy N.D. Cal. 1995).

11 U.S.C. $362(a).

In re GVF Cannery, Inc., 188 B.R. 65 1

(Bankruptcy N.D. Cal. 1995).

In re GVF Cannery, Inc., Case No. 96-20149 SW,

U.S. District Court for the Northern District of

California (Sept. I I, 1996).

Dale Bratton, Note, “The California Agricultural

Producerjs Lien, Processing Company

Insolvencies, and Federal Bankruptcy Law: An

Evaluation and Alternative Methods of Protecting

Farmers,” 36 Hastings L.J. 609 (1985); Riley C.

Walter, “A Case For Avoidance or Secret Farmer

Liens: The California Producer’s Lien,” 4 San

Joaquin Agric. L.R. 37 (I 994).

In re Loretto Winery Ltd., 898 F.2d at pp. 720-21.

Cal. Food & Agric. Code 554001 et seq.

Cal. Food & Agric. Code $55461.

California Bean Growers Assn. v. Bank of

California, et al., Case No. 95-928 17, Adv. Proc.

No. 95-9 140, Amended Memorandum Decision,

April 2, 1996.

California Bean Growers Assn. v. Bank of

California, et al., Case No. 95-92817, Order

Denying Appeal and Bankruptcy Court Order,

August I, 1997.

Cal. Food & Agric. Code $5563 1.5
OREGON As statutorily created interests, liens are “strictly construed” bv courts. That means that the scone of a lien

AGRICULTURAL

LIENS

Gerald G. Watson

Churchill, Leonard, Brown, Lodine & Hendrie,

LLP

will probably not be expanded beyond what is specifitally set forth in the statute. For example, if a particular

product is not covered by the language of a lien statute,

that lien will not apply even if the product is “similar”

to one that is covered. Equally important, each particular lien needs to be properly created and implemented

according to the procedure set forth by statute. A court

is unlikely to ignore even what may appear to be minor

defects in compliance with a statute.

(This article is for general educational purposes

only and is not intended to be legal advice. Persons

should contact their attorney with regard to their

rights and obligations in a speciJic situation.)

Introduction-Agriculture is a key sector of the

Oregon economy. The transaction of business in the

agricultural arena, like all segments of the economy,

depends upon regular, predictable relationships that protect the reasonable expectations of those who are

involved.

What is a Lien?- A lien is a statutorily created

interest that gives the person who is protected by the

lien, a creditor, certain rights in the property of another

person, a debtor. Liens create certainty and security in

transactions where people extend credit or perform

work in advance of payment. Liens are important and

can be very helpful in allowing complex commercial

transactions to proceed smoothly.

There are many kinds of liens. A mortgage or trust deed

are “liens” against real property; a “mechanics lien”

protects people who perform services on tangible property; a “construction lien” is often used by contractors

and subcontractors to secure payment for materials or

work performed’in residential and commercial construction. In addition to these well-known “liens,” there are

less prominent, but equally important liens that apply in

agriculture. Key among those liens are the agricultural

produce lien and the grain producers lien. Other relevant

liens are the agricultural services lien, a nurserymans

lien and possessor-y chattel liens.

How Does a Lien Work?-To understand how liens

operate, it is necessary to understand three legal concepts related to liens: attachment, perfection, and priority. A lien is created when it is attached to the object of

the lien. Depending on the kind of lien, that object could

be land, a car, a house, or agricultural products. People

who are in financial difficulty often owe money to many

people. An “attached” lien is valid, but it will not necessarily prevail over the debtors obligations to other people. For one lien to prevail over another, it must have

priority. The priority of a lien is determined by the time

of its perfection. Perfecting a lien often requires that

special steps be taken, such as filing a notice of the lien

with some governmental agency. Once a lien is perfected, it normally has priority over all liens that are perfected afterwards. Similarly, it would not have priority

over liens that were perfected earlier.

A creditor whose lien is perfected is often called a

“secured creditor.” Similarly, one whose lien has not

been perfected is “unsecured.” It is much better to have

a perfected security interest with first priority than to be

an unsecured creditor.

Oregon Agricultural Liens

There are a number of specific statutorily created liens

that directly affect agriculture in Oregon.

