nodpa logo
industry news banner
DONATE NOW
O-DAIRY | CONTACT US | NEWSLETTER LOGIN | E-LETTER SIGNUP | CALENDAR


Home

Organic Checkoff
Field Days Archives

NODPA Industry News
NODPA Position •   
Statements      

FOOD Farmers •   
Position Statements      

National Organic •   
Coalition      

Action Alerts •   
NODPA Surveys •   
National News
Feed & Grain Prices Organic Pay Price
O-Dairy ListServ

Events
Farmer Classifieds
Business Directory
Newsletters
Advertising
Contact Us

Resources
Featured Farms

About NODPA
Membership
Support NODPA

 

 

 

 

 

 

 

Organic Checkoff Update:
Letter from the No Organic
Checkoff Coalition to the USDA Agricultural Marketing
Service Opposing OTA’s most recent Proposal

Added July 26, 2016

The following letter, which was submitted by the No Organic Checkoff Coalition to the USDA, in which they oppose the Organic Trade Association’s recent proposal, is included in its entirety. While a bit long, it was clear that there is so much significant information in this letter that is not published anywhere else that editing it down to a shorter version would diminish its value.

Dear Ms. Bailey and Ms. Pichelman:

On behalf of the No Organic Checkoff Coalition, representing 1090 signatories opposed to an organic checkoff, including 25 organic farmer organizations and businesses, this letter responds to the recently revised Organic Trade Association (OTA) Proposal submitted May 3, 2016. The revised proposal discusses ideas for a new industry-funded promotion, research and information order for organic products, which would be developed under the Commodity Promotion, Research, and Information Act of 1996.

The No Organic Checkoff Coalition was organized specifically to SUPPORT the FAIR Act that exempts organic farmers from conventional checkoff programs and to OPPOSE the creation of a new federal organic checkoff program. Together this coalition represents more than 6,000 organic farmers from the Western, Midwestern, and Eastern United States.

Our coalition members listed at the end of this letter and petition signatories opposed to an organic checkoff do not think a mandatory federal USDA checkoff program under the restrictions of the Commodity Promotion, Research, and Information Act of 1996 is the correct vehicle to address the obvious need for organic marketing and research. We have not seen any convincing evidence that such a program would support increased domestic organic production, which is one of our major concerns. While our members believe in the importance of organic research and promotion in helping to secure a stable and vibrant future for organic agriculture in the US, a USDA Generic Research and Promotion Order for Organic is not our vehicle of choice. There are other strategies that have been proposed and ignored. One successful alternative strategy to achieve the same outcomes could be a voluntary state or regional checkoff to raise money for on-farm research based on the direct needs of farmers in a given geographic area. Apparently, pistachio growers have been pleased with this approach.

This letter delineates issues in the OTA proposal where there is widespread disagreement within the wider organic community that would create conflict if implemented and which has led to a substantial lack of support for a mandatory checkoff proposal.

1. Lack of Industry Support for a USDA Organic Checkoff

OTA has largely misrepresented organic industry support for a USDA organic checkoff. Its Board made the decision to appeal directly to Congress for language to be inserted into the 2014 Farm Bill that enabled them to apply to USDA for a multi-commodity organic checkoff. This decision was not made in response to demands from organic farmers or even OTA members. Instead, it was based on a survey of Congress completed by the Podesta lobbying group. Retroactively, as an after-thought, OTA and its member-only GRO Organic Core Committee, began preliminary discussions with the organic sector participants to determine the need for an organic promotion and research order. Moreover, as outlined in their original 2015 proposal, their summaries of those discussions did not accurately reflect the wide swath of farmer feedback.

Based on coalition member participation and attendance at the majority of OTA town halls and webinars, we can personally attest that there was significant farmer opposition to the OTA’s and GRO Organic Committee’s proposal, yet this opposition was not accurately recorded in the meeting notes. More recently in 2016, OTA called thousands of certified organic farmers asking them to sign-on in support of an organic checkoff. However, during those calls farmers have not been given the option to register their opposition to the checkoff. Coalition members who have contacted OTA representatives in an effort to record their “no” vote, have been strongly persuaded to support the checkoff or have been told their vote would be recorded as a “maybe,” regardless of their consistent opposition. Thus, OTA data submitted to USDA on behalf of the organic industry support is inaccurate.

In contrast, our coalition has collected 750 signatures in opposition to the checkoff, without robocalls, without a well-funded organizational structure, and with limited producer exposure to the checkoff issue. Furthermore, this coalition in opposition to the checkoff represents over 6,000 organic farmers. See www.noorganiccheckoff.com where testimonials from hundreds of organic producers and consumers explain why they oppose an organic checkoff (See Attachment 1).

