Agricultural Marketing: Comparative Analysis of U.S. and Foreign
Promotion and Research Programs (Letter Report, 04/28/95,
GAO/RCED-95-171).
Pursuant to a congressional request, GAO provided information on U.S.
and foreign promotion and research programs to increase domestic and
foreign sales of agricultural products, focusing on: (1) how U.S.
check-off programs are organized; (2) what factors the check-off boards
consider in planning future program activities; and (3) how comparable
marketing organizations in Australia, Germany, New Zealand, and the
United Kingdom carry out their promotion activities.
GAO found that: (1) the six U.S. check-off programs reviewed vary by
board composition, revenues collected, assessment methods, and options
for initiating, continuing, and terminating programs; (2) the check-off
boards differ in their emphasis on developing domestic or foreign
markets, their methods for selling their products, and their reliance on
research to develop new products, enhance production, and address
nutritional concerns; (3) the check-off boards use market research and
program evaluation techniques to plan their future activities while
coordinating with related groups in preparing and carrying out these
plans; (4) the foreign promotion and research programs reviewed differ
from the U.S. check-off programs in their organizational structure,
funding mechanisms, types of activities performed, and emphasis on
export activities; (5) some foreign marketing organizations have
government members on their boards or guiding councils and do not
require legislative action to change their assessment rates; (6) some
foreign programs promote product groups rather than a single industry;
(7) in general, the foreign marketing organizations do not exempt small
producers from assessments and some receive significant funding from
sources other than their industry assessments; (8) these foreign
organizations generally engage in a wider range of promotional
activities, such as buying and selling products and providing training
and inspection services, than their U.S. counterparts and focus more on
exports than domestic sales; and (9) market development programs may
become more important in the future, since the new international trade
regulations do not limit their use and increase competition.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-95-171
TITLE: Agricultural Marketing: Comparative Analysis of U.S. and
Foreign Promotion and Research Programs
DATE: 04/28/95
SUBJECT: Agricultural products
Commodity marketing
Exporting
Sales promotion
Foreign governments
International trade
Agricultural industry
Agricultural research
Domestic assistance
Comparative analysis
IDENTIFIER: Australia
Germany
New Zealand
United Kingdom
USDA Foreign Market Development Program
USDA Market Promotion Program
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Cover
================================================================ COVER
Report to the Ranking Minority Member, Subcommittee on Risk
Management and Specialty Crops, Committee on Agriculture, House of
Representatives
April 1995
AGRICULTURAL MARKETING -
COMPARATIVE ANALYSIS OF U.S. AND
FOREIGN PROMOTION AND RESEARCH
PROGRAMS
GAO/RCED-95-171
Agricultural Marketing
Abbreviations
=============================================================== ABBREV
AMS - Agricultural Marketing Service
AWRAP - Australian Wool Research and Promotion Organization
CMA - Central Marketing Organization of German Agricultural
Industries
ERS - Economic Research Service
FAS - Foreign Agricultural Service
GAO - General Accounting Office
GATT - General Agreement on Tariffs and Trade
IWS - International Wool Secretariat
MPP - Market Promotion Program
USDA - U.S. Department of Agriculture
ZMP - Central Marketing and Price Reporting Office for
Agricultural, Forestry and Food Products
Letter
=============================================================== LETTER
B-261212
April 28, 1995
The Honorable Charlie Rose
Ranking Minority Member
Subcommittee on Risk
Management and Specialty Crops
Committee on Agriculture
House of Representatives
Dear Mr. Rose:
In response to your request, this report presents information on U.S.
and foreign promotion and research programs. U.S. producers,
importers, and others handling a variety of agricultural products pay
millions of dollars annually for promotion and research programs to
increase domestic and foreign sales of these products. The programs,
authorized by individual federal laws, are known as check-off
programs because of the way they are funded: A small amount is
deducted from the revenues that producers and/or other members of an
industry receive from the sale of their products. The programs are
operated by check-off boards, such as the National Dairy Promotion
and Research Board. The Secretary of Agriculture appoints the board
members from candidates nominated by industry. Many other countries
also have agricultural marketing organizations that conduct
agricultural promotion and research activities. As the General
Agreement on Tariffs and Trade (GATT) reduces export subsidies and
domestic price supports and increases access to protected markets,
the check-off programs may become a more important tool for enhancing
agricultural competitiveness in both domestic and foreign markets.
Specifically, this report provides information on (1) how U.S.
check-off programs are organized and what kinds of activities they
carry out, (2) what factors the check-off boards consider in planning
future program activities, and (3) how comparable marketing
organizations in Australia, Germany, New Zealand, and the United
Kingdom are organized and carry out their activities.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
The six U.S. check-off programs we reviewed\1 collected over $200
million from their industries during 1994 and varied considerably in
organizational structure and activities conducted.\2
Organizationally, the programs vary by the (1) composition of the
board, (2) amount of revenue collected, (3) specific method of
assessment, and (4) options for initiating, continuing, and/or
terminating a program. In terms of activities, the boards differ in
the emphasis they place on developing domestic and/or export markets
and the methods of communication they use to sell their products.
They also vary in their reliance on research to develop new products,
enhance production, and address nutritional concerns.
These check-off boards use market research and program evaluation
techniques to plan future activities. They also coordinate with
related groups in preparing and carrying out these plans. The boards
collect extensive market research information on consumers'
perceptions and consumption patterns to identify and measure existing
and potential market demand for their products. Once programs are in
place, the boards conduct evaluations to assess their programs'
effectiveness. Moreover, the boards use a variety of methods--such
as joint planning, cost sharing, and data base sharing--to coordinate
their activities with those of related groups. Through coordination,
the boards hope to avoid duplication of effort and attain greater
efficiency.
While the foreign promotion and research programs we reviewed are
each authorized by their national government, these programs differed
from U.S. check-off programs in their organizational structure,
funding mechanisms, types of activities performed, and emphasis on
export activities. Specific differences included the following:
In contrast to U.S. check-off programs, which promote the products
of a single industry, some foreign programs promote related
products, such as beef, sheep, and pork, while others promote
unrelated products, such as beef products, dairy products, and
fruits and vegetables. Furthermore, unlike U.S. check-off
boards, some foreign countries' marketing organizations have
government representatives on their boards.
Like most of the assessment rates for U.S. check-off programs,
foreign marketing organizations' assessment rates are generally
fixed per unit sold. However, in contrast to U.S. boards, some
foreign organizations can revise their maximum assessment rates
with ministerial approval, and no statutory amendment is
necessary. Furthermore, only one foreign marketing organization
we reviewed assesses imported products, and none allow refunds
or the use of a referendum to terminate a program. Generally,
these organizations do not exempt smaller-volume producers from
assessments. In addition, some foreign marketing organizations
receive significant funding from sources other than mandatory
industry assessments, including fees for services, revenues from
the sales of products, and government grants. Some U.S.
board-sponsored export promotion activities that are funded by
program assessments may also receive government funding.
Compared with their U.S. counterparts, foreign marketing
organizations generally engage in a wider range of activities,
including purchasing and marketing products, training, licensing
exports, and ensuring the quality of marketed products.
Many foreign marketing organizations focus more on promoting
exports than domestic sales. In contrast, five of the six U.S.
programs we reviewed use their assessments largely for domestic
activities.
--------------------
\1 These programs are the (1) Cattlemen's Beef Promotion and Research
Board, (2) Cotton Board, (3) National Dairy Promotion and Research
Board, (4) American Egg Board, (5) National Potato Promotion Board,
and (6) United Soybean Board.
\2 These assessments collected at the national level do not include
assessments that go directly to the state and regional organizations
that carry out promotion and research activities similar to those of
the national check-off boards.
BACKGROUND
------------------------------------------------------------ Letter :2
Generic promotion and research programs funded through voluntary
check-off contributions have existed at the local, state, and
regional levels for more than 50 years. These programs were
developed to expand the market for the agricultural products of a
given industry. To facilitate better coordination across states,
encourage equitable participation from all those who benefit from
these programs, and create a larger funding base, agricultural
industry groups began to seek federal legislative authority to
establish mandatory national programs. The first federally
authorized program was enacted in 1954, but the majority were created
during the 1980s and 1990s.\3 Of the 19 programs that have been
authorized, 15 are currently active and 4 are inactive. Industry
members who would pay the assessments must approve the creation of a
check-off program in a referendum. Legislation for all check-off
programs also provides industry members with an opportunity to
terminate the program through a referendum.
The U.S. Department of Agriculture (USDA), through its Agricultural
Marketing Service (AMS), is responsible for (1) developing
regulations to implement these check-off programs, in consultation
with the affected industry, and (2) ensuring compliance with the
authorizing legislation and the agency's related orders. AMS reviews
each board's budgets, projects, and contracts to ensure that the
board does not engage in prohibited activities, such as lobbying.
Boards reimburse AMS for its oversight costs.
Generally, USDA does not review the effectiveness of the programs.
However, the legislation authorizing the Dairy Board requires the
Secretary of Agriculture to submit an annual report to the Congress
that includes an independent analysis of the Dairy Board's
effectiveness. In addition, USDA's Foreign Agricultural Service
requires evaluations of the check-off projects that receive funding
from its Market Promotion Program.\4
--------------------
\3 For an overview of these check-off programs, see our report
entitled Agricultural Marketing: Federally Authorized Commodity
Research and Promotion Programs (GAO/RCED-94-63, Dec. 29, 1993).
\4 The Market Promotion Program provides USDA funds to trade
associations to conduct generic promotions or to fund private
companies' brand-name promotions in foreign countries, predominately
for high-value products. In our report entitled Agricultural Trade:
Five Countries' Foreign Market Development for High-Value Products
(GAO/GGD-95-12, Dec. 14, 1994), we discussed USDA's efforts to
measure the effectiveness of activities funded by the Market
Promotion Program.
CHECK-OFF PROGRAMS'
ORGANIZATIONAL STRUCTURES AND
ACTIVITIES VARY CONSIDERABLY
------------------------------------------------------------ Letter :3
The six check-off programs vary organizationally and in the emphasis
given to, and methods used to carry out, promotion and research
activities.
CHECK-OFF PROGRAMS DIFFER IN
THE WAY THEY ARE ORGANIZED
AND CONDUCT BUSINESS
---------------------------------------------------------- Letter :3.1
The programs we reviewed vary in the composition of their governing
boards, methods used to assess industry members, and ways the
programs are initiated and terminated. (See app. I for more
detailed information on each board reviewed.)
The authorizing legislation for each program specifies the
composition of the check-off board. These boards vary by the groups
represented--that is, producers, importers, and consumer advisers or
public representatives--and by size. For example, the Beef Board has
101 producers and 6 importers on its board, and the Egg Board has 18
producers and their alternates. Board membership generally reflects
a geographical mix of the producers assessed and can be changed
administratively in some cases to reflect shifts in production. Some
boards--Cotton, Egg, and Potato--are authorized to include consumer
advisers or public representatives. Members of the boards are
appointed for 2- or 3-year terms.
The authorizing legislation for each program also sets an assessment
level and specifies who in the industry should be assessed. However,
these legislative provisions vary in the (1) methods used to
calculate the assessment, (2) assessment of imports, (3) refunding of
assessments, (4) process for revising assessment rates, (5)
arrangements for giving credit to producers for contributions made to
qualified state and regional check-off programs, and (6) methods for
terminating the program.
As table 1 shows, the six check-off boards we reviewed used several
assessment methods.
Table 1
Assessment Methods, Options to Change
Rates, and Current Rates for the Six
Programs Reviewed
Assessment method and options Agricultural product and
to change rate current assessment rate
----------------------------- -----------------------------
Fixed rate per unit or volume Beef--$1 per head of cattle
sold. sold. Milk--15 cents per
Rate can be changed only by hundredweight of milk sold.
statutory amendment.
Fixed percentage of market Soybeans--0.5 percent of net
value. Percentage can be market value of soybeans
changed only by statutory sold.
amendment.
Fixed rate plus a percentage Cotton--$1 per bale plus 0.5
of market value. Percentage percent of bale value on
is capped at 1 percent. Fixed sales of cotton.
rate and percentage cap can
be changed only by statutory
amendment. The current
percentage rate can be
changed up to the maximum by
the Secretary on the basis of
the board's recommendation.
Fixed rate per unit sold. Eggs--10 cents per 30-dozen
Rate is capped at 20 cents, case of eggs sold.
and this limit can be changed
only by statutory amendment.
The current rate can be
changed up to the maximum by
the Secretary on the basis of
the board's recommendation.
Any proposed increase must be
approved by referendum.
Fixed rate or fixed Potatoes--2 cents per
percentage of the average hundredweight.
national market value for
several years. Rate is capped
at 2 cents or 0.5 percent of
the average U.S. sales price
during the immediate past 10
years. These limits can be
changed only by statutory
amendment. The current rate
can be changed up to the
maximum by the Secretary on
the basis of the board's
recommendation.
------------------------------------------------------------
Smaller-volume producers are exempt from assessments for two of the
six programs--egg and potato. The authorizing legislation for three
of the check-off programs--beef, dairy, and soybean--gives credit to
producers for contributions they make to qualified state or regional
check-off programs. The Egg and Cotton boards have provided funds to
state and regional groups, although they are not required to do so.
Finally, three of the six programs we reviewed--beef, cotton, and
potato--assess importers.
In the past, many check-off programs allowed those who had been
assessed but did not wish to participate in the program to request
refunds of the assessment they had paid. However, most refund
provisions have been eliminated. Of the six programs reviewed, only
the soybean program continues to offer refunds of up to a maximum of
10 percent of the assessments collected from producers in each state.
By statute, USDA must poll soybean producers to see if they want a
referendum held to determine support for the refund policy. Such a
poll is scheduled for July 1995.
The check-off programs we reviewed also differ in their requirements
for revising assessment rates. The programs with fixed rates--beef,
dairy, and soybean--must have their rates revised by statutory
amendment, while the other programs--cotton, eggs, and potatoes--can
have their rates revised administratively within their statutory
ceiling. For the egg program, any increase must be approved by
referendum.