Producers Liens-Unlike California, which apparently has only one such lien, Oregon has two separate producer liens. The Agricultural Produce Lien covers

fruit, berries, vegetables or meat animals sold or delivered to a food processor. The Grain Producers Lien is

narrower in scope covering grain which is defined to

mean wheat, corn, oats, barley, rye, flaxseed, certified

10
alfalfa seed, agricultural seed as defined in ORS

633.5 I I( I), vegetable seed as defined in ORS 633.5 11,

the seed of any cereal grain, soybeans, grain sorghum,

dry beans and peas and any other grain for which standards are established by the State or the Federal governments.

Each lien has distinct requirements and operates somewhat differently. Unfortunately, a review of Oregon case

law indicates that there are no recorded cases, either in

State court or Federal bankruptcy court, interpreting

those statutory provisions. Any ambiguities that do or

may exist in the Oregon statutes have not been resolved

by the courts. Thus, the following analysis is tentative

and based only upon the language of the statutes.

Agricultural Produce Lien (ORS 87.700 to

87.740)-This lien applies only to “agricultural produce” defined as “fruit, berries, vegetables, or meat animals sold or delivered to a food processor.” Any product that does not fit within those four categories or that

is not “delivered to a food processor” would not be covered by this lien.

A “food processor” is defined by the statute to include a

packing plant, cannery, creamery, or other processing

plant that processes agricultural produce and is owned

or oDerated by anv Derson other than a cooDerative

corDoration.“(underlining added) By its terms, the

statute excludes products delivered to a cooperative. It

appears that Californias Producers Lien law has a similar

provision. Severalpotential ambiguities in the scope

of the lien should be noted For example, food

processor is defined to include a creamery, but the

definition of agricultural produce does not seem to

contemplate dairy productr. Somewhat similarly,

would the delivery of grapes (a fruit) to a winery

constitute delivery to a ‘ffood" processor?

Attkhmeut and Perfection-The agricultural produce lien attaches to all of the agricultural produce and all of the other inventory of the food processor

upon delivery to the food processor. It is apparently perfected upon filing (see ORS 87.715) If the agricultural

produce consists of meat animals, the lien also attaches

to accounts receivable of the food processor (ORS

87.705).

Filing-No immediate filing is required. However,

within 20 days of the date on which payment is due (or

in the case of meat animals within 20 days of the date

the animals were delivered to the processor)‘, the producer claiming the lien shall file with the county recording officer in the county where the food is processed a

statement setting forth the amount due, the name of the

food processor, a description of the produce, a statement

that amount claimed is a true and bona fide existing

debt, and the date on which payment was due. (ORS

87.7 IO). Although the statute does not clearly say so,

presumably the failure to file, when required to do so,

would mean that the right to a lien has been lost, or at

least subordinate to any other security interest in the

produce or other property of the debtor. Detailed notice

must also be given to other creditors of the debtor

Priority-Except for tax liens, the lien created by

ORS 87.705 is prior and superior to all others created by

chattel mortgage, bill of sale, conditional contract or

any security interest upon agricultural produce, without

regard to whether such other liens or security interest

attached to the produce before or after the date on which

a lien created by ORS 87.705 attaches.

Lien Foreclosure-The agricultural produce lien is

foreclosed by law similar to the other lien foreclosures.

However, the suit to foreclose the lien must generally be

brought within 6 months after a claim of lien is filed. If

not, the lien ceases to exist.

r Payment is “due” on the date specified in the contract or if there is

no contract or no due date is specified, then two days after the

processor takes delivery of the agricrdtural produce. This particular

provision would apparently preclude coverage if the producer

without a specific due date delays filing its claim of lien beyond 22

days from the date of delivery.

11
New Crops

Development:

Peacetime cropland reduction, i.e., the cropland taken out

of production by Federal Government programs

(Crosswhite and Sand&to, 1991) has increased since 1933

Building R&D (Figure 1). Lack of sufficiently profitable new crop

alternatives has resulted in lost revenue opportunities

Funding Justification from idled cropland and costly Government outlays to keepthe Iand idIe

Gary D. Jolliff

Professor of Crop Science

Department of Crop and Soil Science

Oregon Agricultural Experiment Station and

Oregon State University

Introduction- Surplus production and consequent

low prices of agricultural commodities have been a regular peacetime phenomenon in the United States for

more than a century. It was a problem in the 1870s

when the USDA was formed, in the 1890s when cotton

producers were encouraged to diversify their cropping

systems and introduce new crops (Taylor and Taylor,

1952) and in the periods of 1933- 1942, 1956- 1973, and

1982- 1995 (Figure 1). National farm policy aimed at

agricultural income stabilization was initiated in 1935,

but the problem remained 60 years later, despite large

Government outlays (Tweeten, 1995). Several million

farmers have been forced off the land because of insufficient economic opportunities.

