This type of program may be used to prevent temporary market gluts
and correspondingly depressed prices by smoothing out product flow.
It contributes to more efficient use of nandling and distribution
facilities. However, maximum effectiveness would require "perfect"
market information and administration. All too often one or both of
these are unattainable. Consequently, prorates should be used
guardedly so ag to avoid stifling individual incentive or overly
restricting market supplies.

With a view toward preserving individual incentives, the
Secretary is asking each industry using the prorate feature to assess
its own unique problems and needs and recommend ways to best use
prorate provisions consistent with these guidelines. Among the
approaches that affected committees should consider:

(1) Use of prorate only during a limited part of the season,

ji.e., a limited number of weeks;

(2) Expansion of the specific time frame included in eacn

prorate, i.e., two, three, or four week prorates
instead of only weekly;

(3) A combination of a partial season prorate and expanded

time frame.

The Secretary believes that changes in the present system would
permit greater intraseasonal flexibilities for individual handlers
while at the same time protecting the viability of the program.
Reserve Pools

Reserve pools can be used to control the extreme fluctuations in
supplies and prices that often plague agriculture. However, the
reserve program should not result in stockpiling of certain commoc-

ities with little or no market outlet. Therefore, when an industry


membership ne ‘limited in tenure. Tne Department will work with each
committee to develop an appropriate time frame. The Secretary also

encourages 21] committee members to take a very active role in all

ses of marketing order administration.

PERIODIC REFERENDA
Some marketing orders provide for periodic referenda but most do
not. The Secretary believes these referenda are in the public
interest. They provide the industry with a means to regularly
reassess the value of marketing orders and keep the Department
informed of the wishes of the majority of tne industry. Therefore,
the Secretary is requiring that periodic referenda be conducted for
each order. USUA will work with each committee in deve lopment of a

time frame appropriate for each order.


of this feature with particular emphasis on the following three
areas: (1) Whether quality controls have varied significantly from
season to season or within seasons, (2) Whether the percentage of
product meeting minimum quality standards has been declining, or (3)
Whetner the standards have been tightened over the years.

Grade and size regulations keep low quality produce from the
market. Some argue that this lower quality produce would be attrac-
tive to some consumers. In view of this, industries should consider
changes that would allow the marketing of the off-grade/size commodity
within the local production area as well as consider the establishment
of a minimum quantity. exemption from the quality standard. If the
industry believes that this type of approach could not or should not
be followed, it should present convincing evidence to the Department.
A number of existing orders already have provisions of this type.

Charitable contributions are exempted from regulation in most
orders. This Administration strongly endorses the concept of
charitable contributions and encourages expanded use of these

provisions.

IMPORT REQUIREMENTS UNDER SECTION 608e

Section 608e of the Agricultural Marketing Agreement Act imposes
the same quality requirements on an imported commodity as are imposed
on a domestic commodity. It does not seek to limit imports but rather
to ensure that low quality imports do not undermine the purpose of the

Act, threatening the domestic market for U.S. crops.


committee recommends a reserve, it must clearly state the intended
disposition of the reserve. This should include several alternatives
including a “most likely" projection and should be revised by the
committee to reflect changing supply or market conditions.
Shippina Holidays

Shipping holidays are intended to reduce market supply fluctua-
tions by requiring commodity handlers to refrain from shipping a
certain commodity for a short period of time. Although many marketers
believe that shipping holidays aid market stability and prevent market
deterioration, strong evidence to support or refute this concept has
not been presented. The undetermined value of these measures raises
the question of the need for government involvement. Future recommen-

dations will therefore be carefully considered by tne Department.

QUALITY PROVISIONS

Quality provisions are the most frequently used feature of
marketing orders and are usually in the form of minimum grade and/or
size regulations. This provides consumers with a high quality product,
thus serving the long-term interests of producers, since a good uality
image can lead to long-term market expansion. However, with crops
which reflect the uncertainties of weather, quality requirements need
to be flexible enough to maximize the marketing of all fruits and
vegetables suitable for consumption in fresh form.

Industry should be cautioned that use of quality regulations
primarily as a form of supply control is contrary to Administration

policy. Therefore, the Deczrtment will continue to evaluate the use


is provided for under the statute, the Secretary strongly encourages
cooperatives to refrain from bloc-voting. It is believed that
individual voting will better represent the interests of the industry
and will more clearly demonstrate tne desires of the entire industry,

both to the Department and the general public.