All programs have termination provisions that enable producers voting
in a referendum to terminate the program. The soybean program
provides for periodically polling producers to determine whether they
want to have a referendum on continuing the program. The dairy
program is unique in that it allows dairy cooperatives to cast bloc
votes for their members. However, members are given an opportunity
to vote individually if they disagree with their cooperative's
position. Legislation was introduced in January 1995 in the Senate
that would eliminate the dairy program's bloc voting process because
of concerns about whether it is fair and equitable. In addition,
this proposed legislation would require that the Dairy Board
periodically determine producers' support for the program. No action
has been taken to date on this legislation.
CHECK-OFF BOARDS PLACE
DIFFERENT EMPHASIS ON
PROMOTION, RESEARCH, AND
INFORMATION ACTIVITIES
---------------------------------------------------------- Letter :3.2
The six boards vary considerably in the emphasis placed on, and
methods used to carry out promotion (domestic and export), research,
and consumer and industry information activities. (See apps. II and
III for more information on the use of funds and the activities
conducted by the six check-off boards.)
Five of the six boards spent most of their fiscal year 1994
funds--ranging from about 56 percent for the Egg Board to 75 percent
for the Potato Board--promoting agricultural products, principally in
the domestic market. The Soybean Board does not promote products in
the domestic retail market. However, it does provide information to
domestic consumers on the use of soybean products. The boards relied
on a mix of methods--television and radio advertising, print media,
in-store promotions, and industry newsletters--to communicate their
messages to various audiences. The boards also targeted their
promotions to certain consumer or industry groups. The three major
types of intended audiences were consumers, the food service industry
(restaurants and institutions), and manufacturers.
The boards also use different advertising methods for various target
audiences. For example, the Beef, Cotton, Dairy, and Egg boards have
devoted a considerable portion of their promotion budgets to
television advertising campaigns intended to influence consumers.
Additionally, the Egg Board has used radio tie-ins with major
networks to deliver its national campaign message. Promotional
efforts have included such campaigns as the Egg Board's "I Love Eggs"
and the Beef Board's "Beef. It's What's For Dinner." In contrast,
the Potato Board's 1993 consumer advertising concentrated on print
advertisements in national magazines.
The boards also differ in the emphasis they place on developing
foreign markets; funding for export promotion activities ranged from
less than 1 percent for the Egg Board to 29 percent for the Soybean
Board. In addition, the boards have participated either directly or
through related industry contractor organizations in the Foreign
Agricultural Service's export promotion programs--the Market
Promotion Program and/or the Foreign Market Development Program.\5
These programs provide funds for projects to promote exports through
supermarket promotions, nutritional information, and technical
assistance. Federal funding for these two programs has decreased
over the past few years from about $237 million authorized in fiscal
year 1992 to about $134 million authorized in fiscal year 1994.
The percentage of fiscal year 1994 funds spent on research activities
and the types of research also varied among the six boards. The
percent of check-off funds spent on research varied among the boards,
with the Cotton Board being the highest at about 24 percent.
Research efforts of the Beef, Dairy, and Egg boards have focused
primarily on nutrition education and product development. However,
other boards, such as the Cotton and Soybean boards, focus their
research efforts on production enhancement and product development.
These efforts have included the Soybean Board's production research
on altering the genetic composition of soybeans and product
development research on identifying and developing new uses for
soybeans, such as soy ink and SoyDiesel fuel. In some cases, the
authorizing legislation for a board prohibits it from conducting
certain types of research. For example, the Dairy and Beef boards
are prohibited from engaging in production research activities.
In addition to promotion and research, the six boards spend funds to
provide educational information to consumers and industry. In 1994,
funds spent in this way ranged from about 1 percent for the Cotton
Board to about 30 percent for the Soybean Board. Consumer
information involves activities to provide product information to
consumers through groups that influence consumers, such as educators,
dieticians, physicians, and food manufacturers. These efforts have
included the Egg Board's distribution of educational kits to
kindergarten through sixth grade classroom teachers across the United
States. These kits contain lessons and activities about food safety,
nutrition, and product characteristics. Industry information efforts
have included the Beef Board's distribution of information to
commercial meat buyers in the marketing chain to help them in
purchasing trimmed beef while maintaining an acceptable profit
margin.
--------------------
\5 The Market Promotion Program (authorized in the 1990 farm bill)
and the Foreign Market Development Program (first authorized in 1954)
are jointly funded by USDA, cooperating nonprofit commodity
organizations, and U.S. companies. The Market Promotion Program
focuses primarily on high-value products, such as fruits, nuts, and
processed products. In contrast, the Foreign Market Development
Program focuses primarily on developing markets for grains and
oilseeds.
CHECK-OFF BOARDS PLAN
ACTIVITIES USING MARKET
RESEARCH, EVALUATION, AND
COORDINATION
------------------------------------------------------------ Letter :4
In planning future activities, check-off boards rely heavily on
market research and program evaluation. The boards also work with
related state and regional check-off boards and industry groups to
jointly plan and carry out program activities.
MARKET RESEARCH AND
EVALUATION ARE MAJOR TOOLS
FOR PROGRAM DEVELOPMENT
---------------------------------------------------------- Letter :4.1
All six boards use the results of market research to evaluate their
activities and set priorities for future undertakings. This market
research consists of a variety of efforts, including measuring
changes in consumers' attitude and behavior toward a board's
products, assessing consumers' attitudes toward a board's advertising
campaigns, and identifying new uses and markets for a board's
products, including export markets. The boards also obtain market
research on the views of other groups, such as health and food
service professionals, that may affect demand for the product.
While only the Dairy Board is legislatively required to evaluate its
program's activities, all the check-off programs we reviewed evaluate
their activities using market research, and some use econometric
studies.\6 These evaluations were for specific projects as well as
the overall program. Evaluations may occur during a project as well
as upon its completion. We did not assess the evaluation methods
used by the six check-off boards.
In addition to other evaluation methods, the Dairy and Beef boards
use independently prepared econometric studies to help them measure
the effectiveness of their domestic programs. As part of its
statutorily required annual report on the effectiveness of the dairy
program, USDA's Economic Research Service prepares an annual
econometric report on the impact of the board's advertising on the
sales of two major dairy products--fluid milk and cheese. Similarly,
the Beef Board prepares a biennial econometric report on the impact
of its program on beef prices and calculates the return on each
dollar invested.
Check-off boards use several methods to evaluate the effectiveness of
their export programs, including feedback from trade shows, consumer
surveys, and promotion reports. In addition, board-sponsored export
promotion activities that receive federal funding must comply with
the Foreign Agricultural Service's evaluation requirements.
In 1993, we reported that USDA had evaluated few of the Market
Promotion Program's activities.\7 However, our December 1994 report
noted that USDA now attempts to measure the effectiveness of
activities funded under the Market Promotion Program by selectively
evaluating the results of participants' ongoing activities against
measurable goals provided in the participants' funding proposals.
USDA has developed a methodology to identify activities that have not
been effective in expanding or maintaining market share. Our 1994
report also noted that the agency has developed an econometric model
to evaluate the effectiveness of Market Promotion Program
participants' expenditures in increasing U.S. exports.
--------------------
\6 An econometric study is a statistical analysis that isolates the
effect of advertising from other factors affecting product sales.
\7 International Trade: Effectiveness of Market Promotion Program
Remains Unclear (GAO/GGD-93-103, June 4, 1993).
CHECK-OFF BOARDS WORK WITH
OTHER ORGANIZATIONS TO PLAN
AND CARRY OUT ACTIVITIES
---------------------------------------------------------- Letter :4.2
All of the check-off boards we reviewed that share assessments with
state and regional groups jointly plan and carry out research and
promotion activities. These national boards coordinate with the
state and regional boards to ensure that their efforts complement
each other and achieve maximum impact. In addition, the boards plan
future work with input from manufacturers, universities, and related
trade groups.
The joint efforts take a variety of forms. For example, the Beef
Board obtains comments on its preliminary annual plan from state beef
boards, with which it shares assessment revenues, and other
industry-related groups. As an incentive for state groups to
participate in the Egg Board's "I Love Eggs" national campaign, the
Egg Board agreed to pay a portion of the state industry group's radio
advertising costs for most of 1994.
Check-off boards share marketing and research-related information
with state and other organizations through monthly newsletters,
annual reports, data bases, and periodic meetings. This arrangement
helps ensure more efficient use of resources and avoid duplication of
effort. For example, the Potato Board shares monthly briefing
information and promotional material and holds an annual meeting with
state program managers. Similarly, the Dairy Board has established a
market research data base that it shares with related industry
groups.
In addition, the Dairy Board has formed a cooperative effort with a
related industry group, and the Beef Board plans to work with a new
industry group. In 1994, the Dairy Board and the United Dairy
Industry Association undertook a cooperative effort, Dairy Management
Incorporated, to formalize joint planning and funding between the two
organizations. A beef industry oversight committee, in which the
Beef Board participates, is recommending that two of the board's
major contractors--the National Cattlemen's Association and the
National Live Stock and Meat Board--be consolidated. The Beef Board
would remain outside of this new organization but expects to
coordinate and contract with it for many services.
AGRICULTURAL MARKETING PROGRAMS
IN FOUR FOREIGN COUNTRIES ARE
SIGNIFICANTLY DIFFERENT FROM
U.S. CHECK-OFF PROGRAMS
------------------------------------------------------------ Letter :5
National agricultural marketing programs in the four countries we
reviewed--Australia, Germany, New Zealand, and the United
Kingdom--varied significantly from U.S. check-off programs in their
organizational structure, sources of funding, activities performed,
and emphasis on export promotion activities. These countries have a
long history of exporting and have developed significant expertise in
marketing. Different types of marketing organizations have evolved
in these countries--some are managed by a combination of public and
private representatives and draw funds partially from the public
sector. (See app. IV for more detailed information on the 19
programs we reviewed in these four countries.)
FOREIGN MARKETING
ORGANIZATIONS' STRUCTURE AND
SOURCES OF FUNDING DIFFER
FROM THOSE OF U.S.
COUNTERPARTS
---------------------------------------------------------- Letter :5.1
Some marketing programs in the four countries we reviewed perform
different functions from U.S. check-off programs, which promote the
products of a single industry. Some foreign programs promote many
unrelated agricultural products, and others promote several related
products. For example, Germany's Central Marketing Organization of
German Agricultural Industries (CMA) promotes most agricultural
products in both domestic and export markets. The United Kingdom's
Food From Britain also promotes British food and drink products
primarily in export markets. Other organizations in the four
countries may promote several related agricultural products. New
Zealand's Meat Producers Board, for example, promotes beef, sheep,
goat, and horsemeat products.
Unlike U.S. check-off programs, some foreign countries' marketing
programs either have government members on their boards or are guided
by councils that include government members. For example, 6 of the
13 organizations whose programs we reviewed in Australia and New
Zealand have voting government representatives on their boards. In
Germany, while government representatives are not on CMA's board,
they participate in a supervisory board that helps guide CMA's
activities.
The assessment methods used by the marketing organizations in the
four countries we reviewed also differed from the methods used by the
U.S. check-off boards. While the foreign programs' assessment rates
were generally a fixed dollar amount per unit or volume sold, like
the U.S. programs' assessment rates, the foreign rates can generally
be revised with the approval of the Minister of Agriculture and do
not require statutory amendment. In addition, while the U.S.
check-off boards we reviewed assess producers, the United Kingdom's
Meat and Livestock Commission assesses slaughterhouses and exporters
as well as producers. Unlike some U.S. check-off boards that assess
imported products, only 1 of the 19 foreign marketing organizations
we reviewed assessed imported products. Furthermore, smaller-volume
producers are generally not exempted from paying required
assessments, as they sometimes are in the United States; refunds of
assessments are not permitted; and the programs cannot be terminated
through a referendum. According to officials of the marketing
organizations we reviewed, only national legislation can terminate
their programs.
Some foreign marketing organizations receive significant funding from
sources other than mandatory industry assessments. The United
Kingdom's Food From Britain receives about 60 percent of its funds
from the government,\8 and the remainder comes from industry
contributions and user fees. New Zealand's organizations may receive
partial government funding for some research projects. In addition,
other foreign organizations received funding from a variety of other
sources, including fees for services, such as grading agricultural
products according to quality specifications; investments in
commercial enterprises; and revenues from the sales of agricultural
products.\9
--------------------
\8 The British government plans to gradually decrease government
support.
\9 As discussed below, some organizations in Australia and New
Zealand do not receive assessments but instead purchase and market
agricultural products for the industry, primarily in the export
market. New Zealand's Dairy Board, for example, operates in this
manner.
MARKETING ORGANIZATIONS IN
FOREIGN COUNTRIES DIFFER IN
ACTIVITIES PERFORMED AND
EMPHASIS ON EXPORT
ACTIVITIES
---------------------------------------------------------- Letter :5.2
Like the U.S. check-off programs, many foreign marketing programs
carry out promotion and research activities. However, unlike their
U.S. counterparts, these foreign programs may provide other
services, such as buying and selling products, providing training to
industry, inspecting products, and licensing exporters. The foreign
programs, like the U.S. programs, use market research information to
evaluate their marketing activities. In addition, the United Kingdom
and New Zealand governments are either conducting reviews or planning
to periodically review their marketing programs.
Many of the marketing organizations in the four countries also
performed other activities. For example, New Zealand's Dairy,
Kiwifruit, and Apple and Pear boards purchase and market all products
intended for export, and Australia's Wheat Board purchases and
markets wheat and other grains for both the domestic and export
markets.
In addition, both the United Kingdom's Meat and Livestock Commission
and New Zealand's Meat Producers Board conduct vocational training to
improve the quality and safety of meat. The New Zealand Meat
Producers Board also licenses exporters of meats covered by their
program. Germany's CMA grants its Seal of Quality to German food
products that have passed required tests and inspections. It then
emphasizes the quality of these products in its marketing activities.
While many organizations in the four countries were active in both
domestic and export markets, all but one of the marketing
organizations we reviewed in Australia and New Zealand emphasized
export promotion. Both countries have small domestic markets and
depend much more on exporting. For example, the Australian Wool
Research and Promotion Organization spent about 76 percent of its
funds on export-related activities. New Zealand marketing
organizations also focus most of their activities around the
development of export markets.
