Organic Checkoff – What’s the Beef?

By Liana Hoodes

Liana Head Shot #2 May 2015 (1)

Liana Hoodes has worked on organic and sustainable agriculture policy for over 20 years, most recently as the founding Director of the National Organic Coalition, which she left in January 2015. Currently, Liana is consulting and organizing to advance high-integrity organic as the alternative to the current United States food and agriculture system in the grassroots, regional, and federal arenas. 

Some farmers are incensed at the idea of a checkoff while others are others stunned that there isn’t universal support for an Organic Research and Promotion program (Checkoff).

The organic “Checkoff” will be multi-commodity and will essentially promote organic as an overall brand. So why is there so much concern about this proposal?

Because currently in organic, what’s at risk is much greater than the $30-$40 million pot of gold this checkoff is supposed to create.[i]

Organic is currently at a crossroads.  The organic market is growing rapidly with many new small and large players—with sometimes competing interests.  The future of US organic will depend on who gets to make the decisions for the future of organic — in the checkoff program and in the ever evolving integrity of organic.

At the dawn of USDA organic, there was a hope that not only was the organic farming system different, providing significant extra health and environmental worth to society, but that this difference would be valued enough in the marketplace to carry sustainability (profitability and health) up the food chain. Organic pioneers envisioned that these principles would inspire new systems throughout the food chain to challenge the industrial, subsidy-laden food that may be cheap at the store, but costly to our future.

It remains to be seen whether organic can really serve as this alternative system. A system that addresses family farm agriculture and access to healthy food in the US, where the sustainability (including profitability and human/environmental health) is spread throughout the system, from farm (farmer and farmworker) to fork (all eaters). If organic cannot be that real alternative, then the little green USDA label is just a marketing analog to the conventional food system, where health and sustainability of farmers and eaters takes a back seat to the profits of the biggest players.

So what does this have to do with the Checkoff?

On its face, a “research and promotion program” might help educate consumers about the value of the organic label, increasing demand, and therefore profitability for farmers. But history shows that USDA Checkoffs bring no guarantee of farmer profitability and sustainability. While the promotion efforts may bring a spike in demand, a subsequent surge in supply often comes from increasingly consolidated and global sources at lower prices, resulting in a decrease in farmer pay price.[1][ii]

Currently, organic supply in the U.S. cannot meet demand. Out of necessity, organic processors and retailers are fulfilling their supply needs from the world market– and they are getting used to the lower prices that they can buy raw materials for.

Organic is already being beat out by other labels with higher standards for individual attributes such as animal welfare, non-GMO, and local. And big food companies are seeing dollar signs in the little green label, but looking for the cheapest supply – through consolidation and global supply and pressure on the organic standards to make organic an easier label to earn.

So does the possibility of a USDA Research and Promotion pot of gold fix these problems? Not the way it is currently being proposed. Here’s why:

    1. Unfairness in Checkoff Decision-making. USDA’s rules for checkoffs regulate participation in decision-making (i.e., who gets to vote for/against the checkoff, the governing board, and potentially how the money is spent) for those who hold an organic certificate AND pay an assessment.
      So if at least 60% of small organic farmers are exempt based on size and choose not to pay in, they won’t have a say as to what organic research takes place and how the promotion gets done. These producers are the bread and butter of the organic farming movement and they won’t get a say!
    2. No Focus on Fair prices for US farmers. In focusing so heavily on the promotion of organic, the end game of a new checkoff is to increase sales. Without a US supply to meet a growing demand, US farmers will have to compete with more and more imported organic. Yet keeping a fair pay price for US farmers is the most important thing we need to grow US organic the right way. A USDA Checkoff is not allowed to focus on a fair price for farmers and so growing the brand will trump farm family economics.
    3. Unsatisfactory Funding for farmer-based research and education. [See “Breakdown of the Pot of Gold”] Under the proposed USDA Checkoff, research projects could receive as little as 25% or $5-7 million nationwide after admin costs are taken out of the pot of gold. There is no guarantee that this would fund farmer-based research. Organic needs significantly more farmer-based research to tackle the barriers to production faced by organic farmers at all scales, not just production problems identified by the biggest players.
    4. Can’t Say “Organic Is Better.” The USDA Checkoff will not allow disparagement of other production systems – the message in promotion efforts from a USDA Checkoff cannot be that Organic is a better alternative than conventional for the environment and for health of humans and animals. The checkoff cannot use our most powerful message.

A USDA Organic Research and Promotion Checkoff Program is not the only way to advance organic, but it may be the fastest way to slow the growth of US organic farmers. And it’s the farmers – not the label – that are the stewards of our health and environment. Sign our petition to oppose the creation of an Organic Checkoff program.

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[1] USDA’s description of their checkoffs

[i] Breakdown of the “Pot of Gold” $30-40 million

From OTA: R&P Program Application Industry Overview: The Organic Trade Association and GRO Organic Core Committee proposal for the Generic Research and Promotion Order for Organic (“GRO Organic”) pursuant to the Commodity Promotion, Research and Information Act of 1996

How was the $40 million number calculated?

That number is an extrapolated estimate based on the size of the organic sector, and using the one-tenth of one percent assessment rate described above. The USDA NASS Organic Production Survey estimates organic farmgate value of $3.5 billion, and the OTA industry survey estimates organic sales of $39 billion. With the change in producer assessments to a net farm income model the current projection is closer to 30- 35 million per year at the outset.