U.S. farm policy was changed dramatically in 1996, but

lacks strategic planning for new-crop development.

l./ Adapted from ‘New-Crops R&D: Necessity for Increased Public

Investment’, Pages 115-118. In J. Janick (Ed.). Progress in New

Crops. (ASHS Press: Alexandria, VA) 1996. Also published in the

Proceedings of the First Australian New Crops Conference. Vol.1

pp.144145. U. Of Queenland, Gatton College, 1997. Sincere

appreciation is extended to Steve Dewhurst and Dennis Kaplan,

USDA, Office of BuPget and Program Analysis, for providing

historical budget data; to Carmen Sandretto, USDA’s ERS for

providing historic cropland reduction data used in Figure 1; to Dr.

Abner Womack, and Gary Adams, Food and Agriculture Policy

Research Institute, University of Missouri-Columbia, MO for

providing the historical annual data on the seven crops for acreage

reduction and participant returns per acre, and for reviewing the

calculations; to Dr. James Cornelius, Department of Agricultural and

Resource Economics, Oregon State University, and Dr. Rueben Buse,

Department of Agricultural Economics, University of Wisconsin for

guidance in preparation of the research and reviewing the

calculations.

Surplus production in the 20th century is due to a combination of rapidly increasing technology and agricultural policy. From 1918 to 1940, surpluses were substantially a consequence of the replacement of draft animals by farm tractors. Thereafter, it was exacerbated by

increases in yields through advances in cultivars, pest

control, mechanization, agronomic management practices, and availability of inexpensive nitrogen fertilizers,

combined with Government programs that encouraged

or required planting traditional crops.

With the biological revolution currently underway,

yield-improving technologies can be expected to continue and to spread increasingly throughout the world.

New crops development, particularly industrial crops

(previously called chemurgic crops), have long been

proposed as a vital partial solution to this problem.

Clearly, the problem has not been solved, suggesting

that the neglected search for alternative and new crops

should be reconsidered (Janick et al., 1996).

There are obvious reasons why the private sector

doesn’t invest in new-crops research and development.

New-crops development is: (1) long term, (2) high risk,

and (3) may not yield benefits to the originators.

Therefore, adapters and users intentionally wait until the

profit potential is more obvious and closer-to-hand,

before risking research and development investments

for new crops (Bolen, 1993). Although these factors justify Government-funded intervention in agricultural

research (Alston et al., 1994; Jolliff and Snapp, 1988;

Jolliff, 1989), there has been extreme under-investment

in new crops research and development, compared with

that invested in the established agronomic crops, which

are frequently in surplus (Jolliff, 1989). There is no

voice for new crops, so Federal support has languished.

As a result of under-investment in research, potentially

12
viable new crops have not been developed to the point

of profitability for the private sector. A determination of

the potential payoff to justify increased public sector

investments in new-crops development is needed. The

ob.jective of this paper is to estimate Federal financial

outlays and lost national revenue opportunities for the

period of 1978 through 1994. associated lvith the

absence of sufficient new-crop alternatives.

This study assumes that science, technology, expertise,

and plant materials have existed which could have been

mobilized during the past century to provide profitable

new crops altcrnati+cs for U.S. farmers as an alternative

to tdllng croplnnd or overproducing surplus crops.

Determining Costs of Surpluses-Tllc total cost of

crop over-production for the 17-!fear period 1978 through

1994 was the summation of the total cost of Federal outlays. plus an estimate of the total lost opportunity costs.

