The marketing of California walnuts with special reference to marketing agreements
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Authors Christopher, Charles E., 1882-
Publisher The University of Arizona.
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Link to Item http://hdl.handle.net/10150/553345 THE MARKETING OF CALIFORNIA WALNUTS ivITH SPECIAL REFERENCE TO MARKETING AGREEMENTS
by
Charles E« Christopher
A Thesis
submitted to the faculty of the
Department of Economics
in partial fulfillment of
the requirements for the degree of
Master of Arts
in the Graduate College
University of Arizona
19 3 7
Major Processor
It ^ 4 7 9 / /?_3 7
Z-
TABLE OF CONTENTS Page
I. TITLE PAGE ...... i
II. INTRODUCTION ...... iv
III. METHOD OF PROCEDURE ...... vi
IV. CHAPTER I: HISTORICAL DEVELOPMENT AND PRESENT STATUS OF THE WALNUT INDUSTRY...... 1
Era of Introduction and Selection of tOH t- CO Varieties ...... Present Importance of the Walnut Industry Status of the Walnut Industry Prior to 1933 .. Brands and Varieties ...... ' Distributing California Walnuts...... 14 'Independent Growers1 Associations ...... 15 "The California Walnut Growers association .... 15
V. CHAPTER II: MARKETING WALNUTS PRIOR TO THE AGRICULTURAL ADJUSTMENT ACT OF 1933 ...... 24 Preparing of Shelled Walnuts for Market ..... 24 Foreign Markets Prior to 1932 ...... 30 European Methods of Curing Walnuts ...... 33 Imports and Methods of Selling in Competition. 34 Use of Standardization, Branding, and Advertising...... 37 Chaotic Developments of 1932 ...... 48
VI. CHAPTER Ills THE MARKETING AGREEMENT UNDER THE AGRICULTURAL ADJUSTMENT ACT AND ITS EFFECT ON THE WALNUT INDUSTRY...... 53
Provisions and Purposes of the Agricultural Adjustment Act ...... 53 The Marketing Agreement for Packers of Walnuts Grown in California, Oregon, and Washington...... 53 Provisions of the Agricultural Adjustment Act Affecting Licensees ...... 67 Operations of and Opinions on the Marketing Agreement...... 73
/ / Z ?o 7 ill
Pag®
VII. CHAPTER IV: SUMMARY AID CONCLUSIONS ...... 92
Legal Statu® of Marketing Agreement® ...... 92 The Effects, of the Marketing.Agreement on Producer® ...... 96 The Effects of the Marketing Agreement on the Income of Growers ...... 98 • The Effects of the Marketing Agreement on the Consumer ...... 106 Are the Results Obtained Under the Agreement Antisocial? ...... 108 Outlook and Permanent Solution ...... 113 VIII. APPENDIX ...... ,...... 119 IX. BIBLIOGRAPHY ...... 128 IBTRODtJCTIOH
The questlcaa which this thesis undertakes to answer
Is whether or not the provisions of the Agricultural
Adjustment Act, as passed by the Congress of the United
States in the spring of 1933, and finally approved Hay 12 of that year, together with amendments providing subsidy payments, were effective in securing desirable results for the walnut industry of California, Oregon, and Washington.
There has been considerable difference of opinion among the citizens of the country in general as to the desirability of the provisions of the AAA program both from a social and an agricultural point of view. While it is evident that practically all walnut growers have favored and appreciated the benefits obtained under the surplus control program, a few growers have been opposed thereto. Upon being con sulted, however, those who opposed such a program were unable to present any facts or logical arguments to sup port their opposition.
The Agricultural Adjustment Act made it possible not only for the walnut producers to control the distribution
of the output of walnuts in an artificial manner, but it
also made it possible for them to receive a price for wal nuts not established under unregulated competitive condi
tions. This thesis, in attempting to investigate and to arrive at a satisfactory conclusion concerning the effec tiveness and desirability of the policies established by the Marketing Agreement and the License requirements ob tained under the provisions of the Agricultural Adjustment
Act, considers the problem from two main points of view:
(1) That of the Industry Itself
(2) That of society
The test of the benefits of the Agreement, in so far as the industry itself is concerned, is found in the effect of the Marketing Agreement on the income and morale of the growers.
There are many things to be taken into consideration
in determining the effects of the Marketing Agreement on the consumers. For example, are walnuts a necessity or a
luxury; can other nuts be substituted for them; what ef
fect does the Agreement have on both short- and leng-rim
price determination of walnuts to the consumers; and are
the results obtained under the Agreement antisocial? METHOD OF PROCEDURE
The procedure employed In studying the effect of the Agricultural Adjustment Act on marketing California walnuts can be divided into six general types of investl- C gations:
1. The gathering of as complete a bib]
possible
2, Extensive reading of government-bulletins and
textbooks
5. The preparation of an outline dealing with per
tinent questions bearing on the problem
4. Actual gathering of the material from the fol
lowing sources: a. Governmental publications
b. Early editions of the Pacific Rural Press,
dating back to 1870, The California Culti
vator, The Diamond Walnut Hews, and other
similar publications.
e. Annual Reports and other official documents
of the California Walnut (lowers Association
d. University of California, College of Agri
culture, bulletins
e. Interviews with officials of the Citrus
Experiment Station, The California Walnut vii
Growers’ Association, growers and packers,
and the Manager of the Walnut Control Board
5. The arranging of the material gathered in a logical sequence
6. Analysis of the economic conditions that prevented
effective adjustment of the supply of walnuts to
market requirements, and the way in which the
Marketing Agreement was used to bring about more effective adjustments
7. The arriving at conclusions based on economic
analysis and the probable outcome in the light of
economic principles involved viil
SOURCE OF MATERIALS
The literature and materials used In this study con sist of certain government publications, including the
Agricultural Adjustment Act Itself, The Marketing Agree*'■ ■■■ ment made between the Secretary of Agriculture, H. A.
Wallace, and the handlers of walnuts on the Pacific Coast, together with amendments to this Agreement, The Citrus
Experiment Station and Graduate School of Tropical Agri culture and Horticulture in the Experiment Station, located at Riverside, California, which is a part of the University of California^ made available its entire library and files
and, also, the reports of experiments and research per taining to the walnut industry In California. There is
perhaps no more complete library pertaining to the early history of the walnut industry in the world than that which is contained in the publications of the library and
files in this institution# Utoder the directorship of Dr.
L . D . Batchelor, The California Agricultural Experiment
Station and Graduate School of Tropical Agriculture and
Horticulture in the Experiment Station, has conducted ex
periments and rendered reports on the subject of walnut
culture. Through M s cooperation it was possible to
secure copies of publications now out of print and a com
plete file of the Diamond Walnut Hews, which is the offi
cial publication of the California Walnut Growers Associa
tion. Many features of intense interest appeared in the early editions of the Pacific Rural Press and the Gallfor- nla Cultivator in the 1870,s when the walnut Industry was in a nebulous state of development.
The California Walnut Growers Association made avail able its files, annual reports, and publications. In ad dition, the Association was most considerate in showing how walnuts were packed, graded, canned, processed, shelled, and prepared for market. Officials of the Associa tion explained the organisation of the Association and its problems.
The Walnut Control Board, which is the agency for estimating, controlling, and marketing the surplus of walnuts, made available information pertaining to the methods employed in administering this governmental agency. The Manager of the Walnut Control Board, Mr. W. E. Good-
speed, graciously supplied statistical and other data
presented before the 1935 Agricultural Adjustment Act hearing, which could not be obtained from any other
source.
The Los Angeles City Library was utilized for ob
taining books and other publications pertinent to the
subject being studied. CHAPTER I
HISTORICAL DEVELOPMENT AND PRESENT STATUS OF THE WALNUT INDUSTRY
Era of Introduction and Selection of Varieties
It has been approximately seventy years since the
English walnut, or as it is more properly called, the Persian walnut, was introduced into California on a com mercial scale.1 In fact, its introduction was in the year
1867, less than twenty years after the Gold Rush of the
Forty-niners to the Pacific Coast. Today the English walnut is one of the largest crops of the Pacific Coast states, particularly California.1 2
There are many varieties of walnuts grown in North
America• Among those of the greatest importance are the
following:3
1. The butternut— Juglans clneroa
2. The black walnut— Juglans nigra
5. The California walnut— Juglans California
4. The Texas walnut— Juglans rupestria
5. The Arisona walnut— Juglans major
1. Views of California Walnut Growers Association, Proposed Negotiation of Foreign Trade Agreement with Italy, Washington, D. fc., March 4, 1935, p. 6. 2. Ibid., p. 7. 3. Morris, Robert T., Nut Growing, pp. 180-181. 2
6. A Chinese walnut— Juglans sinensis
7. Two Japanese walnuts
a. Juglans sleboldi
b . Juglans eordlformls
8. And from abroad we have brought the Persian
walnut, Juglans regia.
It is not known whether or not the varieties found in this country have a common origin. There were walnut trees in America before Columbus sailed for this country in 1492.4
Juglans regia, or the English walnut, originally came from Persia. It was grown in the Mediterranean countries for centuries.5 There is no logical or histor ical reason for the name "English" being attached to the
Juglans regia. At an early date this variety of walnut was grown in England, which is probably the reason for the name English walnut.6
The English walnut tree is long-lived and deciduous,
and grows thirty to fifty feet high. It is strikingly
beautiful in appearance. It begins to bear at six to ten
years of age, is in full bearing by the time the tree is
fifteen years old, and continues to bear indefinitely.
Indeed, there is a tree in Crimea near Balaklana believed
4. Morris, op. cit., p. 181. 5. Ibid., pp..185-183. 6. Ibid., p. 183. 5
to be over one thousand years old that Is still producing walnutsWalnut trees wero first Introduced and culti vated for three distinct purposes. The first and most
important was for table use; l.e., to be eaten as food, either raw or used in cooking. The second was the raising
of nuts for oil, which, in some countries, was a very
valuable commercial product. Third, walnut trees were pro
duced for the wood used in furniture-making.
Present Importance of the Walnut Industry
From a small beginning the walnut industry has grown
to be a major industry on the Pacific Coast. So extensive
has the acreage become that today in California, Oregon,
and Washington, 166,005 acres are given exclusively to
this crop.® Almost 12*000 individual growers produce
walnuts on a commercial scale.® More than 30,000 persons
are employed in cultivating, harvesting, and caring for
the walnut Industry. The labor payroll for production
amounts to about three-quarters of a million dollars
annually. During the harvesting season, when the walnuts 91078
7. Price, E. M., The Walnut, p. 13. 8. Walnut Control board, Exhibit Presented as Evidence at 1935 Walnut Hearing, Exhibit” 4. 9. Individual growers include all operators, whether tenants or owners. 10. Views of California Walnut Growers Association, Negotiation of Foreign Trade Agreement with Italy, Washington, b. 6., March 4, 1955, p. 6. 4
are packed, an additional 6,000 worker* are employed In the packing plants at a labor ©est of almost one and one-half million dollars.H
fh@ Investment In tho v/alnut Industry has reached gigantic proportions. It Is estimated that the value of the land, cultural equipment, packing facilities, and trees amounts to more than 015O,(XK),(%O.^ During the last twenty years £4,000,000 have been spent on advertising, which is considered an investment in the future of the walnut in dustry. From 1910 to 1927 the production of unshelled walnuts increased from 19,000,000 pounds to more than
C: '• 85,000,000 pounds. In a ten-year period, from 1924 to
1935, the production of shelled walnuts increased more
than 200 per cent.13 Most of this increase in production
and acreage is to be found In California. The bearing
acreage Increased approximately 100 per cent in California
In a fourteen-year period from 1920-1934.^ Of all the
total bearing acreage in walnuts in the United States,
about 85 per cent Is located in California.15 American
citizens, allowing for but few exceptions, own andtcultivate 12*141511
11. Views of California Walnut Growers Association, Negotiation of Foreign Trade Agreement with Italy, Washington, b. C., March 4, 1935, p, 6. 12. Ibid., p. 7. 15. T H E . , p. 7. 14. She number of acres devoted to the production of wal nuts in California in 1920 was 58,963. This acreage , had increased to 113,000 in 1934. See Table I, Appendix. 15. Views of California Walnut Growers Association, op. cit. p. 8. 5
the walnut groves in all the Pacific Coast states. The growers consider that the walnut crop is a primary in dustry; it represents the growers* sole income in more then 80 per cent of the eases. In but very few instances is it considered a side crop.^6
The consumption of walnuts in the United States in the year 1927 amounted to 140,000,000 pounds. More than
80,000,000 pounds were supplied to the domestic market by the California walnut growers. I? Hot only has production of walnuts greatly increased but also the consumption per capita has greatly increased. The following chart shows the per capita increase in the consumption of walnuts: 1716
16. Views of California Walnut Growers Association, op. . clt., p» 8. , -I:' 17. TRaThut Control Board, Certain Exhibits Presented as Evidence at 1935 Walnut hearing, Exhibit 6. 6
Per Capita Consumption of Walnuts in United States (1910*1950)
1.10 1.00
.80
.60
.40 .30
In the year 1910 the per capita consumption was .70 of a pound; in 1920 it was over .80; and in 1955 it was approximately 1.10.18 19 It is claimed that the consumption of walnuts has been developed by aggressive advertising campaigns of the
Walnut Growers Association, changing walnuts from a luxury to a staple commodity used in almost every kitchen.20 An enterprise that has reached such proportions as that of the English walnut, is an economic industry of sufficient importance to merit widespread consideration.
18. Batchelor, L. P.y Walnut Culture in California, p. 7. 19. See above chart. 20. Meals, C. P., nA Preview of Walnut Advertising for the 1934-35 Season,” Diamond Walnut Hews, August, 1934, • p. 6,-: ■ ■ 7
Status of tho Walnut Industry Prior to 1953 As previously Indicated, prior to 1928 California
furnished about 97 per cent of the walnuts produced in the
Ttoited States.21 Oregon is the most important walnut- producing state next to California.22 in 1928 Oregon pro
duced about 2,000,000 pounds or four per cent of the Cal ifornia production.23 In addition, Oregon had done
considerable planting of young trees.2* In 1920 the pro duction of walnuts in the United States outside of the three Pacific Coast states was probably less than ene per
cent of the California production.25 California has greatly increased Its production of walnuts during the past few years. The rate of Increase seems to take a fairly def inite and constant trend, which Is estimated to be about 6.5 per cent each year over the last twenty-year period.25
The yearly production has grown larger and larger each
year. In 1910 the production was 1,320,000 pounds over
the production of 1909; In 1920 the production was 2,400,- 000 pounds more than In 1919; in 1928 the production was approximately 4,000,000 pounds more than In 1927.2? The
trend is quite definite and progressive even though there
21. Erdman, H. E. and Fuhrlman, W. U., Walnut Supply and Price Situation, p. 11. 22. Ibid., p. 11. 23. Ibid., p» 11. 24. Ibid., p. 11. 25. Ibid., p. 11. 26. Ibid,, p» 11. . 27. See Table II, Appendix. 8
hav® been variations in simual crops.
The abrupt ehanges in supply due to the variations in production from year to year have led to eonelderable marketing difficulties. An abundant crop of one year has required strenuous sales efforts to move the crop without
©utting the selling price. The problem has been further complicated by tho inability to capifcalizeon consumer consumption habits developed during years of enormous orsps, because in years of scanty crops advancing prices tend to place walnuts in the realm of luxury foods.28 31*29 .