The 1996 Act allows the Board to spend up to 15 percent on their administration. Every grant that the check-off gives can also have 15 percent allocated to administration. Taking the OTA highest projection of a gross check-off income of $40 million; therefore $6 million goes to administration of the Board; that leaves $34 million of which 15 percent goes to admin of individual grants or contracts which leaves $29 million; USDA AMS will also charge for their services.

The funds shall be allocated as follows: 25 percent for research, 25 percent for information, 25 percent for promotion, and 25 percent for discretionary funds;

$40 million broken down:

      • 25% of the remaining $29 million for Research = $7 million

Described in the ACT definitions as:

(13) RESEARCH.─The term “research” means any type of test, study, or analysis designed to advance the image, desirability, use, marketability, production, product development, or quality of an agricultural commodity.  [COMMODITY PROMOTION, RESEARCH, AND INFORMATION ACT OF 1996 (7 U.S.C. 7411-7425]

 From the OTA Proposal    “Of the funds allocated to research, the producer assessments within that account shall go into an account for regional research, with proposals to be evaluated by a subcommittee of the Board made up of the regional organic producer members from the Pacific Northwest, California, Southwest, North Central, South or Northeast who will make a recommendation that shall be voted on by the Board”

There are 7 regions:

      • Pacific Northwest
      • Northern California
      • Southern California
      • Southwest
      • North Central
      • South
      • Northeast

This is obviously something to be worked out – probably developed by the Board. However, If a system of somewhat autonomous research regions is developed (ala SARE), and if funds were even partly equitably distributed, that leaves approximately $1 million per region. If allotments for research are based on production or assessment numbers, some regions could get significantly less; others more.

      • 25% for Discretionary = $10 million.

Assuming that this is where the administration $$ come from, under the proposal, no more than 15% of the assessment can be used for administration = $6 million for Administration I would not assume that this would be for admin as admin would come out first

      • 25% for Information = $10 million

Not clear what exactly this is for, but described in the ACT definitions as:    (7) INFORMATION.─The term “information” means information and programs that are designed to increase─(A) efficiency in processing; and (B) the development of new markets, marketing strategies, increased marketing efficiency, and activities to enhance the image of agricultural commodities on a national orinternational basis.   [COMMODITY PROMOTION, RESEARCH, AND INFORMATION ACT OF 1996 (7 U.S.C. 7411-7425]

      • 25% for Promotion = $10 million

Described in the ACT definitions as:  (12) PROMOTION.─The term “promotion” means any action taken by a board under anorder, including paid advertising, to present a favorable image of an agricultural commodity to the public to improve the competitive position of the agricultural commodity in the marketplace and to stimulate sales of the agricultural commodity. [COMMODITY PROMOTION, RESEARCH, AND INFORMATION ACT OF 1996 (7 U.S.C. 7411-7425]

Note that under the ACT, (d) PROHIBITED ACTIVITIES, is specifically:  (d) PROHIBITED ACTIVITIES.─A board may not engage in, and shall prohibit the employees and agents of the board from engaging in─(1) any action that would be a conflict of interest; (2) using funds collected by the board under the order, any action undertaken for the purpose of influencing any legislation or governmental action or policy other than recommending to the Secretary amendments to the order; and (3) any advertising, including promotion, research, and information activities authorized to be carried out under the order, that may be false or misleading or disparaging to another agricultural commodity. [EMPHASIS ADDED]

 

#2: [ii] Checkoff Programs Have Not Been Good For Family Farms (NODPA)

Existing check off programs have not kept small to mid-size family farm producers in business. Data shows declining farm numbers and increasing concentration in agriculture while these commodity research and promotion programs have been in effect. ‘Got Milk?’, ‘The Incredible Edible Egg’, ‘Beef, It’s What’s for Dinner’ and ‘Pork, The Other White Meat’, to name a few, may be nice sounding promotional terms but the producers of these commodities have not been the ones who gained from these programs.

  • Between 1992 and 2004, U.S. farms with hogs declined from over 240,000 to fewer than 70,000. Currently 20 pork entities produce 50 percent of all the hogs in the U.S. Very few independent hog producers remain in business and the market is dominated by the integrated meatpackers. The pork check-off fund will generate $72 million in 2012. (Source: USDA)
  • The wheat check-off was designed to increase wheat exports. Current wheat exports are in fact below the 10-year average, with the wheat check-off having been in place since 1980. (2011/2012 crop year exports are projected to be 27.9 million metric tonnes vs. the 10 year average of 28.3 million metric tonnes.) (Source: Wheat Growers Association)
  • ‘Beef, it’s what’s for dinner’ campaign: This advertising effort is funded by a $1.00 per head check-off assessed every time a live animal changes hands. This checkoff program has been in effect since 1989 and millions of dollars have been “checked off” and millions spent on very creative advertising. What has happened to beef consumption during the time of the campaign? Beef per capita consumption has declined from 88 pounds per person to less than 60 pounds today (USDA, ERS beef per capita consumption, boneless equivalent weight basis).
  • Since the start of the ‘Got Milk’ campaign in October 1993, the consumption of fluid milk has dropped year by year (per capita U.S. consumption of fluid milk in 1993 was 24.37 gallons, in 2010 it was 20.69 gallons), as have the number of dairy farms (in 1993 there were 124,945 dairy farms but only 51,481 in 2011). (Source USDA AMS)
  • The ‘Incredible Edible Egg’ campaign was started in 1977. Since then, consumption of eggs has declined. In 1987, there were around 2,500 operations with flocks of 75,000 hens or more. In 2012, there are 179 egg producing companies with flocks of 75,000 hens or more.