Regulation of Agricultural Marketing and Commodities

SIC 9641

Companies in this industry

Industry report:

This category covers government establishments primarily engaged in the planning, administration, and coordination of agricultural programs for production, marketing, and utilization, including related research, education, and promotion activities. Establishments responsible for regulation and control of the grading, inspection, and warehousing of agricultural products; the grading and inspection of foods; and the handling of plants and animals are classified here. This government group also includes such entities as agricultural extension services, fair boards, marketing, and consumer services.

Government establishments primarily engaged in the administration of programs for developing economic data about agriculture and trade in agricultural products are classified in SIC 9611: Administration of General Economic Programs. Government establishments primarily engaged in programs for conservation of agricultural resources are classified in SIC 9512: Land, Mineral, Wildlife, and Forest Conservation. Government establishments primarily engaged in programs to provide food to people are classified in SIC 9441: Administration of Social, Human Resource, and Income Maintenance Programs.

Industry Snapshot

The major federal agency in this category is the U.S. Department of Agriculture (USDA). This cabinet-level agency, established in 1862, works to improve and maintain farms, to cultivate markets for U.S. agricultural exports, and to regulate the integrity of farm commodities. These goals are accomplished through its various programs (e.g., loans and subsidy payments), marketing and outreach efforts, research, and regulations. The USDA works in conjunction with agriculture departments in states and territories.

Background and Development

While many of the early U.S. presidents considered themselves farmers, a cabinet department to address the needs of the country's largely agrarian society did not come into existence until the mid-nineteenth century. In 1839, Congress appropriated $1,000 for the collection of agriculture-related statistics and the distribution of seeds; this function was assigned to the U.S. Patent Office because Commissioner of Patents Henry L. Ellsworth supported aid to agriculture and the number of agricultural patents being handled by that office was larger than any other category of inventions.

Farming in America gradually shifted from subsistence cultivation to more commercial operations by the mid-1800s, and at the urging of the U.S. Agricultural Society (organized in 1852), a formal agriculture agency (not a cabinet department) was established on May 15, 1862. The first commissioner of the new agency was Isaac Newton, a personal friend of President Lincoln and a farmer. It was during this time the department began to regularly publish statistical and research reports, send scientists to Europe and Asia to observe agriculture abroad, and take some initial steps toward regulation of commodities. In 1887, passage of the Hatch Act authorized experimental stations in the states, and in 1989, raised the agriculture bureau to cabinet status.

Much of the Department of Agriculture's proactive work began during the Great Depression, when farmers faced tremendous challenges and hard times. In 1933, the Agricultural Adjustment Act was passed, its purpose being to adjust production to meet demand, and ultimately establish marketing conditions that would raise farm prices to parity. While this legislation was declared unconstitutional by the U.S. Supreme Court in 1936, many of the functions assigned to the Agricultural Adjustment Administration were incorporated into USDA operations. In the post-World War II period, farmers and the USDA began addressing the problems of crop surpluses, subsidies, and development of new opportunities to maintain farmer income.

Divisions within the USDA that are involved with the marketing and regulation of commodities include the following:

Agricultural Marketing Service. Established on April 2, 1972, the service concerns itself with grading, inspection, certification, market news, marketing orders, and the research and promotion of regulatory programs. Grading standards are in place for nearly 240 agricultural commodities. These standards are developed to certify quality of the commodities being purchased.

Animal and Plant Health Inspection Service. Established in 1977, this service conducts regulatory and control programs designed to protect and improve animal and plant health. Working with state agencies, the inspection service is concerned with humane treatment of animals, the control and elimination of pests and diseases, and animal and plant quarantines. This agency also is involved in border inspection of agricultural products coming in to the United States.

Grain Inspection, Packers, and Stockyards Administration. The former Federal Grain Inspection Service and the former Packers and Stockyards Administration were merged to form this USDA office. The agency is responsible for establishing standards for grains and other assigned commodities and for administering a nationwide inspection and weighing system.

National Institute of Food and Agriculture. Formerly the Cooperative State Research, Education, and Extension Service, this agency works closely with research colleges and universities, agricultural stations, and state agencies, focusing on research, extension, and higher education in the food and agricultural sciences and in related environmental and human sciences. Among this agency's concerns are improvement of agricultural productivity, creation of new products, and addressing of agriculture-related problems as they surface. It has been involved in plant and animal genome, food safety, and sustainable agriculture research projects throughout the country.

One of the most important developments in commodities and price regulation in the late twentieth century had no direct connection to the USDA: the closing of the National Cheese Exchange. Located in Green Bay, Wisconsin, the cheese exchange was a nonprofit organization that helped to determine the price of cheese throughout the nation. In response to complaints from Wisconsin farmers about declining prices, and following a research study conducted by the University of Wisconsin that suggested the exchange was being inappropriately dominated by large traders such as Kraft Foods, Wisconsin's two U.S. senators (Russ Feingold and Herb Kohl) called for an investigation into the exchange's operations. Kraft Foods denied charges of cheese "dumping" in order to lower milk prices, and the Federal Trade Commission's 1996 investigation found no evidence of antitrust violations. But rather than fight what it labeled "assaults from farmers' organizations, politicians, and the media," the cheese exchange's functions were shifted to the Chicago Mercantile Exchange. Although cheese futures trading was adopted by a New York commodity exchange, it had little impact on pricing.

In 2000, the USDA sought to expand economic and trade opportunities for agricultural producers; to ensure food for the hungry and an accessible supply of safe, nutritious, and affordable food; and to promote sensible management of natural resources. In furthering these goals, early in 2000 the USDA announced new criteria for the labeling of "organic foods," eliminating from that category all genetically engineered products and those that had been irradiated.

Current Conditions

As the twenty-first century began, the USDA continued to regulate U.S. farm activity. According to the USDA, a total of 2.2 million farms were in operation in 2009, a number unchanged from the previous year. Total land in farms constituted 919.8 million acres, as compared to 945 million at the start of the decade.

In 2010, the USDA had a budget of $135 billion, and the budget request for 2011 was $149 billion, about 70 percent of which was expected to be used for nutritional programs, including the Supplemental Nutrition Assistance Program (SNAP), Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and school breakfast and lunch programs. The remainder would be allotted to farm and community programs (17 percent), conservation and forestry programs (7 percent), and rural development, research, food safety, and marketing and regulatory programs (6 percent).

The USDA's stated strategic goals for 2011 were to (a) promote agricultural production and biotechnology exports; (b) ensure that all American children have access to "safe, nutritious, and balanced meals"; (c) help rural communities to prosper and repopulate; (d) ensure that the national forests and private lands are conserved and restored as they are made resistant to climate change, while enhancing the efficient use of water resources.

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