CHRISTMAS TREE CHECK-OFF

 

THE CHRISTMAS TREE CHECK-OFF:  I’M JUST ASKING…….

A couple of weeks ago, I sent a version of the article I wrote for our summer newsletter to members of the Wisconsin Christmas Tree Producers Association.  I wanted to widen my search for answers so that I could print a dialog about the proposed check-off. I am beginning with the piece I sent to Cheryl Nicholson and a few of the Wisconsin Board members in case you missed my article.  (I sent this email–so it only went to Board members for whom I had email addresses.) 

QUESTIONS FOR THOSE THAT SUPPORT A CHRISTMAS TREE CHECK-OFF PROGRAM

I recently wrote an article for our newsletter asking some questions about the information revealed on the check-off website. As of this date, I have had two responses and one of them was given only after I specifically asked for a reaction. So—either very few members read the last newsletter—or they read my article and they do not want to discuss anything negative concerning the proposed check-off. Neither answer is comforting.

But more disturbing than those conclusions is this possibility—most check-off supporters have NOT read any of the information on the check-off website. (I reached this conclusion because None of the growers to whom I have spoken have checked out this site.) I must admit I have a difficult time swallowing this one. To encourage more government scrutiny, to welcome a tax, to create additional administrative government jobs without knowing what you are embracing is irresponsible.

I did make some changes to my newsletter article in light of new information, but the substance has not changed.

I went to www.checkoffstudy.com and …….I’m Just Asking—

  1. Check out the major check-off organizations. In 2006, according to the American Agricultural Economics Association there were 17 active national generic promotion programs. The key word in this statement is “generic.” As growers, we understand that not all Christmas trees are alike—and the distinctions are visibly obvious. Norway Pines do not look like Fraser Firs. Do you think that’s ridiculous? The beef check-off is mentioned when supporters talk about a check-off program. You hear the voice over, “Beef—it’s what’s for dinner.” You see a steak. Is it Angus or Kobe Wagyu? You probably could not tell as long as the Angus steak is prime. How will that work for Christmas trees? When the voice over says to buy a real Christmas tree, what tree will be displayed on the printed page or the TV screen? Will it be a fir? If so, what kind? Will it be a pine? Again, if so, what kind? Will our meager budget stretch to display more than one kind of tree? Christmas trees are not homogeneous.

 

  1. If check-off programs have been so successful, why have producers brought judicial challenges to their     constitutionality? American farmers and ranchers are forced to pay hundreds of millions of dollars each year to mandatory assessment programs. It is a fact that the twelve largest commodity promotion boards spend more than $ 700 million each year. Since Congress passed legislation establishing the beef and pork check-offs, there have been several court challenges to both programs. Court rulings have been contradictory. Some have ruled that they are constitutional and some have ruled them unconstitutional. During the past two decades, nearly every commodity promotion program in the U.S. has been challenged.

 

  1.  In March, our state NCTA representative reported that the check-off committee expected to raise $ 2.5 million of which only $ 1.5 million would be used for promotion. The website indicates that they expect to raise almost $ 4 million. At our recent summer meeting, our NCTA representative reported that they expect to raise $ 3,150,000 of which only $ 1.7 million will be available for promotion. Did you know that the check-off board must reimburse the Secretary of Agriculture for all expenses incurred by the Secretary in the implementation, administration, and the supervision of the check-off order—including all referendum costs in connection with the order? In addition, because imports are assessed, reimbursement of costs incurred by the U.S. Customs Service? Do you also realize that all patents, copyrights, trademarks, information, publications, and product formulations developed through the use of funds received by the check-off board, shall be the property of the U.S. Government? You should also consider the fact that they will be using check-off funds to perform the audits that will supposedly keep all affected growers honest.