OBSERVATIONS
------------------------------------------------------------ Letter :6
While the recent multilateral trade agreement of the Uruguay Round of
GATT would limit the extent to which countries could provide
subsidies to the agricultural sector, it would not limit the extent
to which countries could support market development activities. As a
result, market development efforts may become a more important tool
for increasing agricultural exports. Some foreign competitors have a
long history of exporting and have developed significant expertise in
market development activities. This greater emphasis on exports may
give foreign producers a competitive advantage in the global
marketplace.
In this context, a more vigorous export focus would seem to be in the
interest of U.S. promotion and research boards. On the other hand,
foreign countries now have increased access to some U.S. markets
that were previously protected from import competition.
Consequently, U.S. promotion and research programs for products that
have had import protection may face an increasing need to promote
their products in the domestic market in light of increased foreign
competition. In either situation, the boards will continue to play
an important role.
AGENCY AND INDUSTRY COMMENTS
------------------------------------------------------------ Letter :7
We discussed the facts presented in this report with USDA
officials--including the Deputy Administrator, Commodity and
Marketing Programs, Foreign Agricultural Service, and top-level
officials from Agricultural Marketing Service's Cotton, Dairy, Fruit
and Vegetable, Poultry, and Livestock and Seed divisions. In
addition, we obtained comments on the facts presented in relevant
sections of this report from representatives of the U.S. check-off
boards and the foreign marketing organizations we reviewed. These
officials generally agreed with the information discussed and updated
budget and program information that had changed since we completed
our fieldwork. We have incorporated this new information into the
report where appropriate.
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :8
At the request of the Ranking Minority Member, Subcommittee on Risk
Management and Specialty Crops, House Committee on Agriculture, we
reviewed 6 federally authorized U.S. check-off programs--beef,
cotton, dairy, egg, potato, and soybean--and 19 comparable programs
in four other countries. We selected the six U.S. check-off
programs on the basis of their size, years of operation,
organizational structure, and activities, including domestic and
export promotion. We selected the four countries because they have
industry-funded agricultural promotion and research marketing
organizations that perform activities similar to those of U.S.
check-off boards.
To understand how the U.S. check-off programs operate, we reviewed
the relevant authorizing legislation; implementing orders, plans, and
regulations; and USDA guidelines. We also discussed program
operations with USDA officials, including representatives from USDA's
Agricultural Marketing Service, Foreign Agricultural Service, and
Economic Research Service.
We also met with representatives of the six U.S. check-off boards
and some of the associations that the boards have contracted with to
carry out program activities. In addition, we reviewed check-off
boards' annual reports, budgets, marketing plans, program
descriptions, and evaluation reports to gain an understanding of the
programs' size, complexity, and routine activities.
To obtain information on similar programs in Australia, Germany, New
Zealand, and the United Kingdom, we met with officials of the foreign
marketing organizations and U.S. agricultural attach�s posted in
these countries. We also reviewed reports prepared by USDA's Foreign
Agricultural Service attach�s posted in the four countries. We
discussed the organizations' establishment, structure, funding, and
activities with the officials of the organizations. We reviewed
relevant documents of the marketing organizations, including annual
reports and other pertinent information. The information on
Australia, Germany, New Zealand, and the United Kingdom does not
reflect original analysis of these countries' laws and regulations on
our part but rather the views and interpretations of the officials
from the marketing organizations and foreign governments with whom we
spoke. We did not independently validate the data provided by the
marketing organization officials and others.
We conducted our review between April 1994 and April 1995 according
to generally accepted government auditing standards.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 14 days
from the date of this letter. At that time, we will send copies to
the Secretary of Agriculture and other interested parties. We will
also make copies available to others on request.
Please contact me on (202) 512-5138 if you or your staff have any
questions about this report. Major contributors to this report are
listed in appendix V.
Sincerely yours,
John W. Harman
Director, Food and
Agriculture Issues
SIX FEDERALLY AUTHORIZED
AGRICULTURAL PROMOTION AND
RESEARCH PROGRAMS
=========================================================== Appendix I
Authorized/ Assessme
current nt
Total assessment refunds
Name of revenue for rate and currentl Initial
board fiscal year action Coverage/ y referendum and
(year Compositio ended in required to (estimated availabl last
started) n of board 1994 change rate number) e? referendum
---------- ---------- ------------ -------------- ---------- -------- --------------
Cattlemen' Authorized Total: Authorized/ All cattle No Initial
s Beef : $44,704,379. current: $1 producers referendum:
Promotion Producers \a per head of (1.1 Delayed until
and and cattle sold. million) 22 months
Research importers, Sources: 83% and after program
Board based on from Producers can importers started.
(1986) number of assessments receive credit of cattle
cattle per on domestic for and beef. Last
state or sales, 15% contributions referendum:
unit. from to qualified May 1988,
assessments state groups approved by
As of 3/ on imports, of up to 50 79%.\b
31/95: 101 2% from cents on each
domestic investments, dollar
producers and less assessed by
and 6 than 1% from the national
importers. other board.
sources.
Rate can be
changed only
by statutory
amendment.
Cotton Authorized Total: Authorized: $1 Producers No Initial
Board : At least $59,244,274 per bale of (35,000) referendum:
(1966) one cotton sold and Prior to
representa Sources: 73% plus up to 1% importers program
tive from from of bale value of upland start.
each assessments on sales of cotton and
cotton- on domestic cotton. As of cotton Last
producing sales, 23% 3/31/95: $1 products. referendum:
state, from per bale plus July 1991,
importers, assessments 0.5% of bale approved by
and up to on imports, value. 60% of those
15% to be 3% from voting.\ b
consumer investments, Percentage
advisers. and 1% from portion can be
other changed up to
As of 3/ sources. the maximum by
31/95: 20 the Secretary
domestic on the basis
producers, of board's
4 recommendation
importers, . Rate and
1 consumer percentage
adviser, caps can be
and their changed only
alternates by statutory
. amendment.
National Authorized Total: Authorized/ Dairy No Initial
Dairy : 36 milk $78,248,454\ current: 15 farmers referendum:
Promotion producers. a cents per (125,000). Delayed until
and hundredweight 18 months
Research As of 3/ Sources: 99% of milk sold. after program
Board 31/95: 36 from start.
(1984) producers. assessments Producers can
and 1% from receive credit Last
investments. for referendum:
contributions August 1993,
to qualified approved by
state and 71% of those
regional voting.\b
groups of up
to 10 cents on
each 15 cents
assessed by
the national
board.
Rate can be
changed only
by statutory
amendment.
American Authorized Total: Authorized: Up Producers No Initial
Egg Board : Up to 20 $8,387,727 to 20 cents with more referendum:
(1976) members per 30-dozen than Prior to
and their Sources: 98% case of eggs 75,000 program
alternates from sold. laying start.
, assessments, hens
consisting 2% from As of 3/31/ (365). Last
of egg investments, 95: 10 cents. referendum:
producers and less Rate cap can November 1994,
and than 1% from be changed rate increase
consumer other only by approved.\b
or public sources. statutory
representa amendment.
tives.
Current rate
As of 3/ can be changed
31/95: 18 by the
producer Secretary up
members to the maximum
and their if recommended
alternates by the board.
. Any increases
Provision must be
for approved by
consumer referendum.\c
representa
tion was
not
approved
in
referendum
.
National Authorized Total: Authorized: Up Producers No Initial
Potato : $8,044,777 to 2 cents per growing referendum:
Promotion Producers hundredweight potatoes Prior to
Board based on Sources: 92% or up to 0.5% on 5 or program
(1972) production from of immediate more acres start.
, up to 5 domestic past 10-year (6,200),
importers, assessments, U.S. average and Last
and 1 7% from price on importers. referendum:
public assessments sales. August-
representa on imports, September
tive. and less Rate and 1991, approved
than 2% from percentage by 81% of
As of 3/ investments. caps can be those
31/95: 99 changed only voting.\d
domestic by statutory
producers, amendment.
1 public
member, As of 3/31/
and 2 95: 2 cents
importers. per
hundredweight.
Current rate
can be changed
by the
Secretary,
upon the
board's
recommendation
, up to the
maximum.\d
United Authorized Total: Authorized/ Producers Yes, but Initial
Soybean : $24,890,901\ current: 0.5% (381,000) limited referendum:
Board Producers a of net market to 10% Delayed until
(1991) selected value of of each 32 months
on Sources: 98% soybeans state's after program
geographic from sold. assessme start.
and assessments nts\e
production and 2% from Producers can Initial
basis. investments. receive credit referendum
for held February
As of 3/ contributions 1994, approved
31/95: 60 to qualified by 54%. No
producers state groups referendums
representi of up 50% of held since
ng 29 the rate then.\f
states. assessed by
the national
board.
Percentage
rate can be
changed only
by statutory
amendment.
------------------------------------------------------------------------------------------
Note: Data exclude USDA Foreign Market Development Program and
Market Promotion Program funds that went either directly to the
boards or to other industry groups that carry out related export
promotion activities.
\a Beef, Dairy, and Soybeans: For the beef, dairy, and soybean
programs, the assessment amounts reported do not include the amounts
collected through the national check-off programs that, in accordance
with their authorizing legislation, go directly to state and regional
promotion programs. Of the total assessments collected under the
national check-off programs, the following amounts go directly to
state/regional programs annually: about $36 million for beef, $150
million for dairy, and $24 million for soybean programs.
\b Beef, Cotton, Dairy, and Eggs: For the beef, cotton, dairy, and
egg programs, the Secretary of Agriculture is required to hold a
suspension/termination referendum if requested by 10 percent or more
of those subject to the program (beef, dairy), or who voted in the
referendum approving the order (egg), or in the most recent
referendum (cotton).
\c Eggs: In fiscal year 1994, the egg program allocated $609,288 of
its assessments to state and regional egg promotion programs.
\d Potatoes: For the potato program, the Secretary is required to
hold a suspension/termination referendum if requested by the board or
by 10 percent or more of the potato producers.
\e Soybeans: For the soybean program, the Secretary is required to
conduct a poll to determine if the producers want a referendum
conducted on whether to continue refunds.
\f Soybeans: For the soybean program, the Secretary is required to
conduct a poll every 5 years to determine if the producers want a
reconfirmation referendum to be conducted; if requested by 10 percent
of those covered under the program, the Secretary is required to hold
a suspension/termination referendum.
Source: Information provided by the Beef, Cotton, Dairy, Egg,
Potato, and Soybean boards.
PRIMARY USES OF FUNDS FOR SIX
FEDERALLY AUTHORIZED AGRICULTURAL
PROMOTION AND RESEARCH PROGRAMS
========================================================== Appendix II
(See figure in printed
edition.)
Notes: Bars do not add to 100%. Other uses of funds--contributions
to state and regional promotion programs; payments to USDA for
oversight; and administrative and miscellaneous uses--ranged from 4
to 23% of total funds.
The Egg Board's 22% of funds allocated for research is primarily used
for nutrition education.
The Soybean Board does not promote soybeans in the domestic retail
market. But it does conduct domestic consumer and industry
information activities. For example, it provides information on
soybean products to dieticians and food manufacturers.
Data exclude USDA's Foreign Market Development Program and Market
Promotion Program funds.
Source: GAO's analysis of data provided by the Beef, Cotton, Dairy,
Egg, Potato, and Soybean boards.
ACTIVITIES OF SIX FEDERALLY
AUTHORIZED AGRICULTURAL PROMOTION
AND RESEARCH PROGRAMS
========================================================= Appendix III
We reviewed the activities of six U.S. check-off programs: the (1)
Cattlemen's Beef Promotion and Research Board, (2) Cotton Board, (3)
National Dairy Promotion and Research Board, (4) American Egg Board,
(5) National Potato Promotion Board, and (6) United Soybean Board.
This appendix provides information on the boards' promotion,
research, and evaluation activities and their joint efforts with
related groups.
CATTLEMEN'S BEEF PROMOTION AND
RESEARCH BOARD
------------------------------------------------------- Appendix III:1
The Cattlemen's Beef Promotion and Research Board, more commonly
known as the Beef Board, is administered by a board of 101 producers
and 6 importers. These members serve 3-year terms, with no member
serving more than two consecutive terms. The Secretary appoints
board members from nominations submitted by state cattle associations
and state general farm organizations that meet specific requirements.
Table III.1 provides an overview of the beef board.
Table III.1
Overview of the Beef Board
Program aspect Examples
----------------------------- -----------------------------
Products Beef and beef products.
Expenditures (% of 1994 Domestic promotion (55%).
funds)\a Export promotion (12%).
Consumer and industry
information (21%).
Research (8%).
Other (4%).\ b
Restrictions No lobbying.
Advertising cannot disparage
other agricultural products.
No production research.
Cost limitation of 5% for
administration and collection
of assessments.
Must contract with certain
groups.
Promotion activities TV campaign theme: "Beef.
It's What's For Dinner."
Print advertisements: "30
Meals in 30 Minutes."
Research Nutrition.
Product technology.
Evaluation Market research.
Biennial econometric study.
Individual project
evaluations.
Foreign Agricultural Service
(FAS) evaluation.
Joint efforts Contracts with national
industry-governed
organizations to manage and
conduct programs.
Forty-four qualified state
beef councils received about
46% of the assessments, or
$37 million in 1994. The
board's $44.7 million revenue
is in addition to this
amount.
------------------------------------------------------------
\a Does not include USDA market promotion funds.
\b Includes administrative and miscellaneous costs.
Promotion Activities. While the Beef Board's promotion theme and
creative content changed in 1992, the underlying message about beef
remained relatively the same, with emphasis on variety, use, and
health. In 1993-94, the board directed its consumer advertising
campaign towards moderate to heavy beef users, placing primary
emphasis on the meal purchaser/preparer. Women 25 to 54 years old
were the major focus of the campaign. Television has been the
primary medium for the Beef Board's campaign theme, "Beef. It's
What's For Dinner," which reached an estimated 95 percent of the
target audience. Complementing the television campaign were print
advertisements featuring "30 Meals in 30 Minutes" that appeared in 18
national lifestyle, food, and women's magazines. Similarly, in the
food service sector, the board developed marketing partnerships with
some national restaurant chains.
