USDA Abolishes Old Citrus Quota System : Agriculture: Charges of cheating by Sunkist Growers and others reportedly led to turmoil, costly lawsuits.

In a repudiation of the giant citrus cooperative Sunkist Growers, the U.S. Department of Agriculture said Monday that it will abolish a scandal-ridden, Depression-era quota system that let growers keep oranges and lemons off the market to prop up prices.

The USDA said it took the action because accusations of widespread cheating on quotas by Sunkist and dozens of citrus growers and packers--including two in Ventura County--had led to “division and turmoil” within the California-Arizona citrus industry and dozens of costly lawsuits.

The government’s action is unlikely to bring immediate change in citrus prices or supplies. The quota system had been suspended since December, 1992, and the season just ending operated free of market constraints without radical changes in prices or per-acre revenues.

Indeed, the fact that the orange market didn’t collapse “demonstrated that the industry could be profitable in a non-quota environment,” said Rep. Calvin Dooley (D-Fresno), who tried unsuccessfully to forge a consensus among the growers.

The action was greeted euphorically by many independent growers and packers who had chafed under the cartel-like system, which they said rewarded inefficient growers and was controlled by Sunkist.

Sunkist, based in Sherman Oaks, had no immediate comment.

The co-op, which markets citrus for its 6,500 members who grow two-thirds of California’s citrus, has long contended that quotas are needed to prevent sharp swings in supply and price volatility to consumers.

But Richard Rominger, a California farmer who is also deputy secretary of USDA, said that he notified Sunkist personally of the decision Monday. While “they may not have been happy . . . they were resigned to the fact that this is probably the only thing left to do,” he said.

The government acted just a week before federal prosecutors were to go to trial in Fresno in a decade-old case against Sequoia Orange Co., a packinghouse that deliberately violated the quotas in the early 1980s to protest the system.

That case, which put the Justice Department in the position of prosecuting someone for growing too many oranges, was among more than 60 pending lawsuits triggered by the system--including 19 filed by the government last year accusing Sunkist and several of its biggest growers and packers of cheating on the system.

Two large Ventura County packing houses were named in the suits--Saticoy Lemon Assn. and Oxnard Lemon Co.

As part of Monday’s action, the government dropped all those suits.

In Ventura County, where lemons and oranges account for combined annual sales of more than $200 million, an estimated 70% of the county’s citrus growers belong to the Sunkist cooperative, according to J. Link Leavens of Leavens Ranches.

Leavens and other local Sunkist growers said both growers and consumers benefited from the quotas and the government’s action is a setback for both.

“It’s certainly not a plus as far as we’re concerned,” said Leavens, whose family has an 800-acre citrus ranch in Moorpark. “(The quotas) most definitely had a stabilizing effect in the marketplace.”

Leavens said consumers probably will not notice any change in lemon prices, because the quotas for lemons have not been enforced since 1990.

Rather, he said, the ending of quotas may cause dramatic price fluctuations for growers of navel oranges. “It’s going to cause some difficulty for the navel people,” he said.

Managers at the Santa Paula-based Limoneira Co., a Sunkist grower whose 2,000-acre citrus ranch is one of the largest in the world, likewise expressed disappointment in the quota decision.

“If there is no marketing order, the consistency is just not there,” Limoneira Executive Vice President Al Guilin said. “Sometimes there’s an oversupply, sometimes there’s an undersupply.”

But James Moody, a Washington lawyer who has been instrumental in fighting such quotas, said, “I don’t think a progressive Democratic administration could tolerate being in the role of keeping food off the table.”

Rominger stressed that the federal agency still favors marketing orders, of which production quotas are considered the most onerous part. Such orders also let growers act together to promote and market their products.

“But because of all these violations,” Rominger said in an interview, “we don’t believe (the quotas) have been operating as they’re supposed to.”

The USDA said it would consider a new proposal for a citrus marketing order if the industry could ever agree on one, and Rominger said Sunkist officials indicated they might make such a proposal.

Joel Nelsen, president of California Citrus Mutual, a trade group for 850 growers, said the association is scrambling to get a marketing order in place that could operate a statistical and crop forecasting service. Those functions were performed under the program being terminated.

Critics and supporters generally agreed that Sunkist will survive the USDA’s action, though its 65% market share might fall. Sunkist’s brand name and elaborate international marketing system still make it attractive to many smaller growers.

But without the quotas, some larger citrus growers and packers may decide to quit the cooperative, which would save them fees paid to Sunkist, and strike out on their own.

“I’m jumping up and down,” said Dennis Johnston, a third-generation citrus farmer in Kern County.

Johnston said that in the past, he’s had to sell as many as 75,000 40-pound boxes of navel oranges to juice makers, getting about 50 cents a box, because quotas prevented him from selling them as fresh fruit, for which he gets about $8 a box.

“Now, it’ll let me ship the fruit when I decide to ship, and not the boys who sit on the (administrative) committee,” said Johnston, referring to the Sunkist-dominated committee of growers and packers who run the quota system by allocating orders to growers.

The program will end after the expiration of a 60-day notice required by the 1937 legislation that authorized marketing orders. But many growers have said they would stick with Sunkist because of the company’s advertising and marketing prowess.

In its latest fiscal year ended Oct. 31, Sunkist generated about $1.1 billion in revenue, $821 million of which it returned to its members.