Pork Checkoff

Check out the pork checkoff by checking out:  http://www. flaginc.org/topics/news/checkoff/index.php. In 1998, the Campaign for Family Farms initiated a national petition drive calling for a hog farmer referendum to decide if the mandatory pork checkoff should be ended.  That led to a vote conducted by the USDA in August and September of 2000 in which more than 30,000 U.S. hog producers voted 53% ti 47% to terminate the program.  Following the announcement of the vote results in January 2001, then Secretary of Agriculture Dan Glickman ordered the termination of the program.”

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Response to Paul’s Article

     Paul’s statement in paragraph 2 that “the Board runs the whole program is incorrect. If a Christmas tree check-off becomes a reality, every aspect of the program will require approval from the Secretary of Agriculture.  The Board can recommend, but all budgets and financial reports must be submitted to the Secretary.  The Board can receive and investigate violations, but it must report those to the Secretary.  Read the draft of this proposal, every function the Board performs needs approval from the Secretary of Agriculture first.  The powers held by this Board are granted by the Secretary of Agriculture. Board authority is subjugated by the power of that government appointed individual.  Check out the draft, “no program, plan or project shall be implemented prior to its approval by the Secretary.  Once a program, plan, or project is so approved, the Check-off Board shall take appropriate steps to implement it.”  But all of them, every single one of them, must receive prior approval from the Secretary. 

     Language, particularly contract language, can sometimes be a bit obscure.  The draft does say, “ Patents, trademarks, information, publications, and product formulations developed through the use of funds received by the Check-off Board under this subpart shall be the property of the U.S. Government ( the words,  as represented by the Check-off Board do follow, but since every single project, plan, and program must be submitted to the Secretary for approval, those properties really aren’t controlled by the Board.  And if you cannot control property, do you actually own it?   I do have one question, though, what happens if the program is terminated?  The Board would be dissolved. Remember, the language stated….shall be property of the U. S. Government…

      Check-off supporters eagerly embraced the use of “government speech” in countering the free speech  challenge.  Why should they be so quick to declare that the government speaks for us?  A government mandated program must satisfy three tests in order to constitute government speech.  First, the government must exercise sufficient control of the source of the message and be deemed ultimately responsible for the message.  Second, the main purpose of the message and the assessments must be identified as the government’s.  Finally the funding source of the assessments must come from a large non-discrete group. The last qualification could ultimately sink this argument because Christmas tree producers are an easily identifiable, or discrete group.  When you speak for an easily identifiable group, you run a greater risk of being challenged for trampling on its right to Freedom of Speech.

     Paul mentions instances of possible money mismanagement and happily reports that problems were averted because the government stepped in. My response to this?  If there is no check-off, there is no need for government protection from fund mismanagement. He ended that thought with the statement that we will be collecting only $ 2 to $ 3 million a year.  Are we to infer that there will be LESS reason for mismanagement  because, by comparison, it is such a paltry amount? 

    Check-offs have been portrayed negatively because they have a lot of unattractive qualities.  Growers might compose the Board, but the power behind these programs rests in the hands of the Secretary of Agriculture and the USDA.  How much is this oversight going to cost us?  How much will we owe the Secretary of Agriculture, the USDA, the U.S. Customs Service, and the auditors.  What are the projected expenses for the Board?

     We appreciate Paul’s financial support for the DVD.  Actually, we have produced three of them.  Interested parties can purchase one for $ 20.00.  We don’t need a check-off program to get one in every state fair.  I agree that raising money on a voluntary basis can be challenging, but I believe that good projects can get funding.  And government intervention does not ensure success.

     I would argue that a costly government program does not guarantee the spread of relevant information.  I think that highly motivated growers can do a lot and they can do it better, i.e. more cheaply with fewer problems, than a government bureaucracy.

     I appreciate the effort, time and money spent by check-off supporters.  However, those are not sufficient reasons to support this proposal.  Right now, there are too many questions and few good answers. 

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More Comments from Paul Schroeder

 

As I discuss the possibility of a checkoff for live, farm-raised Christmas trees with fellow growers, it seems that at the core of each discussion is “Why would you want the government involved in your business”?  This is a very good question.  After recent events like Hurricane Katrina, Healthcare Reform, Iraq and the Gulf Oil Spill, all events where our government did not make it’s best performance, it is easy to see why the concern.  When we hear about those events, the visions that pop into our head are not of sugar plums.  So, “Why let the government into the Christmas tree business”?  I will try to explain and it will take more than a couple paragraphs, so please hang in there.

The draft that was sent to the USDA for approval has a clause in it referring to patents, copyrights trademarks, information, publications, and product formulations that states that these items “shall be the property of the U.S. Government as represented by the Board”.  The truth is the Board runs the whole program. You may say, therefore, the Government…but be careful here.  First we need to define the Board.

The Board, as we know it, will be the Checkoff Promotion and Research Board.  This Board has not yet been established.  It will be established as soon as a checkoff program is approved for implementation by USDA.  How will that happen?  It is proposed that each of the 30 existing state or multi-state tree grower associations will apply to become a Certified Producer Organization (CPO).  It is further proposed that each CPO will select or appoint a grower from their peers to serve on a nominating committee.  There will be 4 different nominating committees, one for the western region, one for the central, one for the eastern and one for the importer position.  These various committees will meet and nominate, again from their peers, qualified growers or persons related to the industry. These nominees will need to be eligible to be assessed the checkoff.  Two candidates will be nominated for each of the 12 positions available on the Board.  From these candidates the U.S. Secretary of Agriculture will make the final choice for the members of the Board. The USDA wants board member diversity; they want every grower to be fairly represented.

