How the Cranberry Marketing Order Works

Marketing orders can be useful when prices plummet to equilibrate supply and demand and stabilize prices, and when grower returns are less than the costs of production. The Federal Cranberry Marketing Order was created in 1962. Each year the Marketing Committee develops a policy after conducting economic analysis of the cranberry industry. Data on production, acreage, sales, utilization, and inventories are gathered for the analysis. Using these data the Committee forecasts production, utilization, and inventory for the subsequent year. If it determines that the forecasted conditions would lead to disorderly markets, the Committee suggests to the Secretary of the USDA that a volume regulation program be implemented. The regulation would ensure that the supply of cranberries was just enough to meet demand and provide adequate carryover.

There are two types of volume regulation programs that the committee can enact. The first to be created was the Withholding Program. In this program a certain percentage of handler’s cranberries are restricted, so those restricted cranberries can only be diverted to noncompetitive markets, which include exporting to countries other than Canada, donating to charities, and use for research. Growers still deliver all of their cranberries to the handlers, but the handlers then restrict that percentage established by the program. The second type of volume regulation, created in 1968, is the Producer Allotment Program. The Committee determines the average sales history for each grower. Then the committee divides the quantity of cranberry supply it deems acceptable by the total of the average sales histories of all growers to determine an allotment percentage. Growers can then only sell that percentage of their production to handlers. As in the Withholding Program, the excess cranberries can only be diverted into noncompetitive markets such as charity and exports.

Enforcement of the volume regulation program requires that audits and onsite inspections be conducted by the Committee. Additionally, handlers have to provide written documentation of any disposal of restricted or excess cranberries to noncompetitive markets. Penalties for infractions include fines and legal action.

Volume regulations are a good way to prevent short term disorder in the cranberry industry, although increasing demand is a better strategy for long term industry stability. The Marketing Committee has spent, on average, $500,000 per year on two primary methods for increasing demand. First, they have emphasized the health benefits and targeted that information to doctors and health experts, hoping that they will then influence consumers. Studies have shown that health benefits are the most likely factor to increase demand for a food. The second method of increasing demand has been to promote year round consumption of cranberries, instead of just holiday consumption. This has been achieved through printed and electronic advertisements.

 

Sources:

Sexton, Richard. “Evaluation of the Cranberry Marketing Committee’s Promotion Program” Dept of Agricultural and Resource Economics, University of California . 2006.

Farrimond, David. “Cranberry Marketing Order Volume Regulation” Cranberry Marketing Committee