2. Organic is not a Commodity

While Congress agreed that all organic commodities could be lumped together as one organic commodity, this is a flawed decision and has negative implications for the future of organic agriculture and any proposed checkoff program. Organic is a system of production. Certification validates that the associated growing and handling practices comply with Federal regulations, dependent upon a process-based verification of those systems.

In contrast, a commodity is a product. If organic is re-classified as a commodity through the proposed organic checkoff, there undoubtedly would be important, unintended consequences of focusing on the end products rather than the systems of production. The impact would most likely adversely affect human health and the environment, which is what organic was expressly intended to protect with a deliberately designed systems approach to food production.

Furthermore, the organic agricultural market includes almost all agricultural commodities. Each commodity: corn, wheat, eggs, lamb, beef, Christmas trees, cotton, fluid milk, avocados, blueberries, mushrooms, dairy, honey, mango, peanut, pork, raspberry, watermelon, popcorn, sorghum, soybeans, potato, etc. have different research, marketing, and promotion needs. It is antithetical to the conditions set forth in the Commodity Promotion, Research, and Information Act of 1996 for a dairy farmer to pay into a checkoff program, for example, that would fund research and promotion for blueberries. The reclassification of multiple organic commodities into one lump commodity simply makes no sense. It was done prematurely and without input or widespread support from the organic farming community.

3. Proposed Checkoff Assessments Are Burdensome for Farmers and Small Businesses

An organic research and promotion order should not impose arduous compliance requirements on small businesses. Organic certification already is taxing on farmers’ time and a checkoff assessment would magnify this burden tremendously. The OTA’s proposed producer assessments are burdensome, complex, and confusing. While on the face of it, the OTA proposal appears to reduce producer burden by exempting producers grossing under $250,000, the reality of this exemption is much more complex, bringing to light the many problems and inequities embedded in the proposal:

  • It automatically excludes 60% of all organic farmers – the grassroots base of the organic label and market – from the GRO Organic Program decisions, referendums, and leadership.
  • The option to voluntarily be assessed for seven years in order to vote in the referendum creates additional inequities. Those who do qualify for assessment are not locked into being assessed for the next seven years, even if their gross revenue dips below $250,000 the year following the referendum. Those who volunteer to pay into the organic checkoff are committed to stay in for seven years no matter what their gross organic income is. Likewise, if a certificate holder is exempt at the onset of the program and thus does not get a vote in the initial referendum but then reaches the gross sales threshold the following year, they would be paying into a program which they were not entitled to vote on. If the USDA does proceed to a referendum on this checkoff proposal, the most equitable and transparent option is for all organic certificate holders to have a vote on whether to establish an organic checkoff, based on their analysis of the final proposal developed by USDA AMS. If that vote is in favor of a checkoff, future governance decisions should be made according to the proposal published by USDA.
  • OTA’s assessment proposal is inequitable across commodities. For example, dairy farmers have a high gross sales number, but typically low net profit, while other commodities like high-value fruits and vegetables typically have lower gross sales but higher net profit. They both would be classified as exempt or non-exempt under the unequal conditions of their individual commodity characteristics.
  • How will USDA determine gross organic sales? Will USDA use cash based accounting system or an accrual one? Will all certified operations be required to file quarterly gross sales reports to prove they qualify or are exempt from paying into the organic checkoff? Will credit be given for an inventory of inputs purchased in one marketing year but used in another? Requiring quarterly or annual assessment reports is overly onerous as it is unlikely that many small to mid-size farms have bookkeeping employees or staff to operate and manage their computer system.
  • Farmers will have to pay into the organic checkoff within 30 days of the end of the marketing year. This will cause hardship for those small to medium size operations that lack the administrative support to have immediately updated accounts. It is also impossible as some farmers purchase inputs using charge accounts which are invoiced monthly in arrears.
  • Farmers are likely to be hit with lost net income as processors and handlers pass the cost of the checkoff down to farmers with a lower pay price. OTA maintains that the majority of payments will be made by handlers, not farmers, because of the qualifying requirements. It is generally accepted in the agricultural market place that increased costs are not passed up the distribution chain to retailers and consumers because of tight competition. It is inevitable that any checkoff payment made by handlers would be deducted from the pay price of farmers. As an example, the recent exemption of all organic operations from paying into conventional checkoffs saved dairy processors approximately $16 million annually. At the same time organic dairy processors are looking to lower the price paid to organic dairy farmers, despite their new windfall.
  • Even those producers under the proposed $250,000 gross organic sales designation would be required to submit financial documentation to the Secretary of Agriculture, at least annually, or more times if they desire to prove they are exempt. This would further burden small producers.
  • OTA has not been specific about how paying into the checkoff will be policed to ensure that farmers required to pay into the checkoff, actually do. This situation would be aggravated by those organic commodities whose price fluctuates. For example, the price for organic corn is nearly $10 a bushel lower in 2016 than it was in 2015, which represents a large difference in gross organic sales. Other checkoffs are based on volume of production and can be monitored, for example, sale barns or grain elevators. This is a process that could work when a single commodity is assessed. Will USDA AMS be responsible for vetting each submission from each organic producer, importer, and handler to validate their deductions from gross sales? The OTA Revised Proposal presupposes a high cost to reimburse AMS or the Organic Checkoff Board to administer the Organic checkoff fairly. In, sum, the process to fairly evaluate, monitor, and enforce this assessment seems most complex and unrealistic.