Board-sponsored consumer information programs are aimed at four
primary audiences: food journalists, media professionals, health
care professionals, and teachers. Public relations activities are
not only designed to help sell beef but also to dispel negative
perceptions about beef and the U.S. cattle industry while educating
consumers.
However, the largest potential growth area for American beef products
may not be in the United States but in foreign markets. In fiscal
year 1993, exported beef and beef products, totaling $2.5 billion,
accounted for nearly 10 percent of the wholesale value of all
domestic production. The Beef Board's foreign marketing efforts are
directed at expanding markets in Japan, Korea, and Mexico. The board
is also interested in establishing a presence in emerging world
markets, such as China, Latin American nations, and Taiwan.
In fiscal year 1994, the Beef Board spent about $5.6 million through
its contract with the U.S. Meat Export Federation (a nonprofit
organization) to promote beef exports. The Beef Board does not
receive any USDA Market Promotion Program funding. However, the U.S.
Meat Export Federation, which promotes beef and other meats in the
export market, received about $7.2 million in Market Promotion
Program funds and $1.9 million in Foreign Market Development Program
funds for fiscal year 1994. Accordingly, the Beef Board benefits
indirectly from this funding to the extent that the federation uses
these funds to promote beef.
Research Activities. According to board officials, research provides
the (1) precise, highly sophisticated information that characterizes
"good" marketing campaigns that achieve the highest levels of success
and (2) factual foundation for supporting beef products as part of a
varied, convenient, and healthful diet. The board's research
initiates the transfer of research-based information to appropriate
end-users.
Evaluation Efforts. The Beef Board uses several methods to evaluate
its programs. It contracts with a university every other year to
conduct an independent econometric evaluation of its promotion and
research activities. The latest econometric review, issued in
January 1994, concluded that beef check-off programs have
significantly improved demand for beef. The study further estimated
that beef producers had received a return of about $5.40 for every
dollar invested since October 1987.
During the past 2 years, the Beef Board has emphasized the evaluation
of individual projects. Methods for evaluating these projects have
included assessing each project against pre-established objectives,
conducting interim evaluations for projects lasting longer than one
year, and conducting in-depth evaluations for two to four projects
each year.
Joint Efforts. As directed in the authorizing legislation, the Beef
Board carries out all beef promotion and research projects through
nonprofit, producer-governed beef industry organizations. The Beef
Industry Council of the National Live Stock and Meat Board is the
primary contractor for the Beef Board's domestic promotion and
advertising. As the federation of 44 state beef councils, the
Council helps coordinate state and national check-off dollars and
programs. The board coordinates its foreign market development
activities primarily with the U.S. Meat Export Federation.
Currently, the Beef Board's main joint effort is participation on a
beef industry oversight committee that is seeking to concentrate the
beef industry's resources (check-off revenue, dues, and other
revenue) on developing and implementing a single, industrywide
long-range plan. This committee has recommended the consolidation of
the National Cattlemen's Association and the National Live Stock and
Meat Board, two of the Beef Board's major contractors. The Beef
Board will remain outside this consolidated structure but expects to
coordinate closely with the new organization. The new organization
expects to include a Center for International Marketing to coordinate
closely with the U.S. Meat Export Federation in carrying out
international marketing programs for beef.
COTTON BOARD
------------------------------------------------------- Appendix III:2
The Cotton Board is administered by 20 producers, 4 importers, and
one consumer adviser who serve 3-year terms. The Secretary of
Agriculture appoints each Cotton Board member and an alternate from
nominations submitted by producer organizations within each major
cotton-producing state and by importer organizations in the United
States. The board contracts with Cotton Incorporated, a private,
nonprofit corporation, to develop and execute its marketing and
research programs. Table III.2 provides an overview of the Cotton
Board.
Table III.2
Overview of the Cotton Board
Program aspect Examples
----------------------------- -----------------------------
Products Upland cotton, including
cotton seed and products
derived from such cotton and
its seed.\a
Expenditures (% of 1994 Domestic promotion (53%).
funds)\b Export promotion (8%).
Consumer and industry
information (1%).
Research (24%).
State programs (5%).
Other (9%).\c
Restrictions No lobbying.
Advertising cannot disparage
other agricultural products.
Must contract with a certain
group.
Promotion The Fabric of Our Lives\TM
activities campaign.
Joint promotion with a major
consumer products company.
Recognition for the Seal of
Cotton\TM.
Research Textile research/
implementation.
Agricultural research.
Fiber quality.
Fiber processing.
Evaluation Market research.
Individual project
evaluations.
FAS evaluation.
Joint efforts AMTEX\TM Partnership (a
research consortium).
------------------------------------------------------------
\a Upland cotton, a type of cotton, makes up about 98 percent of the
cotton grown in the United States.
\b Does not include USDA market promotion funds.
\c Includes administrative and miscellaneous costs.
Promotion Activities. The board's contractor uses the majority of
its promotion funds for national television advertising (e.g., The
Fabric of Our Lives\TM campaign). The contractor's marketing efforts
also include trade print campaigns, retail promotions, full-scale
publicity events, and collaborations with mills and manufacturers.
All of these programs focus on building demand for cotton apparel and
home furnishings (except for cotton carpets). Furthermore,
recognition of the Seal of Cotton\TM increased in 1993, when the
Cotton Board's contractor signed an agreement with the largest
consumer marketing company in the United States.
International marketing representatives build demand for cotton in
world markets through offices in Japan, Switzerland, Singapore, and
Mexico. According to the Cotton Board's contractor, with 40 to 45
percent of the U.S. cotton crop exported annually, the United States
has a strong presence in the world cotton market. During the 1993-94
season, cotton exports reached 6.9 million bales, with Asia and
Oceania consuming 70 percent of that total. Latin American
countries, particularly Mexico, are also increasing their demand for
cotton.
The board's contractor also helps leverage the U.S. cotton
industry's export sales efforts by contributing $1 million annually
in matching funds to the Cotton Council International. The Cotton
Council International adds this contribution to its Market Promotion
Program funds to promote U.S. cotton overseas.
Research Activities. According to the Cotton Board's contractor,
research plays a critical role in the demand for the industry's
fiber. For example, research may help develop new products that
provide new cotton options for the retail market or innovations that
enhance the cost-effectiveness of cotton mills.
Furthermore, in 1993, the board's contractor entered a new research
initiative--The AMTEX\TM Partnership--to help to bring together
various components of the textile industry and undertake cooperative
research that will increase the competitiveness of the domestic
textile industry. The partnership is a consortium of fiber, textile,
and apparel research organizations and national laboratories. The
board's contractor stated that the partnership will ensure that
cotton remains at the leading edge of technological developments.
Joint Efforts. The authorizing legislation directs the Cotton Board
to contract with an organization or association whose governing body
consists of cotton producers to develop and carry out promotion and
research activities. Accordingly, the board contracts with an
independent contractor to carry out all promotion and research
activities. The Cotton Board's contractor is the only organization
that promotes cotton domestically, and the board provides about 5
percent of the contractor's budget to fund state support programs.
The contractor coordinates agriculture research with land grant
universities and textile and fiber quality research with textile
universities.
Evaluation Efforts. The Cotton Board has not had an outside
evaluation in over 10 years. However, the board uses several methods
to evaluate the overall effectiveness or success of the program,
primarily steady gains in market share and increased sales volume at
the retail level. The board's goal is to increase cotton's market
share of retail sales of apparel and home furnishings (except for
cotton carpets) to 60 percent in the next few years. During the
first 9 months of 1993, retail sales of cotton merchandise rose $3
billion and the market share for the period increased from about 55
percent to 56 percent. Other evaluation methods include measuring
the recognition and awareness of the Seal of Cotton\TM .
NATIONAL DAIRY PROMOTION AND
RESEARCH BOARD
------------------------------------------------------- Appendix III:3
The National Dairy Promotion and Research Board, also known as the
National Dairy Board, is administered by a board of 36 producers who
serve 3-year terms, with no member serving more than two consecutive
terms. The Secretary appoints board members from nominations
submitted by producer organizations certified by the Secretary,
general farm organizations representing producers, or other
associations. Table III.3 provides an overview of the dairy board.
Table III.3
Overview of the Dairy Board
Program aspect Examples
----------------------------- -----------------------------
Products Fluid milk, cheese, butter,
and frozen dairy products.
Expenditures (% of 1994 Domestic promotion (68%).
funds)\a Export promotion (2%).
Consumer and industry
information (10%).
Research (15%).
Other (5%).\b
Restrictions No lobbying.
Advertising cannot disparage
other agricultural products.
No production research.
Limitation of 5% for
administrative costs.
Promotion activities TV. "Milk. It does a body
good."
TV. "Cheddar makes everything
better."
Limited branded advertising.
Research Dairy foods.
Nutrition.
Evaluation Market research.
Mandatory annual report to
the Congress (econometric
study).
Individual project
evaluations.
FAS evaluation.
Joint efforts Undertook a cooperative
effort with the United Dairy
Industry Association in
January 1995.
Sixty-six state and regional
promotion programs receive
two-thirds of the assessment,
or an estimated $150 million
for 1994.
Other Bloc voting.
Termination referendum.
------------------------------------------------------------
\a Does not include USDA market promotion funds.
\b Includes administrative and miscellaneous costs.
Promotion Activities. The Dairy Board's domestic promotion
activities are primarily targeted at consumers, the food service
industry, and manufacturers. The board uses a variety of marketing
techniques and advertising themes, depending on the product and the
targeted market. For example, the board promotes retail consumption
of fluid milk primarily through television advertising, but it uses a
mix of television, print, and radio advertising to promote cheese,
butter, and frozen dairy products.\1 The board contracts with
advertising firms to assist with its market promotion activities.
The board supports both generic advertising to promote consumption of
the general agricultural product and branded advertising to promote
the particular characteristics of a given brand of an agricultural
product. In November 1992, the Dairy Board adopted a policy to
encourage the dairy industry to bring new, unique products to the
marketplace more quickly by offering matching funds for branded
advertising. The new product must establish a new product category
and cannot compete with another established dairy product. For
example, the Dairy Board provided matching funds to promote Yo-J, a
yogurt-juice blend that competes with juices. The board matches
every $3 spent by the marketer with $1 of check-off funds. Total
board expenditures to support branded advertising may not exceed 2
percent of the Dairy Board's annual budget. Once another brand
enters the product category, the board discontinues support for
branded advertising.
The Dairy Board established an export promotion program in 1990. In
1994, the board promoted cheese and frozen dairy products in Japan,
and yogurt, ice cream, and cheese in Mexico. It carries out these
activities through supermarket and food service promotions, trade
missions, newsletters, participation at trade fairs, trade servicing,
and seminars aimed at the press and food distributors. Export
promotion in other markets includes promotional and market research
in the Caribbean, the Far East, and South America. During 1994, the
Dairy Board spent $1.6 million on export promotion activities. In
addition, according to the board, it received $373,000 from the
Foreign Market Development Program and $65,000 from the Market
Promotion Program during fiscal year 1994.
Research Activities. The Dairy Board divides its research into two
broad categories--dairy foods research and nutrition research. Dairy
foods research is intended to encourage the development of new dairy
products, processes, and packaging technologies. Much of this
research is conducted at research centers located at 12 universities.
The centers are funded with equal contributions from the Dairy Board,
the universities, and the local industry. In addition, the board
funds research at two nutrition and health research institutes--the
Genetics and Nutrition Institute and the Cancer of the Colon
Institute.
Evaluation Efforts. The board measures the effectiveness of its
programs in a variety of ways, including market research and an
econometric evaluation, and USDA reports the results annually to the
Congress, as the board's authorizing legislation requires. For
promotions that run for short periods of time, the board compares
actual to expected sales volume as one measure of the program's
effectiveness. For continuous advertising and public relations
programs, the board monitors consumption rates and conducts telephone
surveys to measure the change in consumer attitudes and behaviors
over time. The Dairy Board's July 1994 annual report to the Congress
indicated that for 1993, advertising increased fluid milk and cheese
sales by 3.5 percent and 2.5 percent, respectively.
Joint Efforts. The board coordinates its activities with other state
and regional industry groups and also jointly plans and funds
projects. For example, the United Dairy Industry Association has
been the lead organization for the fluid milk national advertising
campaign, and various state and regional promotion groups also fund
this effort. In January 1995, the Dairy Board and the association
undertook a cooperative effort, Dairy Management Incorporated, to
formalize the joint planning and funding between the two
organizations. Other methods of coordinating the Dairy Board's
activities with other industry groups include sharing market research
and other research information.
Other. The Dairy Board's authorizing legislation provides for a
termination referendum if requested by 10 percent of those covered
under the program. As a result of a petition, a nationwide
referendum was conducted in August 1993 to determine whether
producers favored continuing the program. For the program to
continue, more than 50 percent of the producers participating in the
referendum had to vote in its favor. About 71 percent of the
qualified votes were cast for continuation. About 63 percent were
cast by cooperative associations bloc voting for all their members.
The dairy program is unique in that it allows dairy cooperatives to
cast bloc votes for their members. However, members are given an
opportunity to vote individually if they disagree with their
cooperative's position. Legislation was introduced in January 1995
in the Senate that would eliminate the dairy program's bloc voting
process because of concerns about whether it is fair and equitable.
In addition, this proposed legislation would require that the Dairy
Board periodically determine producers' support for the program. No
action has been taken to date on this legislation.
--------------------
\1 Our prior report discusses the national Fluid Milk Processor
Education and Promotion Program (GAO/RCED-95-60R, Dec. 16, 1994).
While the National Dairy Board operates a check-off program for
producers to promote dairy products, including fluid milk, the fluid
milk processors' program, which started in 1994, provides additional
information to consumers about milk's nutritional value.