Federal Outlays--Included (1) cash out1aJ.s from

Budget Fm-lction (BF) 35 1. (2) the value of certificates.

and (3) interest. BF 35 1 of the Federal budget is a category which includes many aspects of outlays for farm

income stabilization. Much of the expenditure is for surplus commodity-related programs, such as loans. subsidies, and costs of acquiring and storing commodity

stockpiles. Some surplus-commodity-related costs, such

as foreign agricultural export losses? crop improvement

research, funded through the Agency for International

Development (AID), and domestic donations of food

arc not included in BF 35 1 and are not estimated in this

analysis. Also not included are some costs to the consumer and taxpayer such as inflated domestic prices

(e.g. peanuts and sugar). due to Government program

quotas. Certificates or outlays include the $8.4 billion

cost of the 1984 Pa~/mcnt-In-Kind (PIK) program. The

data source for both was the USDA Office of Budget

and Program Analysis.

Interest on outlays (BF 35 1 and certificates) is based on

J-year U. S. Treasury security interest rates (Table B72. Economic Report of the President, February, 1995).

Interest was compounded annually. Sums for each year

Figure l-united States Cropland Acreage Reduction 1933-94.*

Millions of Acres

1933 43 53 63 73 83 93

* Millions of acres of crop/and taken out of production (idled) by federal government programs (trend line: approximate fit

to three means: 1934-1942 = 35; 1957.1972= 47; 1983-1993 = 58). Adapted from Crosswhite and Sandretto (1991)

and updated from C. Sandretto (pers. commun. 1995).

13
were adjusted to 1987 dollars using the appropriate

deflator (Table B-3, Economic Report of the President,

February, 1995). Conversion of 1987 dollars to 1995

dollars was achieved by multiplying the 1987 dollars by

the 1995 GNP Implicit Price Deflator of 1.28 1.

Lost Wealth Estimates-These are based on estimated revenue losses from idled croplands plus the consequent lost-multiplier effect, based on the economic

benefit of new wealth which was not produced.

Calculation of lost wealth is based on idled acreage and

returns/acre data from the Food and Agricultural Policy

Research Institute, University of Missouri-Columbia.

Idled acres for each of seven crops (wheat, corn,

sorghum, barley, oats, cotton, and rice) were multiplied

by the return per acre of farmers who participated in the

Government program for the respective crop. This is an

estimate of financial opportunity for alternative crops on

idled cropland. A multiplier effect of 2.0 was used to

estimate the economic benefit to the economy from new

wealth which could have been generated on idled land if

profitable new crops had been developed for U.S. farmers. The values for Federal outlays and lost wealth for

the period 1978 through 1994 are shown in table I.

New Crop Solutions-The lack of profitable alternative crops for U.S. farmers from 1978-94 has been

extremely costly for taxpayers, with severe social consequences to farmers and rural areas. Total costs for the

17-year period are estimated as $728 billion in 1987

dollars, equivalent to $932 billion in 1995 dollars. This

represents only about one-third of the cropland idled

since 1933 (figure 1). The compounding benefits lost

Table i- OUtlayS and tOSt OppOrtUnitieS for crop

agriculture, 1978-94.

Cafegow Billions of 1987 Dollars

Federal outlay Budget Function 351 254

Certificates ’ 37

Interest (BF 351 + Certificates) XE!

Subtotal 580

Lost wealth opportunities

Lost crop opportunities 74

Multiplier effect loss 14

Subtotal 148

Grand Total 728

because of idled land prior to 1978 are huge, and could

be estimated to strengthen the argument.

Clearly, an economic evaluation of the cost of crop surpluses requires careful examination in the context of

new-crops development policy. The annual Federal budget for agricultural research is about $2 billion. Plant

productivity research, an important component, is

almost completely devoted to established crops. Very

little funding or institutional structure is committed to

new crops development. This seems to argue for a public-interest need for a Congress-mandated national voice

for new crops development to compete for resources in

the public policy arena.

Agricultural research yields high returns on investment.

It can be questioned, however, whether the calculated

rates of return in the literature took into account the high

costs of Government programs associated with the generation of crop surpluses. Also, arguments are frequently

being made that environmental and social costs of activities, such as farm programs, should be considered (Van

Dieren, 1995). Reliable data are needed on impacts of

agricultural research across different groups of agricultural stakeholders including consumers, farmers, environmentalists and conservationists (Thompson, 1996).

