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Marketing Orders: A Self-Help Program for Producers

Thomas Worley
Revised 2/96

Keywords: Marketing Orders, Onions, Production Area, Name Recognition

Federal marketing orders are voluntary commodity programs initiated by producer groups and enacted only when approved in referendums in which all producers within the proposed production area are eligible to vote. They are self governed within legislation established in the 1937 Agricultural Marketing Agreement Act and for the most part are self-financed. The policy environment of restrictive budgets in which the 1995 farm bill will be crafted favors policies that require little net cost to the federal government. Marketing orders are attractive in this environment because they carry only modest administrative costs. This article provides an overview of the most recently issued federal marketing order, the Walla Walla Sweet onion order, and then offers observations concerning the feasibility of marketing orders for more widely grown field crops.

Walla Walla Sweet onions have been produced as a specialty vegetable crop in the vicinity of Walla Walla, Washington and Milton-Freewater, Oregon for over a century. The soils and climate of the Walla Walla valley have proven suitable for commercially producing onions having a mild, sweet flavor originally grown by early Italian settlers. These specialty onions are planted in early fall and over-winter in the fields before restarting growth early the next spring when temperatures reach adequate levels. Walla Walla Sweets are generally harvested over a six to eight week period beginning in the latter half of June. This year, the acreage of Walla Walla Sweet onions was estimated at 1600 acres by the Washington Agricultural Statistics Service.

Walla Walla Sweet onions are widely known for their large size and mild, sweet taste in comparison to other, more pungent dry storage type onions. Sweet onions are generally marketed as fresh produce to be used by the consumer within a short time of purchase. Consumers all across the U.S. have become familiar with the name and taste of Walla Walla Sweet onions. Insuring this reputation for mild flavor and name recognition has led producers of the onions to seek opportunities to enhance the marketing of their specialty product.

A group of producers began to explore the feasibility of a federal marketing order to regulate the handling and marketing of Walla Walla Sweet onions in March 1992. A series of working meetings among growers culminated with the required formal public hearing on the proposed order in November 1993. An April 1995 producer referendum on the order resulted in 100 percent of the growers who voted favoring the adoption of the order. A two-thirds majority of producers voting in the referendum or producers representing at least two-thirds of total volume marketed is needed to pass any proposed marketing order. The U.S. Secretary of Agriculture formally issued Federal marketing order 956 regulating the handling of Walla Walla Sweet onions on May 19, 1995.

The order enables the industry to better characterize the Walla Walla Sweet onion as a separate product, distinct from others in the marketplace. It also provides authority to conduct production and marketing research and promotional activities including paid advertising and establishment of container markings.

The most important tool sought by producers was the ability to maintain name recognition for their product, thereby differentiating it from other onions in the marketing channels. The order provides this distinction for the Walla Walla Sweet onion by outlining a definite production region from which onions identified as Walla Walla Sweet must be grown. The production area defined by the order includes all the traditional growing areas and is roughly bounded by the Washington towns of Touchet on the west, Waitsburg to the north, and Dixie on the east and Umapine, Oregon on the south. The order thereby precludes onions grown outside this area from being designated as Walla Walla Sweet onions.

All first handlers of Walla Walla Sweet onions will be paying the assessment to operate the order and to provide the advertising support and research authorized by the program. Thus, if these activities are successful in improving returns to growers it will be to the benefit of those cooperating producers within the production region who made such gains possible. Onions grown outside the established production area cannot be marketed as Walla Walla Sweet onions.

The order provides for a 10 member administrative committee, consisting of 6 producers, 3 handlers and a public member. This committee will administer the order in partnership with U.S.D.A.'s Agricultural Marketing Service representatives from the Portland field office. Committee members were elected in a grower meeting in late May.

Although it is too early to determine the success of the new Walla Walla Sweet onion marketing order, some long standing orders have evidently proven their value as a marketing tool for the industry covered. Thus, some policy observers have asked if marketing orders could benefit producers of other crops including the major field crops such as wheat. Substituting marketing orders for federal price and income support programs covering the major field crops has considerable appeal in today's budgetary environment because marketing orders involve no direct outlays from the U.S. Treasury. Other than some relatively small administrative expenses, direct outlays do not show up in the Federal budget, so marketing orders have been called, "farm programs you don't see."

In most cases it would be difficult to develop marketing orders that most major crop growers would agree to because of the diverse production and marketing conditions for field crops. Most crops covered by marketing orders are grown by relatively few producers within well-defined geographic areas and are marketed in few channels. In contrast, field crop production occurs over wide areas of the country and involves many producers marketing many crops to many different markets.

Growers may undertake efforts to boost farm prices by restricting sales of high-quality produce to a price responsive markets only when the industry can isolate its product from other competing suppliers. It is generally easier to isolate markets for horticultural crops such as Walla Walla Sweet onions than for major field crops because of the specialized production regions and short marketing seasons for many specialty crops.

Field crops producers in other countries compete directly with U.S. producers through world trade. Any attempt to elevate the U.S. price of field crops via marketing order activity would likely cause domestic producers to lose export shares. Even if marketing orders could be used to increase U.S. prices of field crops above the world price, imports would enter the U.S. market causing domestic U.S. prices to fall. Furthermore, higher farm prices would encourage domestic grain users to circumvent the marketing restrictions by producing their own grain and selling it in a different form. For example, beef feedlots could grow corn and market it through fed cattle.

Despite their potential benefits for producers of many horticultural crops marketing orders do not appear to offer a workable alternative to the current price and income support programs for major field crops.

Thomas Worley is a member of the Western Extension Marketing Committee and is an Extension Economist at Washington State University.

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