AMERICAN EGG BOARD
------------------------------------------------------- Appendix III:4
The American Egg Board, known as the Egg Board, is administered by 18
producer members and their alternates who serve 2-year terms; initial
appointments were for 2 and 3 years to allow for staggered terms. No
member is allowed to serve more than three consecutive terms in the
same position. The Secretary appoints all members from nominations
submitted by eligible organizations, associations, cooperatives, or
other producers. Table III.4 provides an overview of the board.
Table III.4
Overview of the Egg Board
Program aspect Examples
----------------------------- -----------------------------
Products Eggs, egg products, spent
fowl, and products of spent
fowl.\a
Expenditures (% of 1994 Domestic promotion (56%).
funds)\b Export promotion (<1%).
Consumer and industry
information (8%).
Research (22%).
State programs (7%).
Other (about 6%).\c
Restrictions No lobbying.
Advertising cannot disparage
other agricultural products.
Promotion activities "I Love Eggs" campaign.
Advertising tie-in
opportunities.
Research Nutrition.
Evaluation Market research.
Individual project
evaluations.
FAS evaluation.
Joint efforts Coordinates with 41 states
and various related industry
groups.
------------------------------------------------------------
\a Spent fowl are hens that have been used to produce eggs for the
commercial market and have been removed for slaughter.
\b Does not include USDA market promotion funds.
\c Includes administrative and miscellaneous costs.
Promotion Activities. The Egg Board's current advertising strategy
is principally to link eggs with the positive images consumers have
of the taste of eggs. The primary target for the Egg Board's recent
consumer advertising campaign, "I Love Eggs," is women with children,
who make most decisions about family breakfasts. The Egg Board is
concentrating on capturing the "weekend breakfast." The board uses a
variety of marketing techniques and advertising themes, depending on
the targeted audience. For example, the board promotes retail
consumption of eggs primarily through television and radio
advertisements and promotes eggs to the food service industry
primarily through national food service trade publications and trade
shows.
Research Activities. The nutrition portion of the Egg Board's budget
funds nutrition research and nutrition education. In recent years,
the board has used an increased portion of funds on research to
evaluate the effects of dietary cholesterol on plasma lipids. Since
1991, the Egg Board has funded $1.5 million in research projects at
various universities on this issue.
Evaluation Efforts. The Egg Board conducts market research and
evaluates individual projects. However, the board has not conducted
an overall program evaluation since 1981. Board officials, however,
are considering whether to conduct a program evaluation in 1995 that
would include an econometric study.
Joint Efforts. The Egg Board coordinates its activities with state
and regional organizations by developing publicity campaigns several
times each year for use by state and regional groups and by holding
two joint annual meetings with state organizations. In 1994, state
and regional groups received about $609,000 from the Egg Board for
promotional activities. Additionally, in 1985, the board assembled a
scientific advisory panel of medical and nutrition professionals to
help develop strategies to communicate the importance of eggs in
Americans' diets and to assist the board in deciding which research
projects to fund.
Other. In 1994, as a result of a referendum, the Egg Board increased
the exemption level for producer assessments from producers with
30,000 laying hens to producers with 75,000 laying hens and increased
the assessment rate from 5 cents to 10 cents for each 30-dozen case
of commercial eggs. The rate was increased to provide additional
funds, primarily for advertising and research.
NATIONAL POTATO PROMOTION BOARD
------------------------------------------------------- Appendix III:5
The National Potato Promotion Board, known as the Potato Board, is
administered by 99 domestic producers, 2 importers, and 1 public
representative appointed by the Secretary of Agriculture for 3-year
terms. No member serves more than two consecutive terms. Although
each state is entitled to nominate at least one member, states with
production exceeding 5 million hundredweight of potatoes are allowed
to nominate additional members. Producers nominate producer members,
and the board nominates the public member. Importers may nominate up
to five importer members to serve on the board. One-third of the
members' terms expire annually. The board meets annually to review
programs and to determine policy for the upcoming year. Table III.5
provides an overview of the board.
Table III.5
Overview of the Potato Board
Program aspect Examples
----------------------------- -----------------------------
Products Potatoes and potato products.
Expenditures (% of 1994 Domestic promotion (65%).
funds)\a Export promotion (10%).
Consumer and industry
information (2%).
Other (23%).\b
Restrictions No lobbying.
Advertising cannot disparage
other agricultural products.
Promotion activities Potato shopping cart
advertisements.
Quick-and-easy potato/
chicken recipes in magazines.
Research None at this time.
Evaluation Market research.
Individual project
evaluations.
FAS evaluation.
Joint efforts Partnership with Snack Food
Association.
------------------------------------------------------------
\a Does not include USDA market promotion funds.
\b Includes administrative and miscellaneous costs.
Promotion Activities. The Potato Board developed 20-minute potato
recipes because market research showed that potato preparation time
and efficiency were of great importance to meal preparers. The board
paired these recipes with chicken because chicken consumption is
growing rapidly in popularity. The board also developed a software
package containing 40 quick-meal ideas.
In 1993, potato shopping cart advertisements were another major
promotion effort. Messages about potatoes appeared on shopping carts
in 23 of the largest 25 supermarket chains. These advertisements
resulted in a sales increase of 9.6 percent. Additionally, the board
used a "personality" to deliver advertisements to the trade. These
advertisements were placed in magazines and featured potato industry
people talking about why potatoes were important to them and how the
board worked to increase demand. The board also provides nutrition
educators with tools to spotlight potatoes, such as the Vegetable
Parade Poster, which includes potatoes in the "5-a-day" food pyramid.
The board has directed its export efforts to the Pacific Rim and East
Asia, the largest markets for frozen potatoes and french fries.
However, future efforts will be directed towards Central and South
America and Mexico because the board sees potential in these markets.
According to board officials, the export promotion program has
increased U.S. potato exports worldwide. From 1989 to 1994, potato
exports increased by 120 percent. The board received $1 million in
1994 from the Market Promotion Program.
Research Activities. The Potato Board does not fund production
research.
Evaluation Efforts. The board measures the effectiveness of its
programs in a variety of ways, including internal, external, and
Foreign Agricultural Service (FAS) evaluations. The board contracted
with an outside market research firm to evaluate the effectiveness of
four major print advertisements. Market research results, such as
potato usage and attitude-tracking studies, print advertising tests,
and national eating trend surveys, provide the basis for internal
evaluations of promotion projects. The board also measures its
programs by participating in joint promotion evaluation projects.
For example, in 1993, the Potato Board and a major research
organization evaluated the board's promotion of potato products in
South Korea. In addition, the board uses independent contractors to
evaluate projects funded by FAS. The board submits these evaluations
to FAS at the end of the year, and FAS follows up with compliance
audits to ensure that the evaluations are conducted within its
regulations.
Joint Efforts. The Potato Board has worked with states and other
groups on market research for fresh potatoes in other countries. It
also supports joint promotion efforts. For example, the Potato Board
joined with a major restaurant chain in Japan to promote potatoes,
with the restaurant contributing $4 million and the board $110,000.
Other coordination efforts include the "Snack Food Month" promotion
conducted by the board and a snack food association to promote potato
chips.
Other. The authorizing legislation provides for the Secretary to
conduct a referendum at any time to terminate or suspend the
operation of the program at the request of the board or of 10 percent
or more of the potato producers. Legislation also allows the board
to establish an operating monetary reserve and to carry over excess
funds to subsequent fiscal years, provided that funds in the reserve
do not exceed approximately 2 fiscal years' expenses. The reserves
may be used to defray any authorized expenses. In 1994, reserve
funds totaled about $4.3 million. Under a procedure prescribed by
the 1990 farm bill, producers and importers have voted to eliminate
refunds of assessments.
UNITED SOYBEAN BOARD
------------------------------------------------------- Appendix III:6
The United Soybean Board, commonly known as the Soybean Board, is a
60-member producer board nominated by soybean producers. The
Secretary of Agriculture appointed the initial board members for 1-,
2-, or 3-year terms from nominations submitted by soybean producers
and eligible organizations. During each subsequent year, the
Secretary appoints one-third of the board members for 3-year terms.
No member may serve more than three consecutive 3-year terms. Table
III.6 provides an overview of the Soybean Board.
Table III.6
Overview of the Soybean Board
Program aspect Examples
----------------------------- -----------------------------
Products Soybeans and soybean
products.
Expenditures (% of 1994 Domestic promotion (0%).
funds)\a Export promotion (29%).
Consumer and industry
information (30%).
Research (18%).
Other (22%).\b
Restrictions Lobbying allowed in some
foreign countries.
Advertising cannot disparage
other agricultural products.
Allowed to contract with
certain groups.
Limitation of 5% for
administrative costs.
Promotion activities (export Technical assistance to
only) foreign feed mills and oil
refiners.
Consumer promotion of oil
through radio and point-of-
sale materials.
Research Production.
Product development and new
uses.
Evaluation Market research.
Individual project
evaluations.
FAS evaluation.
Joint efforts 27 state soybean board
offices representing 29
states received about 50% of
the assessments, or $24
million in fiscal year 1994.
The board's $24.9 million in
revenues is in addition to
this amount.
Other Refunds of assessments.
Conducts a producer poll
every 5 years to determine
the need for a termination
referendum.
------------------------------------------------------------
\a Does not include USDA market promotion funds.
\b Includes administrative and miscellaneous costs.
Promotion Activities. The Soybean Board focuses its promotion
activities on soybean meal and soybean oil. Currently, all of the
board's promotion programs occur in foreign countries because the
Soybean Board's goal is to increase foreign demand for soybeans and
soybean products. In 1994, between 45 and 50 percent of domestic
soybean production was exported, in contrast with many agricultural
commodities that are primarily consumed domestically. The Soybean
Board has organized four promotion subcommittees to represent the
four regions where promotion activities occur: (1) Latin America,
(2) Asia, (3) Western and Northern Europe, and (4) the former Soviet
Union, Central Europe, and North Africa.
In addition to board expenditures for export promotion, the board's
contractor--the American Soybean Association--received about $1.7
million in Market Promotion Program funds and $6.3 million in Foreign
Market Development Program funds. These funds are used in foreign
markets for radio advertisements and point-of-sales promotions.
Consumer information on the use of soybean products is targeted at
key groups, such as dieticians and food manufacturers in both
domestic and foreign markets.
Research Activities. The Soybean Board's research activities involve
four primary areas of study. Production research focuses on such
projects as creating soybean varieties that are drought- and
pest-resistant and developing genetic improvements to boost yields.
Quality-based research efforts include improving oil production,
protein content, and amino acid balance. Market-focused research
includes such efforts as decreasing the saturated fat content of soy
oil to better compete in today's health-conscious consumer market and
expanding the utilization of soybeans through new products like
SoyDiesel, Soy Ink, and Environ (building material). Basic research
focuses on developing new products to compete with petroleum-based
plastics and adhesives.
Evaluation Efforts. The Soybean Board uses various methods to
evaluate program effectiveness. For example, the board sets aside 2
percent of its budget for program evaluations. While the Soybean
Board selects the program to be evaluated, its contractor, in
consultation with the board, chooses an independent third party to
evaluate specific projects. Other evaluation methods include reviews
by a technical advisory panel. For instance, researchers are
required to submit progress reports to the board so that a technical
advisory panel can review them under a 9-month review system. This
periodic review enables the board to terminate funding for projects
that are not working out so that they are not automatically funded
for another year. Additionally, for FAS-funded projects, the Soybean
Board's contractor is responsible for complying with FAS evaluation
requirements.
Joint Efforts. To enhance coordination, the board's authorizing
legislation requires the board to enter into agreements to ensure
that its authorized activities--promotion, research, consumer
information, or industry information--are each implemented by a
single entity. Accordingly, the Soybean Board contracts with
national, nonprofit producer-governed organizations, such as the
American Soybean Association, for these four activities. The Soybean
Board's contractor implements all board plans for these four
activities and coordinates with qualified state soybean boards
through national and regional meetings. In addition, the board uses
a technical advisory panel, which is composed of researchers,
marketers, and educators, for advice on its future direction.
Other. The board's authorizing legislation provides that each
producer shall have the right to demand and receive a refund from the
board of any assessment collected from that producer. Of the six
boards we reviewed, this is the only board that currently allows
refunds. Refunds are now limited to 10 percent of the total
assessments collected from producers in each state. In fiscal year
1994, the board's refunds totaled about $9.9 million. Full refunds
were allowed until April 1, 1994, after which refunds were limited to
the current level. The results of a producer poll, scheduled for
July 1995, will determine if the Secretary of Agriculture must hold a
referendum to determine if refunds should continue. If the poll
indicates that a refund referendum is needed, producers may continue
to receive refunds until the results of the referendum are released.
Until 1990, all check-off programs were restricted from lobbying
federal, state or foreign governments. However, the Congress
recognized the need for direct contact with foreign government
officials in certain instances under the soybean program. Therefore,
the authorizing legislation includes an exemption to the prohibition
on influencing governmental action for "any action designed to market
soybean or soybean products directly to a foreign government or
political subdivision thereof."
INFORMATION ON SELECTED
AGRICULTURAL PROMOTION AND
RESEARCH PROGRAMS IN AUSTRALIA,
GERMANY, NEW ZEALAND, AND THE
UNITED KINGDOM
========================================================== Appendix IV
We reviewed the activities of 19 marketing organizations in four
countries: (1) Australia, (2) Germany, (3) New Zealand, and (4) the
United Kingdom. This appendix provides information on the foreign
organizations' board structures and functions, sources of funding,
role of government, types of activities carried out, and emphasis on
export promotion.
SELECTED AGRICULTURAL PROMOTION
AND RESEARCH PROGRAMS IN
AUSTRALIA
-------------------------------------------------------- Appendix IV:1
Australia is one of the world's major exporters of agricultural
products. It accounts for over one-half of the world's wool exports,
about one-fourth of the world's beef exports, and nearly one-seventh
of the world's wheat exports. The country has a large resource base
and a relatively small population. Therefore, its export
competitiveness has always been important. In the past, the
Australian government had focused its agricultural assistance on
programs to help minimize the effects of unstable and low world
prices on farm income. However, over the past decade, it has shifted
away from price-related assistance towards more market-oriented
policies. The government has gradually reduced its protectionist
measures and recast the role of grower-funded marketing
organizations, which concentrate their efforts on market promotion,
research, and development.
