Agricultural Marketing Orders - Essay Example

Agricultural Marketing Orders Introduction During the great depression in the 1930’s, economic conditions worsened an existing problem of overburdened markets. To respond to the crisis, Congress had to enact the agricultural adjustment act of 1933 in order to be able to elevate farm prices. They had to impose certain restraints on the quantity of agricultural commodities to be produced. In order to be able to ease concerns with the constitutionality of the 1933 Act, and later the agricultural adjustment act of 1935, the Agricultural Marketing Agreement Act was enacted by congress in 1937. According to Sims and Montana state university (312) the intention of Agricultural Marketing Agreement Act (AMAA) is to be able to establish and even maintain orderly marketing conditions for commodities in the agricultural sector in the interstate commerce. This will enable farmers to receive higher prices. The AMAA, also protects the interests of consumers by ensuring prices deems to be in the interest of the public and be feasible. This should be in view of the existing consumptive demand in the domestic and foreign markets. The farmers in such regions were authorized by government to form cartels. This would help in setting controls on the amount and even the quality of products that might be imported to these regions. Marketing Orders According to American Agriculture (228-229), Agricultural Marketing Orders (AMO) is a legislation allowing producers to be able to withhold output from a specific market for them to be able to increase the market price. In other words Marketing orders are legal instruments designed to help stabilize market conditions for commodities in the agricultural sector. Marketing orders established self-imposed assessment and fee used in various activities in the agricultural sector. The activities include advertising and farmers being able to promote their agricultural products. Secondly, the fee will assist in the expansion of markets and distribution channels. Thirdly, the producers will be able to carry out research on how to improve growing techniques. Fourthly, it will enable farmers to regulate their products in terms of quality and grade. Therefore, trade practices will be regulated. The final point is that producers will be able to resolve various critical problems and their various needs in the industry. Marketing orders were established for various commodities with a requirement of 2/3 support of the producer. It helps to regulate handling of various commodities in instate or even foreign commerce. According to Engle and Quagrainie, (118) in the regulations requirements, marketing orders for a commodity or its products, other than milk has to be designed to achieve the following goals: it should be able to limit and allot amount of any commodity or grade, size and even quality of commodity being marketed. Secondly, it should be able to provide for control and even disposition of surplus commodities and be able to establish reserve pools. Thirdly, it should necessitate inspection of the commodity addressed in the marketing order. The fourth point is that there should be a provision of method that allows fixing of the size, its capacity, weight, dimensions, or even pack of the containers used in the packaging, transportation, sale, shipment or handling of any fresh or dried fruits, vegetable, or tree nuts. The final point is that there should be establishment of research and development projects that helps to improve and even promote the marketing, distribution and consumption or even producing efficiently commodities that are covered by a particular marketing order. Agricultural marketing orders exist for both milk and an approximate of thirty-five types of fruits, vegetables, nuts, and specialty crops. This number however, has fluctuated in the last several decades and remains to be subject to change in the future. Milk marketing orders vary from marketing orders that are applicable to fruits, vegetables, nuts, and specialty crops. The AMAA gives authority to the secretary to be able to create an administrative committee or board for each marketing order. This helps in administration of that marketing order. Marketing orders normally apply to handlers. This includes; processors, associations of producers, and several others involved in handling of commodities relating to a marketing order. All marketing orders are issued as regulation stated by Agricultural Marketing Services (AMS). Who oversees the Marketing Order? The department of agriculture and consumer services is responsible for overseeing the marketing order. A marketing professional who is appointed by the department of agriculture and consumer services handle funds and keep proper records of all projects, contracts and expenditures. Apart from the agriculture and consumer services department, there is an advisory council made up of legitimate members who are active agricultural representatives having stake in the marketing order. The advisory council recommends how best money should be spent through creation of annual budget and ensuring meetings are held regularly. The council has seven members and seven alternates. The role of the advisory council is to advise the department accordingly on needs and priorities. Secondly, they are required to give recommendation on rules and regulations on how to manage the marketing order. Thirdly, they are in a position to advice on collection and spending of money. Fourthly, the council has an obligation to establish committees and subcommittees to be able to conduct certain duties and various projects that relates to the marketing order. The fifth point is that they are involved in research marketing. This includes formulation of contracts for