Introduction

Given the emotional climate that presently exists, it is difficult for others and me to introduce facts and opinions meant to enhance the discussion and debate regarding the proposed CMC regulation. The enclosed statement is part of my continued effort to do so. It is also the substance of the presentation that I will be making when others and I eventually meet with the USDA. While growers may agree or disagree with me, I will remain forthcoming in my efforts to do what I believe is best for our industry, including my growers, my employees and my company. I would appreciate and welcome any constructive and civil response to my presentation.

Maintaining orderly marketing is a key statutory objective of the law that authorizes marketing orders 7 U.S.C. §602 (1) and (4), and if a volume regulation is to comply with the law, it should be designed so that it does not disrupt the orderly marketing of cranberries. A large producer set-aside will create an advantage for those handlers who have accumulated large surpluses, even though these surpluses are the root cause of the industry’s present problems. A large set-aside will also work to the advantage of foreign producers who sell fruit in the United States, but who are not subject to a marketing order. The handlers with surpluses will have more than enough fruit to satisfy their customers’ needs, while handlers who have not accumulated surpluses will not receive enough fruit from their contracted growers to serve their markets and customers. The larger the set-aside, the greater the advantage for holders of surplus and for foreign producers. This advantage comes at the expense of growers contracted to handlers with no surplus.

There are several ways to remedy this shift in market power. One option is to move quickly to adopt a "marketing agreement," either with or without a "marketing order." The "marketing agreement" would apply the same set-aside percentage to surplus, which the marketing order would apply to new crop fruit. In addition, each and every handler could make a binding commitment as part of the marketing agreement to subject its foreign fruit under contract to the same set-aside. The problem here is that there are foreign handlers who would probably not participate in such a binding commitment and would dump all of their berries into the U.S., undermining a marketing order or marketing agreement.

A second option for restoration of orderly marketing conditions would be for the handlers who hold surplus, to provide assurance to handlers who do not have surplus that holders of surplus will supply them with an adequate supply of new crop fruit to meet their customers’ needs. This fruit must be available on a timely basis and at the same cost at which fruit is being purchased by the surplus holding handlers. Once again, the larger the set-aside, the more important these alternate supply arrangements become. There is movement presently among U.S. handlers toward this approach for the 2001 crop relative to the proposed 32% regulation. It is, however, very complicated logistically to develop, store, sell, and deliver a berry pool. Quality control issues in particular are difficult to resolve. It is still too early to predict that these negotiations will succeed. Movement in this regard is slower than anticipated.

For future years, a cleaner and simpler way would be to create an allotment pool with surplus handlers contributing unneeded allotment into such a pool. This is strictly a paper transaction, without the logistical problems that complicate the berry pool. Otherwise, distribution of a pool allotment would be the same as distribution of berries from the berry pool. I am pleased that the CMC amendment sub-committee is giving consideration to this option. Such an amendment will instill the discipline needed to force certain handlers to get their houses in order regarding the accumulation of extra berries that cannot be sold.

Considering all of the above, one would have to conclude that the 32% CMC recommendation for 2001 will be acceptable to the USDA, but only if the companies with a surplus are willing to transfer berries at cost (no more, no less) to handlers without a surplus. The 46% - 50% alternative is too radical. It does not allow enough available berries for the berry pool, punishes growers of independent handlers with no surplus too severely, will create very disorderly marketing conditions, and therefore should be rejected as illegal.

The only realistic choices the growers have at their disposal for this year are a 32% regulation or no regulation at all.

Choosing the 50% option is like voting for no order at all for 2001.

If independent handlers who do not hold surpluses are to support a set-aside now or in the future, they must have assurances that the handlers who hold surpluses will not gain a competitive advantage from their accumulated inventories, which are the root cause of the industry’s current problems. To avoid a sharp shift in market power, either these surpluses need to be subject to the same set-aside as new crop fruit, or there need to be binding commitments that surplus holders will provide new crop fruit to independents at the same cost they will pay to their producers. If the effect of a marketing order with significant set-aside is to deny independent handlers access to fruit on a basis which is equivalent to the access available to the holders of surplus, the order would not promote orderly marketing and would violate the authorizing statute. The Secretary of Agriculture would have no choice other than disallowing the Cranberry Marketing Committee recommendation.

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