 

  1. Some check-off supporters have told me that growers covered by program could apply for refunds during the 3 year period leading up to the referendum. The site reports that if the check-off program is vetoed after the 3 year initiation period, participants could apply for refunds. But their receipt of a refund is dependent on the program being terminated and on the availability of those funds. Since the proposed Christmas tree check-off requires only 10 percent of assessments be held in escrow, the chances of growers getting their money back might not be that good.

 

  1. One of the provisions of the check-off is the ability to discontinue the program if a simple majority of

affected growers votes to do so. If the process is so simple, why do the pork producers still have a check-off? In August and September of 2000, more than 30,000 U.S. hog producers voted 53% to 47% to terminate their program. In January, 2001, the U.S. Secretary of Agriculture, Dan Glickman ordered the termination. In February, 2001, newly appointed Secretary of Agriculture, Ann Veneman reversed Secretary Glickman’s decision ordering the continuation of the pork check-off. The Campaign for Family Farms and several hog farmers sued. On October 25, 2002, U. S. District Court Judge Richard Enslen ruled the pork check-off was “unconstitutional and rotten,” ordering that it be terminated within 30 days. That order was stayed and subsequently reversed. Today, ten years later, there is a pork check-off—despite the referendum vote to terminate it.

 

  1. Check-off supporters have used the concept of “free ridership” as a reason to implement their program. It refers to one grower paying for industry promotion while another does not. The free loader benefits even though he hasn’t contributed financially. The check-off has been promoted “in the interest of fairness.” However, it does not get rid of free riders. Growers selling fewer than 500 trees, or those that will apply for exemptions because they say they sell fewer than 500, will be free riders.

 

  1. 7.     And speaking of fairness, shouldn’t everyone affected have a vote as to whether the check-off is adopted—or not?

 

                               I’m just asking.

Lest you think that I am against an industry-wide promotion—I am not. I am, however, opposed to a program that does not allow each of us a voice. In addition, I believe that when you invite government to step in and help you out, there are strings attached. In the end, the amount of money available for promotion and research will be butchered by the costs of administering the program. And because the government–and not growers, will own any product resulting from research– growers lose an opportunity to create something that could help fund future promotions without constant pleas for money.

I will make a prediction. Because government programs are notoriously wasteful, because marketing programs can be expensive– $.15 per tree will not be sufficient. The argument will be made that they will need more money to get the job done and the board will end up charging more than $.15 per tree. Where do YOU think it will end?

                                 I’m just asking

Paul Schroeder took the time to answer my questions.  His comments follow.  My comments are in italic type. 

Paul,

 

     Thank you for commenting on the questions I posed to supporters of the check-off.  I hope you don’t regret offering to continue our “conversation.”  I think that this “discussion” could help our members understand  some of the most confusing issues surrounding the proposed check-off.

Hi Donna,

Thanks for bringing the proposed check-off to the surface in Minnesota. As with anything new…or political, there are always differing opinions.  This is good.  But there is only one set of facts.  My goal in serving on the task force for the last 2 1/2 years has been to secure and disperse the facts and let people make up there own mind…albeit, my support for a the program does slip out when I quote the facts.  I will try to answer your questions and make comments as I see it.

1.)    When we speak of “generic” in Christmas trees it refers to the general advertising, not the specie.  The Pacific Northwest produces 32% of our Christmas trees, they would like to see 32% of the budget to be spent where there customers are, mostly California.  We can not use words like “Michigan Fresh”, or “Minnesota Grown”.  All ads need to be positive and relate to the total industry of farm-grown Christmas trees.

 

 I must not have made my point clearly or maybe I misunderstood.  According to the website, check-offs are organized to facilitate industry promotions so that all producers benefit.  These promotions must be generic.  But our product is not quite as generic as beef, watermelon, pork, etc.  Many Christmas trees grown in the Pacific Northwest differ in appearance from those grown in Minnesota or Wisconsin, for example.  So, which Christmas tree image will be used to promote the entire industry?  (You mention scenarios later in your response for Tyson Foods, etc.– which tree will be used in these promotions?)  Or are we going to be left with states or regions promoting their own specialty.  If that occurs, are we truly getting an industry-wide promotion?  Basically, my point is this–most check-off programs deal with products that appear very similar.  One hamburger looks pretty much like another when it is sitting alone on a plate without a bun or fixings.  But a Scotch pine does not look like a Fraser Fir.  How does the Board expect to promote the industry so that all participants benefit? 