Brand and Varieties
The California walnut growers have found it to their advantage to standardize the grades of walnuts placed upon the market.2® This permits walnuts to bo sold by speclflea tions and sample rather than by actual inspection of the product. This has created confidence and established standards. These grade standards have been in the process of development for more than twenty-five years.50 it has been during the last decade, however, that particular at tention has been given to the subject of grade standard ization.3^- The marketing classification of walnuts in
28. Erdman and Fuhrlman, op. cit., p. 14. 29. California Walnut Growers Association, California Walnuts, 1931, p. 5. 50. Erdmah, H. E. and Fuhriman, W. U., Walnut Supply and Price Situation, p.17. , 31. ibid., p..IV. ,_ . 9
California is based on the following characteristics: quality, size, variety. There are three main quality grades of marketable walnuts.52 The three grades used by the California Walnut Growers Association are Diamond; first quality; Emerald, second quality; and Suntend, third quality. Other packers who are not members of the Association generally have three quality grades whose specifications are close to these used by the
Association but which are called by other registered brand names. 32
32. Erdman, H. E., and Puhrlman, W. tJ., Walnut Supply and Price Situation, p. 18. 10 #
:MARKET CLASSIFICATIOH OF WALNUTS Used bT C.W.O.A
Brand Sis® Variety Market classification
[ (Seedlings Diamond No. 1 Soft Shell (Large -(Buds Diamond large Buds ( (Fancies :■ ( - •: -- y Diamond -(Medium-(Buds Diamond Medium Buds ( - (Bmeles Diamond Fancy Fancy Varieties
(Seedlings Emerald No. 1 Soft Shell (Large -(Buds Emrald Large Buds ( (Fancies Emerald Large Fancies v ( ■: Emerald -(Medium-(Buds Emerald Medium Buds ( (Fancies Emerald Fancy Fancy Varieties
(Small Emerald Babies53
(Seedlings California Ho. 1 Soft Shell (Largo -(Buds California Large Buds ( (Fancies California Fancies
Suntand -(Medium-(Buds California Medium Buds ( (Fancies California Fancy Fancy Varie ties
(Smll California Babies 54
By quality classification there are three brands.33
The Diamond, which is the highest grade, means that of the
graded and packed nuts, 90 per cent must have sound, edible
33, Babies are either "Baby grade” (round type) or "Long Type Baby grade." . 54. Personal Interview with A. V/. Christie, Field Manager, California Walnut drovers Association, March 26, 1937. 55. krdman and Fuhriman,. op. citp. 18. 11
kernels, and 60 per cent of these kernels must be light In * color. The nuts may be amber but not dark.36 The Emerald brand must have at least 86 per cent sound, edible kernels, with 40 per cent of the 86 per cent light In color. The remaining may be amber.3637 The Suntand brand must contain at least 80 per cent sound, edible kernels. Orchard-run nuts:that have less than 80 per cent sound, edible kernels are considered to be culls.38
According to sis® specifications, the nuts are con sidered either large, medium, or small. This is ascertained by actually measuring the nuts and is based on the openings in the grading screens in the packing plants, through Which nuts of large size will not pass as they progress ever screens of varying also. These screens range in slse from
60/64 inches in diameter to 79/64 inches.39 40
The varying classifications are as follows:
1. Seedlings, which are mainly the soft shells 2. Buds, which are the budded or grafted varieties and are mainly Placentia ; 3. The Fancies, Milch come from the Mayotte, Fran- quette, Concord, Payee, Eureka,.Bud, and grafted varieties*©
Certain varieties have various economic advantages over other varieties in that they are more marketable, more productive, or better adapted for growing under local
36. Erdman and Fuhrlman, op. cit., p. 18. ~ ' 37. Ibid., p. 18. " 38. Ibid., p. 18. 59. Ibid., p. 18. 40. Ibid., p. 19. 12
conditions.Comparatively few varieties# however, have been able to win and retain their popularity with both the grower and the consumer. During the past thirty-five years many new varieties have been originated in California, but moat of them have been propagated to a very limited extent and have soon fallen into disfavor due to some particular shortcoming.
All varieties of walnuts may be classified under two general headings:41 42 (1) seedlings and (2) budded or grafted nuts. The main economic advantages which the budded or grafted varieties have over the seedlings are as followsi4®
1. They are more uniform and superior in quality and
consequently sell for a higher price than the
seedlings,
2. A grove of grafted walnuts is more uniform in production and has fewer "boarders"44among the
trees than the seedling groves.
3. Some of the budded or grafted varieties are less
subject to blight than the seedlings.
It cannot be said, however, that there is any one
particular variety of walnut that is best throughout the
entire state. Soil and climatic conditions differ# and
41. Batchelor, L. D., Walnut Culture in California, p, 26. 42 * Erdman, H . E ., and fu&iman, V/. U., Walnut Supply and Price Situation, p. 19. 45. Batchelor, h. D., op, cit., p. 26. 44. Trees that do not produce enough walnuts to carry their share of expense for operating the grove. 13
the best variety in a particular locality will depend upon its adaptability to the soil and climatic conditions.45 The percentages of the entire California crop devoted to Seed lings, Budded, Fancy, and Babies, as well as the different grades, are given in the following chart:
Pack Out of 1934 Crop by Grades and Varieties
There has been a gradual decline in the number of
acres as well as in the proportion of the total production
of seedlings as compared t© budded walnuts in California,
In 1927 the proportion of seedlings was 37 per cent of the
total production. By 1934 this had declined to 18.6 per cent.4?
There has been an even more remarkable decline in the47 4546
45. Batchelor, op. cit., p, 26. 46. California Walnut arowers, Annual Report, 1934, p. 5. 47. Ibid;; pi 5. - ■ ■ , . . . 1 4
number of acres devoted to seedlings by Association members as compared to the acreage devoted to budded nuts. In 1930 there were approximately 25,000 acres of seedlings out of the total 97,000 acres. The 1935 estimate gives the total acreage at 110,000, only 21,000 of which are given to seed lings.^®
Distributing California Walnuts
The California Walnut Growers Association handles over
85 per cent of the walnuts grown in California. The
Association has over forty local association packing houses. These packing houses, after grading and packing the walnuts, turn them over to the Association for sale and distribution.^®
The walnuts are disposed of through various channels.
The Association sells them direct to chain-store distrib utors and to wholesalers in North America.50 in distrib uting centers, they are distributed to wholesalers through food brokers.51 The Association has a sales department that keeps in touch with various distributors. As far as pos sible, the walnuts are transported in carload lots to the various distributing agencies. These agencies distribute 51504849
48. Personal Interview v?ith A. W. Christie, Field Manager, California Walnut Growers Association, Dec. 14, 1935. 49. California.Walnut" ""Sowers Association, California Walnuts, 1931, p. 35. . ” """" ” ; 50. Ibid», p. 35» 51. ibid.,. p. 36. 15
them to the smaller dealers,' The grower receives nearly
90 per cent of the price at which the walnuts are sold,52 5354
Many believe this due to sound financing, capable manage ment , and the large volume of business that is done.
Independent Growers Associations
There are a few Independent packers who make it their business to purchase, press, grade, and market the walnuts of independent growers who, for various reasons, have not joined tho California Walnut Growers Association, These are relatively few in number, however; and through the requirements of the Marketing Agreement they have been subjected to the same rules in grading, marketing, and processing walnuts as is the California Walnut Growers As sociation. They are also required to comply with the rules and regulations of the Walnut Control Board, as established hy the Marketing Agreement.53
The California Walnut Growers Association
There wore no modern methods for packing, grading, and cleaning walnuts until the late eighties. There were only a few dozen growers, and they paid little attention to how the crop was harvested. 54 At that time when a grower
52, California Walnut Growers Association, California Walnuts, 1931, p. 36. 53, ' Personal Interview with A. W. Christie, Field Manager, California Walnut Growers Association, Dee. 14, 1935. 54, Thorpe,.Carlyle, What Cooperation Has Done for 4,000 Walnut Growers, Riverside, California, 1924, p. 1. 16
located In Southern California wished to sell his walnuts, he would take then to Los Angeles and dispose of then, if
possible, to the coimission men, generally receiving four. to six cents a pound for them* In ease the commission men were not able to find a buyer, the grower would be unable to dispose of his crop.55
Walnuts produced in Southern Europe sold in the
American markets for higher prices than did California
walnuts. California walnuts then were unattractive and of
poor quality. In the nineties, some new acreage began to
produce walnuts, and three or four co-operative organiza
tions were formed at convenient points of delivery for the
growers. These various associations competed with one
another, and, as a result, crude methods of bleaching,
sorting, and grading soon came Into being.86 These asso
ciations sold their walnuts in Los Angeles to the dealer
who offered the highest bid. As production increased, how
ever, the dealers were unable to cope with the situation.8?
Changes developed rapidly in marketing walnuts from
1900 to 1910. Several new associations came into existence
to take care of the increase in production. Each associa-
tion disposed of its walnuts through a distributor who
received a commission. The associations used different 575556
55. Thorpe, Carlyle, What Cooperation Has Done for 4,000 Walnut Growers, Riverside, California, 1§M, p. 1. 56. ibici.V p. l. 57. Ibid., p. 2. 1 7
methods In the grading of walnuts; so the walnut growers formed an organization called the Executive Committee of the Walnut Growers of Southern California, The committee met each fall to talk over market conditions, prices, etc.
Sales representatives were generally present at these meetings, and price agreements were between the growers, packers, and sales representatives♦ Such an agreement was known as a Gentlemen*3 Agreement. If prices were good, the
Agreement was In force; but when the packers had on hand walnuts that they could not dispose of and one of them
lowered the price, the others would do likewise. This would result in further price reductions until there was no market for walnuts. This situation developed almost every year.58 59
The Gentlemen’s Agreement came to an end in 1912.
A large part of the crop could not be marketed or disposed
of by the Agreement. In 1912 prices fell 35 per cent In
three months’ time.5® California then produced only
22,000,000 pounds of walnuts a year. Selling methods at
that time were poor, and the walnuts could not be distrib
uted to the buying public because of lack of good methods
in distribution. There were fifteen associations engaged in the packing of walnuts in California, and because of
poor marketing facilities the packers were discouraged.
58. Thorpe, op. clt., p. 2. ' ~ " """ r ~ 59. Ibid., p. 2. 1 8
They then organized a Central Sales Agency, which was a part of the Central Organization to dispose of all the wal nuts grown by them. The Central Organization, known as the
California Walnut Growers Association, Is located In Los
Angeles, California.60 6261 After due study of the situation,
the California Walnut Growers Association-perfected a plan
of operation and organization for the handling and dle-
_ . . - ' ' - - .. . : posing of walnuts. The various packers and growers Who
process, sort, grade, and pack their own walnuts and who
are members of the Association, belong to organizations
called "Locals.?G1 ^he Association handled 54 per cent of
the walnut crop the first year of Its organization. Each Local Is a co-operative organization.
The purposes for which the California Walnut Growers
Association was formed are as follows:63 To encourage,
promote, and foster in an orderly manner the marketing of
walnuts by the Local#; to eliminate waste and speculation
and to help in the handling, grading, packing, processing,
harvesting, and preparing for market; to engage in making
by-products; to enter into contracts with any of its mem
bers or Locals to furnish machinery, supplies, and equip
ment or financing such activities of said members or
60. California Walnut Growers Association, Artleles of Incorporation, Los Angeles, p. 1. 61. Ibid., p. 1. 62. Thorpe, op. oIt♦, p. 5. 63. California Walnut Growers Association, Articles of Incorporation, pp. 1-2-3-4-5-6-7-8. 1 9
Locals. - ' ' - '
Regulations governing or^misation and mombershlp of the Association grant the following powers $
1. To have the right to lease, sell, manage, buy,
operate, or hold both real and personal property
that may be needed to promote and carry out the
purposes for which said organisation was formed.
2. To have the rl$it to issue notes, debentures,
borrow money, either with or without the giving
of security.
5. To give mortgages, deeds of trust, and to do
everything that may be needed to carry on the
purposes for which the organization was formed.
4. To determine the necessary number of directors ... : ’ : . . . .; • : - . for the Association.
5. To provide for property rights and voting power of
each member. To make rules pertaining to property rights and interests as follows:
a. To permit no person to be a member of the
Board of Directors unless he raises walnuts
or is In charge of products obtained from a
certain number of walnut•producing acres, such nmnber to be determined by the Central Organ
ization. To let each Local appoint one of its
members as a member of the Board of Directors 2 0
of the Central organization. b. To regulate the a m#er of votes that each mem
ber shall have according to the number of tons of walnuts delivered to Central. c. To see that all expenses which are Incurred by
Central against a Local, such as assessments,
deductions, etc., are proportional to the
"open price value" of walnuts delivered to Central by the Local. : d. To permit no person to be a member of Central
unless the Local to which that person belongs
markets all of Its walnuts with Central. e. To allow any Local to withdraw from Central
at the close of the crop year. f. To all any member of a Local to withdraw at
the close of the crop year.' '
g. To authorise Central to Issue a certificate of
membership to ©ach Local representative; which
certificates cannot be assigned without the
consent of the Board of Directors.
h. To elect for one year a Board of Directors,
whose powers are as followst
1) To call meetings, when it Is deemed
necessary, or upon written demand of
one-third of the members.
2) To appoint officers and also remove them 2 1
If it la desired, and to preserlbe their
duties, salaries, etc.
3) To elect a Eresldent, one or srore vice-
presidents, secretary, assistant sec retary, treasurer, general manager, and
such other officers as aro desired.
4) To control and manage the affairs of the
said business.
5) To have the authority and power to
borrow money as follows s
a) To allow the Board of Directors to
borrow such sums as It thinks proper,
or to give mortgages, etc., as
' : :• security. ‘ " • ■ b) To provide that any walnuts deliv-
~ ered to Central by a Local are the
iweperty of Central, and to give
Central the right to borrow money
on, sell, or dispose of said wal nuts. 2 2
The Association, prior to 1952, made it a practice not to have any carryover and forced each season1s crop toward the actual customer as soon as possible.64 According to
Carlyle Thorpe, Manager.of the California Walnut Growers
Association, this is one of the reasons Why the Association has been so successful.®® Another reason that should not be
overlooked, however, is that any Local Association or
grower may withdraw from Central at the close of the crop
year. In this way the Association is different from many
co-operative organizations, since membership is voluntary.
Mr. Thorpe, In substance, states that this feature alone
has helped to make the walnut organization a success be
cause the growers do not hesitate to join an organization
which gives them the privilege of withdrawing under certain
circumstances, The fact that the Locals can withdraw is a
spur to efficiency of operation that tends to create an
alert organization in every department in order to keep the Locals thoroughly satisfied.®®
Central also makes it a policy to return about 75 per
cent of the value of the walnuts delivered to it each week
by the Locals, and final settlement is generally made in
full within ten days after the walnut packing season
ends.67 The Locals may also make advance payments to the
64. Thorpe, o^p^^jcit^., p . 5. ^ - 65. Ibid., p. -4.- ■ w 66. IBH.,vp. i, 67. Ibid., - p. 4i 2 3
grower, and in this way there is cooperation through the entire set-up, and financial assistance to those who need it.68 69
The Association has endeavored to deal fairly not only with the Locals hut also with the consumer. It stresses hl$i quality at fair prices which, in turn, afford only a fair profit for the grower. The Association now has 7,800 grower members who produce more than 85 per cent of the walnuts grown in California.6®
As it is an acknowledged fact that the American farmer is very independent and individualistic, it speaks well for any organization when it is able voluntarily to have the cooperation of nine out of ten walnut growers in Califor nia. The predominating role the Association has-had in the marketing of walnuts is considered in detail in the chapter that fellows.
68. California Walnut Growers Association, Articles of Incorporation, p. 32. 69. California Walnut Growers Association, California Walnuts, p. 5. CHAPTER II
MARKETING WAOTOTS HRIOR TO THE AGRICULTURAL ADJUSTMENT ACT OF 1933
Preparing of She lied Walnut 8 for Market
Prior to 1983, neither California^ Oregon, nor Washington oomrerted any merchantable walnuts to kernels, but sold In the shell. all walnuts packed. Slmee then,
California has entered this field and has steadily In creased its output of shelled walnuts.3-
As late as 1925, the United States produced only
15.12 per eent of the shelled walnuts eonsoBed In this country, and even In 1929 our production of shelled wal nuts amounted to only 19*05 per cent of the amount do mestically consumed. In 1932> however, domestic production increased to 47.18 per eent o f ,the total amount consumed.1 2
It is the opinion of the Association that the reason the United States has increased its production of shelled walnuts is not because foreign competition has lessened, but because of good marketing facilities and the high standards of grading, testing, canning, etc. that the
1. Vfalnut Control Board, Certain Exhibits Presented as ~ Evidence at the 1935 Walnut Hearing, Exhibit 6. 2. see Table ill. Appendix. , “T ...... 25
psekers and gp&mra matntBin,3
It is remarkable the way the dome stIs tratpot @f ? ' shelled walnuts has grown. This growth is re fleeted in the canning phase of the walnut industry. In 1919 the
California Walnut Growers Association turned out 430,704 e ight-ounce cans, By 1925 the output had increased to
2^760,600 eight-ounce cans. This represents an increase in percentage of over 600, Further growth was experienced, and, in 1931, the Association turned out 3,875,25$ eight- ounce cans of kernels,4 The Association attributes this increase to the superior quality of the kernels and the methods used in canning.
