November 13, 2016 | Commentary on Agriculture, Property and Economic Rights

Down with the Tart Cherry Cartel

Some Americans think the best way to run the economy is to appoint a few wise men and let them make the decisions. This applies not just to a few key sectors like running the Fed or ObamaCare. The notion percolates all the way down to tart cherries.

Today, independent growers wishing to market tart cherries as they see fit are stymied by a government-backed, industry-run cartel that controls the market.

In the early 1990s, the bottom fell out of the tart cherry market. American farmers received as little as 5 cents a pound. In 1995, a majority of these farmers voted to have the U.S. Department of Agriculture (USDA) set up a "Cherry Marketing Agreement" that would raise prices.

The authority to do this rested in the 1937 Agricultural Marketing Act, a relic of the New Deal that rejected the free market and provided for cartel-like supervisory boards to administer "marketing orders" for selected crops, under the overall regulatory oversight of the USDA. Approximately 28 marketing orders still exist today, but only two — the Tart Cherry Order and a Spearmint Order — directly limit crop sales.

The 21 farmers and processors who sit on the tart cherry board dictate how many cherries growers can sell at any given time. Imagine having a "National Bread Board" that told bakers how many loaves they could put on the market. That's what happens to tart cherry growers, even those who never supported the marketing order.

Tart cherry board members are not omniscient. They view everything from the narrow lens of their own business operations. This is not to say that they make decisions solely designed to advance their own commercial interests, although any cartel inevitably supplies a strong incentive to engage in self-serving behavior.

But cherry board members are simply not equipped to make the types of decisions they are required to make. No one is. Optimal decisions regarding market efficiency arise not from the cogitations of central planners, but only through the decentralized actions of individual business people operating under a free-market regime.

Even if it were omniscient, the board is not omnipotent. Its authority extends only to the domestic tart cherry industry, yet the market is shaped by producers and consumers around the world. As OPEC (the Organization of the Petroleum Exporting Countries) has learned, even international cartels can't hold back market forces indefinitely. No OPEC member wanted oil to go from $100 a barrel to $30 a barrel in two short years, but it happened.

In recent years, the board has required tart cherry producers to keep a substantial portion of their crops off the market and hold it for potential future sale. It's also decreed that another portion not be sold at all, leading farmers to let food simply rot in the ground.

These orders prevented American farmers from selling roughly 30 percent of their crop this year, even as foreign cherry growers racked up roughly 40 percent of domestic sales.

Adding insult to injury, the cherry board requires domestic farmers to pay into a promotional fund trumpeting the benefits of tart cherries. Cherry imports "free ride" on that marketing campaign, so domestic producers wind up helping their foreign competitors sell, even as they are forced to let their own cherries rot.

An unfettered market is the best arbiter of what constitutes the appropriate mix of imported and domestic goods, as well as how much should be offered for sale and what price they should bring. The current tart cherry cartel interferes with basic economic freedoms: the right of farmers to decide how much to grow and sell, and the right of processors to decide when to hold and when to sell.

In 2015, the Supreme Court struck a blow for economic freedom when it ruled that the USDA had to pay raisin farmers just compensation when the federal government, under the raisin marketing order's supply controls, took some of their raisins. The raisin order's supply controls are currently not in effect, but the order itself — and USDA's power to approve future new restrictive orders — remain in place.

The Agricultural Marketing Act allows anti-market arrangements to be established any time at the whim of special interests. It's distorting the tart cherry industry, and it needs to stop.

Congress should repeal this New Deal artifact entirely. At a minimum, lawmakers should repeal and prohibit supply controls in marketing orders. The free market — not a government-sanctioned, central-planning cartel — knows best.

About the Author

Alden Abbott Deputy Director of the Edwin Meese III Center for Legal and Judicial Studies and the John, Barbara, and Victoria Rumpel Senior Legal Fellow
Edwin Meese III Center for Legal and Judicial Studies

This piece first appeared on The Hill.