These types of accounting could strengthen the case for

Federal investments in new crops development (Jolliff,

1989). Federal appropriations would need to be new cropsspecific to assure resource use in the intended area. This

implies that additional institutional innovation in national

farm policy beyond the USDA Alternative Agricultural

Research and Commercialization Corporation may be necessary to bring about needed change (Jolliff, 1989). A possible new crops initiative has been suggested in CAST

Issue Paper 6 (Janick et al., 1996). Advances in new crops

development may be important in raising the standard of

living in many countries.

Conclusion-Historical fiscal evidence of the costs of

surpluses justifies increased investment in the development of profitable and sustainable new crop alternatives

for U. S. farmers. A long-term strategic national effort

is needed to make maximum use of genetic diversity in

crop agriculture.

14
References

Alston, J. M., Pardey, P.G. and Carter, H.O. (Eds.).

1994. Valuing UC Agricultural Research and

Extension. University of California, Division of

Agriculture and Natural Resources, Agricultural

Issues Center Publication No. VR- 1: 33-5 1.

Bolen, C.D. 1993. New Crops From a Seed Company

Perspective. In: New crops. (Ed. J. Janick and J.E.

Simon) (Wiley Press: New York).

CAST. 1995. Sustainable Agriculture and the 1995 Farm

Bill. Special Publication No. 18 (Council for

Agricultural Science and Technology: Ames, Iowa).

Crosswhite, W. M., and Sandretto, C.L. 1991. Trends in

Resource Protection Policies in Agriculture. In:

Agricultural Resources: Cropland, water, and conservation. Situation and Outlook Report AR-23.

(Economic Research Service, U.S. Department of

Agriculture. Washington, D. C.) 42-49.

Janick, J., Blase, M. G., Johnson, D. L., Jolliff, G. D.

and Myers, R. L. 1996. Diversifying U.S. Crop

Production. issue Paper 6. (Council for

Agricultural Science and Technology: Ames, IA).

Jolliff, G. D. 1989. Strategic Planning for New Crop

Development. Journal of Production Agriculture.

2: 6-13.

Jolliff, G. D., and S. S. Snapp. 1988. New Crop

Development: Opportunities and Challenges.

Journal of Production Agriculture 1: 83-89.

Taylor, H. C. and Taylor, A.D. 1952. The Story of

Agricultural Economics in the United States, 1840-

1932. (The Iowa State College Press: Ames, IA.)

Thompson, R.L. 1996. Keynote presentation. In:

Agricultural Research Assessment: A Symposium

Summary. (The Council on Food, Agricultural,

and Resource Economics: Greenbelt, Maryland).

Tweeten, L. 1995. The Twelve Best Reasons for

Commodity Programs: Why None Stands

Scrutiny. Choices. Second Quarter: 4-7,43-44.

Van Dieren, W (Ed.). 1995. Taking Nature Into

Account. A Report to the Club of Rome.

Copernicus. (Springer-Vet-lag: New York.)

15
Food Quality

Protection Act

Janet L. Andersen, Ph.D.

Director, Biopesticides and Pollution

Prevention Division

Office of Pesticide Programs

Environmental Protection Agency

Goals of the Food Quality Protection Act (FQPA)

Greater protection for infants & children

Comprehensive, integrated approach to risk assessment and

risk management using consistent, health-based standard

Regulation should be flexible enough to allow continuous

update and reinvention in order to remain credible

Highlight of FQPA

Single, health-based standard defined as “reasonable certainty

of no harm”

Aggregate exposure must be considered (not just dietary but

non-occupational routes such as drinking water, lawn and garden, and residential)

Cumulative exposure also considered (common mechanism

of toxicity)

Specific determination that tolerances are safe for children

and use of an additional IO x “uncertainty factor” unless data

are sufftcient to allow a lower factor

Screening and testing program for endocrine disruptors

All existing tolerances to be reassessed within IO years, considering worst first

Limitation on benefits consideration when reassessing tolerances; no benefit8 for new active ingredients

Publication of brochure which discusses risks and benefits of

pesticides, advises consumers on ways to avoid those risks,

lists “eligible” tolerances and alternatives to crops which may

contain them.

Periodic registration review, with a goal of review every I5

years

Provisions for “safer” registrations, minor uses, and antimicrobials

Implementation

Public input efforts underway - Food Safety Advisory

Committee, Pesticide Program Dialogue Committee, Federal

Insecticide, Fungicide and Rodenticide Act (FIFRA) Scientific

Advisory Panel, Endocrine Disruptors Screening and Testing

Advisory Committee, etc.