The California Walnut ffirowers Association began to shell non-roerchantable walnuts in 1915, At that time It was discovered that a considerable percentage of the nuts received had shell blemishes or some other imperfection,
it would not pay to have such inferior walnuts in the .
finished packs because not only would they detract from
the attractiveness of the pack, but also the market value
of all the walnuts would bo less,5 A large number of these
nuts contained good kernels. It was decided to shell the 5
5. California Walnut Growers Association, Proposed Negotla- tlon of Foreign Trade Agreement with Italy, Washington, to. ti,," March 4, 1935, p. 26. 4. California Walnut Growers Association, Diamond-Walnut Hews, Vol, 14, June 1932, p, 1. 5. California Walnut Growers Association, California Walnuts, 1931, p. 29. 2 6
defective walnuts, pick cut the good kernels# and sell them as shelled walnut a, The kernels that wore defective were to be turned into by-products.
The Association has two of these shelling plants in
Los Angeles; together they employ 1,300 men and women during the shelling season.® These plants start operating in October and generally close down in February, March, or
April, depending* of course, on the amount of kernels that are shelled.?
The Association has patented a machine that cracks the walnuts without damaging the kernels, and yet it cracks each nut sufficiently so that the kernels are read ily separated from the shell. A picture of this automatic cracking machine is shown on the following page. The machine has curved vertical Jaws which are set closer together at the bottom than at the top. tolly one nut drops between the jaws at a time. Eaoh walnut falls be tween the jaws until it cannot go any farther, and then the jaws come together enough to crack the shell. They then open, the cracked nut drops out, and a new one enters.8 The cracked nuts are taken to the shelling room and put into bins from which they come out onto a table in front of which are the women pickers.
6. California Walnut Growers Association, op. c it., p. 29. ibid., p. 29. ' ...." 8. ibid., p. 30•, 2 7
10
9. California Walnut Growers Association, California WaInut s, 1931, p. 30. 10. rbifl., p. 31. 2 8
There are three eupa in front of each picker. In one
©up the picker puts the kernels that are plump and light
©ream In color. In another cup are put good kernels that are amber in color. In the third ©up are put the spoiled or defective kernels. The shells are taken away by a conveyor.H
The kernels are again inspected by putting them on a moving belt# and the defective kernels are picked out. From here the kernels go to a machine that has in It vi brating screens» air currents, etc.* to remove all dust and
small pieces of shell.which may be.on "them. Automatic machines weigh and fill each can with kernels; then another extracts the air from the can and seals it.1^
Human hands do not touch the kernels after they
leave the cleaning machines. By extracting the air in the
can, a high vacuum is created. This makes the kernels
keep in perfect condition for many years.I3 . Y- y
Diamond brand kernels are packed in both three and
eight-ounce cans. The Emerald brand le peeked only in
eight-ounce cans.14 For the wholesale users such as bakers
and confectioners, the Association packs the kernels in
25-pound fibre board containers. ^
Walnut oil is extracted from the kernels that are not 14*1213
11; California Walnut Growers Association, op. ©it;, p. 32. 12. Ibid., p. 52. - — 13. T HE., p. 32. 14. Ibid., p» 53. V Kernels o f a color betw een the the een betw color a f o Kernels of California Growers AssociationWalnut prvd y ainlWoeae QrocersAssociation Wholesale National by Approved A ll kernels illustrated above are graded graded are above illustrated kernels ll A The kernels show n below are graded graded are below n show kernels The COLOR COLOR CHART Light 29 and the the and Black Black Light are graded graded are (bad). color. Amber. 3 0
fit for human consumption and is used in the making of different kinds of soap and paint. The cake that is left after pressing out the oil is used for stock food. The ground shells are used as a filler for fertiliser.16
Prior to 1952 the United States did not export any walnuts, but sold all domestic production in the home markets.The 1952 crop was the largest crop that had ever been produced? and over one-third of this crop was unsold at the beginning of the 1933 harvest.18 If the
Association had attempted to place the 1932 carryover, together with the 1933 crop, on the domestic market, it was estimated the grower would have received only about one-half the amount per pound that ha actually obtalned.19
The Association thought of three possible solutions for the difficulty:
, 1. Lower prices so that the consumer would be able
to afford to purchase walnuts as a cheap food
2. Figure out the amount of whole walnuts that the
United States would consume at a profit to the grower and shell the balance
3. Ship the surplus to foreign, markets and compete 19161718
16. California Walnut Growers Association, op. eit., p.33. 17. Walnut Control Board, Certain Exhibits Presented as Evidence at 1935 Walnut Hearing, Exhibit 6. 18. California Walnut Growers Association* Annual Report, 1933, p. 2. See pages 48-52 of this thesis for figures on the 1932 crop and carryover. 19. Ibldv, p. 2. 3 1
with the walnuts prcxliic©a In E«pepe and Aela^3
It wag believed by the management of the Association that the first plan would cause heavy trade losses and ruin trade confidence, and that the second plan would take car® of only a part of the surplus, whereas the third plan, ex porting the entire amount of the surplus of unshelled wal nuts to foreign countries, would cause a sever# price decline to those markets,21 Finally, a combination of the second and third plana was adopted, and In July of 1933,
Carlyle Thorpe, General Manager of the California Walnut
Growers Association, went to Europe and visited the Impor tant European markets. He contacted various brokers and wholesalers and after much sales effort made arrangements for them to handle American walnuts.^ There was a great deal of prejudice to overcome be cause In Europe they do not keep unshelled walnuts In cold
storage, and, as a result, the walnuts that they carry over are generally wormy and rancid when sold the following year, naturally they wore very skeptical of the American walnuts carried over from the previous year because they
did not believe that an old crop could be delivered to
20. California Walnut (blowers Association, Annual Report, 2,953p" p#*' 3, -■ -• • " 81. TSia., p. 4. 28. Ibid., pp. 8-4. . 3 2 1 then in good condition or that It would stand up after deli?0ry.2S - : ; ■■■;,
fading methods in Europe were very poor, .and some of
/ the bags generally were of low quality, European buyers did not think that w® could deliver to them walnut# which would be of the same quality and grade throughout.2^
Another thing that caused the European buyer consider able less was the shrinkage in weights that usually oc curred when walnuts were.stored. This was due to the fact that European walnuts were not cured properly. European buyers were also doubtful as to Whether their consumers would accept our walnuts* :
Before the export business was taken over by the Wal nut Control Board, established by the Agricultural Adjust ment Act, the California Walnut Growers Association sold
7,142,000 pounds to Europe. European buyers were so well
pleased with the high quality of the walnuts that the As
sociation later on was able to command high prices for its walnuts; in fact* §0 to 75 per cent of what they were con
tracted for In the Whited States. After the Walnut Centre!
Board took over the selling of all surplus walnuts, the ex
port business increased at an unbelievable rate,2325 24
23. California Walnut Growers Association, op. cit., 1933, p. 4. — --- " 24. Ibid., p. 4._ 25. in;1933-34 exports amounted to 11,600,000 pounds and for 1934r55, 15,902,000 pounds. Walnut Control Board, Certain Exhibits Presented as Evidence at 1955 Walnut Hearing, Exhibit 6. “ “* ' 5 3
European Methods of Curing Walnuts
After giving much thought to the problem, there ap peared another possible outlet for disposing of surplus walnuts, and the California Walnut Growers Association experimented In the curing of fresh and green walnuts.26 282927
A nFresh Walnut" Is one that has had Its hull removed before the nut Is entirely ripe, and there Is still a high
content of moisture In the nut. It Is not sun-dried or dehydrated.2? The English people use large quantities of walnuts treated in this way. Generally they are eaten
after dinner as a confection. They use a small sharp knife
after the kernels are cracked, and they then carefully take
off the pellicle or Inner skin. This leaves only the white
kernel. These "Fresh Walnuts" have an entirely different
flavor from that of cured walnuts, and are considered a
delicacy by the English people.22
The Association also experimented with "Pickled Wal
nuts." These are cured in an entirely different manner
from "Fresh Walnuts." The walnuts are picked while the
kernels and shells are still green. In fact, the nuts are
Immature, and the shells are soft. The English people are
very fond of these walnuts, and the California Walnut
26. California Walnut Growers Association, Annual Report, 1934, p. 13. ------^--- 27. Ibid., p. 20. 28. Ibid., p. 5. 29. T E H . , p. 20. 5 4
Growers Association Is hopeful that they may enlarge the market for walnuts by producing MPickled" and "F^esh Wal nuts."29
Imports and Methods of Seillng in Competition
Europe produces a large amount of walnuts. In 1958 the total of European production *a# 147,840,000 pounds.
In the same year the United States produced 93,600,000 pounds, or 63.31 per bent of the amount produced in Europe.
In 1930 it was 36.28 per cent of the total of European pro duction.29 3031 Table IV in Appendix does not take into consid eration the walnuts grown in Asia.
Table v, in Appendix, together with supplementary data, gives detailed information as to the amount of wal nuts imported from various countries during the five-year period of 1929-1933.
The Association claims that it is impossible for the
American grower to produce walnuts as cheaply as they are produced in Europe or Asia.31 There packing and harvesting are done largely by members of the family Incident to carrying on other farm activities; women spend more time
29. California Walnut Growers Association, Annual Report» 1934, p. 20. 50. flews of the California Walnut Growers Association, Proposed negotiation of Foreign Trade Agreement with Italy, Washington, D. C., December 14, 1935, p. M V see Table TV, Appendix. 31. Views of. ttto California Walnut Growers Association, Proposed negotiation of Foreign Trade Agreement with France, Washington, D. 0., June 17, 1955, pp. 50-39. 3 5
in th© fields than in the homes; hence, there is hardly any labor outlay for the v/alnut grower. Generally in
Europe and Asia the trees ar® scattered about and other crops are grown in the same fieldr32
The Agricultural Extension Service made a survey of the domestic cost of producing walnuts in California.S5
This survey started in 1930, and th® results are as follow: Excluding Interest on the grower1 s investment, the cost of production for each grower was $.0708 per pound. The average income to each grower during this . period was 10 cents per pound. The average grower’s prof it was only 2.92 cents per pound for the three years of
1931, 1932, 1955. The quotations on French, Italian, and
Rumanian walnuts c.i.f. New York are as follow : California Foreign Prices walnuts delivered c.i.f. New York Hew York
*1931 $.0842 .175 1932 .0847 .146 1933 .1088 .172
^Foreign price average is based on TJ, S. Department of Agriculture, Bureau of Agricultural Economies, Foreign
Walnut Report Ho. 50, Domestic prices are weighted average *53
32; Views of the California Walnut Growers Association, Proposed Negotiation of Foreign Trade Agreement with Italy, Washington, b. C.,becomber 14, 1935, p. 27. 53. Table No. VI, Appendix. 3 6
of all California Walnut Growers Association packs.34
It will b@ noted fr&m the table on the preceding page that foreign walnuts c.i.f. New York are much less in price than California walnuts delivered to New York, This is true even after adding the five cents per pound tariff to the foregoing price on walnuts produced in foreign coun tries and delivered to this country. This brings out very clearly that the tariff is not entirely a barrier to the importation of walnuts. This also Indicates that the
American people are willing to pay the difference in price for walnuts produced in the United states. This is no doubt due to higher quality and the extensive advertising of the American walnut growers, and the superior methods in grading, packing, otc. The Association believes that there can be little doubt, that if the tariff were with drawn, or even reduced, the consumer would purchase more foreign walnuts
It has been one of the many objectives of the Cali fornia Walnut Growers Association to see that these tariff rates are maintained and that the American growers are not
subjected to free, unlimited competition from the foreign walnut producers
34. Views of the California Walnut Growers Association, Proposed Negotiation of Foreign Trade in Agreement with ita ly, December 14, it)35, p . . 35. Views of the California Walnut Growers Association, op. cit., p. 27. 56. Views of Walsut Control Board, Proposed Negotiation of Foreign Trade in Agreement wlih prance, Washington, D, C., Tune iV, 1935, p. 21. ~ 3 7
The walnuts Imported from foreign countries have not been In direct competition with the California walnut as the quality, taste, size* and color of kernel of the foreign nut do not compare favorably with, the local nut.
Hot only Is the California walnut larger, but It Is better processed and graded. It has a good flavor, and the ker nels are larger and very attractive in color. While It is true that small quantities of Imported nuts continued to be sold In the domestic market during recent years, the percentage of Imported, nuts marketed as compared to the home-grown production ha# gradually decreased.
Use of Standardization, Branding, and Advertising
In processing walnuts, the first step Is to put them Into a hopper from which a short elevator and conveyer takes them through a vacuum machine that lifts out those walnuts with immature or shrivelled kernels. Then they are carried over a sorting table where women pick out those which have visible defects such as insect damage, and sun burned spots. 3Tom here the walnuts pass into a revolving drum that has a harmless cleansing solution in it where they are thoroughly cleaned and bleached. However, they are left in this solution only a few minutes as there is danger of the kernels getting wot if the walnuts are left too long in the cleansing solution. They are now placed on another sorting table where women pick out all walnuts 5 8
that are moldy. Moldy walnuts have dark shells and it ia easy to detect them after the shells have been cleaned.
The walnuts now enter a grader nhich is eighteen feet long by forty inches in diameter. The cylindrical walls of the grader have 18,000 holes Which increase in size as the wal nuts pass along. As the grader revolves around and the continuous spiral located within the grader forces the walnuts along, tho small sized walnuts are sorted first, then the medium sizes, and the large walnuts pass out the end of the grader. From here the different sized walnuts travel by separate conveyors to drying bins where they remain for twenty-four hours after which they are dry.
The California Walnut Growers Association has found it to be advantageous to brand its walnuts with what is called the ’’Diamond Brand.” This is done by a machine, pictures of which are shown on the following pages. The largest sized walnuts are stamped with red.ink, and the medium sized with black ink. However, the smallest nuts are not branded ♦ Stamping is done by running them through the stamping machine which automatically stamps each wal nut .3? The machine handles as many as three thousand nuts per minute or 50,000 pounds every eight hours*58 The
Association owns one hundred and twenty-five of these
Wf7 California Walnut Growers Association. Calif •A Walnuts, 1951, p. 26. 58. ibid.,p. 25. 59 Walnut Branding Machine
Awarding DIAMOND WALNUTS their “diplomas.” This branding machine took seven years of experi mental development to reach its final stage of perfection—efficient branding at low cost. A prize award of $10,000.00 was made to the inventor of this machine. Every Diamond Walnut fed to it receives its “diplo ma" of identification in the form of a little diamond stamp enclosing the word “Diamond." The one hun dred twenty-five machines operated by the Association hare a combined capacity of branding 200,000,000 nuts each eight-hour day.
4b. California walnut drowers Association, California Walnuts, 1931, p. 24. 40
Branding
How the walnuts receive the diamond brand. A conveyor belt—like nothing more than a muffin pan, with its little poekets—carries the walnuts directly under the revolving branding roll er which stamps them, nine in a row, as they pass beneath it. 40
frtT»nCq \”nlnut Growers Association, op. clt., p» 41. Ibid., p. 1.
Z 4 1
machines, and it can brand as many Diamond walnuts" in one day as it would take to fill a train containing one hun dred freight ears. These one hundred and twenty-five ma chine a can turn out in eight hours two hundred million nuts.The two pictures on the preceding pages will give a fair idea aa to how the machines operate.
Advertising Media
Advertising has played a very extensive part in developing a market for California Walnuts. The Associa tion has not developed any scientific means of determining the amount that should be expended for advertising pur poses.
As in all periods of economic depression when national income is curtailed, economic enterprises have found it necessary to curtail their expenditures. The California
Walnut dpowers Association Is no exception to this rule.43
During the past sixteen year® more than three million dollars have been spent on advertising by the California
Walnut Growers Association.^4 The California Walnut Growers Association has4442 43
42. California Walnut Growers Association, California Walndta, 1951, p. 25. 43. Personal Interview with A. W. Christie, Field Manager, California Walnut Growers Association, Dec. 14, 1935. 44. Views of the California walnut Growers Association, Proposed Negotiation of Foreign Trade in Agreement with Italy, December i4, p. SO. 4 2
endeavored to do two things in regard to advertising methods:
1. To Increase the eonsumption of the walnuts in
general . - ' - - . ■_ , . .