 

You bring up an interesting point, however in your response. My understanding is that no one group or groups within an industry, can control expenditures so as to benefit that particular group or groups without making a formal request, such as a grant.  Check-off language says as much. According to check-off language, the Pacific Northwest could apply for funding in proportion to the amount of their assessments.  However, their funding would be limited to 10 percent of the amount they contributed.  So, IF the check-off fund collects a little over $ 3 million, and their contribution is about $ 1 million, they could apply for 10 percent of that—or $100,000.00.  Would that satisfactorily fund their California campaign?  But let’s assume for a moment that you are correct, that the Pacific Northwest could control about one third of the promotional funds—I wonder how a North Caroline grower, or for that matter, a Minnesota or Wisconsin grower would react if he knew that almost a third of the check-off assessments would finance a California Christmas tree campaign?

 

2.)   I do not have a good answer for the court challenges.  I know all recent rulings have been favorable to the check-offs.  There have been many different reason for the challenges, but in the end the majority rules.  Sorghum just initiated a check-off program with a delayed referendum and had an 86% approval rating during the comment period. I personally spoke to people in the peanut, watermelon, beef, sorghum, honey and cotton industries, and they were all very pleased with their programs and they all had a very good working relationship with the USDA.  Other members of the taskforce spoke to other industry leaders.  We have asked for the good and the bad from each program.  We want ours to have the best start possible.

 I have an answer.  Court challenges result when people are subjected to mandatory initiatives.  As recently as 2001, a trial court decided that the beef check-off program was unconstitutional.  In a separate case, another challenge to the constitutionality of the beef check-off program landed in the Federal District Court for Montana in November, 2002.  Like many check-off challenges, these cases were based upon the producers’ rights to Freedom of Speech.  That court determined that the check-off allowed the government to make the speech through the cattlemen rather than for the cattlemen.  And as such, the speech was government speech, not individual or private commercial speech.  Therefore, the beef check-off did not infringe on producers’ First Amendment rights to Freedom of Speech.  In appeal, the Supreme Court ruled that the beef check-off program was government speech. 

Say What?!

 

   

           What does THAT mean?  In order to constitute government speech, a government mandated program      must pass three tests.

           First, the government must exercise sufficient control over 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 source of the assessments must come from a large, non-discrete group.  The rationale for this third test is that courts have ruled that greater care needs to be taken anytime government seeks to tax individuals or groups to pay for messages.  The broader the funding source, the more diluted is the government’s infringement on individual rights.  Since Christmas tree growers compose a distinct or discrete group, taxing them to fund a check-off program could be construed as a violation of an individual’s right to free speech.

 

But there is an even more disturbing implication.  Since check-off messages can be considered government speech, the Secretary of Agriculture can exercise much more oversight over promotional messages.  Claims that a program is not being run as a government program could lead to even more legal battles.  Bureaucrats could determine whether a program is consistent with Congressional intent and whether the operating committee is sending an approved message.  Generic advertising without  sufficient government oversight, therefore, could be interpreted as an infringement of participants’ First Amendment rights.  I am not convinced that calling a check-off program “government speech” in an effort to evade Free Speech challenges is the best argument for supporters to make.  In the end, we end up with more government regulations, all paid for with check-off assessments.  As I mentioned earlier, if check-off programs were so successful, court challenges would not continue to complicate check-off programs– eating up funds that would be better spent promoting the individual industries. 