ADMINISTRATIVE PROCEDURES

Responsibility of Committees and USDA

The Act places upon the Secretary of Agriculture the fuil
authority to assure the proper operation of marketing orders.
Marketing order committees have a responsibility to make the most
informed recommendations possible in striving for this objective.
Therefore, it is imperative that all market order administrative
committees proviae the Secretary, through the Agricultural Marketing
Service, comprehensive data trat provide a sound analytical basis for
their recommendations. Failure of the aaministrative committee to
provide this information in a complete and timely manner could result
in delays of the seasonal implementation of provisions of a particular
marketing order. At the same time, the Secretary continues to accept

his responsibility for timely action.

COMMITTEE TENURE
The economic review suggested establishing a limit on tenure to
improve representation and allow for different and more contemporary

ideas. In view of this, the Secretary will require that all committee


Guidelines For
Fruit, Vegetable,
& Specialiy Crop

Marketing Grders

U.S. DEPARTMENT OF AGRICULTURE

JANUARY 25, 1982


DEPARTMENT OF AGRICULTURE
UFFICE OF THE SECRETARY
WASHINGTON, CC. 20250

THIS LETTER WAS SENT TO ALL ADMINISTRATIVE COMMITTEE CHAIRPERSONS AND MANAGERS

Wer 1-9 1903

Mr. Roger M. Nixon

Chairman, Citrus Administrative
Committee

2615 Derbyshire Road

Maitland, Flortda 33751

Dear Mr. Nixon:

As you know, supply control morketing orders recently underwent an intenaive
Executive Branch review including an airing of the eubject in the White louse
and before the full Cabinet. [ would not Suggest thut the outcome wan reached
without some inttial disagreement. However, I an taking this opportunity to
tell you that this review resulted in g reaffirmation of Administration
support for the marketing order concept, for the policy guidelines {asued last
year for these programs, and the Secretary of Agriculture to administer the
programs,

A year of experience operating within the policy gufdelines tasued {n 1982 hae
demonstrated their value ag a basis for Industry-government understanding. We
belleve that this ia an appropriate time to expand on this experience and
identify more specific plans for applying these guldelines to season-long
volume control programs. Our objective 1s to reduce constrainta where
possible under these programs in order to rely more fully on free marret
forces. To further define the marketing order guidelines the following would
apply:

With regard to producer allor ment programs, we intend to
phase out entry barriers over the next five years. This
will provide the affected industries with a reasonable
anount of time to adjust their marketing practices.

For market sllocation and reserve pool programs, we intend
to require that primary markets have available a quantity
equal to 110 percent of recent years' sales in those
outlets before approving secondary market allocation or
pooling. This will assure plentiful supplies for consumers
and for market expansion but will retain the mechanism for
dealing with burdensome supply situations.


CONCLUSION

The role of the Department of Agriculture is to develop and
implement agricultural policies that are in the public interest.
Marketing orders that are wisely constructed, appropriately utilized,
and effectively administered are part of such a policy. However, as
with any other program, there are possibilities for misuse. These
preceding guidelines are established to assure that abuse does noz
occur and to provide a means of better understanding of the bound-

aries, both to the industry and the general public.

10


U.S. policies on foreign trade must take into consideration
requirements of a number of international agreements to which tne
United States is party. Accordingly, the Department will review any
proposed marketing order legislation or regulation to ensure that its
provisions and impact are compatible with the intent of Section 608e
and with these international agreements.

In conducting this review, the Agricultural Marketing Service
will examine all available information and will maintain close contacz
with other government agencies as well as industry sources. Conse-
quently, industries are cautioned to carefully examine future recom-
mendations to make sure that they are consistent with the spirit and

intent of the law and U.S. international obligations.

RESEARCH AND PROMOTION

Fruit and vegetable marketing orders authorize the collection of
funds for use in Product ion and marketing research and for advertising
and promotion. The Administration supports production and marketing
research because it can help producers respond rapidly to acute
problems that reduce yields. Researcn can also provide new tecnniques
to increase yields and reduce production and marketing costs in the
future. Advertising and promotion can contripute to economic

efficiency by helping consumers make oetter informed decisions.