2. To build up a constantly Increasing preference
for the Bl&moM and Emerald brands*5
These brands, the Diamond and the Emerald, are the two
highest ranking brands of walnuts produced in the domestic market. >
Most of the advertising M s been placed in leading
magazines where full-page colored advertisements are mad®
attractive to the average house-wife. Most of the adver
tising is done in what are known as the women * s "Big
magazines: The Ladies1 Home Journal, Woman1 s Home Com panion , Good Housekeeping, Delineator, Pictorial Review,
and McCall* s Magazine.-G These combined magazines have a
monthly circulation of more than fourteen million copies.
These advertisements usually consist of full-page colored
advertisements in which are depleted various salads, can
dies, puddings, cakes, etc., usually accompanied by recipes
which usually cause the readers to feel that, in buying 4546
45. California Walnut Growers Association, California Walnuts, 1951, p. 37. 46. Meals, C. F., ”A Preview of Walnut Advertising for the 1934-55 Season," The Diamond Walnut Mews* August, 1934, p» 6. 45
walnuts, they are acquiring a product that contains high food value. On the following pages are some pictures of advertising taken from "California Walnuts."
After advertisements are placed In these leading magazines, the reader is asked to request a book of tested recipes and menu suggestions, many thousands of which are distributed annually.
The Association goes still further and distributes a free pamphlet entitled, "The Place of Walnuts in Everyday
Cooking," which gives the chemical content and food value of California walnuts and suggest® uses for walnuts in pre paring a balanced meal.^ These pamphlets are distributed especially to domestic science teachers, dieticians, and magazine advertisers.47 4849 Billboard advertising is done rather extensively. Each fall and winter the Association
'posts thousands of large billboards with attractively colored advertisements In two hundred of the largo cities throughout the nation with such statements as "Walnut Days toe Here Agato,f and "lew Crops Are Here.” Many of these slogans are vividly reproduced on street-car cards, es pecially for passengers to read as they travel to and from their dally tasks.4®
In addition to the use made of women*3 magazines,
47. California Walnut Growers Association, California Walnuts, 1951, p. 57. 48. Ibid., p. 57. 49. Ibid., p. 37. 44
Advertising HFmiA TYPICAL DIAMOND -—i WALNUT. ADVERTISING ■■ CAMPAIGN ¥
VS / tradition They add Delicious Flavor to Any Menu / ru a k diam o nd walnuts
CARDS
WALNUT DAYS ! L i A I M J O . OPS HERE
A R t mr DIAMON D-WALIM LIS
24-SHEET POSTERS
50. The California Walnut Growers Association, op. clt♦, p. 38. ----- 45
Advertising
□ ; ADVERTISING PORTFOLIO
51* The California Walnut Growers Association, op* clt«, p * 39 * 4 6
billboards, and street-car cards, the radio and newspapers have been important media for advertising programs. During one crop season the Association has found that on the nation-wide radio program, about the same number of re quests for recipe books eome from the radio programs as come from the magazine advertisements, and the cost of ad vertising over the radio .is approximately the per capita cost of advertising in magazines.52
The management of the Association has decided to dis continue the radio advertising because of the great amount of effort required to put on these programs, which taker place during the season when efforts are needed to mer chandise the new crop, whereas magazine advertising can he prepared in advance of the crop season. 53
The distribution of the cost of advertising by the various media of magazines, newspapers, radio, billboards,
street-car cards, etc., is illustrated in the chart on the following page: 5253
52. California Walnut Growers Association, Annual Report, 1933, p. 14. *-----—— 53. California Walnut Growers Association, op. cit., pp. 14-15. 47
Where the Advertising Dollar Went54 (1932)
In 1915 the total amount spent for advertising by the
Association was $5,179.08. In 1916 the Assoelatlon paid out for advertising $14,019.29, which is almost three times as much as the year before. In 1917 the total amount ex pended for advertising was only $541.10, and in the fol lowing year it was $60,967. This is an increase of 1127 per cent.55
The Association did not do any national consumer advertising until 1918. Prior to that time it advertised only in local trade papers. Since 1918 the Association has generally figured one-half cent a pound for advertising of merchantable walnuts. In 1927 and 1932 the walnut crops;
54. California Walnut Growers Association, Annual Report, 1932, p. 14. — ------55. See Table VIII, Appendix. 4 8
were very large and the Association found it necessary to
spend over one-half million dollars each year for ad
vertising purposes in order to help dispose, of those
crops.56
Chaotic Developments of 1932
It has previously been indicated that the trend of
walnut production in both California and Oregon during
recent years has been sharply upward* On an average, this
increase has been approximately 5,600,000 pounds a year.57
' ' The normal increase In the production of walnuts was
accelerated in the years of 1950, 1931, 1932, and the
walnut growers found themselves with an increased supply
of walnuts and the consumer with greatly reduced purchasing
The Association states that Diamond Ho. V s sold
at wholesale, f.o.b. Los Angeles, for 15.5 cents a pound
in 1932. This was 3.5 cents a pound less than they
brought in 1931. In 1950 the price was 23 cents a pound.
Prom 1924 to 1928 the price of Diamond Ho. V s held
fairly steady at around 28 cents a pound except for the
year of 1927, when the crop was very large. However,
^6. See Table VII, Appendix, as to amount of walnuts pre- duced for different years. Personal letter from C. F. Meals, Advertising Manager, California Walnut Growers Association, May 16, 1957. 57. California walnut Growers Association, Annual Report, 1933, p. 35. ---:------4 9
for 1927 Diamond No. V s sold for 21. cents a pound.58 59
The per capita supply of unshelled walnuts In the
Tfcited States averaged 0.61 pounds for 1922-23 to 1929-30.
There was little carryover prior to 1932. The supply of
shelled walnuts averaged 0.19 pounds per capita during the
period 1922-23 to 1929-30. For the past four years there was a decreased per capita consumption of both shelled and
unshelled walnuts. The consumption of unshelled walnuts was only 0.43 pounds per capita, and the consumption of
shelled walnuts was 0.12 pounds per capita. There are
several reasons why there has been a decrease in the con-
sumption of walnuts since 1930, such as the following:
1. Reduced domestic buying power
2. The high tariff on both shelled and unshelled
walnuts
There Is a tariff of five cents a pound on unshelled wal nuts and fifteen cents a pound on shelled walnuts.59
While it is true that during recent years walnuts
have been more or lees removed from the luxury class of
food materials, it is true, also, that the average con
sumer when he found his purchasing power curtailed would
eliminate walnuts as one of the first foods from his
58. Personal letter from C. F. Meals,.Advertising Manager, California Walnut Growers Association, May 16, 1937 5 9 . caB.fomla Walnut Growers Association, Annual Report, March 4, 1935, p. 36. ------5 0
household budget,: In 1932 the Pacific Coast produced 77,000,000 pounds of walnuts, (One-third of this amount remained unsold at
the beginning of 1933 harvest*)60 This unusually large 1932 erop, together with the curtailed purchasing power brought
about by the economic and business depression of this
period, caused a Vast surplus of walnuts to accumulate.
The walnut growers, consequently, found themselves facing
a 1933 production and carryover of 80,000,000 pounds of
walnuts.Gl It was estimated that the consumers would pur
chase from 50 to 60 per cent of the 1932 carryover and
new crop of 1933. It is little wonder that the growers
began to figure out what such a demoralised domestis mar
ket would mean to the growers and packers if they tried
to supply 80,000,000 pounds to a consuming public which
demanded, at the most, only 50,000,000 pounds.62 The
California Walnut Growers Association estimated that
chaotic prices would result if attempts were made to mar
ket all of the carryover and the new crop.66
Self-interest always has been one of the most impelling
motives of activity. The walnut growers of California,
Washington, and Oregon, through their aggressive leadership,
60. California Walnut Growers Association, Annual Report, 1933, p. 2* ------—- 61. Ibid., p. 2* • ■ * Ibid'. , p « 10 . 6o» lb I'd., p. 4. 5 1
set about to see what eould b@ done to enable them to eriMPket 80,000,000 poimtis ©f mlauts at a price that would return a profit to the grower and avoid a chaotic price level should all the 80,000,000 pounds be dumped on the market at once.64 xkider the leadership of the Democratic administration which came into office March, 1933, many new types of legislation were enacted. One of these was the Agricultural Adjustment Act which provided for a pos sible agreement among the producers in various phases of agricultural production to agree on methods of diverting a proportionate part of their production to other uses in stead of placing the whole amount before a purchasing pub lic that could not and would not purchase the whole at a price sufficient to return a profit to the producer.65
It was the walnut growers of California, Oregon, and
Washington who, through their executive officers, secured through the Agricultural Adjustment Act the Marketing
Agreement for packers of walnuts grown in these three states. It is this Agreement under which the walnut crops of 1933, the carryover of 1932, and the crops of 1934-35 have been marketed.
There is considerable difference of opinion as to the value and effectiveness of this Marketing Agreement among individual growers, but it is the opinion of the California 6465
64. California Walnut Growers Association, op. cit., p. 4. 65. Ibid., p. 6. ----- 5 2
Walnut Growers Association, and also the Oregon and Washing ton Associations, that the Agreement has been the savior of the walnut industry of the Pacific statesA detailed consideration of the provisions and effectiveness of this
Agreement will be considered in the following chapter. 66
66. Thorpe, G., "Closing Payment on 1933 Crop to be Made September 15," Diamond Walnut Hews, August, 1954, p. 1# CHAPTER III
THE MARKETIKQ AQREEMEHT TUBER THE AGRICULTURAL ADJUSTMENT ACT ARD ITS EFFECT OH THE WALNUT INDUSTRY
Provisions and Purposes of the Agricultural Adjustment Act
In the Agricultural Adjustment Act, approved by the
United States Congress on Hay 12, 1933, It was declared that a national economic emergency existed because of the
Increasing severe disparity between prices of agricultural and other commodities. It was also stated that an attempt should be made to maintain a balance between the consump tion and the production of all agricultural commodities, and that it was desirable that there should be brought about such marketing conditions as would establish fair prices to farmers in order to enable them to buy other commodities.1
The Marketing Agreement for Packers of Walnuts Grown in California, Oregon, and Washington
The Marketing Agreement for the packers of walnuts
In California, Oregon, and Washington is an agreement drawn up in conformity with the Agricultural Adjustment 1
1. United States Department of Agriculture, Agricultural Adjustment Administration, Marketing Agreement Series- Agreement No. 12, 1934, p. TT Aet between the walnut packers and the Secretary of Agri culture of the United States, Which provided for a Walnut
Control Board, whose members were selected as followt2
The Board consists of nine members. Eight of these members were appointed, subject to the approval of the
Secretary of Agriculture, as followt four members were selected by the California Walnut Growers Association* one member was selected by the Worth Faelfle Hut Growers
Cooperative* one member was selected by the majority vote of all other packers doing business in the state of Oregon who agreed to abide by the provisions of the Marketing Agree ment and Order* one member was elected by the majority vote of all other packers doing business in the state of Cali fornia who agreed to be bound by the provisions of the
Marketing Agreement and Order* and tho eighth member was selected by walnut growers who do not market their walnuts through the Association. The ninth member was selected by a three-fourths vote of the other eight members.3
The members of the Walnut Control Board were to serve without compensation but were allowed necessary expenses.
From their number a chairman of tho Walnut Control Board was selected to be its official representative and to carry on all communications with the Secretary of Agriculture.4
2. United States Department of Agriculture, Agricultural Adjustment Administration, op. cit., p. 1. 5. Ibid., pp.* vl— 5 5
After agreeing on the definitions and interpretations of certain teras, the contracting parties agreed that the
Walnut Control Board should have the following powers and duties:5
!• The Walnut Control Board was given power to super
vise the performance of the Marketing Agreement and
to act as intermediary between the Secretary of
Agriculture and the individual packer.
2, The Control Board had full power and authority to
make such expenditures an it deemed necessary to
carry out the provisions of the Agreement» •
5» The Control Board was required to keep complete and
proper accounts of all receipts and disbursements,
as well as all merchantable walnuts delivered to
the Board and all other business transactions that
the Board conducted.
4. The books of the Control Board were to be open fear
inspection by the Secretary of Agriculture, or his
duly authorised representative.
5. The Control Board was given power to appoint such
employees as it deemed necessary and to fix their
salaries and duties* ;
6. The Control Board was to hear and dispose.of all
differences and disputes arising in connection with 5
5. Bnited States Department of Agriculture* op. c i t p. 4. 5 6
the performance of the Marketing Agreement.
7. All decisions of the Control Board were to be
made by majority vote of the members.
The Walnut Control Board was to control the distri bution of walnuts in the following manner:6
1. Within five days after the effective date of the
Agreement and on August 15 of each sucoeeding year, each packer was to file with the Walnut Control
Board a sworn statement of the amount of merchant able walnuts held by him on the preceding August 1,
showing the quantity, pack, and location thereof.
2. The Control Board was to determine, not later than
five days after its organization in 1935 and not
later than September 1 of each following year, the
estimated domestic supply of walnuts produced or to
be produced that year, and to add to that all
stocks of walnuts of previous years1 crops in pos
session of the packers on August 1 In order to
arrive at a total of merchantable walnuts available
for sale.
3. Not later than five days after the consummation of
the Agreement and on September 1 of each succeeding
year, the Walnut Control Board was to ascertain the
estimated consumptive demand on the basis of prices 6
6. United States Department of Agriculture, op. city, pp. 4-5-G-7* m
not exceeding the tnaxlraun price a specified.7
4. After detereinlng the consumptive demand at the
specifled price, the Walnut Control Board pas to
annoance tho proportion that the consumptive de
mand would bear to the total supply, such propor
tion to ho called the "salable porcentage^!? In
ascertaining the salablo percentage, the Control
Board was to require a two-thirds vote of the
membership.. ■ _.... ■ -. . ■ • ■
5. Bo packer could sell during any crop year any
walnuts in e mess of the salable percentage of
M s supply during the year, xmloss he deposited
cash in lieu thereof.
6. All walnuts m t included in the salable percentage
of each packer were to be delivered to the T7alm*fc
Control % a r d at such time and place as the Con
trol Board required#":.; ;;:i : : - -. - ■
7. The Control Board had the right to increaso tte*
salable percentage at any date during the year it
deemed advisable, in which case each packer m s
allowed to increase his salable percentage in
accordance with the now scale determined by tho
Board# ■ ■ - .. ... - . .. ,
8. Bach packer was required to have ready for
7# See page 5$ for prices specifled for the year 1935, and how the maximum price is used. 5 8
delivery to the Control Board a quantity of wal
nuts according to the surplus percentage of his
merchantable walnuts; and in ease he had sold or
contracted to sell M s surplus walnuts, the Con
trol Board was to buy from other packers at a
fixed price a sufficient quantity of walnuts equal
to his required surplus. The packer was to pay to
the Control Board the amount for which he con
tracted to sell his surplus if it was not below the
minimum price established, less a small brokerage.
If he sold his surplus walnuts for less than the
minimum price, he had to pay the minimum price to
the Walnut Control Board.
9. In case any packer had a portion of the salable
percentage of his merchantable walnuts on hand,
he could deliver them, after January 1 of the
crop year, to the Walnut Control Board and re
ceive money to compensate him for the unsold
portion, in so far as the Board had available funds.
The selling price per pound was determined by
the Walnut Control Board on or before October 15
of each year by setting minimum prices subject to
the approval of the Secretary of Agriculture, f.o.b.
California, Oregon, or Washington. The minimum
price fixed for any year could be changed by the 5 9
Walnut Control Board, subject to the approval of
the Secretary, by a required two-thlrde vote of
the members of the Control Board, The Marketing
Agreement provided for the maximum price for each
grade, and no packer was permitted to sell mer
chantable walnuts at a price In excess of that
established by the Agreement.