 

 

3.)You are right about the check-off dollars being used to cover administration costs.  The Watermelon board, which raises about 1.6 million dollars, pays the USDA about $60,000.  Nova Scotia, which has their own providence Christmas tree check-off, does not have a budget for enforcement.  One of the other reasons for a delayed referendum is the cost.  In three years we will to have a budget for that.  The web-site numbers were based on the Harris poll harvest of 31 million trees in 2007, that number has dropped considerably since then. 

 How was it determined that the watermelon check-off, of all other programs, best mimics the Christmas tree check-off?  What criteria were used?  Since a significant portion of U.S. watermelon production is exported, and imports comprise a growing part of the watermelon consumption in this country, what costs are attributed to the U.S. Customs Service?  How about costs attributed to audits?  What about all the other costs associated with the implementation and oversight of the program, including but not limited to, reimbursements to the Board?  What are the cost estimates for the Christmas tree program?  Any decision about the economic feasibility of a check-off program should include all costs associated with its implementation.

 

And it still leaves the issue of the ownership of all patents, copyrights, trademarks, information, publications, and product formulations developed through the use of check-off funds.  According to the website, these “properties” shall be the property of the U. S. Government. To me, this is a serious lapse of common sense.  If the Christmas tree industry, using check-off funds, is fortunate enough to produce something unique with earning potential—we would not be able to capitalize on it because we would not own it.  My question is why not?  Our funds were used to create it and we are compelled to reimburse every government entity that participated in its creation.  It is the fruit of our labor, so to speak.  It should be ours. 

 

4.)I think you have all of the facts on the 10% set aside.  This is a USDA requirement laid out in the 1996 bill that oversees checkoffs.  If the delayed referendum passes, the withheld funds go into the general budget, if it fails they are prorated back to those who applied for them.

 Thanks for confirming this aspect of the proposed check-off.  Some growers are under the impression that they will get their money back if they decide individually, that they do not want to participate after the initiation period. 

5.)   I know there was a lot of negative news about the Hog industry, but a survey last year showed that the check-off was supported by 77% of the hog farmers. See http://nationalhogfarmer.com/pork-checkoff/pork-producers-positive-checkoff-0426/ or www.pork.org.  The same survey showed that 80% thought that the check-off achieved it’s goals.

 I did check out the 2009 survey quoted in your answer.  It was based on 550 producers.  According to the 2007 agricultural census, there were 75,442 hog farms in the U. S.  I am not sure that 550 producers out of 75,442 is an adequate proportion to reach valid conclusions.  However, one answer from that survey stands out among all others.  When asked if they thought the industry was moving in the right direction, 40 percent responded “yes”, but a majority, 50 percent, said it was moving in the wrong direction.  I think that answer, alone, speaks volumes about the efficacy of the pork check-off. 

 

 I would also remind you that over 10 years ago a majority of hog producers voted to terminate their program.  Despite that vote, and contrary to the language of the check-off, hog producers are still  bound by a mandatory check-off program.  This is indisputable evidence that check-off programs are not easily terminated.  Selling the Christmas tree program with this argument is disingenuous. 

 

6.)   Every industry has free riders.  Look at ours right now.  If we raised $900,000 in 2004 just by starting a market expansion program, and it improved sales by 30% over the next 2 years, why were we only able to collect $158,000 last year and only half of this years budget of $250,000 is pledged so far.  A small core group is carrying the whole industry!  The proposed check-off would apply to all growers producing over 500 trees.  This will cover 92.3% of the trees cut according to the 2007 Ag census, but only 42% of the farms.  I think that 80% participation would be great.  Those who produce less than 500 trees will be asked to participate but they will not have a vote. 