Diagram 1. ORGANIC PRODUCERS: HOW WILL YOU DETERMINE NET ORGANIC SALES?

OTA’s proposal outlines that qualifying organic certificate holders would be assessed based upon net profit; however, for small and mid-size diverse farming businesses, this is complex as many small businesses typically produce all their own farm inputs. Small to mid-size producers may rent or own more acreage to grow their own organic inputs, a strategy necessary in many parts of the country to maintain access to organic inputs. For example, many organic dairies are grass-based and do not purchase any feed. They have limited inputs but may have to pay a mortgage or rent to manage the land necessary to meet organic certification requirements. How would this cost be factored-in to make the program fair to all farmers? Furthermore, small to mid-size organic farms have high labor costs, an expense typical of farms who have not reached the scale requiring more mechanization. These costs would not be included in some definitions of net organic sales. Generating net profit numbers for the purposes of the GRO Organic Program would be overly onerous for small businesses, expose them to increased risk for financial audits by the Board, and open them to Federal penalties for any under payments.

The diagrams OTA included in their revised proposal in an attempt to better explain how net organic sales would be calculated grossly oversimplify the reality of the majority of small businesses in the organic sector. Many small businesses grow, process, store, etc. their own on-farm inputs. There are not off-farm sales receipts to simply subtract expenses from sales. How would this be calculated equitably across the different commodities included in the organic commodity umbrella? See Diagram 1, which illustrates the complexity of fairly and uniformly calculating net organic sales.

4. Organic Research is NOT a Priority in OTA’s Checkoff Proposal

While U.S. certified organic farmers are mixed in their support and opposition to the proposed organic checkoff, the great majority of producers agree that there is a need for more agriculture producer-focused organic research. The proposed OTA research dollars for production agricultural research are much too low and fail to recognize this need and priority in the organic industry. The proposal to allocate 12.6% as the minimum starting point for all checkoff dollars to support agricultural research does not reflect this unanimous priority among organic farmers. OTA’s research allocation is much less than the 25% they would allocate to the amorphous “discretionary funds,” which seriously undercuts the needs of the organic farming community and allows a quarter of the industry-generated funds to be spent on undisclosed expenses and in a non-transparent manner.

5. Farmers Don’t Hold Enough Power in OTA’s Proposal

Small- to Mid-size grassroots organic farmers built the U.S. organic label and market, yet they would hold only six reserved seats (37%) on the board of 16 members. It is clear that organic farmers are not determining the course of the proposed organic checkoff and will not determine the spending of checkoff funds if a checkoff is set up. As certified organic FARMERS comprise of the majority of all U.S. certified organic entities, we feel this lack of farmer representation is egregious and disrespectful to the organic farmers that helped to build the organic market and movement to what it is today.

6. Referendum Voting Process Is Overly Burdensome

USDA should make participation in the initial Organic Checkoff referendum the simplest and easiest for all certified entities. There is no reason why the referendum should require that certified operations request a ballot in order to participate. The agency has every mailing address for every certified operation and should mail them a ballot with a self-addressed, postage-paid, return envelope to ensure highest rate of participation.

7. Checkoff Would Increase Organic Imports.
Importers Would Not Contribute Their Fair Share

The U.S. domestic organic market has grown at such a rapid pace such that demand for organic products far outreaches the domestic supply. OTA’s proposed organic checkoff priority “to promote and grow the organic market” would undoubtedly increase organic imports in the absence of a “made or grown in the US” market plan. Under the Commodity Promotion, Research, and Information Act a checkoff cannot promote just domestic sales of the commodity. The recent increased demand for organic products has increased the importation of organic commodities which are cheaper than domestic product. USDA ERS data currently shows that 60-70 percent of U.S. soybeans are imported with some knowledgeable industry people putting that figure at up to 90% and 40% of U.S. organic corn supplies imported. Recently, 3 bulk ship loads of organic grain were brought into U.S. ports in one week. This has caused the pay price offered to U.S. organic farmers to drop under this foreign competition. While the OTA Checkoff Proposal states that it would help support thousands of U.S. acres to transition to organic production, if farmer organic pay-price drops because of an onslaught of cheap foreign organic imports, U.S. farmers would be unwilling and unable to financially afford to transition to organic.