Now we have a board that is appointed and overseen by USDA, hence the U.S. Supreme Court ruling that Federally-authorized checkoff programs are “Government Speech”, but the board members are growers and producers just like you and me!  The Government is only involved in an “oversight” capacity.  The USDA will assure that all advertising is fair to the whole industry, that all monies collected are spent for the benefit of the whole industry and that the programs that are initiated by the Board are worthwhile.  The Board and USDA will periodically be required to provide an opportunity for Christmas tree growers to determine if this program is providing value back to the growers who are being assessed the checkoff .  In other words, assessed growers will be able to pass judgment on whether or not the checkoff program’s efforts have improved the value of the live, farm-raised Christmas tree in the market place. This is good.

Recently the United  Soybean Board (USB) was investigated by USDA’s Office of Inspector General only to find that they were completely on track.  They did however ask the Board to utilize a different system of  accounting practices.  More than 18 months ago, some leaders of another soybean industry organization had expressed concern that USB may have been misusing some checkoff funds.  USB was completely exonerated by USDA for all of the allegations. However, this investigation demonstrates the Government was there to protect the soybean farmer.

A similar instance brought the beef checkoff to the headlines.  In this case, a third-party audit commissioned by the Cattlemen’s Beef Board (the beef checkoff board appointed by USDA) found that its primary contractor may have utilized some checkoff dollars for lobbying efforts instead of for promotion, which is not allowed for any Federally-authorized checkoff program. Please keep in mind that these two checkoff programs collect over $60 million each year.  The live Christmas tree checkoff program is projected  to raise $2-$3 million per year.

In both of these cases the Government was there to protect the small farmer, not to hurt him.  But when these checkoffs are in the news they are portrayed negatively which potentially gives the readers a bad taste for all checkoff programs. That “bad taste” may evolve into an opposition to anything that involves the Government.  Once again, let me state that this program will be run by tree growers, not government officials.  The monies collected will be paid directly to the Board and they will be spent by the Board.  Only a small oversight fee will be remitted to the USDA. The Board will select an advertising firm or professional promotional group that will work to improve the image of the farm-grown Christmas tree.  This we really need now more than ever.

Many states, Minnesota included, are trying to raise monies for promotion and research.  This has been very difficult to do as these programs rely on voluntary contributions and those are slow in coming.  I have personally donated to Minnesota’s development of a promotional DVD. I saw it playing at the Minnesota State Fair.  That was great.  But this could be used at every state fair in the nation.  And it could be a cost that is shared by every tree grower.  That’s the point of a checkoff…to get more growers engaged in the cost of promotion, not just a few. I applaud the efforts of those who  donate time, effort and money for the benefit of our industry but, will they always consistently be there?

Now, back to my second paragraph.  In a recent article in the Wisconsin Quarterly Journal, Jeffrey Owen, Extension Forest Specialist, North Carolina State University wrote about Christmas tree preservatives.  He found that after extensive studies of eight different products recommended to be put in the tree stand water to help hold the needles on your tree, all failed to make an improvement, instead they did more harm than good.  Some of these products are being sold by Christmas tree growers and they are causing the needles to fall off!  Think about that.

This brings up 2 points.  First, how do we spread this information out to every grower?  Where do the funds come from? Who gets it done?  Who follows up to make sure consumers know the best way to care for a farm-raised tree once it has been cut and placed in a stand?  One answer would be the Checkoff Board, if we had one.  And the second point; what if there was a product out there that could be put in the water of a balsam to make it hold needles like a Fraser.  What if it just hasn’t been found yet?  What if it would revolutionize and eliminate the whole “messy needle” argument?  If that ever happens I want the benefits to go to our industry.  A Checkoff Board might be able to help. Think of the benefits that we might reap from the discovery of a product that really worked.  Will we ever know?  There are so many things that could be done on a nationwide scale to improve the image of the real Christmas tree.  Fifty percent of Americans still think a fake tree is better for the environment!  We know that purchasing a real tree is better for our environment, our economy and our family values and traditions.  But to convince the public is going to take a significant effort and we can’t do that alone.  We need to consider the strength of numbers.  There are almost 20,000 tree growers nationwide.  Let’s work together on this through a checkoff program.

When arguing for the Erie Canal, it was New York Governor Dewitt Clinton’s greatest fear that all the years of study and preparation might be lost.  That the life-long efforts and dreams of so many statesmen might not be realized, that the project might be seen as too large and costly and the opportunity for this accomplishment might never come again. Well, there are those of us that feel the same way about a checkoff for the Christmas tree industry.  There was an unsuccessful attempt to implement one 20 years ago.  A lot has changed since then. Now, many growers who see the need have made a substantial commitment.  An extensive amount of research was conducted. Meetings have been attended and discussions have taken place.  Numerous articles have been written, thousands of phone calls have been made.  A substantial monetary contribution has been given by a few for the benefit of the whole.  It is my fear that if we are not successful this time, it will not happen in my lifetime. We really need to seriously consider the value of an industry wide promotional program now before it’s too late.