Implementation Plan issued in March, with update issued in

October

Implementation plan outlined five principles for agency activities: sound science; health based approach; promotion of

safer, effective pest control methods; openness; and accountability

Sound Science/Health Based Approach

Interim decision logic developed

Proposed approaches to 10x. common mechanism and aggregate exposure

Promoted discussion on areas such as in-utero exposure and

endocrine disruptors

Publication of a tolerance reassessment schedule which

addresses “worst first” criteria (Organophosphates,

Carbamates, B2s first)

For all tolerances set post-FQPA, special sensitivities of children have been considered

Promoting Safer Effective Pest Control Methods

Published final guidance for reduced risk and pesticide applications

Continued expedited review of “safer” pesticides

Added Pesticide Environmental Stewardship Program (PESP)

partners and supporters

Awarded grants for PESP partners and supporters

Openness and Accountability

Established Food Safety Advisory Committee (helped develop interim decision logic)

Formed Workgroups within the Pesticide Program Dialogue

Committee (PPDC), in areas such as minor use, consumer

right-to-know, and new safety standard

1 6
Distributed Implementation Plan and periodic updates

Initiated Endocrine Disiruptors Screening and Testing

Advisory Committee

All science issues have been taken to the FIFRA Scientific

Advisory Panel

Meetings/workshops with stakeholders (e.g. minor use,

antimicrobial, environmental groups) to discuss implementation activities

Establishment of Minor Use Program; Minor Use Crop

Alliance formed to improve coordination and strengthen

interaction with registrants

First annual antimicrobial progress report

Decisions are being made-as of end FY 97,29 new active

Ingredients and 387 Emergency Exemptions granted

FQPA Minor Use Provisions

Minor use “offtces” at EPA and USDA

EPA-minor use team with members in each Division in the

Office of Pesticides and a team leader working directly for

the Office Director

USDA-new Pest Management Office working from the

Deputy Secretary’s Office

Extended exclusive use of data to registrants to add minor uses

to pesticide label. One year for each three minor uses added up

to a total of 3 more years of exclusive use.

Additional time to develop residue data to support minor uses

for pesticides undergoing reregistration

FQPA Minor Use Provisions

Waivers for minor use data if incremental risk from the minor

use would not pose “unreasonable adverse effect”

Expedited registration of new active ingredient solely for

minor uses or if for every major use there are three or more

minor uses also propose or minor use would replace a use

canceled in last five years or minor use would prevent the

need for a section 18

FQPA Definition of Minor Use

Crops less than 300,000 acres across US without sufficient

economic incentive to get registration, and

I. Insufficient efficacious alternatives

2. Alternatives pose greater risk

3. Minor use is significant in managing pest resistance

4. Minor use plays a significant part in IPM

Provisions Likely To Have the Most Impact

Aggregate exposure

Cumulative exposure

Endocrine disrupter screening

Tolerance Reassessment

Effects on minor use chemicals

Consumer brochure (potentially)

Movement toward safer, reduced risk, alternatives (reduced

risk policy, new standard, reregistration, etc.)

Conclusion

FQPA is a deliberate challenge to EPA to reinvent its risk

assessment and decision making process

it pushes us on data, science, and resources

These are the right things to do, but they require tough decisions and will take some time, and

