US Programs Affecting Food and Agricultural Marketing

541 Pages·2013·4.15 MB·English

by  Walter J. Armbruster

Natural Resource Management and Policy
For further volumes:
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Walter J. Armbruster Ronald D. Knutson
●
Editors
US Programs Affecting
Food and Agricultural
Marketing
Editors
Walter J. Armbruster Ronald D. Knutson
Farm Foundation, Emeritus Texas A&M University
Darien, IL, USA College Station , TX, USA
ISBN 978-1-4614-4929-4 ISBN 978-1-4614-4930-0 (eBook)
DOI 10.1007/978-1-4614-4930-0
Springer New York Heidelberg Dordrecht London
Library of Congress Control Number: 2012948770
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Preface
Government policies and programs must constantly adjust to change, or they become
a drag on markets and on the fi rms that operate within them. If US policies and
programs affecting food and agricultural marketing do not adjust in a dynamic man-
ner, it is likely that neither farmers nor consumers will fully realize the ef fi ciency
increasing gains that result from innovations that are constantly occurring in the
food value chain. Armbruster and Knutson have spent many years studying markets
and the policies and programs under which they operate. Both served in the position
of the chief economist within the Agricultural Marketing Service (AMS) of the US
Department of Agriculture (USDA). At the time, AMS had the responsibility for
administering most of USDA’s marketing programs. It is because of their personal
interests in seeing that marketing policies and programs adjust to change that this
book is written. But today, a number of policies and programs affect food and agri-
cultural marketing other than just the traditional marketing system-focused ones.
Therefore, this book addresses that broader perspective more appropriate in this age
of global food and agricultural markets.
The distinction between policies and programs is important. Policy is a guiding
principle that leads to a course of action or set of programs. Programs implement
policies. Policies and programs exist in both the public and private sectors. People
in both the public and private sectors resist change. In government, policies typi-
cally change when elections result in shifts in the political party in power, when
there is a crisis, or when market evolution fi nally makes it obvious that adjustment
is needed. In the private sector, policies typically change with changes in manage-
ment, when there is a crisis, or when market evolution makes it obvious that adjust-
ment is needed. Private sector programs tend to adjust to pro fi t opportunities, while
considering the risk involved. Firms that resist change may fi nd themselves at a
competitive disadvantage and lose market share. This creative destruction process
does not operate in the public sector where program changes occur more slowly and
depend on leadership by public servants and political appointees, as well as coop-
eration from producers and marketing fi rms in many cases.
Decisions needed to be made on which policies and programs to analyze.
In making these decisions, the focal point was on the government policies and
v
vi Preface
programs that most directly shape contemporaneous marketing practices and
decisions of farmers, agribusiness fi rms, and consumers throughout the food value
chain. Consideration was given to interest group concerns about existing market-
ing policies and programs, as well as to evolving societal values and consumer
expectations of the food system. Therefore, this book not only explains the
changes in marketing policies and programs that have occurred and indicates
where further policy adjustments may be needed, but also explores where new
programs may be needed or existing program functions may be better performed
by the private sector.
The individual chapter authors provide expertise based on their research and
advisory roles related to the program areas they analyze. The evaluation is con-
ducted utilizing speci fi ed economic criteria and drawing on the author’s own
research and that of their peers, as well as government agency and private sector
information and expertise. Each chapter was reviewed by at least two agricultural
economist peers from academic, government agency, or industry backgrounds. This
process contributed to more accurate, up-to-date, and thorough assessments of the
state of existing policies and programs, their impacts on economic ef fi ciency in the
markets and potential updates in them to better match today’s market needs.
Darien, IL, USA Walter J. Armbruster
College Station, TX, USA Ronald D. Knutson
Acknowledgments
This project bene fi tted from fi nancial support provided by the US Department of
Agriculture’s Agricultural Marketing Service (AMS), Animal and Plant Health
Inspection Service (APHIS), and Economic Research Service (ERS); and by Farm
Foundation. We thank those who facilitated this support and/or provided intellectual
guidance: David Shipman, Warren Preston, and Enrique Ospina of AMS; Kevin
Shea, Parveen Setia, and Christopher Klocek of APHIS; and Kitty Smith, Sally
Thompson, and Laurian Unnevehr of ERS at the time this project was being devel-
oped, but now engaged in other challenges; and Neil Conklin, Sheldon Jones, and
Vicki Liszewski of Farm Foundation.
We must single out James MacDonald of ERS for his guidance in framing our
analytic framework based on ef fi ciency criteria, drawing on his long tenure in
researching and teaching the concepts involved in this area. Richard Heifner, author
of Chap. 3 on the history of government involvement in the marketing system, also
contributed signi fi cantly to framing the ef fi ciency criteria. Kenneth C. Clayton, now
retired from AMS, provided early encouragement and guidance. We also owe a
large debt of gratitude to the numerous individuals who provided review comments
on the chapters.
Our thanks go to Walt’s wife Helen and Ron’s wife Sharron for their support as
we worked on this interesting and challenging project.
vii

Contents
Part I Market Evolution, Policy History, and Consumer Expectations
1 Evolution of Agricultural and Food Markets ....................................... 3
Walter J. Armbruster and Ronald D. Knutson
2 Expectations and Realities of the Food System .................................... 11
Jean Kinsey
3 A History of Government’s Role in the Food and
Agricultural Marketing System ............................................................. 43
Richard G. Heifner
Part II Market Structure, the Supply Chain, and Marketing Orders
4 Market Structure, Trade Practice Regulation,
and Competition Policy .......................................................................... 65
Walter J. Armbruster
5 Managing the Supply Chain Through Cooperatives
and Contract Integration ....................................................................... 103
Ronald D. Knutson and Robert A. Cropp
6 Federal and State Marketing Orders .................................................... 137
Mechel Paggi and Charles F. Nicholson
7 US Generic Advertising and Promotion Programs .............................. 171
John M. Crespi and Richard J. Sexton
8 US Export Market Development Programs ......................................... 195
Shida Rastegari Henneberry
ix