Paul L Schroeder

Member, Christmas Tree Checkoff Task Force

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RESPONSE TO PAM

     I have included Pam Helmsing and Dan Hanauer, Jr.’s articles in an effort to provide some balance to the check-off discussion.  Dan had submitted his article for the Journal and it was rejected for publication.  Pam’s article follows Dan’s because some of her points addressed the issues Dan presented. 

     Are check-off programs constitutional?  Well, Pam’s correct that they have been tested all the way to the Supreme Court.  But her statement that “they were definitely ruled constitutional” is misleading.  Check out “Choices, The Magazine of Food, Farm, and Resource Issues, the 2nd Quarter, 2006.”  Constitutionality of check-off programs has not been clear-cut.  In fact, in 2001, the U.S. Supreme Court ruled in U.S. v. United Foods, that the federally mandated mushroom advertising program was unconstitutional as compelled private speech. Check-off programs have been deemed “government speech” in order to side step the “right to free speech”, but there is a downside to this argument.  “Government speech” must pass three tests.  1. Government must exercise sufficient control over the source of the message to be deemed ultimately responsible for the message.  2.  The main purpose of the message and program must be identified as the government’s.  3.  The source of the assessments must come from a large, non-discrete group.  Since Christmas producers are a discrete group, a challenge to our proposed check-off may very well succeed.  And as a producer, are you happy with 1 and 2?

     Check-off programs are designed to assist agricultural industries.  The sticking point with most of them is that they cannot help one agricultural industry at the expense of another.  (for example, one cannot say pork is healthier than beef).  However, our competition is nonagricultural and yet I have been told that we will be restricted as to what we can say about artificial Christmas trees.  Why?

     Is some self-appointed group claiming to represent the entire industry?  Well, she is correct in that the Secretary of Agriculture will appoint Board members from nominations received, but since nominations come from the committee, we should expect to see check off committee members on the final Board.  For example, last March at our Winter Meeting, one of our members told me that Paul Schroeder will be a member of this “as yet to be  determined Board.”  Really?  How can that be?”  I asked.  “Are these Board members self-appointed?”  

  Will a check-off solve all our current problems?  No.  I think it will add to them. Graphs, charts, and statistics can be useful, but their usefulness is limited to the hard conclusions that can be drawn from them.  Her graph offers no “proof.”  In fact, this chart purported to “show” the connection between demand and promotional dollars spent, doesn’t even track those promotional dollars. There is no cause and effect here, only her conjecture.

     Will it encourage more people to grow more treesMaybe.   If people perceive that Christmas tree farming is profitable, with few barriers to production, more of them could begin producing trees, and existing growers could expand their production.  And assuming that they all harvest more than 500 trees, assessments would increase—turning over more dollars to the check-off board.  I am sure they would like that. 

Is a bigger industry betterMaybe, maybe not. 

Is it going to replace my individual marketing? No, nor should it.

Is NCTA for a Check-offYes, and it should be no surprise. Pam suggests that they reached that position only after the passage of time and an overwhelming number of growers voting for a check-off.  I did not get a chance to vote.  Of those that voted—how many of them informed themselves about agricultural check-off programs?  How many of them know anything substantive now? 

Why can’t we vote up front? With all due respect, this argument is spurious.  Had they wanted to test the pulse of the growers nationwide, they only had to consult their members and those of state associations. All they had to do was ask the growers what they thought and how many trees they sold.  They’ve had more than two years to do this.  But before the discussion went so far as a “vote,” this committee should have remained objective about the check-off.   They should have done a better job informing themselves and growers of all the ramifications, instead, I think they became starry-eyed about the possibility of collecting $ 3 million. 

What is taking so longWe are talking about government, right?

Are you personally for or against itCheck out the industry-wide task force that was formed to study the merits of a Christmas tree check-off in April of 2008.  Pam Helmsing was listed as an ex-officio member.  Exactly, when did she cross the line from an objective Drake & Company employee to a check-off supporter?  In fact, since Drake & Company seems poised to help manage those check-off dollars, can anyone associated with them offer unbiased comment?

What she said:

     There is a “Need To Do Something!”

     We cannot do this “something” without a check-off.

     Then the scare tactic, we need the check-off–or else. 

What we should be asking:

     What will be the total cost of this program?  Will it be cost effective?

     What will the generic industry-wide promotion look like?  WHAT IS THE PLAN?

     What proof do you have that this program will do what you say it will?

     The check-off is a trade-off.  We have been told that in return for our money, we will be blessed with increased Christmas tree sales with hints of good prices.  But no real proof of this promise has been offered.  Think about the trade-offs we do know.  We pay, we get another auditor inspecting our operations.  We pay, we get more forms to complete.  We pay, a Board, managed by government officials is created to control our promotional dollars. 

     Our national representative reported that the check-off expects to collect $ 3,150,000 in its first year.  Of that, they expect only $ 1.7 million will be available to the Board.  Where did the rest of the money go?  What kind of national, industry-wide advertising program can they mount with that?  What kind of promotion will satisfy growers in the Pacific Northwest, North Carolina, and everywhere in between?  And will the money remaining after all the expenses have been paid, be enough to do it? 

     Near the end of her article, Pam has some bulleted statements.