The six Australian marketing organizations we reviewed differ from
those in the United States in organizational structure, role of
government, sources of funding, types of activities performed, and
emphasis on export promotion. These organizations were the (1)
Australian Dairy Corporation, (2) Australian Dried Fruits Board, (3)
Australian Horticultural Corporation, (4) Australian Wheat Board, (5)
Australian Wine and Brandy Corporation, and (6) Australian Wool
Research and Promotion Organization/International Wool Secretariat.
The size and composition of these boards vary, as do their
activities. Generally, research and development activities are
managed by separate entities within the same industry and are funded
by separate assessments. Owing to a changing economic environment,
Australia's farmers must take a more global view of their markets and
compete more vigorously in the export arena. Thus, agricultural
marketing and promotional boards have turned more of their attention
to the export market, concentrating their efforts on expanding
foreign trade.
ORGANIZATIONAL STRUCTURE,
ROLE OF GOVERNMENT, AND
SOURCES OF FUNDING
------------------------------------------------------ Appendix IV:1.1
All six organizations are managed by boards. These boards range in
size from 5 to 17 members and consist of grower representatives and
industry and business experts. Some of the boards have independent
representatives from outside the industry. In contrast to U.S.
check-off boards, all but one of the Australian boards have a
government representative, who generally serves as the communications
link between the board and the federal government and provides the
board with expert advise about government policies. Almost all
representatives are nominated by the industry and officially
appointed by the Minister for Primary Industries and Energy.
According to board representatives, their programs may only be
terminated by an act of Parliament.\1
Annual revenues in 1993 for the six organizations ranged from $1.3
million to $1.7 billion.\2 Except for the Australian Wheat Board, all
the boards we reviewed receive some direct funding from
assessments.\3 These assessments account for as little as 23 percent
to as much as 80 percent of the boards' annual revenues. The
industries vote to adjust assessment rates annually, if required, for
the following fiscal year. The government collects assessments on
producers through handlers and processors. The government then turns
these funds over to the appropriate board. For some industries, such
as honey, smaller-volume producers are exempted from paying
assessments. No provisions exist for refunding the assessments.
Unlike some U.S. check-off boards, none of the Australian boards
assess importers of agricultural products. For four of the programs
we reviewed, other major sources of revenue include government
grants, which range from 13 to 30 percent of the boards' incomes;
interest income; and user fees.\4
In the 1980s, the Australian government restructured its agricultural
board system. It developed a tripartite system that separates
marketing boards from statutory industry councils and
research/development bodies in each industry. Now, marketing and
research functions are generally conducted by separate entities
within the same industry and funded by different assessments. For
example, the Dairy Research and Development Corporation manages
research and development for the dairy industry and receives an
assessment of $0.013 per kilogram of butterfat produced, while the
Australian Dairy Corporation receives $0.0377 per kilogram of milkfat
produced for promotional activities.
In addition to representation on some boards, government involvement
in board activities ranged from simple oversight to direct economic
support of research and promotional activities. The government
matches each industry's research and development assessment funds up
to a maximum of 0.5 percent of the industry's gross value of
production. Boards are required to submit annual reports to
Parliament for approval but do not conduct formal evaluations of
their activities (except for an annual financial audit).
--------------------
\1 The International Wool Secretariat is a nongovernmental body and
therefore cannot be terminated by Parliament. Its board includes
representatives from the other member countries: New Zealand, South
Africa, and Uruguay.
\2 The average annual exchange rate for 1993 was $1.00 U.S. =
A$1.4704 and the rate for 1994 was $1.00 U.S. = A$1.3667.
\3 Since the Australian Wheat Board is responsible for selling
Australian wheat, 98 percent of its revenues, or $1.7 billion, comes
from grain sales. About 82 percent of that amount reflects export
sales. In addition, the Wheat Industry Fund, which is managed by the
Australian Wheat Board, receives a 2-percent assessment on wheat
sales for the board's capital base. The board uses the capital base
for investments.
\4 The Australian Dried Fruits Board, Australian Horticultural
Corporation, Australian Wine and Brandy Corporation, and Australian
Wool Research and Promotion Organization.
BOARD ACTIVITIES AND FOCUS
ON THE EXPORT MARKET
------------------------------------------------------ Appendix IV:1.2
Less than 10 years ago, the Australian agricultural economic base was
experiencing a downturn characterized as the worst in decades.
Because of this economic situation, the Australian government is not
providing as much direct financial assistance to its agricultural
sector as it once did. The government used to shield its farmers
from the uncertainty of world markets by providing price supports and
other financial assistance. Now, government assistance typically
takes the form of export market development grants and trade
enhancement programs rather than price supports. Price supports
still exist in the dairy industry but are funded by a market support
assessment on milk producers.
Since agricultural industries must focus more on market forces than
ever before, promotional and research activities have assumed a
greater role. Agricultural producer boards, which are statutory
marketing authorities, participate in these activities. In addition,
the Australian Dairy Corporation and the Australian Wheat Board can
purchase and sell products. While all boards engage in typical
marketing activities, such as trade shows, point-of-sale promotions,
and advertising, some practice more nontraditional marketing
techniques. For example, the Australian Wine and Brandy Corporation
participates in the Australian Government Officials' Scheme, through
which Australian embassies and consulates purchase domestic wine for
official functions, thus increasing the product's exposure.
Australian marketing organizations also carry out other activities
not generally conducted by U.S. check-off boards, such as setting
quality standards for the industry and issuing export licenses. In
addition, they invest in other ventures, which allow them to
diversify their holdings and further expand their export businesses.
For example, the Australian Dairy Corporation wholly controls
Austdairy, a subsidiary that turned a profit of $1.33 million in
fiscal year 1993-94. Finally, the Australian Dairy Corporation and
the Australian Wheat Board purchase products and sell them in
domestic and/or export markets. The Australian Dairy Corporation's
sales are limited to specific export markets--e.g., Japan and the
European Union--and producers are not required to supply their
products to the Australian Dairy Corporation for export to these
markets. Neither of these organizations receive direct government
income support. However, both boards get indirect government support
through government guarantees for the borrowed funds they use to
purchase their commodities.\5
Table IV.1 summarizes selected information on the six marketing
programs we reviewed in Australia.
Table IV.1
Selected Information on Promotion and
Research Programs in Australia
Marketing
organization
(year Types of
started/ Organizational Composition of Sources of activities--uses
reorganized) functions board funds\a of funds
------------ -------------- -------------- -------------- ------------------
Australian Promotes dairy Authorized: Total funding Export sales cost
Dairy products in 11. Members: 9 1994: (58%),
Corporation both domestic industry $310.2 Price supports
(1986) and export (includes million\\b (35%),
markets. chair), 1 Domestic marketing
government, Assessments (3%),
Purchases and and 1 managing (41%), export Export marketing
sells certain director sales (57%), and promotion
products in (permanent and other (1%), Investment
Japan and the member). (2%). (1%), Operations
European (1%),
Union. Except for the Assessments Interest (1%).
chair, who is rates (per kg.
Controls chosen by the of milkfat):
export Minister, and Market
licenses in the managing support, $0.33
order to director, the (terminates as
fulfill trade members are of 6/95);
commitments. self- Promotion,
nominated and $0.0377;
appointed by Corporation,
the Minister, $0.007.
Department of
Primary
Industries and
Energy.
Australian Promotes Authorized: 6. Total funding Overseas marketing
Dried Fruits exports of Members: 3 1993: (66%),
Board sultanas, packers or $1.3 million. Operations (34%).
(1991) raisins, and exporters, 1
currants. grower, 1 Assessments
independent, (80%),
Conducts and 1 government
market chairperson grants (13%),
research on (independent). and interest
these (7%).
products. Members are
appointed by Assessment:
the Australian $10.20 per
Horticultural metric tonne
Corporation on on dried fruit
the basis of production,
recommendation collected 44
s from an days after the
expert panel. fruit is sold.
Australian Promotes and Authorized: 8. Total funding Domestic marketing
Horticultura coordinates Members: 6 1994: (47%),
l the export of industry, 1 $6.1 million. Export marketing
Corporation horticultural government (5%),
(1987) products, representative Assessments Operations (27%),
including , and 1 (59%), export Market R&D (8%),
apples, pears, managing charges (8%), Industry payments
nashi, citrus, director government (7%), Meetings/
avocados, (permanent grants (30%), conventions/
nursery member). and other newsletters (3%),
products, (4%). Assessment
honey, Industry collection costs
macadamia representative Assessments: (3%).
nuts, and s are chosen Rates vary by
chestnuts in by a selection use and volume
both domestic committee and within the
and export appointed by following
markets. the Minister, industries:
Department of apples, pears,
Works to Primary nashi, citrus,
improve the Industries and and avocados\.
efficiency and Energy. The
quality of government Nursery, 2.5%
production and representative of wholesale
marketing of is chosen pot sales;
these directly by Macadamia
products. the Minister. nuts, $0.015/
kg.; Honey,
$0.022/kg.;
Chestnuts,
$0.037/kg.
An additional
assessment on
exports is
charged for
all products
except
chestnuts and
nursery.
Australian Purchases, Authorized: Total funding Direct costs
Wheat Board promotes, and 11. Members: 1 1993: (59%), (e.g.,
(1939/ markets wheat, chairperson, 1 $1.7 billion. storage, freight),
1989) grain, and managing Cost of sales
their products director, 1 Export sales (53%),
in both government (82%), Movement in pool
domestic and representative domestic sales grain inventories
export , and 8 (16%), and (-27%),
markets. industry other (2%). Interest (9%),
representative Operations (7%),
Participates s (nominated The board Other (-1%)\\.\c
in related by a selection purchases and
value-added committee sells
activities. largely Australian
appointed by wheat.
the Grains
Council of Operating
Australia). expenses and
other direct
Members, costs are
except the taken out of
managing the sales, and
director, are the profits
appointed by are returned
the Minister to the farmers
and may be on a pooled
farmers or basis.
individuals
with expertise The Wheat
in finance, Industry Fund
marketing, or receives an
business assessment of
management. 2% on all
wheat sales
for the
board's
capital base.
Australian Promotes grape Authorized: 8. Total funding Overseas
Wine and products in Members: 1 1994: marketing\e
Brandy both domestic chairman $3.7 million. (78%),
Corporation and export (ministerial Regulatory
(1980) markets. selection), 1 Assessments services (15%),
government (23%), user Operations (7%).
Performs member, and 6 fees (35%),
market members with government
research on industry or grants (24%),
these business Australian
products. expertise. Government
Officials'
Licenses Scheme\d
exports. (18%), and
other (<1%).
Sets quality
standards. Assessments:
For up to and
including 10
tonnes
processed,
$146.
For over 10
tonnes
processed,
$132 plus a
certain amount
per tonne,
ranging from
$3.07 to
$0.29, based
on the total
product
weight.
Australian AWRAP promotes Authorized: 9. Total funding Export promotion
Wool wool in Members: 1 Dec. 1993- (76%),
Research and domestic and chairman, 1 June 1994: Research (14%),
Promotion export managing $91.3 Other (10%,
Organization markets. director, 1 million. includes domestic
(AWRAP) government promotion).
Internationa AWRAP also representative AWRAP
l Wool identifies , and 6 others assessments
Secretariat research and with industry (49%),
(IWS) development expertise. government
(1972/1991, requirements grants (15%),
1993) and provides AWRAP board other member
funding. members are countries'
As of Dec. appointed by contributions
1993, the IWS promotes the Minister (25%), and
operations the use of for Primary other (11%).
of the two wool and wool Industries and
organization products Energy. AWRAP
s have been internationall However, the assessments
combined. y. managing are based on
director is the value of
appointed by wool sold to
the other an initial
board members. buyer; 3.5% of
The this value is
appointments used for
are based on promotional
advice from an activities and
industry 0.5% for
selection research and
committee. development.
The government
The IWS board matches
consists of up research and
to 19 members: development
8 from AWRAP, expenditures.
3 from New
Zealand, 3 Fees:
from South Beginning May
Africa, 1 from 1, 1995, IWS
Uruguay, 1 will charge
chief companies for
executive use of its
officer, 1 "woolmark"
director of (trademark).
operations,
and up to 2
additional
members
appointed by
the IWS board.
The chairman
and managing
director of
AWRAP are the
chairman and
chief
executive
officer,
respectively,
of IWS.
--------------------------------------------------------------------------------
\a The average annual exchange rate for 1993 was $1.00 U.S. =
A$1.4704 and the rate for 1994 was $1.00 U.S. = A$1.3667.
\b Includes gross value of sales from Austdairy, a wholly owned
subsidiary of the Australian Dairy Corporation.
\c Does not include $1.2 billion in pool payments to growers.
\d The Australian Government Officials' Scheme ensures that
Australian wines are available at overseas embassies for functions to
which foreign dignitaries are invited.
\e Includes the Australian Government Officials' Scheme.
--------------------
\5 Products delivered to the marketing boards are pooled for sale,
and net revenue is shared among pool participants.
SELECTED AGRICULTURAL PROMOTION
AND RESEARCH PROGRAMS IN
GERMANY
-------------------------------------------------------- Appendix IV:2
Germany is the world's largest importer and fourth largest exporter
of agricultural products, and its food and beverage industry
represents Germany's fifth most important industry. Germany's major
high-value agricultural products include milk, cheese, meats, and
processed foods. More than two-thirds of its agricultural exports
are purchased by other European Union countries. Because Germany is
a member of the 12-member European Union, all European Union market
ordinances apply to its agricultural products. These market
ordinances include regulation of price support programs, production
quotas and set-asides, import restrictions, and export assistance
programs for targeted commodities.
We reviewed the overall organizational structure, funding, and
activities of the Central Marketing Organization of German
Agricultural Industries (CMA) and the German Wine Institute. These
two German agricultural marketing organizations varied considerably
from U.S. check-off programs in organizational structure, role of
government, types of activities performed, and the emphasis on export
activities. Funding of the two marketing organizations was similar
to U.S. check-off programs in that it came primarily from mandatory
assessments, with neither organization receiving government funding.