 

Even with a Christmas tree check-off program, there will be free riders.  The language ensures it.  If this is an argument for the check-off—it fails.  I have a couple of issues with the numbers in your answer.  First, I doubt that your numbers can support a direct cause and effect.  I am referring to your conclusion that in 2004, the industry raised $900,000.00, and as a result of that fundraising, sales improved 30 percent in the years between 2004 and 2006.  According to the Floriculture and Nursery Crops Yearbook, September 2007, there was a 12 percent increase in the number of Christmas trees sold by the surveyed states between 2003 and 2006. (I used this resource because of its pedigree and because it reported harvest figures close to the period you mentioned.  And though not all states are surveyed in these reports, the production proportion they represent is overwhelming credible. This source is used repeatedly by government and business because its representations are deemed accurate)  But even if we assume that your 30 percent figure is accurate, I could find no clear cause and effect for the increase you reported. And since artificial Christmas tree sales rose during this same period, I doubt that you can single out the expansion program as a cause of increased sales of real trees. For that matter, using your reasoning, what would prevent someone from saying that the $900,000.00 spent in the expansion program caused the sales of artificial trees to increase? 

 

 I do have another thought.  More producers might voluntarily fund a marketing program, if a good one were offered to them.  I attended an executive director meeting in Iowa in 2008.  In that meeting, Pam Helmsing excitedly told the group about a promotion that Drake Company wanted to fund for the coming Christmas season.  The gist of the promotion was—we would partner with Gymboree and pay $50,000.00 to $60,000.00 to have Entertainment Tonight follow Angie Harmon to pick out her Christmas tree.  They would go to her home and she would talk about the experience on Entertainment Tonight and a second tier talk show.  I was not enthusiastic and raised my hand to say as much.  I mentioned that I doubted many people knew who Angie Harmon was—or would care that she had a real tree.  In addition, I did not think a one-time sound bite on ET and another on a second tier daytime talk show would be a good use for 50 to 60 grand. I mentioned that most of my customers were working or in school during the day—so they would not hear a daytime TV sound bite. I thought it was a poor use of limited funds.  For whatever reason, I don’t think this promotion prevailed, at least I did not see it.  But then at that time of year, I am working at our farm during ET and like my customers– I don’t watch much daytime TV–anytime of the year.  My point is—maybe, just maybe, producers aren’t contributing because the promotions have left something to be desired. 

7.)   I have been advised that the delayed referendum has been used by every commodity board formed since the law was written in 1996.  There is an expense here and a difficulty in verifying who is eligible to vote. The delayed referendum also gives us a chance to see what a program will look like and if it works. 

 I doubt that saying check-offs have always been done this way is a sufficient answer.  Due diligence by committee members should enable them to announce the program parameters.  The committee has already determined approximately how much money will be raised.  The question of who will be eligible to vote does not have to be answered until the end of the referendum period.  And at that time the answer will be easy.  If you paid and you sold over 500 trees, you vote. 

 

Check-off supporters have had over 2 years to compile detailed information about what the Christmas tree check-off will look like.  Since Pam Helmsing is noted on the check-off website, I would imagine that Drake Company will be involved in the actual promotions. You’ve told us approximately how much money you hope to raise.  Your answer that the Pacific Northwest expects to control almost one third of the assessments for a California campaign is revealing.  What other plans are in the works?  You mention that the delayed referendum “gives us a chance to see what the program will look like and if it works.”  I guess three questions I have are; who decides what the program will look like and who decides if it works?  And does the voice of the Christmas tree producer who sells 501 trees count?

 

With all due respect, your answer does not address the interest of fairness.  Dress it up any way you like, the check-off assessment is a tax.  And it is a tax not mandated by Congress.  Supporters are not asking every grower to vote because if they did, the check-off would be dead in the water.  I would be very surprised if a majority of growers, when asked, would agree to another tax on their production.            Why do I feel that check-off supporters are lulling producers with a few feel-good claims into going along with the program? Then after, hope those same producers will be apathetic enough to offer little resistance to the program’s continuance?  And if the pork producers situation holds true for our industry, it won’t make any difference if we vote it out after 3 years.  Now that would really be unfair. 