Promotion works.  Not always.  Remember the Edsel?

Misinformation has to be countered with facts.  I agree.  Give us some.

Voluntarily funded promotion programs are destined to be short-lived because those who don’t contribute gain a competitive advantage over those that do.  I had to reread this one because it did not make sense.  (But then I remembered the great bugaboo that promoters have…I’m talking about free ridership.)  According to her, voluntary programs do not last because growers who donate are financially penalized because they give money to support them–and those who do not–benefit from the promotion without paying for it.  The first huge assumption one has to make for this to be true, is that all promotions are equally successful among all producers.  And–that all variables between all producers are equal–with this exception–the ONLY difference being some donated and some did not.  First, not all promotions are successful, even spending millions does not guarantee success.  Second, I don’t know how anyone would be able to control all the market place variables to prove this hypothesis.  It makes more sense to me that a grower who donates to a promotional program might actually use it to his advantage and therefore benefit more than someone who does not donate.  (And this check-off does not end free ridership because anyone harvesting fewer than 500 trees would be exempt from the assessments.  All these producers would by definition, be free-riders.  Is this how the Board plans to help the little guy?)

The Real Tree industry is going to continue to face challenges…. Maybe, but how is the check-off going to fight these battles?  Other than a steady stream of funding, the check-off can guarantee nothing.  Supporters should be able to give specifics about their plans, how these funds will be spent, how much administration will cost, but they haven’t done that.

The fake tree industry is commissioning “research” aimed at finding someone….Some growers in Minnesota, Wisconsin, Illinois, and Indiana are collecting money to have an independent laboratory analyze an artificial Christmas tree.  Care to donate?  Contact d.revak@frontiernet.net.

If it’s not worth 15 cents a tree to answer these serious challenges as an industry, the handwriting is on the proverbial wall.  Maybe the issue is not so much the $.15 per tree.  Maybe it’s the mandatory assessment, the lack of concrete information about the promotions, the government scrutiny, or the idea that a lot of growers feel they did not have a voice in the process.

     Like I said before, the check-off is a trade-off.  Supporters have said that the industry is in real trouble, that we must do something, and that the check-off is the answer.  My experience, after talking to quite a few of them–is they have not taken the time to read about agricultural check-off programs.  Their decision is not an informed one.

     Take the guy that harvests 2000 cut your own trees.  He watches his income and expenses and works hard, so he’s doing okay.  Someone comes to him and says, “You’re in real trouble and I can help.  Give me $ 300.00 and I’ll promote trees.”  That someone doesn’t tell him how he plans to do this, but he does say he is going to take the money out of his market and spend it “for the industry.”  But not all of it.  The USDA, the Secretary of Agriculture, the U.S. Customs Service and auditors will take pieces of it.  So about half will be spent on actual promotion.  Oh, and auditors will come out to check his records to ensure that he is complying with the program.  Wouldn’t that grower ask some questions?  Shouldn’t we ask questions?

     Maybe you are saying, “It’s only $ 300.00.”  Well, how do you feel about $ 3+million?  Is that enough to get you to ask some questions?   

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CHECKOFF CHECKUP

American Christmas Tree Journal

July 2010

Checkoff

Location: Pages 14-17

Number of Words: 2,707

Related Materials: 1 chart; sidebar

 

CHECKOFF DISCUSSION CONTINUES                                                         

 

By Pam Helmsing

I’m told that when the Christmas Tree industry discussed a checkoff program in the 1980s, it involved death threats and destroyed friendships. The industry has come a long way in working together. While not everyone is agreement, for the most part the discussions have been respectful and have resulted in a higher level of understanding of the goals and concerns.

Not surprisingly, here at the national office, we hear from those who support a checkoff and those who don’t. We get a wide array of questions and comments, and would like to address a few here.

 

What’s the difference between a Checkoff and a Marketing Order?

The Christmas Tree industry is discussing a Checkoff Program – not a Marketing Order.

“Checkoff” is the common name for a Federal Research and Promotion Program. USDA defines this as: “Authorized by federal legislation, these programs are designed to strengthen the position of the industry in the marketplace and to maintain and expand domestic and foreign markets. The programs are all fully funded by industry assessments. Board members are nominated by industry and appointed officially by the Secretary of Agriculture. AMS oversees the activities of the boards or councils and approves budgets, in order to assure compliance with the legislation.”

Marketing Orders generally contain provisions to manage production and quality, in addition to seeking to stabilize markets. USDA defines them as: “Marketing agreements and orders are initiated by industry to help provide stable markets for dairy products, fruits, vegetables and specialty crops. Marketing orders help to maintain the quality of produce being marketed, standardize packages or containers, and authorized advertising, research and market development. Each order and agreement is tailored to the individual industry’s marketing needs.”

Are Checkoff programs constitutional? I heard they weren’t.

Federally-authorized checkoff programs have been tested all the way to the U.S. Supreme Court, where they were definitively ruled constitutional. The Court ruled these programs were, in effect, “government speech.” There are currently 18 national programs in operation: Beef, Blueberries, Cotton, Dairy Products, Eggs, Fluid Milk, Hass Avocados, Honey Packers and Importers, Lamb, Mangos, Mushrooms, Peanuts, Popcorn, Pork, Potatoes, Sorghum, Soybeans and Watermelon.