The maximum prices for 1935 wore as follow $
California Packs Cents Per Pound Ho• 1 Grade of Ho# 1 Soft Shell— — — — 1@^ Baby Grade— — — —— —————————— — —— llw . Long Type Baby Grade—————— —————— —————12^- Large Budded, Large Concords,Large Franquettes, large Mayettes, and r
Large Furekss— — — — —— —— —— —— — 21 Medium Budded————————— ———————— ————————15 Fancy Concords, Fancy Franquettes, Fancy Mayettes, and Fancy Paynes— — — 16^ Fancy Eurekas— ----— — ------
Oregon and Washington Packs
Large Franquettes— 21 Fancy Franquettes— — — — — —— — 17& Standard or Medium Eranqmttes— -— — 14§ . Large Soft Shells-— — — ------— 20 Fancy Soft shells— ——— — — — ———— —— 15 Standard or Medium Soft Shells— — — 12§®
It is to be noted that the prices listed above
were maximum prices of the Walnut Control Board
and that actual prices as set were considerably
less than the m&ximmi prices quoted in the
8. Whited States Agriculture, op. clt., p. 8. 6 0
foregoing table.-
For 1053*54, the minim®! prieea f.o.b.
California, Oregon, and Washington shipping points,
established by the Walnut Control Board, were as
follow :
California Paek# Cents :■ ■■■' . : / : : ■ 1 Per Pound Ko. 1 GBpade Bo. 1 Soft Shell— ------12|- Baby GradO'*'*"'*"'*""**^'**0 • Long Type Baby Grade**— —«**10 Large Budded and. Ijarge Concords— — — — —— — 14 Large PTanquettes, Largo Hayattes, and L a r ^ Paynes—— —— — ——— —— — — ——— ———14 Large Eui*olcas— ——— — —— — — — ———— —— —— 15 Medium Buddted— — —— — — ———— — — —— —— — ll-^' Fancy Concorde, Fancy Eranquettes, Fancy Mayettes , and Fancy Paynes— — — — 12& ' Fancy Furehas— ———— —— —————————————————— ——13^
Owgon and Washington Mcks Large Franquettes— — — — ------— 14 Fancy Franqi^ttes———— — ——— — — — — — 12'^' Standard or Medium Franquette s— — — io Large Soft Shells— — — — — — — — — IBi Fancy Soft Shells— ——— — ——— — — — — — — —H'J Standard or Modlvsn Soft Shells— ———————— — 9
The minim®! prices of walnuts for 1935-34, estab lished by the Walnut Control Board were one-half cent below the prices of walnuts established by the California
Walnut (lowers Association for different grades.9
Mr. W. E. Goodspeod, Manager of the Walnut Control
Board, states that the maximum and minimum prices for 9
9. Personal interview with D. H. Swarthoff, Assistant Field Manager, California Walnut (lowers Association, yune 2, l936 # ' ..... ' ' ■ 6 1
/
1933-34 were established for the following reasons:
Maximum prices were established by the Secretary to prevent abuse of the Agreement• and License by the Industry? in other words, he was protecting the consumer. The maximum prices were arrived at theoretically on the . basis of returning to the grower parity prices.*®
Minimum prices were established by the Control Board for the purpose of securing stabilization of the domestic market. The Agreement and License provided that ne packer should sell below these prices. These mini mum prices were also used by the Board for the purpose of setting up credit to each packer who delivered surplus walnuts; also for the purpose of establishing a price at which the Control Board could buy surplus from packers with cash in lieu of surplus.H
In order to be certain that the above provisions were
carried out by the sellers, it was further provided:^
1. No packer was to give any discounts or other
allowances that would reduce the price at which
he agreed to sell.
2. Ho packer was to give to purchasers any allow
ances for advertising not actually prepaid, nor
for unsupported claims of shortages or damage,
or unverified claims of inferior quality.
3. The surplus as placed with the Walnut Control
Board was to be disposed of in accordance with
the following provisions:^ 12131110
10. See page in regard to parity prices. 11. Letter from Walnut Control Board, May 22, 1936. 12. Tfoited States Department of Agriculture, op. elt., pp. 9-10-11. 13. Ibid., p. 11. 62
a. The Walnut Control Board was to have full
power and authority in the disposal or sale
of its holdings. b. No merchantable walnuts could be sold as un
shelled walnuts where they would enter into the
channels of trade and compete with the walnuts
sold by the packers. c. In case the surplus walnuts wore sold to any
foreign country, Including Canada, it was
required that they be sold with such safe
guards as would prevent their reimportation
into the United States. d. Prior to January 15 of any crop year, the
Walnut Control Board could not sell more than
50 per cent of the surplus walnuts delivered
to it.
©* On September 1 of each crop year* the Control
Board was to release to each packer the unsold
portion of the walnuts which had been previous
ly delivered to it by each packer, provided
that when this quantity was added to the es
timated new crop, it would only be sufficient
to supply the estimated consumptive demand
for the coming year. In no case should such
release, when added to the estimated new crop,
exceed the consumptive demand for that year. 63
f. Each load of merchantable walnuts shipped by
any packer In California had to be accompanied
by a certificate issued by the Dried Fruit
Association of California ©r by an inspector
designated by the Walnut Control Board. Mer
chantable walnuts grown and shipped in Oregon
or Washington also had to be accompanied by a
certificate, but this certificate was issued
only by inspectors designated by the Walnut Con
trol Board. Each certificate had to show the
identity of the packer, the quantity and pack
of walnuts shipped, the fact that the walnuts
conformed to Federal standard, and any other
requirements which the Walnut Control Board
might specify.
g. The Walnut Control Board was authorised
to levy and collect from the packers all
assessments necessary to administer the
provisions of the Agreement. Stmh assess
ments were prorated on the basis of the
tonnage on which the salable percentage was
applied during the crop year. All assessments
were used solely for the purpose of adminis
tering the Agreement. In ease of excess funds
accumulating, the Walnut Control Board was to
refund on the same basis upon which the 6 4
assessments were made. h. Each packer was required to maintain a system
of accounting that would accurately reflect
the business transactions of itself and of
Its affiliated agencies. All such records
were to be kept open for inspection by the
Secretary of Agriculture or his duly authorised
agent for the purpose of furthering this
Agreement* The Secretary was to regard such
information as confidential, except in such
instances as it might be demanded by the
President or either Bouse of Congress.
1. Each packer was not only obliged to abide by
the Agreement but was under obligation to noti
fy the Walnut Control Board of any breach of
any provision by any other packer who was a
party to the Agreement. If the Control Board
received information that any packer was vio
lating the terras or conditions of the Agree
ment, it would be the duty of the Walnut Control
Board to investigate any such suspected viola
tion. A report of its findings was to be made
to the Secretary of Agriculture if it was found
that any violation or breach was in evidence.
j. The Control Board might designate a reputable
firm of certified public accountants to examine 6 5
any of the books of any packer for the purpose
of ascertaining whether or not ho was fulfilling
the requirements set forth by the Agreement.
In case of a dispute between any packer and the
Walnut Control Board relating to any findings
of any Investigation, it was to be submitted to '
the Secretary of Agriculture, who would rule upon It after he had obtained all data pertain
ing to the ruling of. the Board upon the con
troversy.
k. The Control Board was not to be considered
liable for any mistakes of judgment or, for
any acts of omission or commission unless they
were acts of dishonesty.
l. The Control Board by a two-thirds vote could
amend or modify the Agreement, subject to the
approval of the Secretary of Agriculture, and
the amendment would he effective unless-10 per
: cent of the packers of the preceding year made
a written protest within fifteen days after its
proposal by the Walnut Control Board.
The final provisions of the Marketing Agreement per tained to its termination, which might take place In one of the: following manners:^ 14
14. TJnitedStatea Department of Agriculture, op* clt., p. p. 13. 66
1. By written notice of the Secretary of agriculture
or by a press release stating that the Marketing
Agreement m s terminated
2. By written notice of two ©r more packers, who,
during the previous year, shipped 70 per cent or
more of the total tonnage, of merchantable wal
nuts marketed
3. By the termination of the Agricultural Adjustment
Aet, which authorised the formation of the
Marketing Agreement
The -intention of the Marketing Agreement was to make more effective the policy of Congress as set forth in tho
Agricultural Adjustment Act. It was stated in this Agree ment that there should be established and maintained a bal ance between consumption and production of walnuts which would reestablish prices to consumers at a level that would give the agricultural commodity a purchasing power, with respect to the articles of industry that the farmers buy, equivalent to the purchasing power of such agricultural commodity in the base period,*5 It was desirable that this ultimate purchasing power should gradually correct the in equalities due to the current consumptive demand of do mestic and foreign markets. Consumer interests would be protected by readjusting farm prices of walnuts to such15
15. The base period was taken as an average in the pre-war period of 1909 to 1914. 6 7
levels as would not Increase the percentage of consumer retail expenditures for walnuts above that In the base period, but would return to the farmer an Income commen surate with the pre-war years of 1909-14.
Provisions of the Agricultural Adjustment Act Affecting Licensees
Section 8" of the Agricultural Adjustment Act provided that the Secretary of Agriculture should have the power to issue licenses that would require processors, associations, producers, and others engaged in handling interstate or foreign commerce of any agricultural commodity to obtain licenses which would not be In conflict with existing Acts of Congress, and to require any such licensee to furnish such reports as to qualities of agricultural commodities, prices, etc., that would be necessary to control the In dustry.^-® "" ......
On October 7, 1935, the Secretary of Agriculture, acting in conformity with the provisions of the Act, Issued
licenses to California, Oregon, and Washington packers.
He justified this'action by virtue of the fact that walnuts
entered into competition with commodities between or
among several states, as well as foreign countries.!?
In order to obtain a license, each packer was 1716
16. United States Department of Agriculture, op. clt»~ p. -19...... 17. Ibid., p. 19. ' f . 6 8
required to comply with ®@i»isin males and regulation# aa established between the Secretary of Agriculture and the
Walnut Control Board# among the most important of which are the following:18
1. Each licensee was required within five days after
the effective date of the license, and thereafter
on the 15th of August of each year, to file with
the Control Board a sworn statement of the quantity of merchantable walnuts held by him on the pre
ceding August 1,
2. Licensees were not allowed to sell nor offer for
sale nor ship any unshellod walnuts, other than
those specified as merchantable by the Control
Board. - ■ ■ - - / . - .. ■ . ...
3. The salable percentage of walnuts during any crop
year of each licensee was to be calculated by
adding the carryover of the preceding year held
by him on August 1, plus the walnuts acquired by
hi® subsequent to that date.
4. Each licensee was required to deliver to the
Control Board the excess above the salable per
centage# Which was to be known as the surplus.
5. In case of revision of the salable percentage,
each licensee was permitted to sell a total 18
18. United States Department of Agriculture, op. elt. # ' pp. 23-24-2S. \ 6 9
quantity equal to sueh revised salable per
centage of merchantable walnuts.
6. If, at any time before December 15 of each year,
a licensee had sold, or contracted to sell any part
. of his surplus walnuts, the Control Board, if it
had money available and packs offered would per
mit, was to buy from other packers at a fixed price
a sufficient quantity of walnuts equal to his
required surplus. The licensee was to pay to the
Control Board the amount for which he contracted
to sell his surplus, if it was not below the mini
mum price established, less a small brokerage
fee.19
7. All unshelled walnuts offered for sale by a licen
see were required to be graded for size and in
accordance with the pack specified in the license,
and were required to meet the standards established
by the Walnut Control Board. Sale of ungraded or
orchard-run nuts was not permitted.
8. Licensees were required to have all unshelled
walnuts and culls Inspected and certified by the
Inspection agencies of the Control Board. Surplus 19
19. This provision of the 1954 Amended License is the same as that in the 1955 Marketing Agreement. See page 58. The 1953 Marketing Agreement for Packers of Walnuts grown In California, Oregon, and Washington Included all those packers signatory thereto. The 1934 Amended License included all other (non-a 1 gnatory) packers, male ing the surplus provision mandatory on every packer. 7 0
control provisions were to be enforced at the
time of inspection for certification,
9. The Control Board fixed the responsibility for
complying with the terms of the license on the
person or firm who graded, culled, and packed the
walnuts, and entered them into the channels of
trade,
10, Inspection and certification agencies for Califor
nia were the Dried Fruit Association of California,
branch offices in San Francisco and Los Angeles $
and, for Oregon and Washington, Oregon State De
partment of Agriculture, located at Salem, Oregon,
The cost of Inspection was to be borne by licensee
and would be rendered by request of licensee or
at the direction of the Control Board,
The various Agreements, Amendments, Licenses, and
Orders under which the Walnut Board has operated are as follow :
1. Effective October 9, 1933 to August 27, 1934
a. Federal Marketing Agreement b. Federal License
2. Effective August 27, 1934 to October 16, 1955
a. Amended Federal Marketing Agreement b. Amended Federal License
3. Effective October 15, 1935 to date
a. Hew Federal Marketing Agreement 7 1
b. Federal Order20
On detober 15, 1935, the Secretary of Agriculture, th® lorthem Paclfle Hut fitirowers Cooperative, the California
Walnut Growera Association, and the Oregon Hut Growers, Inc. entered into a new agreement known as the Marketing Agree ment Regulating tho Handling of Walnuts Grown in California,
Oregon and Washington* .The principal, dlfferenea# between
the first Agreement and License and the various amendments,
and the now Agreement and Order are thesei
. - ' ' . -- ' ' -- '' 1, The first Agreement and License provided for the
establishing of maximum and minimum prices at which wal-
■ ■ • ' . - ' ' ■ ■ •'■■■■ . ■ ■ . . nuts could be sold, whereas the new Agreement and Order
eliminated these provisions because they were eliminated
from the Agricultural Adjustment Act as amended by Congress
in 1935, it being feared that price-fixing provisions would be declared unconstitutional.2!
Mr. J. H. Kennedy, Assistant Manager of the Walnut
Control Board, states;22
In the present Marketing Agreement and Order, there are no maximum or minimum prices specified. We do, however, have credit ericas which are used to credit packers for walnuts delivered as sur plus and used as a basis for computing the cash due when packers deliver cash in lieu of surplus walnuts. These credit prices are fixed at a
20. Personal letter from Walnut Control Board, May 15,1936. See page 77 as to how domestic prices are determined. 21. Personal letter from Walnut Control Board, May 15,1956. 22. Letter from A, W. Christie, Field Manager, California Walnut Growers Association, May 19, 1936. 7 8
certain percentage below the domestic selling prices* For the 1936-56 crop the credit prices were fixed at five per cent below the domestic prleee* y; ' .
2* The first Agreement; and License endeavored to con- trol intrastate commerce by stipulating that it was indis- tinguishably intermingled with interstate commerce. This provision is not in the new Marketing Agreement and Order, and the intrastate shipments of walnuts by the state of California are now controlled by tho California Agricul tural Adjustment Act of 1935, This state Agreement and
License is exactly, the same as the Marketing Agreement and
Order, except Shat It has substituted for the name of the secretary of Agriculture the name of the Director of Agri culture of the state *f California* The Act further pro vides that the state agreement expires when the Federal
Marketing Agreement and Order expires. The California
Agricultural Adjustment Act endeavors to cooperate with and assist the national government in promoting the reha bilitation of agriculture by eliminating the causes of the collapse of the agricultural purchasing power and by help ing to bring about enforcement of marketing agreements.
The State Board under the California Adjustment Act is composed of the.same members as the Walnut Control Board except that Oregon and Washington are not represented.
In other words, they simply approve what the Walnut Control
Board .does.. ;■ v/y.
Mr. W. E. Goodspeed, Mana^r of the Walnut Control 7 3
Board, states:
Answering one of your questions specifically will state that the Control Board now has the legal authority to require all California packers to contribute surplus referable to both inter state and intrastate shipments; and Oregon pack ers to contribute surplus referable to inter state shipments»2S
3. The first Agreement and License controlled surplus
of merchantable walnuts for a given packer solely on the
basis of his total tonnage for. the year. The new Agree
ment and Order provides that surplus shall be controlled
for each pack separately; i.®., surplus percentage of each commercial pack. .
Operation of and Opinions on the Marketing Agreement
It is evident that the requirements for Licensees and
the standards set by the Marketing Agreements and Licenses
under the Agricultural Adjustment Act were intended to be
inelusive.