 I know the total funds raised are hard to pin down…simply because we have no way of knowing exactly how many trees are produced.  The industry uses the Harris Poll, they put the number at about 28 million for the last two years.  The USDA Ag Census of 2007, put that number at 17,500,000.  We like the higher number, but you will see conflicting statements depending on the source of the information.  What we do know, is that in the past 20 years the number of  American households increased by 26% while the sale of real trees decline by 22%.  During this same time the fake trees increased by 85%. 

 Again, I would caution against making sweeping generalizations with statistics.  The composition of American households has changed dramatically in the past 20 years.  For example, a significant number of these new households do not celebrate Christmas.  By lumping all households into one big number, you make a dramatic statement, but that figure really doesn’t reveal any useable information.  A significant portion of all households will never celebrate Christmas with a tree, real or otherwise.  Your comparison would be more credible if you could isolate the households that used to purchase a real tree and now don’t.  I prefer the facts without the hype.

 

 I do think that an industry-wide promotion could increase sales of Real Christmas trees.  However, I am not convinced that the proposed Christmas tree check-off will achieve this goal.  I have talked to quite a few growers who support the check-off.  They have been unable to explain the program they support.  All of them have admitted that they have not gone to the check-off website.  I find it very troubling that they would eagerly embrace a new tax, audits, and more government regulations without understanding the situation.  And you should, too.  It is not sufficient to say that “we need an industry-wide marketing program and claim that a Christmas tree check-off is the best way to achieve it.” 

 

I know we can’t do it alone, but with an industry-wide program, maybe we can convince the public about how green we are.  You have personally done a whole lot toward that goal with the DVDs.  Just imagine what could be done with a real budget. 

 

As tantalizing as this prospect is, according to the language of the check-off, Minnesota would only be entitled to 10 percent of their contributions to the fund.  The 2007 Agricultural census reported our state sold 202,259 trees.  If that number is accurate, it would be higher than the amount covered by the check-off program because it would include growers selling fewer than 500 trees.  So, we would be able to request—at the most- $ 3,000.00.  Now I would not turn it down if offered, but it is hardly an inducement to allow the government to add another tax to my business.   

 

We will never be able to compete with the TV commercials of the big commodities, but look at “Trees For Troops” where we partner with FedEx. The press we get here alone is worth millions!  Wouldn’t it be nice to see a Tyson foods add with a family gathered around a Christmas tree?  I want to see a Stanley garage door opener ad showing the lift high enough to let in the family car with a Christmas tree on top. I want to see a Freightliner calendar with a load of Christmas trees on the December page.  I want to see the man-on-the-street survey showing that over 75% of Americans think a real tree is better for the environment. 

 

 Believe me, Paul, I would love to see all these things.  I just don’t think that a check-off is the way to do it.

 This we can not do alone.

 

 Individually, I think we can do more than we do.  But I do agree with you that coming together with an industry-wide promotion could be a great thing. We just disagree as to method..

 

   We must all work together to preserve the tradition we cherish, the livelihood we love and the industry we support. 

 

Again, what’s not to love about your statement?  I just have too many unanswered questions to support a Christmas tree check-off program.  Would you like to take another swing at them? 

 

I am sure I have not answered all of your questions…but I tried.  Feel free to comment any time. 

 

I hope you aren’t regretting your offer for comment. 

Thank you for all of your efforts. 

Ditto. I may not agree with you, but I do believe that your intentions are good. 

Paul Schroeder

It is important to say that Paul Schroeder is the only person to take the time to answer all the questions I posed to our Board and most members of the Wisconsin Board.  If anyone can shed some light on these issues, I invite them to respond.  Agree or disagree, informed discussion is to be prized. Our members deserve it.  

 

Donna M. Revak

d.revak@frontiernet.net

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One Response to CHRISTMAS TREE CHECK-OFF

  1. Rob Roland says:

    This is really enlightening material. I can’t wait to read more…

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