Federal and State Marketing Orders

Abstract

Marketing orders (MO) have been a fundamental component of US ­agricultural policy since the 1937 Agricultural Marketing Agreement Act. They were established to modify the conduct and performance of participants in selected agricultural commodity markets to achieve “orderly marketing.” As of 2011, MO existed for milk and approximately 22 types of fruits, vegetables, nuts, and specialty crops. Commodities regulated by MO share certain economic characteristics, including greater perishability (less storability), price variation and related distributional inequalities and multiple market outlets providing opportunities for price discrimination. MO for fruits, vegetables, nuts, and specialty crops have provisions that focus on grades and standards (including food safety) and volume restrictions (often linked to opportunities for price discrimination). MO for milk focus on minimum price regulation, with emphasis on milk used for fluid purposes. The economic impacts of MO have been examined in numerous studies, often without a strong consensus about how they affect the various forms of economic efficiency, either in general or for specific commodities. Policy options for MO include (a) maintaining current MO, (b) replacing MO with other government marketing programs, (c) modifying MO to keep pace with changes in industry and market characteristics, and (d) elimination of MO with or without a phase-out period. Additional research on MO should focus on the fundamental market parameters (such as relevant elasticities), nonmarket effects of MO (such as impacts on nutrition or health), and the dynamic implications of MO elimination or modification on price discovery, risk management options and use, and organizational arrangements.