BLOC-VUTING
When referenda are conducted either on a proposed order or amend-
ment of an existing order, the law allows a cooperative to vote for

its membership. This is referred to as bloc-voting. Althougn this


Market Allocation Programs

The Secretary recognizes that market allocation programs can be
beneficial to producers when used properly. The programs must allow
individual incentive and product innovation, they should not be used
to inhibit long-run market expansion or to encourage or continue ~
chronic over-production. The Secretary intends to evaluate annually
the economic situation in each industry where market allocations are
proposed to ensure that regulations are designed with these objectives
in mind.

Tne Secretary will evaluate committee recommendations as to their
possible long-term effects on price differentials between markets and
the percentages of production going to the different markets. This is
to ensure that market adjustment and public interest concerns receive
appropriate attention.

The industry must monitor the effects of continual use of annual
regulations, so that regular suppiy and demand signals from the market
are not distorted. The committees must submit, and the Secretary will
consider, market allocation recommendations separately from all otner
features available under tne program, including prorates.

Prorates

Prorates are measures which regulate the short-term flow ofa
commodity to market. Specifically, the term "prorate" refers to the
establishment of a maximum quantity a handler may snip during a
limited time period. Recommendations for prorates tnat nave an
allocative effect will be considered separately.

This Agministration believes that prorates can be a valuable tool
for effective marketing serving the interests of both producers and

consumers through market stabilization and extension of the season.


both buyers and sellers provides proaucers inc consumers a cegree of
protection against extreme losses arising from economic and natural
causes.

In keeping with the Administration's cz

Act, the Secretary will require some aclu

restrict entry, limit supply, or perpetuate cver-sucziy of %,
commodities. The extent of Federal involvement will be consistent
with the efficient use of the nation's resources in the interest of
producers and the general public.

The following general guidelines will be applied to all Federal
marketing orders covering fruits, vegetables, and specialty crops.
These guidelines will be applied to each marketing order on a

case-by-case basis, after full discussion with the industries involved

VOLUME CONTROL PROGRAMS

Producer Allotment Programs

The Department's recent economic review pointed out that proaucer
allotment programs have the potential for limiting supply, causing
underinvestment by industry, and reducing open competition by
restricting entry of new producers.

While the allotment system is contrary to the general policy cf
this Administration, it does have a statutory basis. To balance
policy goals with statutory requirements, the Secretary will carry out
these programs in a manner that will eliminate barriers to entry.
Where changes in existing programs are necessary, the Secretary wiil

work with the affected inaustries toward graqual adjustments


GUIDELINES FOR
FRUIT, VEGETABLE,S SPECIALTY CROP
MARKETING ORDERS

The Agricultural Marketing Agreement Act of 1937 (Act) authorizes
the Secretary of Agriculture to administer marketing order programs
for fruits, vegetables, and specialty crops. In response to the
President's Task Force on Regulatory Relief, the Secretary of
Agriculture initiated an economic review of Federal marketing orders
in May 1981. This review was undertaken to determine how well the
programs are meeting the Administration's goals of --

--Reducing Federal government regulation;

--Maximizing producer returns through open and competitive

marketing;

--Achieving more efficient allocation of resources;

--Supporting the concept of self-help programs.

The Department's economic review evaluated the impact of the
numerous programs permitted through the marketing order system. After
extensive analysis, the report concluded that orders have the
potential to effectively stabilize supplies and prices but some may
impose inefficiency on the production and marketing system.

Recognizing the inherent instability in producing and marketing
agricultural commodities in general, and these crops in particular, the
Secretary intends to operate marketing order programs jin a manner to

reduce extreme fluctuations in supplies and prices. Reducing rists to


Hr. Roger M. Nixon

We aluo intend to provide for greater flexibility under
prorate programs. However the principal prorate programe
are in formal rulemaking under the Administrative Procedure
Act and I cannot make specific Judgements about changes
until hearing records have been analyzed.

I believe that constructive changes such as these will make the marketing
order concept even stronger. 1 intend to continue to use my statulory
authority to administer these programs for the benefit of the Awerican
farmers and the public in general.

Sincerely,

Yoh R. Block
Bouretary