An Evaluation of California's Mandated Commodity Promotion Programs

Abstract

This article provides an overview of mandated commodity programs in California, and summarizes and interprets existing evidence on their economic impacts. The analysis draws upon the recent book edited by the authors: The Economics of Commodity Promotion Programs: Lessons from California. New York: Peter Lang Publishing, April 2005. The book documents the institutional arrangements, summarizes the history of recent litigation, and presents the results of a number of benefit‐cost studies of mandated commodity programs in California. The overwhelming conclusion from the studies reported in the article is that the programs have been very profitable for California's agricultural producers.

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“…A less conservative estimate would charge only the additional expenditure associated with the experiment against the measured benefits, implying benefit–cost ratios to producers of 15:1 if they bear the entire cost and 22:1 if they bear costs in proportion to their share of benefits. These estimated benefit–cost ratios are within the typical range for generic commodity promotion programmes, as reviewed by Alston et al. (2007).…”

“…Such benefit–cost ratios are very favourable (a benefit–cost ratio of anything over 1:1 is sufficient to justify an investment). As documented by Kaiser et al (2005) and Alston et al. (2007), estimates of the average benefit–cost ratio in this range have been found in previous studies of generic commodity promotion in the United States.…”

“…Alston et al. (2003), Tremblay and Tremblay (1995), and Alston et al. (2007) discuss these measures, in particular the measure of consumer welfare change, which they argue is appropriate for promotion‐induced demand shifts associated with signals about product quality.…”

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“…This article builds on an extensive body of literature in which researchers have simulated the effects of regulations, collective actions by producer organizations, or outbreaks of food-borne illness or animal disease using equilibrium-displacement type models. Alston et al (2007) outlined a general framework for analyzing a supply shift that triggers a demand shift, summarizing a dozen studies of mandated commodity promotion ("checkoff") programs in California. Most of these studies were ex post analyses of commodity promotion programs; one (Gray et al 2005) involved an ex ante simulation of the costs and benefits of a federal marketing order that mandated quality standards and an inspection program for aflatoxin (a toxin linked to cancer) in California pistachios.…”

“…In addition to the various works summarized by Alston et al (2007), other papers that have used an equilibrium-displacement framework to study similar issues include the following: Paarlberg et al (2003), who simulated the effects of hypothetical outbreaks of foot-and-mouth disease; Pendell et al (2010), who simulated the welfare effects of the adoption of an identification and tracing system for U.S. livestock; Muth et al (2002), who simulated the welfare effects of mandating post-harvest treatment of oysters, incorporating positive demand effects; and Mottaleb et al (2012), who simulated equilibrium effects of the adoption of a new variety of droughtresistant rice under varying climate-change scenarios.…”