Are check-off programs in danger?

On Monday, June 25, in a 6-3 vote, the U.S. Supreme Court agreed that a federal law mandating that mushroom growers pay into a collective advertising fund was unconstitutional. The case was brought when a Tennessee mushroom company, United Foods, Inc., refused to pay check-off funds since 1996.

What does this have to do with Delta-grown crops? Plenty, because the program United Foods objected paying into is akin to check-off funded programs for other commodities. Check-off dollars for cotton, soybeans, milk, beef, eggs and a host of other products are now in jeopardy. How much jeopardy is the question.

David Fraser, the Cotton Board vice president of communications, says the organization is in the process of “digesting the decision and going over it with our board and whatnot. It will have an affect on the cotton check-off, but to what degree we aren't sure. This definitely opens a can of worms for all the commodity programs.”

The case had been brewing for some time. While not generating much attention nationally, it was being watched by commodity group insiders with a keen eye.

Justice Anthony Kennedy, who authored the majority opinion, said a U.S. appeals court had been correct in an earlier ruling saying the mushroom assessment was unconstitutional. The court found mandated check-off funds violate the First Amendment guarantee of free speech. Why? Because the company involved was forced to help pay for advertising benefiting its competitors.

Kennedy said free speech is severely curtailed if the government can require someone to subsidize speech the government smiles on.

Despite the ruling, Agriculture Secretary Ann Veneman staunchly defended check-off programs.

“USDA generally regards promotion activities conducted under federal marketing agreement and order programs and federal research and promotion programs to be effective tools for market enhancement.

“USDA continues to believe the national commodity research and promotion programs offer opportunities to maintain, develop and expand markets for agricultural products both home and abroad,” she said.

The ruling comes on the heels of a 1997 Supreme Court decision that denied free speech was at risk in a similar program for California tree fruits. In his writing, Justice Kennedy says that situation was different because the mandated check-offs for the California fruits were part of a comprehensive program restricting marketing autonomy.

“The tree fruits ruling (Wildman vs. Glickman) was based on the fact that the whole industry was under marketing orders. There was what was termed a ‘very comprehensive regulatory scheme in place.’ That essentially eliminated competition due to quality concerns, fruit and nut sizes — basically everything that affects the tree fruit and nut industry,” says Fraser.

As competition had been eliminated, all growers were working from equal footing anyway. So the court ruled the promotional tree fruit program was just a natural extension of that.

In the case just decided (U.S. vs. United Foods), “the Supreme Court is saying for mushrooms there is no such broad or comprehensive regulatory scheme in place. Therefore, the producers aren't being forced to cooperate with each other. Forcing them, or compelling them, to conform to this kind of speech isn't legal according to the court,” says Fraser.

Fraser hasn't talked to any of his counterparts from other commodity groups. “But we're having a conference call at noon (on June 26). The call will basically be a review of what's happened. A commodity attorney out of Washington, D.C., will interpret this ruling for us.”

At this point, the Cotton Board isn't going on record about how this ruling will affect operations, says Fraser. “We just don't know enough. Will it affect us? Yes, it will. From what quarter and in what manner, we don't know. It'll be at least a few weeks before this shakes out.”

Has there been much dissent from cotton growers about paying the check-off funds? Not much, says Fraser. “The overwhelming majority of cotton farmers know the program is very effective. Over the last 10 years, the program essentially more than doubled per capita consumption of cotton from 15 pounds to 37 pounds.

The program is unique and works. We went from a low retail market share of 34 percent in 1975 to 61.5 percent now. So over 61 percent of all fiber sold retail is cotton. That's very strong.”

But Fraser admits there are producers who balk at handing over check-off dollars.

“Whether cotton or some other crop, growers are facing economically tough times. They're looking at every way to make a buck and stay afloat.”

If you ask the average producer if, despite the current economic conditions, the program is strong and working for them, they'd overwhelmingly say yes, claims Fraser.

“Our program builds demand. Prices are a function of supply and demand. We can only have influence on domestic demand, not on world supply. And world supply is where the big problem is,” he says.

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