Is some self-appointed group claiming to represent the entire industry?

No. The Christmas Tree Promotion Now group represents themselves – individuals concerned about the Real Christmas Tree industry. They have had multiple discussions with USDA about the level of industry support and the fact that there are individuals who are for and against it.

If a checkoff program is authorized by USDA to begin, there will be an extensive nominating process that will give all interested parties a chance to be nominated to serve on the board. The U.S. Secretary of Agriculture will appoint the board from the nominations received.

 

Will a Checkoff solve all our current problems?

No. It’s important that the industry have realistic expectations. When NCTA began its Market Expansion program in 2004, the goal was to “Stop the Bleeding” or stop the decline in tree sales. An increase in sales would be exceeding the goal.

Economists use scatter charts to illustrate demand. One would expect that as price goes up, the quantity demanded would go down. When market actions run counter to this principle (i.e. both price and quantity go up – or down) that indicates a shift in demand.

Looking at the data from the annual consumer poll conducted by Harris Interactive, we notice a sharp increase in both the number of trees consumers reported purchasing and the price they reported paying between 2003 and 2004. This appears to be a positive shift in demand. I would argue that it is no small coincidence that this was the first year of the Market Expansion program in which the industry invested about four times the marketing dollars that were invested in 2002 and 2003.

Demand appeared to make another, albeit more modest shift in 2005, when consumers reported purchasing 21% more trees, while paying only 1.6% less. Since then, funding for promotions programs has dropped considerably and demand has drifted back toward the 2004 level.

Had the industry been able to sustain the demand at the 2005 level, one would project that with 28 million trees on the market, as there were last year, consumers would have been willing to pay about $5 more for trees than they did – or they would have purchased up to 34 million trees at the price paid in 2009. Had there been 28 million trees on the market with demand at 2002 levels, one could have expected the price to be about $32, or about $10 less than consumers reported paying in 2009.

As any economist or reputable investment broker will tell you: past performance is not a guarantee of future performance. Certainly the demand equation for Christmas Trees has other variables – species, size, location, style, freshness and services offered, to name a few. And the quantity available for purchase by consumers may be less than what is available in the fields if wholesalers, brokers and commercial retailers do not have confidence in the market. One way to increase confidence in the market is with a consistent marketing program.

Other measurements of success could include successful research to improve needle retention after harvest, or an increase in the number of Real Trees exported. Many checkoff programs get additional funding from USDA’s Foreign Ag Service to help develop foreign markets.

Will it encourage more people to grow more trees?

That’s possible over the long term. Any time an endeavor is profitable, it will attract expansion and new entries. However, Christmas Tree production is fairly inelastic in the short term (5-10 years) because of the length of time it takes for a seedling to reach saleable size. It also has fairly high barriers to entry: high costs of land and labor with a long lag before income starts to come in. Still, the industry has proven an ability to expand in the face of profitability – even sometimes in the face of unprofitability. Unlike the current situation, though, increased production with a checkoff program in place would presumably generate more marketing dollars.

Is a bigger industry better?

That depends. Is your vision for the industry to have a Real Christmas Tree available to everyone that wants to purchase one? Or do you just want to be more efficient and more successful than your neighbors?

Maryln Jorgensen, a diversified Iowa farmer shared a story about his cattle operation. When one of his neighbors went out of business, he was happy because that meant more of the market for him. A couple more neighbors went out of business and he thought he’d do even better. Several more went out and he had nearly all of the local market. Then the packing house closed, meaning he no longer had a market for his cattle and had to get out of the cattle business himself.

A larger industry has a greater voice on issues like fire codes, pest control and other regulations. A smaller industry means more individual independence and more dependence on yourself. It really boils down to your vision for your business and the industry.

 

Is it going to replace my individual marketing or take away my competitive edge?

No. A checkoff program would promote all farm-grown Christmas Trees. Ten percent of the funds would go to state Christmas Tree associations to do more targeted, localized promotions. These efforts would concentrate on increasing consumers’ desires to buy a Real Tree versus a fake one. Growers and retailers would still need to convince the consumer to buy the tree from them. It will not result in the same price for everyone … or make bad tree farmers automatically successful.

 

Is something being sneaked past us?

NCTA, along with the state/regional Christmas Tree associations have endeavored to hold a frank and open discussion of a possible checkoff program over the past two and a half years. A task force was formed to study the possibilities. Informational sessions encouraging farmer feedback were held at several state/regional Christmas Tree association meetings, as well as at each NCTA meeting since February of 2008. There have been frequent articles/updates in NCTA and many other publications.

For those who have been talking about a checkoff for nearly three years now, it’s hard to imagine that anyone involved in the industry could be unaware of the discussion. Then again, it’s also hard to imagine that anyone could believe that a fake tree is better for the environment, but there are people out that that haven’t gotten that message either.

While the major features have been widely discussed, the specific details won’t be available until USDA finishes its work and publishes the checkoff program draft rules in the Federal Register. Then we will all be able to read, analyze and have a chance to comment on it.

Is NCTA for a Checkoff? I don’t remember being asked!

NCTA’s Board of Directors, which is responsible for the affairs of the organization, considered feedback from the meetings discussed above and polled the boards and/or members of their respective state/regional organizations. The feedback (positive and negative) was reported at an NCTA board meeting in March of 2009. After hearing all reports, the Board voted to support a checkoff.