According to page 19 of the OTA revised proposal, organic imports would get a break on their assessment by being allowed to subtract import costs such as freight charges—one of the largest costs in shipping products to the U.S. Moreover, organic imports would be assessed on the cost of the raw product—typically far cheaper than U.S. grown products. Subsequently, not only would this lead to an increase in organic imports, but it would also decrease overall checkoff revenue as cheaper imports substitute for higher-priced US-produced organic products, making it even harder for U.S. growers to compete in the domestic organic market.

U.S. organic producers undergo the highest-integrity organic inspections and certification processes in the world. While the USDA National Organic Program strives to maintain this integrity across the globe, we know, realistically, that it is impossible to conduct the same type of rigorous organic inspection and traceability in countries at war, like Turkey and Ukraine, where most of our current organic corn imports are coming from. A checkoff campaign that encourages imports over domestic transition would serve to decrease consumer confidence in the USDA organic program and seal.

8. Organic Producers May Have to Pay into Multiple Checkoffs

Organic producers and organic handlers with dual-covered commodities must apply to their commodity checkoff boards for exemption from their federally mandated conventional checkoffs. There is no exemption from State based conventional checkoffs. This exemption has only recently been introduced and does not have a track record for how timely, complicated, or efficient these exemptions would be. In order to only pay into the organic checkoff, farmers will need to exempt themselves annually from paying into the conventional check off. Part of that exemption is providing proof that the operation has paid into the organic checkoff. According to the OTA, if a farmer already pays into a conventional commodity checkoff and wishes to be exempt from paying into the organic checkoff the farmer must:

Organic producers may apply to the Board, on a form provided by the Board, for a certificate of exemption prior to the start of the marketing year. This is an annual exemption and organic producers and organic handlers must reapply each year. Such organic producers and organic handlers shall certify that they have remitted an assessment for the dual-covered commodity pursuant to a commodity promotion law. Upon receipt of an application for exemption, the Board shall determine whether an exemption may be granted. The Board may request documentation providing proof of the remittance of the assessment for the dual-covered commodity. The Board will issue, if deemed appropriate, a certificate of exemption to the eligible organic producer or organic handler. It is the responsibility of the organic producer or organic handler to retain a copy of the certificate of exemption.

It is possible that while an organic producer is waiting for their conventional commodity board to determine whether or not they have submitted all of the correct paperwork to be exempted from their conventional checkoff payments, they may also be assessed under the organic checkoff. Many organic producers expect that it would be more complicated to apply for exemption, and end up surrendering to the double payment. It is likely that the small to mid-size producers, with little administrative staff would be hit the hardest with this possibility.

9. Projected Checkoff Revenue is Unverified

OTA has not provided any valid, independent research data that confirms the estimated organic checkoff revenue. Using net income as the value for assessments makes projection extremely difficult. While there are statistics and data on volume and sales for many organic commodities, there is no independent data on the cost of production. Therefore, there is no data on which to base an opinion of $30 million in checkoff revenue. Most of the data necessary to assess net organic income is proprietary.

As you can see from the above concerns, there are many philosophical, economical, equality, structural, and transparency problems with establishing a mandatory federal organic checkoff. OTA’s proposed checkoff would be complicated to administer and it is impossible for it to accurately estimate the dollar amount raised by their proposed program. Although in principal, the intent of an organic research and promotion program – more organic research, clarity of food labels, and organic technical assistance for transition – is a good one, most members of the organic farming community agree that they prefer a different solution than the proposed checkoff program.

The proposed mandatory organic checkoff would generate a limited pot of money from dozens of very different commodities within the organic community. Competing demands for the money would inevitably set farmer against farmer, further complicating the administration of the program and overshadowing any good the checkoff intended to achieve. OTA’s proposals have already caused much emotion and conflict within the organic community. To take it to a referendum would do a disservice to the organic community. It would divide rather than unite us, ignite a firestorm of adverse media coverage and injure the organic brand in the process, defeating the purpose of an organic checkoff in the first place. A mandatory federal organic checkoff is not the right fit for the organic community. We urge you to outrightly reject OTA’s proposal and encourage the organic community to explore other options.

Thank you for the opportunity to provide input on this important issue and for your thoughtful consideration of our remarks. We would welcome the opportunity to continue this discussion and evaluation with AMS at a mutually convenient time and place.

For a list of signatories and more information please go to:

www.noorganiccheckoff.com