Mr. W. E. Gbodapeed, Manager of the Walnut Control
Board, states:
Licensees are privileged and requested to report infractions. These will be inves tigated by the Boardfs management, and if sub stantiated will be reported to the Board. The Board will handle minor infractions itself, but will report all major infractions to the Secretary of Agriculture through the Agricul tural Adjustment Administration. The latter 25
25. Personal letter from W. E. Goodspeed, Manager, Walnut Control Board, Los Angeles, California, lay 22, 1956" 7 4
has indicated that It will prosecute violators of the License to the full extent and with the full force of the laws at its disposal,®'
In the spring of 1953 the walnut industry found it self with a carryover from the previous year's crop far greater than at any time In the history of walnut pro duction in the United States,85 In previous years, the carryover would more or less naturally ho disposed of in light crop years, thus lessening the total supply of walnuts available for sale. Prior to 1933, It had been eeraparatively easy to sell the surplus that was carried over from previous years. The spring of 1933 found a carryover of more than twenty million pounds of walnuts from the 1952 crop.85
Through the operation of the Walnut Marketing Agree ment, the establishment of the Walnut Control Board was made possible. This brought about a national plan for
the walnut Industry, instead of leaving the disposal of
the walnuts to the haphazard and varying methods that might have been employed by the individual producer.
The Walnut Control Board was to market the surplus in
non-competitive channels and to open up foreign markets,
24. Walnut Control Board, Circular letter to Signatories and Licensees, Los Angeles, California, September 4, 1954. 25. Views of Walnut Control Board, Proposed negotiation of Fereign Trade Agreement with France, 1935, p . 9, 26. Ibid., p. 9. " • r— . , :
i W '' 7 5
particularly in northern and western Europe, The Associa tion claims that the deyelopaeat ef the foreign markets saved the industry between two and three million dollars on the 1933 crop alone.87
The California Walnut (lowers Association estimated that the return to the individual growers from the 1933 crop would have been from three to five cents a pound less had it not been for the beneficial effects of the
Marketing Agreement, The Association also claims that if it had not been for the Agreement * undoubtedly the industry would have continued to build up a burdensome annual carryover, or would have been forced to flood the domestic market with walnuts In such quantities as would have resulted in a ruinous price to the industry, thereby forcing domestic prices down to a parity with returns possible throufdi exportaticn.
The California Walnut Growers Association takes into consideration many things in establishing prices at which walnuts can be sold. The Manager of the Association visits approximately one hundred and fifty food brokers each year throughout the United States* He inquires of these brokers the amount of walnuts that they think they can dispose of.
A few of the things that are taken Into consideration in
97* (California IVainut Growers A ssociation, Annual Report, 1933, p, 9. See page 32 for the number of pounds of walnuts exported. 76
determining the price at which a given quantity of walnuts can be sold for are the following:
Past Sales and Experience
Economic Condition of Country as a Whole
Level of Food Prices in General
Competing Products
Foreign Walnut Crops - Tariff on Walnuts -
Humber of Unemployed People
The Quality of the Walnut Crop
The Size of the Walnut Crop
Total Population^8
The Marketing Agreement and License of 1933-34 pro vided that the maximum prices at which different grades of walnuts may be sold. This Agreement and License provided that maximum prices shall be arrived at by using as a base the prices during the pre-war period (August, 1909, to
July, 1914).28 29 *
However, as a matter of fact, the average price from
1909 to 1914 of Humber ones (walnuts) was used as a base from Which the prices of other grades were determined.50
28. Personal interview with A. W. Christie, Field Manager, California Walnut Growers Association, June 2, 1936. 29. Personal interview with b. M . Swarthout, Assistant Field Manager, California Walnut (lowers Association, June 2, 1936...... SO. Ibldi ; 7 7
Hr. A. V/. Christie, Field Manager of the California
Walnut Growers Asaoelation, states;
The Control Board estimates consumptive demand primarily by projecting in the forth coming year the experience of the past few years with respect to the actual quantity of walnuts consumed in this country at a definite range of prices as to quality and size. Con sumptive demand must always bo at least par tially based on the experience of those who have had many years of experience in walnut merchandising, but the estimate is made rather definite by reference to available statistics rather than by trusting to memory or guess work. ' ' .. ... - - : . ' ' - ■
The Gemral Crop Sect ion of the A,A.A. has made a very exhaustive study of this very matter and presented their findings last September in a typewritten treatise, with tables and graphs, entitled “An Economic Brief Relating to Walnuts Grown in California, Oregon, and Washington,” by E. S. Braun and J. Poole. The very definite data given in this treatise was used by the Control Board in estimating the consumptive demand for 1955-36. This treatise very clearly shows the relation between the quantity of walnuts, which this country will consume Under present economic conditions and the price which may be obtained therefor. In fact, it shows the relation between any: givenqustntity' and the gross return which may be expected for that quantity.31 The Economic Brief .referred.to above states:
At the relatively low level of prices pre vailing during the past four years, the total return to growers resulting from the marketing of large crops is less than when smaller volumes are used into trade channels. With demand con ditions equal to those of 1934 and on the basis of past price relationships, total returns to growers are at a maximum when a volume of31
31. Personal Latter from A. W. Christie, Field Manager, California Walnut Growers Association, May 8, 1936. 7 8
approximately 26 >000 to 27,000 tons is mar keted unit®lied. Under demand conditions at the level prevailing prior to the depression, maximem returns to growers would be reached at about 40,000 tons.
Factors Affecting the Movement of Domestic Uhsholled Walnuts
Isolating and determining the relationship between the movement of merchantable unshelled walnuts and the price at which they move in volves the segregation and measurement of such factors as signlfloantly influence either move ment or price. In walnuts, as in most commodities, a number of supply factors are operating at the same time in determining either price or movement into trade channels. Supply factor# and demand factors are frequently operating in tho same di rection and frequently operating in opposite di rections* For example, import supplies may be de ere a sing tending to raise, fried* ^ end-: domestic production may be increasing, tending to depress prices. Also consumer buying power may be in creasing at a time when production is short, in which ease these two would bo operating in a manner to.raise prices> Removal of the in fluence of these various factors is a necessary step in ascertaining the relationship between"the price and movement of unshelled walnuts. The determination of such factors by the multiple correlation technique at once makes measurable both the net relationship between quantity and price, and the other principal factors, The method of graphic curvilinear correlation is used in the following analysis .32
By this method an approximation to the true relationship between price and movement is adjusted as indicated by the-relationship of residuals from »approximate1 line of regres sion used, to other factors, until successive adjustment reveals the true relationship of each factor to the movement of unshelled walnuts.
32. Bean, t . II., ‘’Applications oi* a Sim plified Method of Oaphle Curvilinear Correlation,11 Parts I and II, U. S, Dept. of Agr. April 1929 and Sept. 1929. In Tiew of the fact that walnut prleee, connomly known aa "opening prices," are quoted to the trade and maintained with but slight if any modification, by the California Walnut Growers Association, which handles approximately QO% to 85^ of all domestic walnut production, determination of relationship between walnut prices f.o.b. and movement Into trade channels, requires the Isolation and measurement of those factors which in the main determine the volume of unshelled walnuts which can be moved Into trade channels at the prices as set*
Year to year changes in the movement of domestic merchantable!unshelled walnuts may^ha accounted for. by changes in opening prices,35 changes in Income of domestic consumers, changes in the volume of imported unshellod walnuts and changes in the relationship of prices for Im proved pecans to prices of unsholled walnuts. The effect of these factors during 1925 to 1934 is demonstrated graphically in Figures 3 and 4. Opening prices are of major importance in deter mining the volume of unshelled walnuts that can be moved into trade channels. Changes in con sumer purchasing power have markedly influenced the volume of unshelled walnuts that have been taken off the market at given prices during recent years. Prices of improved pecans have declined relatively to those of unshelled wal nuts, with consequent replacement of walnuts. Thai change in this. factor occurring since 1930 and during the period of marked contraction in consumer buying powers prevents establishment at this time of the probable effect of competi tion from pecans on mahellod walnuts In future seasons.
Relationship between Movement of Unshelled Walnuts and Total Returns to Growers : : : : Average prices received by growers for 33
33. Opening prices are, of course, only determined upon by the Association after study of both domestic and for eign production, and of expected consumer demand as in dicated by trade conditions just prior to movement of the new crop. F ig u r e 2
Season Average for Price of Demesfcle tMshelled Walnuts and Index of toban Gonstaier Income 192S-24, 1954-SS Cents Per per cent pound
v Consumer Index \ (1984-1929=100) 100
80
6 0 •29-.30
Tfiaited Statoo Dept, of Agriculture Heg. 29444 AAA from A In thousands of tons Total Available Supply Thousand Tons hhle ant n ... Pric.esF.O.R. and Walnuts Dhshelled Figure 3. Relationship between Supply of Domestic Supply between Relationship 3.Figure i Urban Consumer Income Index, December Index, Income Consumer Urban 70 5 0 5 5 0 105 100 95 % 85 80 75 18 1 8 U Price - cents per pound-per cents - Price U 20 • 22 1 22 ;20 • ' • •■24 26 _____ •
110 8 2
Figure S (Cent*)
95 96 97 98 99 100 101 102 103 104 105 per cent Urban Consumer Income Index, Dee. In per sent of Sept. - Oct. Average
5 6 7 8 5 loll 12 lb 14 15 Imports of Unshelled Walnuts - thousand tons
43 +8
14 16 18 20 SS 26 S5 S5 55 3% 36 Pecan Prices* • cents per pound Average prices to the trade by National Pecan Marketing Association. F lg u r o 4 .
Relationship Between Domestic Marketing of Unshelled Walnuts and F.O.B, Opening Prices, Adjusted for Demand Conditions and Volume of Imports.
D o m estic Movement (Tons) ' (Thousands) *34 .31 19=23-1934 f.o.b. 48 p o a l t i i on __ 's. *33 f '27 X^. * ...... :..- . .. 40 X •x. s "X X *30 Of o X 1934 e *89 38 * p o s i t io n X . '21 :x z 1923 i 24'-:. ■' ' »....-..-'.... r rr -. ft> ,r ,,,^ X, 'x. X ' x ^ X X ^ f S C JLw < 1934 mpovzor x ___ .posilblon X X & X oO - ' X :
8 10 12 14 16 18 20 22 24 26 28 Season Average F.O.B. Price (Cents Per Pound) TABLE V I I I
CALCULATED PRICES AND RETURNS TO GROWERS UNDER DEMAND CONDITIONS EQUAL TO 1934, WITH TOTAL SHIPMENT OF UNSHELLED WALNUTS VARYING BETWEEN SIXTEEN AND FORTY THOUSAND TONS
i V Total t Packers * $ Price Received $ Total : Price Received rvalue : Margin : by Growers : Value Pack s : F.O.B, : s $ to ■ -..r! - • ' : • : . ' t ______: Growers ""-'"l" : 2 : 5___ : 4____: 5 : 6 : 7 :___ 8 1,000 cents dollars 1,000 cents cents dollars 1,000 ton# per lb per ton dollars per lb per lb per ton dollars 40 9.58 191.88 7,663 5.0 4 *# *1.68 3,663 38 10.35 206.94 7,864 5,0 106.94 36 11.12 222.31 8,003 5.0 6,12 188#*1 !;2o6! 34 11.88 237.68 8,081 5.0 6.88 137.68 32 12.65 253.05 a#o*8 5.0 7.6* 153.05 30 13.42 268.42 a l o w 5j> 8.42 168.42 28 14,19 283j78 . 7,*46 5.0 9.19 183.78 26 14.96 299/15 7,778 5*0 9.$# 199.15 1 1 24 15.73 . 314.68 7*648 5 # 10.73 5,148 22 16.49 329.89 7,28* 5.0 11.49 S5:g 5,058 345.26 20 17.26 6**06 64* m il il:io 1 ; ^ i:8 M® If 4,416 Eolation Total Docostic Hovenont. of Unshollod Walnuts eM Total Returns to lowers Under Demand Conditions Equal to 1954
Dollars
16 18 20' 22 24 25 28 50 52 54 36 36 40
Tima (Thousands) 86
their deliveries have been closely related to the prices established for merchantable un shelled walnuts. On the basis of this relation ship an indication of the effect on total re turns to growers of variation in the movement and price of merchantable unshollod walnuts, under demand conditions equal to those in 1934, is demonstrated in Table VIII and Figure 5, em phasising for comparative purposes the optimum volume and tho actual tonnage moved into trade channels in 1934-35. Under the demand conditions prevailing in this season, total returns to growers, orchard-run basis, are less when rela tively large tonnages are shipped unshelled, than when somewhat smaller quantities are moved, total returns Increasing as the tonnage increases until the point of maximum returns is reached with the shipment of 26,000 tons, following which further increase in tonnage results in a decline in the total return to grower*.
Relationship between Movement and Price of -tosh*lie* Walnuts
With demand conditions at tho level pre vailing during the past four seasons, the re lationship between prices received by farmers and the volume moved into trade channels becomes inelastic when tho volume is relatively heavy. That is, beyond a certain point, total returns to growers from the sale of a large quantity is less than would be received from the sale of a somewhat smaller quantity. For example, under the level of demand existing in 1934-35, the relationship is as follows: total returns to growers increase as the volume of unshelled wal nuts: increase up to approximately twenty-seven thousand tons, but declines for quantities greater than this amount. The optimum volume, from the standpoint of returns to growers, depends upon the supply price relationship and the level of consumer demand, insofar as this is reflected by the trade.
Assuming the spread between f.o.b. prices and prices to growers to remain constant, an increase in the former from 10 to 15 cents, or SO per.cent, would result in an increase of 83 per cent in prices received by growers. The relatively greater change in prices to growers is 8 7
accounted for by the fact that at present low price levels, marketing charges represent a higher percentage of the f.o»b, price than is true when f.o.b. prices are relatively high* Similarly, a small percentage Increase In the price paid by consumers results in a larger percentage Increase in f.o.b. prices.
In short, within certain limits and under present demand conditions, growers as a group stand to gain materially from controlling the volume of unshelled walnuts moved into trade channels, while the Increase in prices received by growers made possible by such action is accompanied by a relatively smaller increase In prices paid by consumers.
: A fundamental promise underlying the success ful control of a farm product is that the burdens involved in such control should be shared among all members benefiting therefrom, and should be appor tioned as equitably as possible. If a volume con trol program results in a higher price per unit on a restricted quantity permitted to move into cer tain trade channels, any growers who could avoid participation in regard to such control would benefit at the expense of other growers.
Determination of Salable Tonnage by Control Board
The salable percentage of the total available supply of merchantable walnuts In 1953, as de termined by the Control Board in accordance with its powers under the Marketing Agreement (Art.Ill, See. 2), was 70 per cent♦ With an estimated total merchantable supply of 80,000,000 pounds, the salable tonnage anticipated by the Control Board amounted t© 28,000 tons* As indicated by the analysis,34 the volume which, under 1935-34 demand conditions, would result in the greatest return to growers was 26,000 tons, a figure which checks closely with the estimate of the Board. 54
54. Brown, E. W., Senior Agricultural Economist, and Poole, J., Associate Agricultural Economist, "An Economic Brief Relating to Walnut® Grown in California, Oregon, and Washington," Agricultural Adjustment Administration, United States Department or Agriculture, Sept.12,1935. 8 8
Total salable tonnage, as determined by the Con trol Board for the following year 1954-35, was 25,000 tons as against an optimum volume of ap proximately 27,000 tons indicated by the anal- : ysls...... ^ . From the standpoint of maximum returns to growers In 1935 It would appear that not loss than 26,000 tons and not more than 30,000 tons of unshollod walnuts be offered for sale In the domestic market>34
It is the opinion of the California Walnut Growers
Association that:
The Walnut Marketing Agreement adopted by the industry last fall under the provision of the,Agricultural Adjustment Act proved a life-saver for the walnut industry . .... It is hoped and believed that the surplus : control will operate even more satisfactorily for the 1934 season. . . . It was there fore determined that this season's salable percentage for all packers would be 70 per cent and that 30 per cent of the available supply would be termed surplus and must be delivered as such to the Control Board for exporting and by-pr©ducting. The 70 per cent, of 715,500 bags estimated supply amounts to 500,500 bags, the largest quantity which It is estimated can be consumed in America during the season at prices which will show a reasonable crop return. In other words, we are now producing 30 per cent more walnuts than this country will consume, so we must suffer the consequences which are represented by the difference between the domestic and foreign price of the surplus.35
Naturally there was some disagreement as to what
the salable percentage should be. From the data
available, it is evident that the estimates which were
made by the California Walnut Growers Association have 35
35. Thorpe, C.» ^Closing Payment on 1933 Crop to be Made September 15,” Diamond Walnut News, August 1934, p. 1. 8 9
been as accurate as one would expect an estimate to be. The Association estimated the surplus for the years of 1953 and 1934 should amount to 30 per cent of the total supply (the on-coming crop plus carryover). Some of the independent packers estimated the salable percentage to be as high as 85 per cent.
