SCOTUS Rejects USDA’s Raisin Cartel

A couple years ago I posted (here) about a lawsuit progressing through the courts concerning the USDA’s raisin marketing order. The Raisin Administrative Committee (RAC) basically sets a quota on the amount of raisins that can be marketed in a given year as a way of maintaining high-priced raisins. The RAC requires produ799184_1280x720cers to turn a portion of their crop over to the RAC, which then markets the “excess” raisins to other countries or uses.

Today, the US Supreme Court ruled in Horne v. Department of Agriculture that the USDA-sponsored Raisin Administrative Committee’s process amounts to an unconstitutional governmental “taking”. Apparently the decision is limited to the raisin program and it opens the doors to other ways for the USDA to control the raisin market, but the decision also raises questions about the constitutionality of other agricultural commodity programs.

 

A GMO Rose By Any Other Name?

An interesting article in today’s New York Times on how some companies are circumventing regulatory barriers in developing new plant varieties by using “genetic editing” rather than “genetic engineering,” which is often referred to as GMO. The difference? Not the outcome (a plant that’s DNA is changed to express different traits); just the way in which the genetic change is produced. From the article (emphasis added):

Regulators around the world are now grappling with whether these techniques are even considered genetic engineering and how, if at all, they should be regulated.

 

“The technology is always one step ahead of the regulators,” said Michiel van Lookeren Campagne, head of biotechnology research at Syngenta, a seed and agricultural chemical company.

The problem stems largely from defining (and regulating) genetically modified plants not based on the fact that they are genetically modified, but based on the technological process by which they are modified. Humans have been manipulating plant genes for millennia; more recently using (a growing number of) technologies in the lab rather than long, drawn-out, and less-precise processes in the field. That poses a problem for regulators and critics who need to carefully circumscribe what kind of genetic modifications are, and aren’t, considered acceptable.

Meanwhile, the real question is whether a (genetically modified) rose by any other name (or technology) would still smell as sweet.

 

When Consumers Speak

I spent the past week teaching managerial economics in a new masters of agribusiness and entrepreneurship program at Agricultural University-Plovdiv. It was a good opportunity to reinforce (or in some cases introduce) an understanding of property rights and of the role of markets not just to coordinate resources but to elicit, reveal and transmit knowledge throughout the economy. (It was also somewhat apropos that the class ended on the 25th anniversary of the fall of the Berlin wall, and Nov 10 is Bulgaria’s anniversary of the end of Communist control.)

One of the issues we discussed was the sensitivity of many Bulgarians (and Europeans in general) to things like genetically modified organisms (GMOs) in the food supply and the use of antibiotics and growth-stimulating hormones in meat and dairy. We discussed differences in attitudes between consumers in the US (in general) and in Europe, and differences among consumers in the US. We discussed alternate ways of responding to those sensitivities–whether government-imposed regulations or privately-organized initiatives in response to consumer demands. So news this week from the US provided two very timely examples. Continue reading When Consumers Speak

A Tilted Level Playing Field For Farmers

Yesterday, the World Trade Organization ruled in favor of the United States on claims that India had violated trade rules by prohibiting imports of US poultry, meat, eggs, and live pigs on “phytosanitary” (i.e., food safety) grounds. The WTO ruling is available here.

US farmer organizations were predictably thrilled by the ruling, since it may force India to open up it’s market to the tune of $300 million a year. I was particularly taken by this quote in the Des Moines Register by David Miller, director of research and commodity services for the Iowa Farm Bureau Federation:

“Iowa and U.S. farmers want a level playing field for international trade and we are confident that the WTO dispute resolution process provides an avenue for that to happen.”

I can only assume, then, that the Iowa Farm Bureau will also support removing the protectionist US sugar program, which restricts sugar imports and causes the price of sugar in the US to be 2 to 3 times higher than the world price of sugar. A recent study by Beghin and Elobeid published in the journal Applied Economic Perspectives and Policy suggests that eliminating the sugar quota would make US consumers better off to the tune of $2.9 to $3.5 billion per year and create as many as 20,000 new jobs.

Of course, that would come at a cost to Iowa corn farmers, who benefit greatly from inflated sugar prices that create a market opportunity for high-fructose corn syrup. Or perhaps what Mr. Miller meant is that Iowa and US farmers want a level playing field for international trade, as long as it tilts in their favor.

Why MO Amendment 1—And Its Opponents—Are Wrong

When I taught my first agricultural economics class, it happened to be at the peak of the 1998-99 hog industry crisis. I told my students, “Your parents don’t have a Constitutional right to raise hogs.” It was true then, is now, and should continue to be. But largely not for the reasons opponents of Missouri Amendment 1 claim.

You see, a Constitutional right implies an obligation, either positive or negative or both, on the government. For instance, the right to vote requires the government to make it possible for every adult to vote (a positive obligation) and prohibits the government from doing things that impede persons’ rights to vote (a negative obligation). The US Constitution’s 1st Amendment rights to religious freedom, free speech, etc., and the 2nd Amendment are expressed in the Constitution as negative obligations; e.g., “Congress shall make no law…,” or “the right of the people to keep and bear arms shall not be infringed.” But ultimately, the role of the Constitution is to put limits on what the government can, can’t–and must–do.