will require unprecedented stakeholder participation

Process will be refined, as will decisions, as we proceed

Extends comment period/waiting time to 180 days before

EPA accepts voluntary cancellation

17
ATTENDEES

AGRICULTURAL BARGAINING

COUNCIL

744 Main St. Suite I

Presque Isle, ME 04769

2071764-3380

Vernon DeLong

AGRICULTURAL COUNCIL OF

CALIFORNIA

P.O. Box 1712

Sacramento, CA 958 12

9 161443-4887

Kristin Power

APRICOT PRODUCERS OF CALJFORNJA

2125 Wylie Dr., Suite 2A

Modesto, CA 95355

209/524-080 1

Bill Ferriera, Connie Ferriera,

Gene Bays, Eleanor Bays

CALIFORNIA CANNING PEACH

ASSOCIATION

P.O. Box 7001

Lafayette, CA 94549

5 1 O/284-9 17 1

Ron Schuler

Ron Martella

Lloyd Narita

Azam Kham

Bill Bryan

Heidi Sanders

CALIFORNIA FREESTONE

PEACH ASSOCIATION

P.O. Box 7001

Lafayette, CA 94549

510/284-9171

Rich Hudgins

CALIFORNIAPEAR GROWERS

4600 Northgate Blvd., Suite 2 10

Sacramento, CA 95824

9 16/924-0530

Terry W. Barton

CALIFORNIA TOMATO GROWERS ASSOCIATION

P.O. Box 7398

Stockton, CA 95267-0398

209147% I 76 I

John C. Welty

Jo Anne Hancock

Brian Kilmer

Clarence Vosti

Carl Evers

CHURCHILL, LEONARD,

BROWN, LODJNE & HENDRJE,

LLP

P.O. Box 804

Salem, OR 97308-0804

5031585-2255

David H. Leonard

Jerry Watson

ENVIRONMENTAL PROTECTION

AGENCY

401 M Street, SW

Washington, DC 20460

703/308-8 128

Janet Anderson, Ph.D.

HANSON, BRJDGETT, MARCUS,

KLAHOS & RUDY

333 Market St. 23rd Floor

San Francisco, CA 94 IO5

4 151777-3200

Stephen B. Peck

HAZELNUT GROWERS BARGAINING ASSOCIATION

8101 SW Nyberg Rd. #201

Tualatin, OR 97062

5031692-5932

Michael Klein, Kelly Klein

Don Christensen, Laura Christensen

Larry Christenson, Lois Christenson

Michael Kerr, Sandra Kerr

Cohn Kohlmeyer, Judy Kohlmeyer

Al Mansfield, She-She Mansfield

Jim Mamach, Jenene Mamach

Edwin Pardey, Pat Pardey

Elmer Skurdahl, Charlotte Skurdahl

Stan Vobora, Betty Vobora

Don Youngblood, Jeanne Youngblood

Milbum Ziegler, Velma Ziegler

MALHEUR POTATO BARCAJNJNG ASSOCIATION

P.O. Box 665

Vale, OR 97918

503/473 -3 I22

Jack Pressley, Melinda Pressley

Bob Holmes

MICHIGAN AGRICULTURAL

COOJ’ERATJVE MARKETING

ASSOCIATION (MACMA)

P.O. Box 30960

Saginaw, Ml 48909

5 17/323-7000

Randy G. Harmson

Jerry I,. Campbell

Richard L. Wadsworth

MICHIGAN ASPARAGUS ADVJSORY BOARD

P.O. Box 900

Dewitt, MI 48820

5 171669-4250

Donald Wadsworth

MICHIGAN PROCESSING APPLE

GROWERS

PO. Box 30960

Lansing, MI 48909

8001292-2653

Tom Butler

Dawn Drake

Chuck Stein

MINISTRY OF AGRICULTURE

AND FOOD

Guelph, Ontario CANADA

Paul Glenney

NATIONAL CONTRACT POULTRY GROWERS ASSOCIATION

P.O. Box 824

Ruston, LA 71273

3 I 8/25 l-9227

John Morrision

NATIONAL COUNCIL OF

FARMER COOPERATIVES

50 F Street, SUITE 900

Washington, DC 20001

2021626-8700

David Graves

18
NATIONWIDE INSURANCE

One Nationwide Plaza 3- 14-05

Columbus, OH 432 15-2220

6 141249-5330

Willard Engel

OLIVE GROWERS COUNCIL

I2 I East Main St.

Visalia, CA 9329 I

209/734- I7 IO

Adin A. Hester

Pat Akin

ONTARIO VEGETABLE GROWERS MARKETING BOARD

435 Consortium Ct.

London, Ontario N6E 2% CANADA

519/681-1875

John Mumford

Lloyd Arnold, Elaine Arnold

Walter Brown, Elfreida Brown

Mark Delanghe, Arlene Delanghe

Dave Epp

Richard Penner

OREGONIANS FOR FOOD &

SHELTER

34 15 Commercial St., SE

Salem, OR 97302

5031370-8092

Terry Witt, Patti Witt

PERENNIAL RYEGRASS BARGAINING ASSOCIATION

P.O. Box 3228

Salem, OR 97302

503137%0195

Jim Cames

POTATO GROWERS OF IDAHO

133 I4 N. Billy Lane

Chubbock, ID 83202

208/785-l I IO

Richard Watt *

POTATO GROWERS OF WASHINGTON

PO. Box 563

Othello, WA 99344

5091488-6688

Dale Lathim

PRUNE BARGAINING ASSN.