In 1935 the estimated surplus was 55 per cent. The Walnut Control Board estimated the total supply and the salable percentage of the consumers* demand slightly in excess of 60,000,000 pounds of merchantable walnuts to the domestic market. This leaves 32,500,000 pounds in the
1935 crop and carryover to be sold in foreign markets or to be sold domestically In non-competing channels.37 %% i* the opinion of the Walnut Control Board that the large sur plus supply can be moved because of the estimated short crop in Europe and the favorable situation in the domestic market.36 *38 The following graph prepared by the California Walnut
Growers Association compares the estimates of crops with
the actual crops produced for the years 1930, 1931, 1952,
1933, and 1934.
36. The California Walnut Growers Association, Annual Report, 1954, p. 6. 57. walnut Control Board, Brief Presented as Evidence at 1935 Walnut Hearing, p. 58. ‘ " 38. ibid., p.-jar: 90 4 V
C.W.Q.A. Crop Estimates Compared with Actual Production Year JDat( 100 200 3fDO 4(:)0 5C!0 6C10 Tlioi W 9 \ : f 1 sane 8-3( 4 BaE; 1930 rr 10-' "1 — — — — 10-21 — — — — — J 6-K 1931 8-2( 10-1 6-S . — — mmm mmm mmm
8-K 1..... 1932 Q 1 i# | 1 6-8 - — — — — — —e — — — 9-21 1953 4 ; 6-15 8-21 r b 1934 9-2£ mmm — ' — - •— — -me
======Crop estimates ---- ‘Z.ZZ, Actual production
The foregoing graph indicates that only in ono year
was there a material discrepance between the estimated
production and the actual production.
It is evident that the California Walnut Growers
Association believes that the Marketing Agreement made
under the Agricultural Adjustment Act has been the savior
of the walnut industry, eliminating the Inequalities
between consumption and production of walnuts at a price 39
39. California walnut Growers Association, Annual Report, 1934, p. 7. — -— — ---- 9 1
which is fair to the producer.
The officials of the Walnut CNmtrol Board were of the same opinion that something more permanent had to be done to meet the chaotic conditions then existing in the industry.40 40
40. Personal interview with Hr. W. E. Goodspeed, Manager, Walnut Control Board, December 14, 1935. CHAPTER IV
SUMMARY AM) CONCLUSIONS
Legal Status of Marketing Agreements
As to whether or not the New 1955 Federal Marketing
Agreement and Order pertaining to the walnut industry are unconstitutional, it must be recognised that any conclu sions arrived at must be the result of reasoning based upon existing Constitutional provisions, statutes, and court decisions.
The United States Constitution states:
The Congress shall have the power to regulate commerce with foreign Nations, and among the sev eral States, and with the Indian Tribes.3-
The Agricultural Adjustment Act, among other things,
states that the Secretary of Agriculture shall have the
following powers:
To enter Into marketing agreements with pro cessors, associations of producers, and others engaged in the handling, in the current of inter state or foreifpi commerce of any agricultural commodity or product thereof after due notice and opportunity for hearing to Interested parties. The making of any such agreement shall not be held to be in violation of any of the anti-trust laws of the United States, and any such agreement shall be deemed to be lawful.1 2
1. United States Constitution, Article 1, Section 8, Clause 3. 2. Agricultural Adjustment Act, Title 1, Part 2, Section 8, p. 4. 9 3
The New 1935 Federal Marketing Agreement and Order derive their power to function from the above section of the Agricultural Adjustment Act. The Agricultural Adjust ment Act derives its power to function from the above sec tion of the United States Constitution. It is claimed that the above section of the Agricultural Adjustment Act is still in effect.5**34 5
However, on January 6, 1936, that part of the Agricul tural Adjustment Act which dealt with the processing taxes, was declared unconstitutional by the United States Supreme
Court.4
The Agricultural Adjustment Act provided that the pro cessing tax could be applied only on certain basic agricul tural commodities. These commodities included wheat, cot ton, field corn, hogs, rice, tobacco, and milk and its products. Walnuts were not included in this group.5
The California Walnut Growers Association states that the lew 1935 Federal Marketing Agreement and Order, under which the walnut industry operates, do not control produc- % tion or levy processing taxes. The Association further
states that the United States Department of Agriculture has
informed them that the above decision of the United States
3. Personal interview with A. w. Christie, Field Manager, California Walnut Grower# Association, June 2, 1936. 4. California Walnut Growers Association# Diamond Walnut lews, January, 1936, p. 3. 5. Agricultural Adjustment Act, Title I, Sections 9 and 11, pp. 5-8. 9 4
Supreme Court does net affect marketing agreements and orders.6
As to whether or not the California Agricraltwal Ad justment Act, which cmtrola intrastate shipments of wal nuts within that state, will be declared unconstitutional, is a question that has not M e n decided by the Baited
States Supreme Court.17
While it is true that the production of walnuts has not been limited, the amount of walnuts put on the domes tic market has been.
Anti-trust laws do not forbid agricultural organiza tions of various kinds. The Clayton Act states:
That the labor of a human being is not a com modity or article of commerce. Hothing contained in the anti-trust laws shall bo construed to forbid the existence and operation of labor, agricultural, ©^horticultural organisations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, ©r to forbid or restrain individual members of such organizations from lawfully carrying out the objects thereof? nor shall such organizations, or members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the : anti-trust laws.67 8 A more recent Act of Congress, the Capper-Velstead Act,
further emphasizes the right of farmers to control the mar
keting of their products. This Act states:
6. California Walnut Growers Association, op. clt., p. 3, 7. Personal interview with A. W. Christie /“Field Manager, California Walnut Growers Association, Jhne g, 1936. 8. Curtis, Roy Emerson, Trusts and Economic Control* "Clay ton Act," (1914) See* C, Sti 6tat., V30, 1931, p. 165. 95
Persons engaged in production of agricultural products as farmers, planters, ranchmen, dairymen, nut, or fruit growers, may act together in associa tions, corporations, or otherwise, with or without capital stock, in collectively processing, pre paring for market, handling, and marketing in inter state and foreign emmmrce, such products of persons so engaged. Such associations may have marketing agencies in common* and such associations and their members may make the necessary contracts and agree ments to effect such purposes;-— 9
Judging from the above Acts of Congress, it would ap- -•--rPcjp pear that it would not be in violation of the United States
Constitution for farmers to have marketing agreements con trolling the amount of products they put upon the market at a given time if the products entered Interstate or
foreign commerce.
It took a long time, however, before the federal gov
ernment and the states would permit group marketing, and
even now their activities must be carried on within the
limits of what is known as the "rule of reason•w The Sec
retary of Agriculture is given the right by the federal
government to review the activities of such organisations
in order to determine if their actions have caused an undue
enhancement of prices.10 This would appear to give them.the
right to withhold part of the total supply from reaching
the domestic market, the surplus to be marketed at lower
prices in non-competing channels, as long as it did not
9. tiurtis. Soy Srorson, op. cit., p. 166. "Canper-Volstead Act" (1922) 42 Stat.,- 5 3 E 7 ~ 10. Eourse, Edwin G., Marketing Agreements Under The AAA, p. 363. ' ‘ ------96
amount to an unreasonable Increase of price.
As every grower of walnuts Is compelled to turn over part of his walnuts to the Walnut Control Board, would this be taking of his property without due process of law?
The United States Constitution states:
— nor shall any state deprive any person of life, liberty, or property, without due process of law $ — '
Ho person shall-— be deprived of life, liberty, or property without due process of law;— H
It will be seen from the above that neither the states
nor the federal government ©an deprive a person of his
property without due process of law.
Above are a few of the questions that will have to be
settled within the next few years. How they will be set
tled, it is Impossible to say. In a large measure it will
depend on what policy the federal government pursues; that
Is, whether It will advocate laissez-faire principles or
a planned economy.1112 This phase of the* situation is taken
up in the latter part of the chapter♦
The Effects of the Marketing Agreement on Producers
The production of walnuts has never been curtailed by . - . - any of the various marketing agreements under which the
walnut Industry has operated. The walnuts are handled by
11. United States Constitution, Articles X and XIV. 12. Ware, C. F. and. Means, 0, C ., The Modern Economy in Action, pp. 1-232. 9 7
the growers, the packers, and the food brokers in the same
■aimer now as they have always been handled. Each grower is still free to sell his walnuts to Whomever he may please except that percentage he has to turn over to the Walnut
Control Board.
If the control of the supply of walnuts put upon the market results in the price of walnuts being too high, more walnut trees will be planted. As a result of this, compe tition will become stronger between individual growers and in time the less efficient producers will be eliminated.
As production increases, surplus will increase. This will tend to decrease the total value of the walnut crop. The
long-run disadvantages to the walnut industry may more than
offset the short-run advantages. For this reason the
Association would also like to control production of wal nuts.13 '' ■' - ' r . y
In January, 1956, the federal government announced
that it had authorised benefit payments of $1,250,000 to
the Walnut Control Board \md@r the provisions of Section 32 of the amended Agricultural Adjustment Act
which provides for subsidy payments. It is claimed by
the Walnut Control Board that this fund will increase the
returns on surplus walnuts by about five cents a pound.
After deducting operating expenses, the Control Board
1 3 . S e e P® ge - 9 8
estimatee the grower will receive about eleven cents a pound for his surplus walnuts. The Board claims that this amount is close to that which the grower will receive per pound for his'salable percentage .14 if this policy is con tinued, there is a possibility that so many walnut trees will be planted, and the production will be so great, that the federal government will have to abandon this policy.
Then there will be an oversupply and low prices. The only way at present by which the walnut industry can overcome this is either by keeping the price of walnuts low enough so that more trees will not be planted, or by regulating production. As the industry is operated unddr surplus con trol, the increase in profits to growers is regulated so as to oppose the possibilities referred to above.15
Effects of the Marketing Agreement on the Income of the Growers
In attempting to arrive at any logical conclusion ' from the facts set forth in the previous chapters on the income of the growers, it is necessary to take many factors into consideration. The paramount consideration is, of15 14
14. J1¥he Good Hews is but— fenefit Payments Secured," ~* Diamond Walnut Sews, Janmry, 1936, p. 1. 15. Goodspeed, l/V Manager, "The Effect of Surplus Control on lowers Returns," The Diamond Walnut Sews, March, 1937, p. 4. In 1932 Diamond iio. l*s sold at ^lolesale for 15.5 cents a pound, in 1933 for 16.5 ' - cents, in 1934 for 15.5 cents and in 1955 for 14,5 cents a pound. The above prices held firm in most . cases throughout each year. 9 9
©©urae, whether or not the Walnut Control Board, as es tablished by the Agrleultural Adjustment Act, has been effective In maintaining prices, moving excess production, returning a fair price to the grower, and assisting in the marketing of the surplus in foreign markets• In short, has the Marketing Agreement, Order and License requirement for packers, as administered by the Secretary of Agricul ture, been the saving of the industry as maintained by certain walnut growers, or would the industry have pros pered as well without the Marketing Agreement, Order and
License?- • • -
Then, too, there is the consideration of whether or not the legislation as developed under the Hew Deal made it possible to secure for California, Oregon, and Washing ton walnuts a marketing agreement that tended to hold the supply from the domestic market, thus becoming antisocial in its effect e This phase of the subject is discussed in | the latter part of the chapter.
In the spring of 1933 the walnut industry had an over- supply of walnuts from the 1952 crop of nearly 30,000,000 pounds and an estimated bumper crop for the coming year.
The officials of the Association were alarmed and felt the necessity of devising some means of controlling the supply of walnuts offered to the buying publi©. The provisions of
the Agricultural Adjustment Act seemed to offer the
solution.
//j* ?o7 1 0 0
All that Is necessary to curtail production In many manufacturing enterprises Is for the managers, or hoard of directors, to decide to produce less and then carry out the decision. This is not so simple a matter in agricultural production. Officials of the Walnut Control Board are of the opinion that the method of handling the 1932 surplus was very successful.
They state:
The fact to be considered is that each grower * s net return is larger by reason of surplus control than it would be if an uncontrolled over supply were forced on the domestic market, in which event prices for the entire crop would promptly tumble to the level of export and by-product values which are several cents a pound lower than present net grower values.16
In the five-year period previous to 1934, the yearly production of merchantable walnuts in California amounted to nearly 56,000,(X)0 pounds. In the five previous years the yearly average was approximately 42,000,000 pounds.I7
When it is considered that the 1934 production amomted to more than 68,000,000 powds and that the 1935 crop is es timated to be the largest crop ever known in the history of
the walnut culture on the Pacific Coast, the problem of the
Walnut Control Board in moving the surplus supply is more keenly appreciated, especially when put on a.percentage17 16
16. California Walnut Growers Association, Annual Report, 1934, p. 7. 17. Ibid., p. 9. 1 0 1
tossIs, Using the 1920 production as a basis of 100 per sent, in 1927 the production had increased to 211 per cent and the estimated 1935 output to 230 per cent,*8 It is a basic economic law that when supply increases, with no change in demand, prices decline. With a crop of merchantable walnuts exceeding the previous five-year average toy 20 per cent to 30 per cent, prices declined only 12.5 per cent.*8 Using the prewar period of 1914-19 as a base of 100 to represent prices received by farmers for all farm products, the United States Government re ported that prices for farm products averaged during the year of 1934 only 90. Using the same price index for
Diamond Ho. 1 walnuts, the price was 106.88
If walnuts had followed the same price trend as other agricultural commodities, the price of Diamond Ho. V s in the year of 1954 would have been 12.7 cents instead of the actual price of 15.5 cents a pound.
\ - ■ The following chart shows that the price of walnuts since 1921 has been higher in proportion than the prices of all farm products. Since walnuts are a specialty and not a staple product, this clearly shows the benefit to ' _ * growers of co-operative enterprises because the demand for 10
10. Walnut Control Board, Certain ExhibitsPresented as Evidence at 1935 Walnut bearing, Exnioit 5, 19. California Walnut Growers Association, op. cit., p.9. 20. Ibid., p. 10. --- — Walnut Prices Compared with Prices of a ll Farm Products and Prices Farmers Pay for Comr odities They Buy 102
1920 1921" 1922 1923 1924 1925 1926 192V 1928 1929 1930 1931 1932 1933 1934 Pre-War (1909-1914) Average Equals 100 Prices Diamond Ones Prices of All Farm Products Prices Farmers Pay
g1!,' TaT-ifornTa walnut Growers s so elation. Annual Report, 1934, p. 9 1 0 3
a specialty product declines faster than that of a staple in times of stress. Of course, all farm products would in clude both staple and specialty products. It is true that the price of walnuts fell from 1933 to 1934 and that the general price level of all farm products advanced, but the
Association claims the price of walnuts would have been much lower if the surplus of 1932 and the large crop of
1933 had been put on the domestic market.
The Association claims that, while it is true that a bag of walnuts will not exchange for as great a quantity of manufactured products as it would have in the prewar per iod, due to advance in prices of other commodities, it should be pointed out that it will buy proportionately more
. -• than other farm products, such as a bushel of corn, a sack of potatoes, a bushel of wheat, a bale of cotton, etc.22
The reasons why the general price level of walnuts is higher than that for all farm products are discussed below.
