California raisins reached their peak as cultural icons in the late 1980s, with a series of Claymation TV commercials showing them crooning and dancing through “I Heard It Through the Grapevine” and other R&B standards. TV specials followed, along with a Saturday morning cartoon, a line of collectible toys, even an Emmy.
By 1990 the vogue had passed. But these days the raisins have been displaying their star power in court. As recently as the last week of November, a group of raisin growers won a skirmish in federal court allowing them to expand a compensation claim against the government for hundreds of thousands of dollars in raisins held off the market by agricultural officials in an effort to support prices. That ruling followed a 2015 Supreme Court decision labeling the price-support scheme unconstitutional.
It was highway robbery...How can I give up half my crop when I can’t cut my expenses by 50%?
Meanwhile, several raisin growers are suing in Sacramento state court to overturn a state-sponsored raisin marketing program that succeeded the dancing raisins campaign, on grounds that it violates their free speech rights.
It’s not that California raisin growers, who are largely located around the Fresno County community of Kerman, are particularly obstreperous or litigious. It’s more that marketing and price-support programs that in some cases hark to the Great Depression have become outdated. The transformation of American agriculture from a mass of small holdings into large businesses that are more capable of responding to the volatility of supply and demand means that government intervention in the markets isn’t needed economically as much as it used to. Nor is it as politically palatable as it was in the past.
“Some people would rather have government out of the business entirely,” says Daniel Sumner, an agricultural economist at UC Davis.
The target of three lawsuits in federal court — and the subject of the 2015 Supreme Court case — is a price and marketing program for raisins that began in 1949. Domestic prices had plummeted by more than 60%, to $130 per ton from a peak of $309 in 1946. The reason was growers accustomed to World War II demand hadn’t cut back production fast enough to respond to both a reduction in raisin consumption and the recovery of European farms that had stopped producing during the war.
The government’s preferred remedy was a “reserve pool” — a certain percentage of the crop from all growers was turned over to the government and held off the market. The hope was that the artificial scarcity would force prices higher, more than making up for the loss of any income on the reserve. To a certain extent, this seemed to work: prices recovered to $311 per ton in the 1958-59 growing season.
But the idea of sidelining already harvested crops didn’t sit well with many farmers. This was unsurprising. The same thing had happened in 1933, when Franklin Roosevelt’s agriculture secretary, Henry Wallace, had ordered the plowing under of 3.5 million bales of surplus cotton and the slaughter of 6 million piglets. His goal was to combat a disastrous overproduction of cotton and pork that had contributed to a farm belt depression then in its second decade. The mass destruction caused a public uproar and grieved Wallace, himself the child of a farm family. But he saw it as a necessary short-term emergency response, and it was not to be repeated.
The raisin program lived on, however. Raisins in the reserve pool were sold by the government for export or to public programs or donated to charity, with the meager proceeds returned to the growers. In 2002-03 the mandated reserve pool was an enormous 47% of the entire crop. Growers ultimately received $205 a ton for the reserve, and $745 on the open market for their remaining “free tonnage.” The following season the reserve was 30% and growers got nothing back, though they got $810 per ton for what they were allowed to sell.
The Supreme Court case was born in 2002, when grower Marvin Horne refused to turn over any raisins to the reserve pool. “It was highway robbery,” he told me. “I thought, ‘How can I give up half my crop when I can’t cut my expenses by 50%?’” Horne, 71, had other objections to the system. He blamed it for a long-term decline in the raisin industry, both in acreage and participants, and complained that the very concept of giving up half his raisins for “the common good” smacked of life in “a communist state.”
In any case, when the government fined Horne $480,000, the market value of the withheld raisins, plus a $200,000 penalty, he sued. The court ruled in what was effectively an 8-1 decision — only Justice Sonia Sotomayor dissented in full, though three other liberal judges dissented in part — that the reserve pool amounted to a government “taking” of property “without just compensation,” in violation of the 5th Amendment.
The decision mystified some economists, who observed that the court had approved other production-limiting regulations with the same effect. “There’s no particular rhyme or reason to it,” says Sumner. Raisin agencies “could have done the same thing through price orders, and here the government just took physical delivery.” Chief Justice John G. Roberts Jr., the opinion’s author, however, ruled that there is a difference “between appropriation and regulation,” and that the Constitution governs “means as well as ends.”
As it happens, by the time the Supreme Court weighed in, the reserve pool system was on its way out. No reserves have been taken since 2009 — at first because “market conditions” allowed all cultivated raisins to be sold, according to Barry Kriebel, president of the big cooperative Sun-Maid Growers of California, and then because of the Supreme Court decision.
Nor does there seem to be any great urgency to replace it with a system that would survive Supreme Court scrutiny. “The industry doesn’t have the same need for a reserve as it did in 1949,” Kriebel says. Sun-Maid is owned by 650 farmers raising about 30% of the state’s crop.
Other forces are helping to keep supply and demand in sync. California acreage devoted to raisins has shrunk to about 175,000 now from 280,000 in 2000; more than 6,000 acres a year have been converted to higher-value crops such as almonds and pistachios or for citrus orchards. Yields per vine have increased and farming has become more efficient, with a shift from drying grapes on the ground to drying-on-the-vine allowing more harvesting by machine.
But while many in the industry say it will never again need a backstop like the reserve pool, raisin prices are under pressure again. Field prices reached $1,600 a ton in 2015, comfortably ahead of the $1,350 per ton that the state’s Raisin Bargaining Assn. says is the cost per ton of production. The association, which represents about 1,000 farmers accounting for another 30% of the state’s crop and negotiates a price with raisin packers that is used as an industry benchmark, told members last month that packers are pressing to cut the field price by as much as $500 per ton for the 2016 crop. As we write, a price for the 2016 harvest, which was completed in October, still hasn’t been set.
Giving up on the reserve pool means “removing a tool you need at certain times,” says Henry Kaiser, an agricultural economist at Cornell University who has studied California raisin marketing. If the reserve pool had not taken more than a third of the crop during surplus years in 2001 through 2004, he says, “prices would have collapsed.”
But he adds that to be effective, production controls must include all growers: “You have to mandate that everyone’s in, but the Supreme Court said that’s unconstitutional.”
Facing rising production from Turkey, China and South America and the siren call of high-value tree nuts, the very survival of California’s raisin farms may be in question. Marvin Horne is among the pessimists. He says three years’ worth of his own harvests is still in storage, part of an industry-wide surplus estimated at more than a six-month supply — another dead weight on prices.
“The California raisin industry,” Horne says, “is going bye-bye.”