335 Teegarden Ave., Suite B

Yuba City, CA 9599 I

5301674-5636

Greg Thompson

Ken Lindauer, Dorothy Lindauer

RAISIN BARGAINING ASSN.

3425 N. First St. #209

Fresno, CA 93726-68 I9

209122 I -I 925

Wayne Albrecht, Judy Albrecht

Jim Andreas, Jill Andreas

Charanjit S. Batth, Shamsher K. Batth

Norman Engelman, Carolyn Engelman

Sam Esraelian

Richard Garabedian, Ellie Garabedian

John Kalebijian, Esther Kalebijian

Bob Kaprielian, Miriam Kaprielian

Steve Kister, Linda Kister

Vaughn Koligian, Mary Ann Koligian

Steve Lehman, Patty Lehman

Bill Martinelli, Lea Martinelli

Kay Paboojian, Jr., Rosemary

Pabooj ian

John Pakchoian

George Porter, JoAnn Porter

Frank Silva, Janice Silva

Louis Spate, Rosalie Spate

Steve Spate, Tracy Spate

SNAKE RIVER POTATO GROWERS

RR I, Box 240

Glenn’s Ferry, ID 83623

2081366-2675

Ronald Buatte. Charla Buatte

SNOKIST GROWERS

PO. Box 1587

Yakima, WA 98902-6026

5091453-563 I

David Long

SOUTHERN MINNESOTA FARM

CROPS ASSOCIATION

RR I, Box218

Sleepy Eye, MN 56085

5071794-22 I3

Dean Ibberson

UNIVERSITY OF CALIFORNIA

CENTER FOR COOPERATIVES

One Shields Ave.

Davis, CA 95616

9 161752-2408

Mahlon Lang

Karen Spat z

USDA/APHIS

Jamie L. Whitten Building, Room 302-E

14th & Independence Ave., SW

Washington, DC 20250-343 I

2021690-0472

Charles P. Schwalbe

USDA/RURAL BUSINESS-COOPERATIVE SERVICES

STOP 3250

1400 Independence Ave., SW

Washington, DC 20250-3250

2021720-7558

Randall E. Torgerson

Andrew Jermolowicz

USDA/RBS

350 N. Dunham St.

Prineville, OR 97754

54 I /447-5 I 7 I

Bob Haase

ZOLLINCER CONSULTING

I I60 Cotta Vista

Turlock, CA 95380

209/632-4013

Dave Zollinger

19
U.S. Department of Agriculture

Rural Business-Cooperative Service

Stop 3250

Washington, D.C. 20250-3250

Rural Business-Cooperative Service (RBS) provides research,

management, and educational assistance to cooperatives to

strengthen the economic position of farmers and other rural

residents. It works directly with cooperative leaders and

Federal and State agencies to improve organization,

leadership, and operation of cooperatives and to give guidance

to further development.

The cooperative segment of RBS (1) helps farmers and other

rural residents develop cooperatives to obtain supplies and

services at lower cost and to get better prices for products they

sell; (2) advises rural residents on developing existing

resources through cooperative action to enhance rural living;

(3) helps cooperatives improve services and operating

efficiency; (4) informs members, directors, employees, and the

public on how cooperatives work and benefit their members

and their communities; and (5) encourages international

cooperative programs. RBS also publishes research and

educational materials and issues Rural Cooperatives magazine.

The U.S. Department of Agriculture (USDA) prohibits

discrimination in all its programs and activities on the basis of

race, color, national origin, gender, religion, age, disability,

political beliefs, sexual orientation, and marital or family

status. (Not all prohibited bases apply to all programs.)

Persons with disabilities who require alternative means for

communication of program information (braille, large print,

audiotape,‘etc.) should contact USDA’s TARGET Center at

(202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director,

Office of Civil Rights, Room 326-W, Whitten Building, 14th and

Independence Avenue, SW, Washington, D.C. 20250-9410 or

call (202) 720-5964 (voice or TDD). USDA is an equal

opportunity provider and employer.