Additionally, NCTA members were surveyed in January of 2010, with 62% indicating they were in favor of a checkoff and only 17% opposed.

Does that mean all members have to be for a checkoff? Of course not. NCTA is about a lot of different initiatives that promote and protect the industry. Every member is not going to agree with every position NCTA – or any organization – takes. While there is a tendency to want to say “My way or the highway,” consider that you remain an American although you may not like every action Congress takes and remain a Christmas tTree farmer although the weather doesn’t always cooperate.

Why can’t we vote up front?

This is probably one of the hardest questions for many people to wrap their minds around. The act that authorizes checkoffs allows either an upfront or delayed vote, called a referendum. The delayed referendum provision was included to give industries the chance to test the program before making a decision.

To many, it seems counterintuitive to be “forced” to buy something before you know whether or not you want it. To soften the impact, when this provision is used, USDA requires the board to allow producers to apply for refunds during the first three years of the program and set aside 10% of the total receipts to fund those refund requests.

An additional challenge with an up front referendum for Christmas Trees is the lack of a database that verifies how many trees each producer sells. Since it has been proposed that those selling less than 500 trees per year would be exempt from paying the assessments, only those that sell 500 or more trees per year would be eligible to vote. If a program is established prior to a referendum, it will be easy to verify that those who paid in are the ones who are eligible to vote.

However, the referendum is not your first opportunity for your views to be heard. The comment period on the USDA Draft Rule allows you to weigh in on not only whether you support the program or not, but specifically what points you agree with or would like to see changed. After the comment period, USDA will publish a final ruling, which could be to proceed with the program as first published, halt the process, or proceed with a modified program based on comments received.

What is taking so long? Does that mean USDA is reluctant to start a program?

USDA carefully reviews such proposals and questions each provision to try to best assure that the program will work for the industry it is designed to serve. To do that, they have to learn about the industry, which takes time. They say that the delay has had to do with the process and changes in personnel. In July, the proposed program was sent to the USDA Office of General Counsel (OGC) by the USDA Agricultural Marketing Service, which would provide oversight to the Real Christmas Tree checkoff program. Once OGC approves the wording in the draft rule, it will be published and a comment period will follow.

 

Are you personally for or against it?

I probably shouldn’t answer this, but it’s a fair question.

As an employee of Drake & Company – NCTA’s management firm – it is my job to help the board get access to as much factual information as possible to aid in their decisions. I am pleased that the board diligently gathered factual and subjective information from a wide variety of sources.

As NCTA’s Executive Director, it is my job to support the decisions of the board.

I do have concerns about how it will affect NCTA and how NCTA and the new checkoff board will work together for the good of the industry. I am pleased that NCTA president Dick Moore has appointed a task force to study how other national organizations and their checkoff boards interact – getting advice on what has and has not worked for them.

As an agricultural economist who has spent 30 years in agriculture and almost 13 of them with NCTA, these things I know:

  • Promotion works.
  • Misinformation has to be countered with facts.
  • Voluntarily-funded promotion programs are destined to be short-lived because those who don’t contribute gain a competitive advantage over those that do. (If you truly believe voluntary donations are the way to go, may I remind you that the voluntary program is all we will have for the 2010 season? Please send your contribution today!)
  • The Real Tree industry is going to continue to face challenges that threaten its very existence. Fire codes are likely to get more and more restrictive – not just in public buildings, but in all households. This battle is on our doorstep now, and voluntary funding that may or may not come in isn’t going to cut it.
  • The fake tree industry is commissioning “research” aimed at finding someone – anyone that is seemingly credible – to say that fake trees are better for the environment than real ones.
  • If it’s not worth 15 cents a tree to answer these serious challenges as an industry, the handwriting is on the proverbial wall.

 

A checkoff program offers a higher level of funding than the industry has had in the past, and perhaps more importantly, consistent funding. We are now halfway through the year and NCTA has commitments for less than half of this year’s promotion budget. It’s hard to plan effective programs when you don’t know the budget.

I’ll leave you with this fact for perspective: NCTA’s entire 2010 budget for promoting and protecting the industry is less than one artificial Christmas Tree company spends on a single, one-page ad in a national magazine.

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SIDEBAR

KEY PROVISIONS

USDA is considering a Federal Research and Promotion Program, commonly called a checkoff program, for the Christmas Tree industry. Key provisions are expected to include:

  • An assessment rate of 15 cents per harvested tree.
  • An exemption for anyone that sells fewer than 500 trees per year.
  • An assessment on imported trees in cases where the importer imports 500 or more trees per year.
  • A delayed referendum, to take place within three years of the start of the program so the industry can assess the value of the program before deciding whether to continue or not.
  • Each company subject to the assessment would have one vote in each referendum.

 

The 1996 Act, which is the legal authority for checkoff programs provides that:

  • The checkoff be governed by an independent board with representation proportionate to production.
  • 10% of the income would be set aside for a temporary refund program, which would available to those requesting refunds prior to a referendum passing. This amount would be prorated if refund requests exceed the 10% set aside.
  • If the initial referendum passes, a subsequent referendum would be held every five years.
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marketing disorder

 

Marketing Disorder

Dan Hanauer, Jr., Wisconsin Christmas tree grower

Unicorns, mermaids, and other people who are going to help me market my trees all occupy the same fond corner of my heart.  The difference is that believing in unicorns and mermaids is harmless and free, the magical marketer about to be imposed on us, supposedly by us, is not.

