SCOTUS Decision Offers Hope to Farmers Wanting Economic Freedom

In addition to collecting information on your telephone and Internet activity, the federal government is collecting your raisins. Yes, you read that right.

Since 1937, the federal government has forced raisin growers to hand over without compensation a percentage of their annual crop to a government-sponsored raisin marketing board, keeping this portion from consumers in open domestic markets.

The goal is to reduce the supply of marketed raisins and artificially increase the price paid to farmers. The raisin board is one of several boards the federal government created more than 75 years ago under the Agricultural Marketing Agreement Act of 1937. Similar boards control other agricultural products, including milk, fruits, and vegetables.

A group of raisin farmers, led by Marvin and Laura Horne from Fresno, California, oppose the federal government taking their private property without just compensation.

“This is America, not a communist state,” they said when filing their lawsuit. In some years, growers were forced to turn over 30 percent and 47 percent of their crop to a “reserve pool” controlled by the raisin board. But the Fifth Amendment says “private property (shall not) be taken for public use, without just compensation.”

The seized portion may later be sold by the government overseas, or sold or given away in “noncompetitive” domestic markets such as school lunch programs.

The Hornes won a preliminary victory June 10th when the U.S. Supreme Court ruled 9-0 that their case be sent back to the 9th Circuit Court of Appeals in San Francisco to decide whether this forced taking of part of their raisin crop is unconstitutional.

The Hornes have grown raisins in the Central Valley since 1969. They have long opposed the raisin board and tried not to participate, saying: “We will not relinquish ownership of our crop.” But the USDA brought an enforcement action against them in 2004, hitting the Hornes with fines and assessments of nearly $600,000 for evading the raisin board. That’s when the Hornes sued.

Growers should be free to trade with whomever they choose at mutually agreeable prices. The notion that farmers will perish without price supports is ludicrous. Dramatic advances in technology, transportation, and forward and futures markets have occurred since 1937. As economist Robert Murphy notes: “[F]orward and futures contracts can act as a type of insurance policy, where traders can reduce their exposure to fluctuations in critical spot prices by buying or selling the appropriate instrument.” Farmers can reduce their exposure to temporary price fluctuations using forward and futures contracts.

New Deal-era agricultural price-support programs, which mainly benefit huge agribusinesses not mom-and-pop family farms, are no longer needed. The Senate version of the next farm bill, approved on June 10th, will cost a staggering $955 billion over the next 10 years.

If the Hornes prevail, it would put in doubt the constitutionality of all government agricultural price-support boards. We can only hope. Stay tuned.

Lawrence J. McQuillan is a Senior Fellow and Director of the Center on Entrepreneurial Innovation at the Independent Institute. He is the author of the Independent book, California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis.
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