The U.S. Government’s Sweet Stash

A Supreme Court case reveals a federal stockpile of raisins | “They’re just set aside in a separate stack at each packaging plant”

Claire Suddath

In June the Supreme Court ruled on an obscure case called Horne v. Department of Agriculture, brought by a California raisin farmer who claims the federal government has illegally confiscated his private property by requiring him to pay into a national raisin reserve. The case didn’t attract much media attention because the justices unanimously decided to kick it back to a lower court for further review — and because it was quickly overrun by the gay-marriage and voting-rights decisions.

Yet the existence of a government-run dried fruit hoard will come as a surprise to most Americans and raises serious questions. Where are these millions upon billions of raisins kept? Can we eat them? Why is the government hogging raisins? What other sweet, chewy snacks is Washington stockpiling — and seriously, can we eat them? “There is no Uncle Scrooge’s nickel bank of raisins,” says Mechel Paggi, director of the Center of Agricultural Business at California State University at Fresno, who explains that the government doesn’t maintain a central raisin stash. Instead, they’re stored in smaller piles at packaging plants. (Darn. Would’ve been the ultimate episode of Storage Wars.)

The raisin reserve is the result of what’s called a federal marketing order, a set of rules establishing how much of a specific crop can be sold in any given year. The regulations date back to the Agricultural Marketing Agreement Act of 1937, which sought to give Depression- and Dust Bowl-ravaged farmers a way to limit supply collectively to raise crop prices.

There are now 22 crops with marketing orders, including avocados, peaches, kiwis, dates, walnuts, tomatoes, olives, and prunes. The allowable crop levels are set by industry-led bodies with names such as the Raisin Administrative Committee and the Almond Board of California, which are overseen by the U.S. Department of Agriculture. “The USDA is kind of like a policeman,” says Andrew Novakovic, an agricultural economist at Cornell University. “They don’t make the decisions so much as make sure everyone abides by the rules.”

The government doesn’t warehouse perishable items; there’s no point in hoarding millions of peaches if they’re only going to go bad. So market orders for those crops control supply in other ways. The most common method is to place stricter quality controls on the product-deciding it has to be a certain size, shape, or ripeness to be sold — that cause farmers to hold back a larger portion of their harvest. Raisins and nuts, however, keep for a long time, and in years when a limit is declared farmers who exceed it must stockpile the overage. “They’re just set aside in a separate stack at each packaging plant,” says Gary Schultz, president of the Raisin Administrative Committee. In the past, up to 47 percent of the annual raisin yield has been reserved this way. Once sidelined, these raisins can’t be sold until the government says so. “If the committee decides to release some or all of them into the marketplace later ... we hold an auction,” Schultz says. Unauctioned food is sometimes given to charity or government food programs before it spoils.

All farmers are required to surrender their excess crop. For the past 11 years, Marvin Horne, a 68-year-old California raisin farmer, has refused to play by the Raisin Administrative Committee’s rules and now owes the government $650,000 in fines and 1.2 million pounds of raisins. Horne argues that not being able to sell his entire yield costs him money, even though the reserve is designed to inflate prices. So in 2008 he sued.

Economists differ on whether Horne’s right. “There is a pretty good argument and evidence that raisin farmers as a whole come out ahead from the reserve policy, to the disadvantage of consumers and taxpayers,” says Dan Sumner, director of the Agricultural Issues Center at the University of California at Davis. Novakovic at Cornell isn’t so sure: “If I’m not selling 10 percent of my crop, but I’m getting a higher price for the other 90 percent of it, which is better?” he asks. “When you don’t know the price ahead of time, you can’t answer that question.”

Novakovic says that over time the crop reserves have a negligible effect on prices. That may be why most crop committees have suspended or eliminated their limits in recent years. Almond reserves haven’t been required since 1994; the order on nectarines and peaches was terminated in 2011. Even the hidebound protectors of dried grapes are coming around. The raisin committee hasn’t instituted a reserve in the past three years and might not have one next year, either. “This is the first time since 1949 that we’ve gone this long without one,” Schultz says. “Global supply and demand has been very much in balance.”

The bottom line A Depression-era law intended to stabilize produce prices requires growers of 22 crops to store a portion of their harvest.

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