I see two distinct portions of the marketing order discussion: the Promise and the Process.  First, the Promise.  I believe we all work in an industry that we love.  We have one of the best stories in the marketplace, the natural green product grown in America, versus the petrochemical based fake imported from abroad.  No argument there.  Many of us are second generation growers perhaps hoping for a third, our lives are inexorably tied to our profession.  What a wonderful career to follow in this world!

However, our beloved industry must exist in the cold calculating arena we call the marketplace.  Here, I believe, are some indisputable facts about our marketplace:  1) We exist in a country with excess agricultural capacity, resulting in a very elastic supply.  2) The KEY TO SUCCESS is neither supply nor demand, but the RELATIONSHIP between the two.  3)  Firms within our industry must turn a profit over the long run.

Now, how is the marketing order going to help us in light of these facts?  Remember, this is being sold to us on the basis that increased funds for marketing and research will increase demand for our product and improve our industry.  Let’s look at the main parts of the argument.

MARKETING – Demand.  Probably the main component, since, after all it is called a marketing order.  I believe most growers are actually thinking SALES, which is the ultimate goal of the marketing effort.  I believe that many supporters of the marketing order have unrealistic expectations that someone else is going to solve their sales problems using primarily other people’s money.  This is my main objection concerning the Promise of the marketing order.  We have the dual problems of competing in an industry that suffers from chronic oversupply, within an economy that currently stinks.  Would increased marketing result in more real trees being sold overall?  Probably so.  Therefore, I have consistently and voluntarily contributed to the market expansion program.  However, an increase in demand would only be a temporary boon to those who currently have a tree inventory.  Will the marketing order change the long term relationship between supply and demand?  I don’t think so, remember our excess agricultural capacity.  Demand creates its own supply; we will simply grow more trees in response to increased demand.  What is the goal of the marketing order?  The real tree market in the U.S. has historically been 30 to 40 million trees.  Do we expect to increase it by 1 million, 5 million, 10 million? Does anybody doubt that we can grow another 10 million trees in the U.S.?  What is the difference if we grow 40 million trees and sell 30, compared to growing 60 million and selling 50?  It is human instinct to want your industry to be “bigger”.  However, a bigger industry does not do the individual growers any substantial good if there are still too many trees to sell.

MARKETING – Supply.   Here is my question.  If we agree that we grow too many trees, why do we ceaselessly try to increase the supply of trees?  Certainly as individuals we have an incentive to grow more in our own operation.  But as a group this makes no sense.  How many times have you read an incoming state or national president’s column talk about how they want to increase the membership in the organization?  Why??  Because bigger is better, right?  Often the organization becomes the end itself instead of the means.  Bring in more growers, bring in more new growers, teach them how to grow trees and then suffer the consequences of too many trees. This makes no sense.  This was the problem with the community grazing grounds in earlier centuries.  The individual had incentive to add more livestock until the grounds could not support the entire herd and everybody’s livestock starved.  Yes, we are a generous group bound by a common spirit.  Yes, I and many others have benefited by learning from the group.  Ultimately, however, we are not only peers, we are competitors.  We can affect the relationship between supply and demand by not encouraging an increase in the supply.

TURNING A PROFIT.  Sell your trees.  Take the proceeds and subtract direct costs you cannot eliminate including labor, fuel, electricity, telephone, postage, interest, loan payments, equipment, twine, fertilizer, herbicide, maintenance, planting stock, your own marketing costs and many others.  Now subtract the government costs that you also cannot eliminate such as property taxes, payroll taxes (Social Security and Medicare), state and federal income taxes, unemployment taxes, workman’s comp, excise taxes on tires, taxes on electricity telephone and other services, fuel taxes, groundwater fees on herbicide, vehicle registration fees, WDATCP license fees, and more. Expect this bite from your pocket to increase substantially in our current political environment.  To this we want to add a self imposed per tree tax with the hope it will improve our sales?  Now look at optional costs such as WCTPA and NCTA dues and convention costs, and market expansion and legislative fund contributions.  These could be and very well might be eliminated or reduced to offset marketing order taxes.  The result would hurt our marketing efforts because of the fine work these organizations do.  Then ask yourself who you are working for, because a whole lot of people get in your pocket before you do.  Do you really want to add another?  Finally, consider this.  A new tax has to either increase the cost of the product, making sales harder, or decrease your profit, making your life harder.

RESEARCH.  The supporters of the marketing order also tout research as a benefit to our industry.  In 2009, I attended two Christmas tree growing seminars held at universities.  One was held at Penn State, number of attendees from Wisconsin: 1. The other was held at Michigan State, number of attendees from Wisconsin: 5. We have research coming out of our ears that almost nobody takes advantage of.  Is more research good?  Of course it is.  But how much and at what cost?  We have all sorts of research that is underutilized and I am not in favor of adding another tax to my current burden to generate more.

