Research
Working Papers
Factors Affecting the Duration of Agricultural Marketing Orders
with Jill J. McCluskey and Michael P. Brady
Abstract
Marketing orders are government-supported cartels that were designed to help small farmers during the Great Depression. Over the last forty years, however, many of these orders have chosen to terminate. Considering the potential for superior returns, this result is surprising, and little research has been done to understand the reasons behind termination. In this research, we endeavor to fill this gap by analyzing a novel data set on the timing of initiation and termination of marketing orders active between 1974 and 2019. We estimate duration models to examine the impact of specific factors on marketing orders’ probability of survival. Our results show that having a corresponding marketing agreement and a higher value of production leads to a decrease in the probability of termination, while age leads to an increased probability of termination.
Why are Agricultural Marketing Orders Less Prevalent than in Previous Years
with Jill J. McCluskey and Michael P. Brady
Abstract
The number of agricultural marketing orders has declined over the last thirty years. Since marketing orders are essentially government-sanctioned cartels, these terminations are unexpected. In this paper, we use a novel dataset to empirically examine whether market or cultural factors better explain this trend. We find that farm growth and stronger economies of scale are associated with a decrease in the number of active marketing orders, while a higher level of family labor inputs were associated with an increase. Therefore, it appears that small family farms benefit from marketing orders, so continued increase in the size of the largest farms is likely to further reduce the prevalence of marketing orders.
General Equilibrium Effects of Terminating an Agricultural Marketing Order's Supply Control
with Jill J. McCluskey, Michael P. Brady, and Philip Watson
Abstract
Marketing orders have a variety of authorizations they can choose to better their profits, and one of the most controversial is supply control. In this paper, we set out to determine what would happen if that control were eliminated. Using a 13-sector computable general equilibrium (CGE) model, we estimated general equilibrium effects when the California raisin marketing order lost their supply control. This elimination increased raisin production which, as expected, led to a decrease in price. Similar effects were found in the fruit sector as well. Output values were significantly higher for raisins, fruit, forestry, and mining; however, the remaining sectors observed a reduction in their sales. While the percentage changes were small, they were quite significant leading to overall economy losses between $138 million and $6.6 billion. At the same time, all households had increased utility with small shocks, but as the amount of the supply control increased, utility became negative for larger income levels. If a marketing order chooses to terminate or eliminate their supply control, their sales will increase, but it comes at the cost of the overall economy.