services. Finally, they deal with reports and complaints or violation of marketing order and suggest changes and improvements that will expand the industry. Marketing Agreements Marketing orders vary from marketing agreement. Marketing orders bind all individuals and businesses classified as handlers in a geographic area covered by the order. Marketing agreements contrast from marketing orders in that, they are voluntary and involve only the handlers who are signatories of the agreement and are bound by its regulation. In addition, a marketing order does not require marketing agreement to be issued for it to take effect. According to Hill et al (23), marketing orders and agreements were established to assist producers in controlling supply and encouraging marketing that is more orderly. Orderly marketing helps in reducing problems of seasonal shortages and even surpluses. This was done with the expectation that it would increase producer prices and hence higher income. The legislative authority for these and agreements are the agricultural Marketing Agreement Act of 1937.The Act was amended by several subsequent farm bills. Concerning the statutory and regulatory framework, marketing orders and agreements are supervised by Agricultural Marketing Services (AMS). Agricultural Marketing Agreement Act of 1937 (AMAA) authorizes them as amended; it allows producers to be able to promote orderly marketing. According to Womach and Canada (120), this is achieved through collectively influencing the supply, demand or even price of a particular commodity to be able to create orderly marketing. Establishing Marketing Orders and Agreements The AMAA, its implementing regulations, and the Administrative Procedure Act set forth the process for establishing marketing orders and agreements. Any person proposes marketing order, including the secretary. Incase a different person other than the Secretary initiates the proposal, then that person has to file a written application with the Secretary. The administrator is then required to do an investigation on the proposal in order to determine if there is adequate, reason to believe that the issuance of the order or agreement will affect the declared policy of the AMAA. It should also provide an opportunity for hearing on the proposed order. Subsequent to the hearing, the administrator issues decision recommending that other thing has to be ruled upon each of the proposed findings or conclusions presented by concerned people and proposes marketing agreement or order or refuses the request to do so. Finally, in setting up a marketing order or agreement, it involves referendum approval. Here two thirds of producers, either by number or volume, of a specific commodity has to approve the order or agreement proposed. Once it has been approved, the order or agreement will remain binding to all handlers within the marketing area as specified in the order or agreement. The process to amend an order or agreement is parallel to the process of establishing an order or an agreement. Agricultural marketing orders, put into operation with the initiative and approval of affected producers, are a form of supervised self-regulation. The 47 orders in effect variously authorize quantity controls, quality controls, and market support activities for fruits, vegetables, and specialty crops. Administered by producer committees under the supervision of the Agricultural Marketing Service, for most of their history they produced little controversy. In recent years, they have been attacked as anticompetitive. The impact of orders on prices, however, seems limited at best. Orderly marketing has largely replaced concern for "parity prices" as the goal of marketing orders. Conclusion The great depression in the 1930’s worsened economic conditions. Therefore, production of goods and services became disturbing because the market could not dispose off products produced. There was little money in circulation to purchase the goods and services. As a result, producers faced losses and were discouraged to produce. Producers of fruits, vegetable, milk and nuts were not spared either. Luckily, Congress anticipated the challenges and moved forward to enact adjustment Act of 1933. The Act put a ceiling on the quantity of farm produce. Furthermore, Congress enacted the Agricultural Marketing Agreement Act in 1937 to help create orderly marketing of the agricultural products. The Agricultural Marketing Agreement Act helped farmers get higher and prices as well as protect the consumers from exploitation. Agricultural marketing orders were legislated to allow farmer hoard their farm produce to stabilize the market. The marketing orders put ceiling on the quantity of products produced, handle surpluses, inspected the commodities and change the commodities to meet market requirements. The orders covered thirty-five fruits as well as vegetables, nuts and specialty crops. Marketing agreements were also developed. They are applicable to the handlers who are the signatories to the agreements. Both marketing orders and agreements helped controlled the agricultural commodities and stabilized the markets. References American Agriculture. A Survey of Agricultural Economics Literature. Minneapolis, MN: University of Minnesota, 1990. Sims, James and Montana state university. Beneath the Bottom Line. Philadelphia, USA: DIANE Publishing, 1996. Engle, Carole and. Quagrainie Kwamena. Aquaculture marketing handbook. USA: Wiley-Blackwell, 2006. Womach, Jasper and Canada Carol. Agriculture: a glossary of terms, programs, laws and websites. New York: Nova Publishers, 2000. Hill, Lowell D. Bender Karen, and World Bank Developing the regulatory environment for competitive agricultural markets, Washington, USA: World Bank Publications, 1995. Read More