The text of Constitutional Amendment 1.
The text of Constitutional Amendment 1.
CONSTITUTIONAL AMENDMENT #1
Section 35. That agriculture which provides food, energy, health benefits, and security is the foundation and stabilizing force of Missouri’s economy. To protect this vital sector of Missouri’s economy, the right of farmers and ranchers to engage in farming and ranching practices shall be forever guaranteed in this state, subject to duly authorized powers, if any, conferred by article VI of the Constitution of Missouri. – See more at: http://www.mofb.org/KeepMissouriFarming.aspx#sthash.fca5gKo6.dpuf

The first problem with Missouri Amendment 1 is that it is not clear what obligations it imposes on the government, whether positive or negative. Opponents have argued, with rather disingenuous scare tactics, that the Amendment creates a negative obligation that would prohibit the State from regulating the agriculture industry in any way, leaving agricultural producers with free rein to abuse the animals they produce and the land and watersheds they work. Not only is that a grossly unfair and inaccurate characterization of the agriculture industry, it is also clearly not true. As with any other Constitutional right, the ability to exercise those rights is balanced against the public welfare interests of the State. Yes, the standard is higher in considering what limits are appropriate, but the State clearly would still have a role in prohibiting the Armageddon-like outcomes opponents warn against.

What has not been asked is what positive obligations Amendment 1 creates. If farmers and ranchers have a Constitutional right to engage in farming and ranching practices, what is the obligation of the State to affirmatively protect that right? Does it mean the State must further subsidize farmers and the farm industry, which is already one of the most heavily subsidized industries in the US? Does it mean the State must guarantee that farmers can continue to be farmers no matter what economic conditions might dictate? Does it mean contracts to foreclose on farming operations would become unconstitutional? Is it an individual right entitling each specific farmer to be a farmer forever, or is it a group right that protects farming as a productive operation. The language of the amendment itself provides no clear answer.

And what would be the consequences of the kinds of protections possible under the proposed amendment? Opponents have focused on anti-corporate bigotry and xenophobic scare tactics. However, more meaningful questions could be raised about the consequences for innovation in agricultural practices that improve food quality and supply but that might disrupt or challenge current practices and threaten to displace some producers. Or about the incentive for the agriculture industry to be innovative in its environmental practices and technologies—not in the sense that waterways would become toxic, like opponents suggest, but that there may be less incentive to developing new technologies and practices that do an even better job than current practices. Or about the incentive of the agriculture industry—and individual producers—to be sensitive and responsive to neighbors’ (and voters’) interests and concerns.

Finally, does it make sense to single out one profession or one sector of the economy as being worthy of Constitutional protection? Especially when there are already laws that provide the kinds of protections proponents of Amendment 1 want? Why is farming special compared to nursing, teaching, childcare, or any number of “socially valuable” industries (as if other professions are any less meritorious)? Proponents of Amendment 1 will rightly argue that agriculture has been under attack by special interest groups that take advantage of a voting public that lives in romanticized ignorance of the industry that produces their beloved burgers and bacon. However, the solution to that problem is not to further insulate the industry from the voting public, but to be more vigilant in educating the public and State officials in the face of anti-farming interests.

The Missouri Constitution is not the place for industries or professions to hide from competitive pressures—whether economic or ideological.

So Much News, So Little Time

The past couple weeks I’ve either been traveling, camping, or preparing for trips. Leave the keyboard for a couple weeks and all kinds of interesting things happen.

It’s SCOTUS season, with the Supreme Court handing down some long-awaited (and some less-awaited) decisions to close out the 2012-13 term. In one of them, Horne v. Department of Agriculture, the Court unanimously ruled that agricultural producers had the right to contest the marketing order set-asides as “takings” and sent the case back to the Ninth Circuit for further consideration. The SCOTUS ruling itself opens a potential host of legal challenges not just from agricultural producers, but any businesses that seek to challenge regulatory fines (see here). Now the Ninth Circuit will have to deal with the takings issue itself, which I discussed previously (here).

The SCOTUS also ruled on a land use property rights case that has potential implications for a wide range of businesses, including agricultural producers and agribusinesses. Koontz v. St. Johns River Water Management District expanded the scope of the Court’s rulings in Nollan v. California Coastal Commission and Dolan v. City of Tigard, which set limitations on the government’s ability to impair property interests with land use regulations. This case deserves a little more digging for those interested in land use restrictions and required environmental concessions.

And finally, the US House of Representatives showed that no political backscratching is exempt from ideological divides as it failed to pass its own version of the Farm Bill. Republicans who felt the programs contained in the bill needed to be cut further teamed with Democrats who believed the cuts were already too large to kill the bill. Most of the disagreement had less to do with farming, per se, than with food stamps and other nutritional subsidy programs. “Oh SNAP!” indeed!

Perhaps I’ll get some time to go back and look at each of these in a little more detail and write more on each–or at some of the other issues that have come up over the past couple week.

Oh SNAP! An Organizational Failure

As Congress attempts to work out a new farm bill, at the center of the debate between the House and Senate is the Supplemental Nutrition Assistance Program (SNAP), more commonly known as food stamps. SNAP has grown significantly over the past few years, rising from $37.6 billion in 2008 to $78.4 billion in 2012 according the USDA. Of the roughly $1 trillion expected to be spent over the next decade under the anticipated farm bill, about $800 billion is for nutritional assistance programs.

(One may wonder why food stamps and school lunch programs are part of the farm bill. They have been pretty much since World War II, when farming states found a national security reason (under-nourished draftees) to boost demand for excess agricultural production by channeling more food through elementary and secondary schools.  It also makes a nice urban-rural quid pro quo; legislators from urban areas with many more SNAP-eligible voters have incentive to support sending money to rural areas to support farmers, and vice-versa.)

Not surprisingly, the Democratic-controlled Senate wants to “rein in” SNAP spending by $4 billion over the next decade—or about 0.5%–while the Republican-controlled House is looking at a “catastrophic” cut of $20 billion—or less than 3%–over the same time. That’s 3% off a program that has more than doubled in the past five years. (You might sense the sarcasm here).

One of the reasons SNAP has grown so tremendously to begin with—in addition to the economic situation (it has still grown 10%+ the last two years)—is an organizational failure in the way SNAP is administered. Continue reading Oh SNAP! An Organizational Failure