We also obtained information on the government's Sales Promotion
Fund, which collects the assessments that are used to finance both
CMA and another organization--the Central Marketing and Price
Reporting Office for Agricultural, Forestry and Food Products
(ZMP)--which provides agricultural market information for both
domestic and export markets. ZMP's principal role is to serve as a
central market and price reporting office for market reports on
agricultural, forestry, and food products. ZMP's annual funding from
the Sales Promotion Fund was an estimated $8.6 million in 1994.\6
--------------------
\6 The average annual exchange rate for 1994 was $1.00 U.S. = DM
1.6228. We also used this exchange rate for 1995 dollars.
ORGANIZATIONAL STRUCTURE,
ROLE OF GOVERNMENT, AND
SOURCES OF FUNDING
------------------------------------------------------ Appendix IV:2.1
Organizationally, CMA is a quasi-governmental agency that conducts
national, generic promotions for virtually all German food and
agricultural products,\7 except for fish, forestry, and wine
products. CMA is structured as a corporation, with 55 percent of its
shareholders representing farmer organizations and 45 percent
representing food processing or food trade organizations. The fish,
forestry, and wine industries each has an independent marketing
organization to promote its products.
CMA is managed by a board composed of 26 industry members elected by
the shareholders, who are in turn indirectly guided by the
government's Sales Promotion Fund Administrative Council. This
council is composed of both industry and government members, with a
government majority. The German Wine Institute is guided by the
German Wine Fund, whose administrative council is composed of 44
consumer and industry representatives. The two funds are established
by federal law.
These two organizations' expected funding levels for 1995 are an
estimated $92.4 million for CMA and $14.2 million for the German Wine
Institute. Funding comes primarily from mandatory industry
assessments; neither organization received government funds. CMA's
assessments are ultimately paid by the farmers in a number of product
sectors and collected by the government's Sales Promotion Fund.
According to CMA, about 70 percent of the assessment funds are from
the meat and dairy product sectors. The Sales Promotion Fund
Administrative Council uses the assessment funds to finance the
operations of both CMA and ZMP. The German Wine Fund collects
mandatory assessments from both producers and wine traders. Neither
of the organizations assessed imported agricultural products.
The assessments are collected for most domestic agricultural and food
industry products, with few exemptions for smaller-volume producers
and no provisions for refunds. Other sources of income include CMA's
user fees, which are collected to reimburse the organization for the
costs associated with issuing quality assurance seals.
Assessment rates are prescribed by federal law. CMA's assessment
rates were revised for the first time in 1993, resulting in increased
assessment rates for the majority of the agricultural product
sectors. The German Wine Institute's assessment rates were revised
in 1994.
--------------------
\7 These sectors include beef, pork, eggs and poultry, milk, cattle
for breeding, bread, beer, sugar, fruits and vegetables, flowers, and
oil, seeds and tobacco.
BOARD ACTIVITIES AND FOCUS
ON THE EXPORT MARKET
------------------------------------------------------ Appendix IV:2.2
The marketing organizations in Germany engage in a variety of
promotion and marketing activities, including point-of-sale
promotion, media advertising, market research, and trade shows. The
organizations carry out these activities in both the domestic and
export markets. In addition, CMA emphasizes food quality with its
CMA Seal of Quality for German food products that have passed
required tests and inspections. Companies that obtain this quality
seal benefit from CMA's Seal of Quality promotions. Between 12,000
to 14,000 German food products carry CMA's Seal of Quality.
In contrast to most of the U.S. check-off programs we reviewed, the
CMA and the German Wine Institute placed greater emphasis on export
promotion. In 1995, CMA will spend an estimated $22.2 million, or
about one-fourth of its estimated total funding, on export promotion,
and the German Wine Institute will spend almost $6.2 million, or
close to one-half of its total funding, on export promotion
activities. CMA's export promotion activities are guided by offices
in eight countries--six in other European Union countries, one in New
York, and one in Tokyo. The German Wine Institute also has offices
in other European countries, Japan, and the United States.
Table IV.2 summarizes selected information on the two marketing
programs we reviewed in Germany.
Table IV.2
Selected Information on Promotion and
Research Programs in Germany
Marketing Types of
organization activities
(year Organizational Composition of --uses of
started) functions board Sources of funds\a funds
------------ -------------- ------------------ ------------------ ----------
CMA Promotes all Authorized: 26. Total estimated Export
(1969) agricultural Members are funding 1995: activities
products elected from the $92.4 million. (25%),
except fish, 53 producer and
forestry, and agricultural Assessments (96%), Domestic
wine in both industries user fees and activities
domestic and (manufacturers, other (4%). No (75%).
export wholesalers, and government funds
markets\. retailers) are provided.
associations\.\ b
Provides Assessment rates
central Members are vary by
marketing elected at the agricultural
support. shareholder sector.
meeting.
Conducts food Assessments are
quality tests paid by farmers.
and There is no
inspections. assessment on
Issues CMA imports.
Seal of
Quality.
Trains
exporters and
sales
personnel for
food shops.
Conducts
market
research in
domestic and
export
markets.
German Wine Markets and Authorized: 44 on Total funding Export
Institute promotes the Administrative 1995: $14.2 activities
(1949) German wines Council.\c million. (50%),
in both Members: 18
domestic and representing wine- Funding is almost Domestic
export estates and their entirely from activities
markets. cooperatives, 8 assessments from (50%).
regional wine the German wine
Conducts promotion boards, industry. There is
market 7 industry no government
research in associations and funding.
domestic and groups, and 11
export wine trade and Assessments: Since
markets. consumers. 1994, the rate for
producers has been
The overall $80.11 per hectare
strategy is of vineyard area.
monitored by its In addition, the
supervisory board assessment rate
(7 members). for all wine
traders was $0.80
Administrative per hectoliter of
Council members grape must
are appointed by (unfermented
the Ministry of pressed juice) or
Food, Agriculture wine; or per 133
and Forestry. kilograms of
Members of the grapes or grape
supervisory board mash.
are elected by the
Administrative
Council.
--------------------------------------------------------------------------------
\a The average annual exchange rate for 1994 was $1.00 U.S. = DM
1.6228.
\b The CMA board receives guidance from the Sales Promotion Fund
Administrative Council, which is composed of government, producer,
agricultural industry, and consumer representatives.
\c The German Wine Institute is guided by the German Wine Fund
Administrative Council, which is composed of industry and consumer
representatives.
SELECTED AGRICULTURAL PROMOTION
AND RESEARCH PROGRAMS IN NEW
ZEALAND
-------------------------------------------------------- Appendix IV:3
New Zealand has a large quantity of productive land in comparison
with the size of its population (3 million). Historically, trade has
been concentrated on outputs from the land. The most significant
productive use of land has always been agriculture. New Zealand's
producer marketing boards, which began forming in the 1920s, are
among the oldest and best known government-sponsored institutions.
Originally they were given broad legislative authority to negotiate
freight rates and insurance charges, stabilize domestic prices
through product acquisition, even out seasonal peaks in produce
shipping, coordinate export promotion, and conduct other activities
to improve grower returns. In the mid-1980s, as part of a widespread
deregulation of key sectors of its economy, New Zealand abolished
more than 30 agricultural production and export subsidy programs. As
a result, New Zealand farmers lost nearly 40 percent of their gross
income and had to become more responsive to the market. This
deregulation also changed the fundamental role of the boards and
caused them to reevaluate their operations and marketing strategies
and to implement new initiatives.
The seven New Zealand marketing organizations we reviewed were (1)
the New Zealand Apple and Pear Marketing Board, (2) the New Zealand
Dairy Board, (3) the New Zealand Game Industry Board, (4) the New
Zealand Horticulture Export Authority, (5) the New Zealand Kiwifruit
Marketing Board, (6) the New Zealand Meat Producers Board, and (7)
Wools of New Zealand (formerly the New Zealand Wool Board). The size
and composition of these organizations' boards vary, as do their
activities. In contrast to U.S. programs, most New Zealand boards'
promotion activities are focused on increasing exports. Most boards
also conduct research, some of which is partially funded by the
government. In addition to promotion and research, these producer
boards have other functions, such as issuing export licenses, setting
quality standards, and for some, purchasing and selling products in
domestic and export markets.
ORGANIZATIONAL STRUCTURE,
ROLE OF GOVERNMENT, AND
SOURCES OF FUNDING
------------------------------------------------------ Appendix IV:3.1
All the boards we reviewed are legislatively mandated. The
organizations' boards range in size from 5 to 13 members. Generally,
board members are elected directly through various affiliated
associations to 3- to 4-year terms. Other members are either
nominated by the board and/or appointed by the government because of
their proven experience or specialized knowledge.
The boards receive no grants or concessionary loans from the
government for market promotion activities. However, through its
Public Good Science Fund, the New Zealand government remains the
dominant supplier of research funds. Research priorities and
requirements are established by a joint government and private sector
board. Funding for agreed-upon projects is disbursed on the basis of
bids received. New Zealand producer boards compete for government
funds for particular research activities. Long-term basic research
(10 to 15 years) is generally carried out by the government's Crown
Research Institutes,\8 and applied research is generally the
responsibility of the boards.
New Zealand boards receive their funds in a variety of ways. Some
receive their funding from mandatory assessments, others receive
income from purchasing and selling products in domestic and foreign
markets, and one charges fees for services. The boards that assess
members generally collect them from all domestic producers, with no
exemptions for smaller-volume producers or option for refunds. None
of the boards we reviewed assess imports. Generally, large farms
provide the majority of board revenue. For example, about 29,000
farmers pay assessments to New Zealand's Meat Producers Board, but
5,000 to 6,000 farmers account for more than half of the total amount
collected. The boards that collect assessments can change the rates,
but notification of rate changes must be made in the New Zealand
Gazette (which is similar to the U.S. Federal Register). For the
most part, assessment rates have remained fairly consistent over the
past several years.
Three of the boards we reviewed--the New Zealand Dairy Board, New
Zealand Kiwifruit Marketing Board, and New Zealand Apple and Pear
Marketing Board--have as their primary responsibility the export of
products. These boards purchase and market all products intended for
export; deduct their expenses from market returns; and distribute the
net returns to contributing farmers, growers, and dairy companies.
The boards' involvement in domestic promotion varies. For example,
the New Zealand Kiwifruit Marketing Board promotes kiwifruit with
domestic retailers, and the New Zealand Dairy Board through its
subsidiary companies has limited involvement in the local market in
areas such as marketing coordination with local companies and
providing educational and nutritional information on dairy products.
In 1993, the Apple and Pear Board Act was amended to allow for
deregulation of the domestic market, and since January 1994, the New
Zealand Apple and Pear Board is no longer the only seller in the
domestic market. The board will no longer be involved in domestic
promotion activities.
--------------------
\8 In 1992, the government formed 10 Crown Research Institutes to
take over the major research responsibilities from previous
government agencies. These institutes do not have any core funding.
They operate as science contractors and are expected to be viable
businesses and return a dividend to the government.
BOARD ACTIVITIES AND FOCUS
ON THE EXPORT MARKET
------------------------------------------------------ Appendix IV:3.2
Because about 85 percent of New Zealand's agriculture products are
exported, most board activities center around the development of
export markets rather than domestic promotion. This is in contrast
to U.S. check-off programs' domestic focus. In addition, unlike
their U.S. counterparts, some New Zealand boards also license
exporters, set grading standards, ensure quality control, and
purchase and sell products in both domestic and export markets. Some
boards, such as the New Zealand Apple and Pear Marketing Board and
the New Zealand Game Industry Board, have developed their own brand
names--ENZA and Cervena, respectively--that are used primarily for
export promotion.
While most boards' applied research is directed towards market
development, some research is production-oriented. For example, the
New Zealand Meat Producers Board provides some funds to the Meat
Research Development Council, which in turn helps to fund "monitor
farms." On these farms, the farmers hold "field days" during which
they demonstrate new technologies to other farmers. According to the
board, the monitor farm program is well recognized and has increased
on-farm productivity.
The New Zealand government has sought to make the boards more
accountable to producers and has taken several measures to ensure
that the boards operate in the most efficient and effective manner
possible. These measures include requiring performance and
efficiency audits every 5 years, appointing individuals with
commercial expertise to serve on the boards, and requiring financial
reporting to be in line with current commercial standards.
Probably the most significant of these measures is the requirement
for a performance and efficiency audit every 5 years. These audits,
mandated in 1992, are to provide independent assessments of the
boards' overall performance. At the time of our review, audits of
the New Zealand Dairy Board and the New Zealand Horticulture Export
Authority had been completed, and the New Zealand Apple and Pear
Marketing Board audit was scheduled to begin soon.
Table IV.3 summarizes selected information on the seven marketing
programs we reviewed in New Zealand.
Table IV.3
Selected Information on Promotion and
Research Programs in New Zealand
Marketing
organization Types of
(date of most activities
recent Organizational Composition of Sources of --uses of
reauthorization) functions board funds funds
---------------- -------------- ------------------ -------------- ----------
New Zealand Purchases and Authorized: 7. Total funding Direct
Apple and Pear markets all Members: 4 are 1993: $320.7 costs
Marketing Board apple and pear nominated by the million. (25%),
(1948) fruit intended farmers Distributi
for export. federation; Sales (99%), on (49%),
3 are selected on Other (1%). Operations
the basis of their &
commercial No marketing
expertise. assessments. (22%),
Board deducts Other
All members are its expenses (4%).
appointed by the from profit on
Minister of sales of
Agriculture. product and
distributes
remainder to
growers.
New Zealand Purchases and Authorized: 13. Total funding Sales cost
Dairy Board markets dairy Members: 11 are 1994: (40%),
(1961) products elected by the $3 billion. Payment to
intended for cooperative dairy dairy
export. companies; 2 are Sales (86%), companies
appointed by the Other (14%) for
Operates Minister of (nondairy manufactur
research and Agriculture on the products). ing costs
development basis of their (27%),
centers in commercial No Subsidiary
selected expertise. assessments. operating
countries, Board deducts costs
focusing on its expenses (9%),
the from the Other
development of profits on (24%).
in-market sales of
capabilities. products and
distributes
remainder to
dairy
companies.
