Federal Marketing Orders and Agreements:

An Overview

 

Marketing orders and agreements are legal instruments issued by the USDA Secretary that are designed to stabilize market conditions for certain agricultural commodities by regulating the handling of those commodities in interstate or foreign commerce. Once approved by the USDA Secretary and producers, marketing orders are binding on the entire industry in a specified geographic area. Marketing orders and agreements are broken down into three specific categories: (1). Fruits, Vegetables and Specialty Crops, (2). Milk and Dairy Products, and (3). Miscellaneous Commodities. Under the applicable regulations, marketing orders for any commodity or its products, other than milk, must be designed to accomplish at least one of the following goals:

    • limit and/or allot the amount of any commodity, or any grade, size, or quality of that commodity that is marketed;
    • allotting/providing methods for allotting the amount of any commodity that each handler may purchase on behalf of any producer during a specific period;
    • provide for control and disposition of surplus commodities and establish reserve pools;
    • require inspection of the commodity covered by the marketing order;
    • provide “a method for fixing the size, capacity, weight, dimensions, or pack of the container, or containers, which may be used in the packaging, transportation, sale, shipment, or handling of any fresh or dried fruits, vegetables, or tree nuts”; and
    • establish research and development projects to “assist, improve, or promote the marketing, distribution, and consumption or efficient production” of commodities covered by a particular marketing order.
    • Milk marketing orders, on the other hand, are to ensure that dairy farmers receive a minimum price for each classification of milk and receive payment within a specific time frame. This helps guarantee that consumers have stable supplies of milk throughout the year without wide fluctuation in the price of the dairy product.

See 7 U.S.C. § 608c(6).


Statutory and Regulatory Framework

Marketing orders and agreements are administered by the Agricultural Marketing Service (“AMS”), an agency within the USDA, and are authorized by the Agricultural Marketing Agreement Act of 1937 (“AMAA”), as amended, 7 U.S.C. §§ 601–27; 671–74. The regulations establishing and governing marketing orders and agreements are found at 7 C.F.R. §§900–999 (fruits, vegetables, nuts and specialty crops), 7 C.F.R §§1000–1199 (milk) and 7 C.F.R. §§1200–1599 (miscellaneous commodities).


Historical Development

Economic conditions during the Great Depression of the 1930s exacerbated an existing problem of overburdened markets. In response to this crisis, Congress enacted the Agricultural Adjustment Act of 1933 to elevate farm prices by imposing certain restraints on the quantity of agricultural commodities that could be produced. To alleviate concerns with the constitutionality of the 1933 Act and later the Agricultural Adjustment Act of 1935, Congress enacted the AMAA in 1937.

The AMAA is intended “to establish and maintain … orderly marketing conditions for agricultural commodities in interstate commerce” so that farmers will receive higher prices. The AMAA is also intended to protect consumer interests by requiring prices to that “the Secretary . . . deems to be in the public interest and feasible in view of the current consumptive demand in domestic and foreign markets.”

In 2015, the Supreme Court of the United States granted a writ of certiorari to hear Horne v. Department of Agriculture, a case dealing with a federal marketing order. In 1949, the U.S. Department of Agriculture implemented a marketing order that authorized the federal government to reserve a percentage of the yearly California raisin crop to stabilize the supply, and thus the price of California raisins. Horne, a California raisin farmer, attempted to bypass the Marketing Order by processing his own raisins, which he believed would exempt him from the reserve requirement. After a $700,000 fine, he sued the Department of Agriculture alleging a violation of his Fifth Amendment rights under the Takings Clause.

In its 8-1 decision for Horne, the Court held that the Marketing Order’s reserve requirement constituted a taking under the Fifth Amendment because it deprived the owners of their property rights to “possess, use, and dispose of” the raisins. Because a physical taking had occurred, returning the net proceeds of the sale of the raisins to the owners does not exempt the government from paying “just compensation” for the taking itself. The Court also held that making the reserve requirement a condition on legally participating in the raisin market effects a per se taking. The reserve requirement cannot be properly characterized as a voluntary exchange for a governmental benefit. Therefore, the government had to pay a just compensation for the taking and rescind the fine it had imposed on Horne.


Marketing Orders

Marketing orders exist for milk and approximately twenty-one types of fruits, vegetables, nuts, and specialty crops, although this number has fluctuated over the last several decades and is subject to change in the future. Milk marketing orders are different from the marketing orders applicable to fruits, vegetables, nuts, and specialty crops and are not within the scope of this overview. The AMAA also provides an additional program for peanuts, which is also not within the scope of this overview. For more information on milk marketing orders and the program for peanuts, please visit the Farm Commodity Programs: An Overview

The AMAA authorizes the Secretary to create an administrative committee or board for each marketing order to help administer that marketing order. Marketing orders apply to handlers- “processors, associations of producers, and others engaged in the handling”- of commodities subject to a marketing order. All marketing orders are issued as a regulation promulgated by the AMS.


Marketing Agreements

Marketing orders differ from marketing agreements: marketing orders are binding on all individuals and businesses who are classified as ‘handlers’ in a geographic area covered by the order, and marketing agreements are binding only on handlers who are voluntary signatories of the agreement. Unlike marketing orders, marketing agreements are voluntary and only the handlers who have signed the agreement are bound by its regulations. A marketing agreement need not be issued for a marketing order to take effect.


Establishing Marketing Orders and Agreements

The AMAA, its implementing regulations, and the Administrative Procedure Act, 5 U.S.C. §§ 551–706, set forth the process for establishing marketing orders and agreements. Any person, including the Secretary, may propose a marketing order or agreement. If a person other than the Secretary initiates the proposal, that person must file a written application with the Secretary.

The Administrator is required to investigate the proposal to determine whether there is “reason to believe” that issuance of the order or agreement “will tend to effectuate the declared policy” of the AMAA. If the Administrator determines that the proposed order or agreement “will tend to effectuate the declared policy” of the AMAA, it must provide for an opportunity for a hearing on the proposed order. A Notice of Public Hearing is issued and published at least 15 days before the hearing.

Following the hearing, the Administrator issues a recommended decision that, among other things, rules upon each of the proposed findings or conclusions submitted by interested persons and either proposes a marketing agreement or order or denies the request to do so.

The final step in establishing a marketing order or agreement is referendum approval. Typically, two-thirds of producers, either by number or volume, of the particular commodity must approve of the proposed order or agreement. Once approved, the order or agreement is binding on all handlers within the marketing area specified in the order or agreement.

The process for amending an order or agreement parallels the process for establishing an order or agreement.