THE PROCESS.  I believe the Promise of the marketing order is misguided and exaggerated.  I believe the Process used to impose this on us has been devious and indefensible.  Keep in mind that the general premise of the marketing order is that the brute force of the Federal Government is brought to bear upon the members of an industry, supposedly for their own good, and supposedly at their request.  What has happened here is that a small group has exceeded their mandate, and determined that they must do our thinking for us.  At some point they transitioned from researchers of the marketing order to advocates for it.  To be fair, I believe that the advocates for the marketing order have good intentions and have put a lot of their own time and money into this effort.  I also believe they have done an adequate job of informing the industry that they were exploring a marketing order and seeking input.  However, they strayed way off track when they decided that since they were appointed to study the marketing order they also represented the industry.  It is shocking to me that without a vote (at least in Wisconsin) ten people can jet off to Washington and volunteer an entire industry for a self imposed tax and further regulation and enforcement at the hands of the Federal Government.

Early on in the process, June 21, 2008, I said the following in an e-mail to our marketing order representative “EVERYONE WHO IS GOING TO HAVE TO PAY SHOULD GET AN OPPORTUNITY TO VOTE”.  I went on to say “It sounds to me like they are considering the fact that these meetings could constitute the approval to go forward.  That is slippery.”  This was in response to a summary of a marketing order meeting held in North Carolina.  Reading the minutes, it was clear to me that the committee members were considering simply anointing themselves as “The Industry” and petitioning the USDA without being inconvenienced with a messy problem like a vote of industry members.  As we now know, this is exactly what they did.

I raised this issue at the Michigan State Fir Conference, during an impromptu presentation by some of the team of 10 that petitioned the USDA for all of us regular folks.  The answer I got was that they would not know how to find all the people who should vote.  Really??  How much do you want to bet they will find these folks when it is time to assess the marketing order tax?  Another feeble argument the presenter laid on us was that you can’t vote on something until you try it.  Really??  I have not tried crack cocaine, but am completely ready to vote against any referendum legalizing it.  Another big argument is that many or most industries currently operating under marketing orders did it without an advance vote.  Really??  This makes my whole case; they had to sneak it through the back door just like this one.  Finally, a member of the marketing order committee told me that there was overwhelming support for the marketing order.  Two sentences later the same person said they were not sure a vote would pass.    Really??  How can you have overwhelming support and the vote not pass?  My belief is that the committee is afraid there is a different viewpoint between them and the industry members as a whole, so they had to slide it through without a vote to insure it goes their way.  I wonder how up front these people will be once they have a million or two of our dollars to play with.

Marketing order advocates will tell you that there will be a comment period before the USDA issues its decision on the marketing order.  Rest assured, I will comment, but does anybody really believe the USDA is going to turn down an opportunity to further regulate us?  After “we” asked them to?  Another tactic to reassure us before they regulate us is that in three years we will be allowed to vote on the issue, and maybe even get some of our money back.  Wow, let’s look forward to closing the door three years after the horse left the barn.

I don’t doubt that a vote would pass.  I think many believe in the false hopes I laid out in describing the Promise of the marketing order.  I do know that I will not vote for, nor do I support the marketing order.  I do not want another tax; I do not want another layer of government imposing its will on me.  If you are opposed to this marketing order, do not be afraid to comment to the USDA, and to the marketing order committee, at this point it appears to be our only option to have our voices heard in advance.

When this battle erupted twenty years ago, one of our Wisconsin leaders fought very hard to keep us free from this burden.  I have been appreciative ever since and repeat here some of his warnings about what a marketing order will mean to us.  There will have to be some type of data collection and enforcement mechanism.  Do you want to turn your customer list over to a panel of other growers so they can determine if you properly paid your tax?  Of course, there will be another set of confusing forms to fill out and payments to be made.  When you deal with the government, your time is valued at zero.  Do you want to spend more time in your office documenting your finances so you can send more of them off to yet another nanny who promises to make your life better?  If the marketing order had passed twenty years ago, would we be better off now?  I doubt it.  How many of us would be glad we paid marketing order taxes for the last twenty years?  How much would that have cost you?  Are the industries currently covered by marketing orders living the high life?  Do they have such great sales they can’t fulfill them all?  Is everyone winning?  Or do they still have producers struggling to make it?  Success will not be gained by creating some utopian

industry where everyone wins – that is a fantasy.  The key to each of our successes is to be high enough on the competitive ladder within the industry to be profitable in the long run.  Unfortunately, there will always have to be some who do not make it; hopefully they will go on to success in some other endeavor.

There is always somebody promising to solve your problems for you, but – oh yes – there will be a fee.  I do not want another group of people doing my thinking for me, and promising to solve my problems if only I will turn over some of the money I earned to them.  I spend a lot of time and money doing my own marketing, and that is the way I want to keep it.  When I have to submit to and pay some self appointed elitist group for the privilege to grow Christmas trees on my own land, and sell them to make my own living, I am no longer living in the America I grew up in and love.  Well……… at least I will still have my unicorns and mermaids.

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more on the check-off

This blog was started in an attempt to ask some questions of those supporting the proposed Christmas tree check-off. I am troubled by the fact that many supporters have not researched agricultural check-off programs, in fact, most of them have not checked out the check-off website.   It is not sufficient to state that the industry is in trouble– we need an industry wide promotion– therefore we need a mandatory check-off program. Supporters must provide details, such as promotion proposals, budgets, and goals.  They need to define the problem and provide evidence that the check-off will correct it.  I invite those both supporting and opposed to the check-off to comment on this page.

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