New Zealand Game Promotes Authorized: 8. Total revenue Venison
Industry Board venison and Members: 4 are 1993: $4.9 marketing
(1985) velvet deer farmers million. (55%),
products for nominated by the Velvet
export. Deer Farmers Assessments marketing
Association; (92%), Other (10%),
Manages 3 represent (8%). Research
industry exporters and are (9%),
research nominated by the General Quality
programs. Deer Industry assessment assurance
Association; rates: training
Provides 1 is nominated by Venison, (14%),
training for the board. $0.13/kg.; Other
quality All members are Fallow deer, (12%).
assurance appointed by the $0.10/kg.;
standards. Minister of Velvet, $1.62/
Agriculture. kg.
New Zealand Conducts, Authorized: 5. Total revenue Employee
Horticulture collects, and Members: 1993: fees and
Export disseminates 3 are appointed by $310,000. operating
Authority market various affiliated costs
(1987) research. federations Farmers (100%).
representing (83%),
Licenses producer and Industry
exporters. exporter (17%).
interests;
Promotes 1 is appointed by No
compliance the government on assessments.
with grade the basis of Collects fees
standards. commercial for services
expertise; and 1 from farmers
chairperson, who and industry.
cannot be an
officeholder or
member of any of
the nominating
bodies.
New Zealand Purchases and Authorized: 8. Total revenue Direct
Kiwifruit markets all Members: 4 are 1994: sales
Marketing Board kiwifruit elected by the $326.6 costs
(1977) intended for growers; 3 are million. (48%),
export. appointed by the Distributi
board on the basis Sales (99%), on (36%),
of their Other (1%). Marketing
commercial (7%),
expertise and No Other
approved by the assessments. (9%).
Minister of Board deducts
Agriculture; its expenses
1 is appointed by from the
the Minister of profits on
Agriculture and sales of
represents the kiwifruit and
government and the distributes
interests of the remainder to
consumers. growers.
New Zealand Meat Promotes beef, Authorized: 11. Total revenue Export
Producers Board sheep, goat, Members: 6 are 1993: $16.9 promotion
(1921) and horse meat directly elected million. (28%),
products for by meat Research
export. producers; Assessments (24%),
4 are nominated by (77%), Other Personnel
Licenses the board on the (23%). costs such
exporters. basis of their as staff
commercial relocation
Sets quality expertise and General and
control appointed by the assessment salaries
standards. Minister of rates per head (27%),
Agriculture; and 1 at time of Other,
Funds research represents the slaughter: including
and Dairy Board and is Sheep/lamb/ travel,
development appointed by the goats, and
for on-farm Minister on the $0.25; property
and off-farm basis of a cattle, $2.27; (21%).
development, recommendation of calves, $0.13.
which can the Dairy Board.
provide
technology
transfer.
Informs
farmers about
markets,
market
development,
and how to
meet market
demand through
scheduled
meetings.
Wools of New Promotes wool Authorized: 10. Total revenue IWS\b
Zealand and wool Members: 6 are 1994: (46%),
(1977) products in elected by $34.5 Promotion
both export farmers; 2 are million. &
and domestic nominated and research
markets. appointed by the Assessments (13%),
government on the (82%), Wool
Sets value and basis of their Other (18%). sales
sells wool commercial administra
stock until expertise; 1 is Assessment tion
depleted. nominated by the rate: 6% on (11%),
board and value of wool Interest
Provides appointed by the sold to expense
technical government; and 1 initial buyer. (13%),
assistance to (the Director Other
farmers. General of (17%).
Agriculture)
Manages a serves as an ex-
research and officio member.
development
program as There is no
well as government
provides representation on
technology the board.
transfer for
research and
development.
--------------------------------------------------------------------------------
\a The average annual exchange rate for 1993 was $1.00 U.S. =
NZ$1.8495. For 1994, the average annual exchange rate was $1.00 U.S.
= NZ$1.6844.
\b The board pays the International Wool Secretariat a fee for
product development, wool promotion, and other activities.
SELECTED AGRICULTURAL, FISHERY,
AND FOOD PROMOTION AND RESEARCH
PROGRAMS IN THE UNITED KINGDOM
-------------------------------------------------------- Appendix IV:4
For 40 years after World War II, British farmers were encouraged to
produce as much food as possible in a bid to improve self-sufficiency
in food supplies. By 1970, the United Kingdom had transformed itself
from a net importer to a net exporter of grain. Today, the United
Kingdom is the world's ninth largest exporter of high-value
agricultural and food products. Its major high-value exports include
meat and alcoholic beverages, and more than 60 percent of its
agricultural exports are purchased by the other 11 member countries
of the European Union. Because the United Kingdom is a member of the
12-member European Union, all European Union market ordinances apply
to its agricultural products. These market ordinances include
regulation of price support programs, production quotas and
set-asides, import restrictions, and export assistance programs for
targeted commodities.
The four United Kingdom agricultural marketing organizations we
reviewed varied considerably from U.S. check-off programs in
organizational structure, role of government and sources of funding,
types of activities performed, and emphasis on export promotion.
These organizations were (1) Food From Britain, (2) the Home-Grown
Cereals Authority, (3) the Meat and Livestock Commission, and (4) the
Sea Fish Industry Authority.
ORGANIZATIONAL STRUCTURE,
ROLE OF GOVERNMENT, AND
SOURCES OF FUNDING
------------------------------------------------------ Appendix IV:4.1
Food From Britain is a quasi-government marketing organization that
promotes British food and drink products primarily in export markets.
The other three marketing organizations promote specific sector
products, such as meat, in both domestic and export markets.
The four organizations are managed by boards composed of both
industry and independent members appointed by government ministers.
The organizations' boards range in size from 12 to 21 members, most
of whom are appointed from industry nominations. However the
government appoints several key board members, such as the chairman
and deputy chairman, who are independent of the industry.
The four marketing organizations receive funding from assessments,
government grants, and fees for services to government or industry.
In 1993, annual funding levels ranged from about $9.7 million for
Food From Britain to about $63.5 million for the Meat and Livestock
Commission.\9 In 1993, Food From Britain received about 60 percent of
its funding from the Ministry of Agriculture, Fisheries, and Food.
However, the government is committed to reducing Food From Britain's
reliance on government funding and to having it rely more on private
industry funding. The remaining three organizations were funded
partially by assessments but also received funding from other
sources, such as government grants and fees for services, which
accounted for about 15 to 35 percent of their total funding.
The organizations collect assessments from all domestic producers for
products brought to market, with no exemptions for smaller-volume
producers or provisions for assessment refunds. The Sea Fish
Industry Authority was the only marketing organization we reviewed
that assessed imported products.
The three organizations vary in how they set assessment rates.
Assessment rates for the Sea Fish Industry Authority can be adjusted
from time to time, after consultation with industry, within the
statutory assessment limits. The rate is imposed by the Sea Fish
Industry Authority's regulations and confirmed by the government.
The government sets the Meat and Livestock Commission's assessment
limits every 3 to 4 years after consulting with the industry. The
commission is then free to establish the rates for the year without
government approval. The Home-Grown Cereals Authority's assessment
rates are reviewed annually and can be adjusted with government
approval. Only Parliament can terminate the marketing programs.
The government evaluates these marketing organizations about every 5
years. For example, the Ministry of Agriculture, Fisheries, and Food
conducted a policy review of the Sea Fish Industry Authority in 1991
to evaluate, in consultation with the industry, the future role of
the authority, the assessment rate, and the basis of industry
funding. The government report made a number of recommendations
concerning the authority's organizational structure, funding, and
activities.
--------------------
\9 The average annual exchange rate for 1993 was $1.00 U.S. = .6658
British Pound Sterling and the rate for 1994 was $1.00 U.S. = .6529
British Pound Sterling.
BOARD ACTIVITIES AND FOCUS
ON THE EXPORT MARKET
------------------------------------------------------ Appendix IV:4.2
The marketing organizations in the United Kingdom engage in a variety
of research activities and in typical marketing activities, such as
trade shows, point-of-sale promotions, and advertising. Most of the
organizations spend the majority of their funds on promotional
activities. Notably, however, the Home-Grown Cereals Authority
spends about 62 percent of its funds on research activities. In
contrast to U.S. check-off programs, three of the four organizations
we reviewed performed additional activities, such as vocational
training, quality assurance, and collection and distribution of
information to the government and industry. For example, the Meat
and Livestock Commission collects and publishes information on
slaughterhouse design and operations, provides industry training for
the retail, wholesale, and catering sectors, and runs meat
classification programs. Two of the three organizations spend over
30 percent of their funds on activities other than promotion and
research.
Some organizations emphasize export promotion activities. For
example, Food From Britain spends almost all of its funds promoting
exports of British food and drink products, primarily to other
European countries and North America. The Home-Grown Cereals
Authority and the Meat and Livestock Commission spent about 13
percent and 7 percent, respectively, on export promotion during 1993.
Table IV.4 summarizes selected information on the four marketing
organizations we reviewed in the United Kingdom.
Table IV.4
Selected Information on Promotion and
Research Programs in the United Kingdom
Types of
Marketing activities
organization Organizational Composition of Sources of --uses of
(year started) functions board funds\a funds
---------------- -------------- ------------------ -------------- ----------
Food From Promotes Authorized: No Total funding Export
Britain British food fewer than 13 and 1993: $9.7 promotion
(1983) and drink no more than 21 million. (100%).
products, industry members
primarily in representing all Government
export sectors of the grants (60%),
markets. agrifood and
industry. contributions
from other
Members are agricultural
appointed by the marketing
Minister of organizations
Agriculture, and user fees
Fisheries and Food from exporters
and the (40%).
Secretaries of
State for
Scotland, Wales,
and Northern
Ireland. The
Ministers appoint
one member to be
chairman and
another to be
deputy chairman.
Home-Grown Promotes Authorized: up to Total funding Domestic
Cereals British cereal 21 industry and 1993: $12.6 promotion
Authority products and independent million. (6%),
(1965) oil seeds. members consisting Export
of not less than 5 Assessments promotion
Conducts nor more than 9 (85%) and (13%),
research on cereal growers, an other sources Market
these equal number (5 to (15%). informatio
products. 9) of dealers and n (9%),
processors, and up Assessment Research
Provides to 3 independent rates (62%),
services for members, including (exclusive of Other
the government both the Chairman value-added (10%).
such as and the Deputy tax) per tonne
reporting of Chairman. traded for
price fiscal year
information Members 1993: cereal
and serving as representing the growers,
an agent of interests of $0.451; cereal
the growers, dealers, dealers (net
Intervention and processors are of grower
Board for nominated by the contribution),
Agriculture relevant trade $0.04;
Produce. organizations. All processors of
members are cereals for
appointed by animal feed,
Ministers. $0.03; other
processors,
$0.09; and
oilseed
growers,
$0.751.
Meat and Promotes beef, Authorized: 13 Total funding Domestic
Livestock sheep, and industry and 1993: $63.5 promotion
Commission pork products independent million. (46%),
(1967) in both members (maximum Export
domestic and of 15 can be Assessments promotion
export appointed) (65%), fee and (7%),
markets. consisting of 4 other income Research
from the producer (23%), (5%),
Conducts sector, 4 reimbursement Services
research on slaughterers, for government to
cattle, sheep, wholesalers, and services industry
and pigs. manufacturers, 2 (12%). (23%),
retailers, and 3 Services
Provides independent Two assessment for the
support members, including rates--a government
services to the Chairman, general , such as
the meat Deputy Chairman, assessment and purchasing
industry, and Chairman of an assessment meat for
including meat the Consumers for specific the
quality and Committee. species government
classification promotion. 's
. Industry members Interventi
are nominated by General on Board
Provides industry sectors assessment (12%),
planning, and appointed by rates per head Policy,
design, and Ministers. The for 1993 were: legislatio
project three independent pigs, $0.556; n,
management members are cattle, $2.31; training,
services to appointed directly sheep, $0.391; and
clients in the by Ministers. and calves, communicat
meat industry $0.12. ion (5%).
such as meat Producers pay
plants. 50% and
slaughterhouse
Meat industry s and
training livestock
courses, exporters pay
including the 50% of the
retail, general
wholesale, and assessment.
catering
sectors. Species
assessment
rates per head
for 1993:
pigs, $0.511;
cattle, $2.61;
and sheep,
$0.391.
Producers pay
100% of the
species
assessment.
Sea Fish Promotes sea Authorized: Up to Total funding Domestic
Industry fish 12 industry and 1994: $13.4 promotion
Authority products. independent million. (36%),
(1981) members consisting Research
Conducts of 8 nominated Assessments and
research on from the sea fish (72%), developmen
sea fish industry, and 4 government t (32%),
products. independent grants and Other
members, including fees for (31%).
Trains all the chairman and services (8%),
sectors of the the deputy and other
sea fish chairman, and 2 sources (20%).
industry. other members who
must be Assessment
Provides independent of any rates per
financial financial or tonne on sea
assistance in commercial fish or sea
the form of interests in the fish products
grants and sea fish landed,
guarantees to industry. imported, or
the sea fish trans-shipped
industry. Members are at sea within
appointed by British
Ministers. fishery limits
for 1994 were:
whole sea fish
$11.33 and
fish fillets
$22.67. First
purchasers pay
the
assessment.
--------------------------------------------------------------------------------
\a The average annual exchange rate for 1993 was $1.00 U.S. = .6658
British Pound Sterling and the rate for 1994 was $1.00 U.S. = .6529
British Pound Sterling.
MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V
RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C.
Juliann M. Gerkens, Assistant Director
James L. Dishmon, Jr., Project Leader
Jay L. Scott, Senior Evaluator
Carol Herrnstadt Shulman, Communications Analyst
ATLANTA REGIONAL OFFICE
Kathy R. Alexander, Evaluator
Natalie H. Herzog, Evaluator
FAR EAST OFFICE
Kimberly M. Gianopoulos, Senior Evaluator
James L. Morrison, Senior Evaluator
OFFICE OF THE GENERAL COUNSEL
John F. Mitchell, Senior Attorney