The Association claims that the success with which the walnut industry has maintained its standing and marketed
its production through the current depression is due large ly to three factors: the Association Itself, surplus
control, and advertising#
1. The Association. The California Walnut Growers
Association controls 80 per cent of the walnuts grown on
22. California Walnut Growers Association, Annual Report, 1934, p. 10. ------1 0 4
the Pacific Coast, It Is a co-operative, non-profit enter prise efficiently a M properly managed, enables the con centration of sales and advertising efforts, and carries
In addition to this, the Association renders valuable ser vices In the way of recipes for cooking and salad mixing. The Association has W e n the one stabilising factor in the walnut industry; it has maintained standards and prices; it has avoided cut-throat competition and price-cutting methods, and in this way, undoubtedly, avoided market demoralisation. However, the Association could not main tain stable prices when the surplus problem became serious in 1933.25 The Association took the leadership in organis ing and securing the Marketing Agreement and Order, which provided for a Walnut Control Board, and assisted this Board by helping to dispose of the surplus production. The opening of the foreign markets by the Association serves as an Important factor in taking from the domestic market the excess of the salable percentage of the walnuts produced. " .:-r : : \ ' - 25. California Walnut Growers Association, Annual Report, 1933, p. 9. ------2. The Walnut Control Board. The Walnut Control Board has undoubtedly been sueoessful In controlling the surplus, lot only Is the California Walnut Growers Association re quired under agreement to turn over to the Walnut Control Board the surplus of the production In excess of the salable percentage, which usually ranges from 25 to 50 per cent, but the independent packers are also required to turn over a like percentage of their pack to the Walnut Control Board. Thus, the Board has served as a stabilizing factor in the walnut industry to a degree far greater than would have been possible by the California Walnut Growers Asso ciation, 5. Advertising. It is the opinion of the Association that the use of advertising has done much to maintain sales and prices at reasonable levels in the face of the depres sion. Undoubtedly the California walnut growers have been fortunate in maintaining advertising appropriations as a means of assisting in marketing the walnut crops during the current period of economic depression and curtailed na tional income.24 The writer believes that the facts given in the thesis substantiate these claims. ' 24. California Walnut Growers Association, Annual Report, 1934, p. 9. 1 0 6 The Effects of the Marketing Agreement on the Conamnei* Regardless of how the grower may classify walnuts, the consumer does not think of them as being a necessity. Even the Association admits that the consumer classifies all nuts as semi-luxuries. By this the Association means that the public will only purchase walnuts freely during prosperous times and during hard times the average house wife will not purchase them. The Association further claims that men out of work, estimated to be 10,000,000 In March, 1956, together with their families, do not pur chase walnuts. Again, there are a large number of people v/ho have not recovered financially from losses sustained during the past few years. This group would not purchase many walnuts. The above data clearly shows that walnuts are not a necessity.25 . The walnut is the only tree nut grown in America that is produced in sufficient quantity to supply more than the demand. There are not enough almonds and filberts to sup ply the domestic demand. The Association claims that pecans are the most direct competitor of walnuts. The 1936 pecan production Is estimated at 100,000,000 pounds. This is twice the usual average. The Association claims that the pecan market la demoralized and that this is due to 25. Thorpe, C.» "Thorpe Makes Interesting Analysis of Mar- keting Situation," Diamond Walnut Mews, March 1936, p. 1. 1 0 7 the fact that the Industry does not have a strong co operative control. Growers as a rale receive three cents a pound from packers for pecans. Other nuts, especially pecans, can be substituted for walnuts. Through advertis ing, the Association has built up a demand for walnuts. This could also be done in regard to other nuts, and then people might buy more of these nuts and less walnuts. Competition i*om other nuts will become more severe as time goes on, because of increased production of nuts in general. The United States Department of Agriculture states: The production of tree nuts in the United States has been steadily increasing for many years. In the five years, 1920-24, the combined produc tion of walnuts, pecans, almonds, and filberts averaged 46,500 tons; in 1925-29, 75,400 tons; and in 1930-54, 79,800 tons, The indicated 1955 production of these nuts totals 107,000 tens. This is a record figure. It is 54 per cent above the 1950-54 average, and 39 per cent above the 1954 production of 77,100 tens.26 Barring unforeseen abandonment of acreage or pulling of trees, the total United States acre age in tree nuts will Increase considerably during the next few years, and a total production figure in the neighborhood of 100,000 tens may be ex- _ pected to become typical rather than exceptional.2” All of the above nuts must be sold at some price or dumped; therefore, competition between different kinds of 2627 26. See Table I, Appendix, for amount of walnuts produced in United States. 27. Thorpe, C., "Thorne Makes Interesting Analysis of Mar keting Situation," Diamond Walnut Hews, March 1936, p. 1. 1 0 8 nuts will become more severe as time goes on. The kind of nnts a consumer buys depends to a large extent on which nuts he likes the best. To a large extent it is a matter of taste. Are the Results Obtained Under the Agreement Antisocial? Our nation m s founded from the beginning upon what is now known as individualism, The settling of the VJest V ■ - \ ’ l waex an outgrowth of the'desire for Individual liberty, / ! /"\ z ,, / ■ v freedom, ZaM ehterprise.28-89 The problems brought about by the enormity of the crops of walnuts produced in California, Oregon, and Wash ington have been a result of the individual freedom, which is the basic philosophy of our government* Because of the rapidly increasing acreage devoted to walnuts, the ever growing output of walnut crops has doubled several times in the process of the development of the walnut Industry In the last century. Due to this large increase in acreage, enormous output and enormous crops caused a surplus to exist in the walnut industry. This came about and was engendered by the individuals themselves who chose to plant, develop, and grow walnuts. This same group of individuals, in exercising the 88. Studebaker, John W., The American Way, p. 6. ' ' 89. Marshall, L. C., Industrial Society, pp. 1054-1036. 1 0 9 individual freedom and liberty granted to entrepreneurs under the Constitution, developed an industry of such large proportions that its production could not be sold to the consuming public at a profit* Those engaged in the indus try found it in a chaotic state of existence due to their inability to market a product which, because of their greed, had been overdeveloped, with a consequent supply greater than the consumptive demand. While it has been an inherent policy of American democracy for all citizens to have Individual liberty, freedom and choice of enterprise, it has also been a basic principle that the welfare of all citizens should be of paramount importance. Our lawmakers and citizens have always been opposed to legislation that favored the in dividual as against the majority of citizens, or legisla tion that tended to savor of class legislation* It has been proved that walnuts are a highly nutritive, valuable food. It is an acknowledged fact that, during the years of the current economic depression, there is a percentage of the population of the United States, particularly in the cities, which has a food supply not only greatly cur tailed but grossly inadequate* Yet, in the face of this situation, the Agricultural Adjustment Act made possible the consummation of the Marketing Agreement permitting the walnut growers and packers not only to set the price at which walnuts were sold, but also to regulate the flow no of walnuts to the domestic market for the purpose of maintaining that price. It has been the policy of the packers and growers, through the Walnut Control Board, to sell the surplus in foreign markets at a price that has been at tines only 50 per cent of the price charged to the American conswer. Legislation which even permitted the making of an agreement sanctioning such practices,, to say nothing of assisting in carrying such a program to completion, is generally contrary to the best interest of consumers. It is to the Interest of walnut consumers to pay prices suf ficiently high to keep an adequate supply of walnuts coming to the market. The orderly movement of goods to the market will xmdoubtedly reduce the cost to the pro ducer through the elimination of waste, and this reduced cost will be passed on to the consumer by means of lowered prices. Edwin 0. Hours® statest In so far as such movements result in more efficient handling of the product and the avoid ance of sending it into markets which are unable or unwilling to repay the costs incurred in getting it there, it would seem that there is no question as to the soundness of this move ment to bring the distributive process under the devices of orderly control.50 However, the above may not be the case. It Is the tendency of any group that gets control of the price that a commodity sells for hy controlling the amount of goods 50. Hourse, Edwin G., Marketing Agreements Under the AAAj p • 362• I l l that Is put on the market# to raise prloes. Mr. H. R. Wellman states: — -It Is becoming Increasingly apparent that when any group has the power to control the price of the commodity it sells. It tends to raise the price too high* On the one hand# high prices tend to retard consumption, and, ©n the other hand, they tend to Increase production, and the higher the price in relation to the prices of competing products, the more pronounced are these tendencies. This danger is not confined to voluntary programs, but may be equally serious, if not more serious, under marketing agreements and licenses, since the degree of control is greater.31 Again, in times of financial distress the consumer might be able to purchase walnuts for less than cost of production to the producer if the market was flooded with them. This would benefit the consumer for a short period of time, but in the long run the consumer might pay mere because growers would not only neglect the care of their walnut groves but might pull out a large number of their walnut trees. When times became better, the consumer sight not be able to buy walnuts for these reasons ex cept at very high prices. It takes a long time to pro duce walnut trees. Some economists are of the opinion that we should have a planned economy as it is impossible for the old economy 31 31. Ilourse, Edwin G., Marketing Agreements Under the AAA, p. 566, quoted from Wellman, H. K., /‘some Economic Aspects of Marketing Agreements for Fruit* and Vegetables," paper presented at annual meeting of Western Farm Economic Association, Corvallis, Ore., Aug. 12-13, 1935. 1 1 2 of laissez-faire to work,32 the main reason being given that the modern corporation destroys automat 1@ adjustments j beeause prices are fixed. On the other hand, many econo mists believe that a planned economy will destroy democracy and raise prices of goods to the ultimate consumer because of the lessened efficiency of the factors of production, / / and also because It takes away from the people not only / | the freedom of enterprise but also the right of personal \ liberty.33 Every society decides what la right or wrong. In a planned economy the supply of products put on the market would be regulated. Under a system based upon the assump tion that adjustments take place through the movement of prices, any such restriction of supply would be anti social. It must be remembered, however, that the move ment of prices has failed to bring about this adjustment, because there h a w grown up within the system such re strictions and barriers as price control by large com binations, immobility of factors of production, and fixed rates of interest, to name only a few of the most obvious ones. If it is Impossible to restore competitive conditions. It will then be necessary for some provision to be made, g2. Ware, C. F. and Means, G. C., The Modern Economy In Action, p. 18. 53. Brown, Dr. E. J., Head, Economics and Business Adminis tration, Unlv. of Ariz., Class Lecture in Laissez- faire vs. Planned Economy, July, 1936. ' 1 1 5 such as marketing agreements, to bring about a balaraie between agricultural and Industrial elements of our so ciety. The farmer*s costs, irrespective of the amount of production, are relatively fixed, while his income is relatively variable. 5. In the last analysis, the question as to whether or not a certain policy is antisocial does not belong to the realm of pure economies but to that of political economy except that it is the function of the economist to show how such a policy burdens the economic system in general.34 Briggs and Jordan state* -- it hoxvevor does not avoid such prob lems if their consideration is necessary to the scientific development of the subject.35 The writer believes that a discussion of the effects of marketing agreements on the growth and development of our economic system is essential to the scientific treat ment of the subject. Outlook and Permanent Solution S-1-. The question naturally arises as to whether or not the Walnut Control Board, established by the Marketing Agreement under the Agricultural Adjustment Act, will 34. Bourse, Edwin G.» Marketing Agreements Under the AAA, p* 366. 35. Briggs, Milton and Jordan, Percy* A Textbook of Economics, p. 3. • 1 1 4 adequately serve as a solution to the dilemma of the wal nut producer with an ever-increasing supply and a more or less stable demand; In a consultation with the officials of the California Walnut Growers Association, it was indicated that the officials Eire well aware of the impending problems of In creasing production. They state: — under current economic conditions, the people of this country are consuming all the walnuts they can afford at prices which will return a modest profit to economical producers. Unquestionably, consumption could be considerably Increased by a drastic decline In prices, but the above mentioned treatise30 clearly shows that such a reduction would merely result in lower returns to growers than they are currently re ceiving. As economic conditions in this country continue to Improve not to mention increase in population, we fully expect consumption of wal nuts to increase. When wo reach the next and highest peak of prosperity, doubtless walnuts will also reach a higher cmsmsption in thin country than ever before. Oh the other hand, wo must remember that the production of pecans is steadily increasing and they are walnuts chief competitor, not to mention the steadily In- . creasing importation of foreign nuts, particular ly Braslls and Caslmrs.3? ^ As the walnut Industry is faced with the problem of overproduction, surplus control is of vital importance. From the growers1 viewpoint, three things can be done. First, do nothing and let the law of supply and demand regulate prices; second, continue the program of keeping 36. See Treatise on pages 78 to 88. 37. Personal letter from Mr. A, W. Christ1©* Field Manager, California Walnut lowers Association, May 8, 1936. 1 1 5 the surplus of walnuts off the domestic market; and third, endeavor to bring about a balance between consumption and production by restricting production. The second method takes care of the surplus problem, but it dees not prevent the surplus from getting greater year after year. Hr. - - ... Frank Hayes, Chairman of the Surplus Control Committee, states: We would be immeasureably better off if we could solve our problem by the third method and bring about a balance between production and consumption. This would be an ideal condition worth striving for. It is not likely that we will ever attain it completely but every step we take in that direction will be well worth while and will to that extent lower the cost of sur plus control.38 In regard to surplus control, Mr, Goodspoed, Manager of the Walnut Control Board, states: Surplus control is a temporary expedient, but is not the permanent solution of the surplus prob lem. Removal of tnargihal39 acreage, at industry expense, and licensing of new plantings have been suggested. In the meantime we could well give further attention to industry advertising. It is to be hoped that the Agricultural Adjustment Administration will eventually alter its policy to include provisions for industry advertising in marketing agreements and licenses.*0 The Surplus Control Committee sent out questionnaires 58. Hayes, Frank, Chairman, Surplus Control Committee, Inter-County Walnut (Growers* Dept, of the Farm Bureau, "The Growers* Viewpoint on Control," Diamond Walnut Hews, March, 1936, p. 10. 39. Speaker must have meant sub-marginal instead of marginal acreage. 40. Radio talk by W. E. Qoodspeed, Manager of the Walnut Control Board, on station KPO, Los Angeles, California, March, 1935. e 116 to all the walnut growers In six southern comities in California to got the growers * reactions in regard to the control of production. Over a thousand replies were re ceived. Five hundred and six growers were in favor of the removal of trees. Two hundred and seventy-six were in favor of pulling trees if they received a reasonable sum In compensation. Two hundred and thirty-nine of the growers did not wish to have their trees pulled. This latter group was composed largely of growers whose land was located in districts whore subdivision was taking place, which land would comtand a higher sale price if the walnut trees were left standing. The two hundred and sixty-seven growers who expressed a willingness to have their trees pulled, produce about 10 per cent of the surplus, or 3,000,000 pounds. It was es timated that, if a careful survey was made, enough sub- marginal walnut trees could be found, the pulling of which would eliminate the present surplus problem. Of course, only submarginal trees would be pulled. If walnut trees return cost of production, they are valuable to the grower and to society. V/e must have marginal land in every line of agricultural production. It Is the submarginal land, or groves, which should be removed from production. Under competition it is the cost of production to the owners of marginal groves that determines prices in the long run. Competition constantly tends to eliminate the shbmarginal 1 1 7 producer. According to th® Agricultural Extension Service there are thousands of acres of submarginal trees.** This Is be cause of poor'location, wrong varieties, and adverse climatic conditions. It is estimated that walnuts sold on the domestic market bring about six- cents a pound more than those turned over tb the Walnut Control Board.*2 This would be an inducement for walnut growers to get rid of their poor trees. The submarginal grove neither bene fits the grower nor society, and there seems from the social point of view to be no logical excuse for its con tinued existence • The submarginal land that produces wal nuts might well be devoted to other crops which would furnish food or other necessities for society at large, and, at the same time, would return a profit to the individual grower. In regard to control of production. Hr. Christie states: While we do not expect anything to bo done along this line this year, there is a little pos sibility that next year the government may aid in the removal of some of the lowest producing and most unprofitable walnut groves in connection with its operation under the Soil Conservation Act.*3 41. Haynes, Prank, Chairman, Surplus Control Committee^ Inter-County Walnut Growers1 Dept, of the Farm Bureau, "The Growers* Viewpoint on Control," Diamond Walnut Hews, March, 1956, p. 10. 42. Ibid., p. 10. 4 3 . 'Personal letter from Mr. A. W. Christie, Field Manager, California Walnut (lowers Association, May 8, 1936. 1 1 8 The Walnut Control Board and Association believe that the permanent solution to the walnut growers* problem is not only in the control of surplus, the maintenance of prices, more effective advertising methods, increased per capita consumption, more Intensive development of foreign markets, improvements in grading or marketing methods, and the discovery of additional usos for by-products, but also that the real solution is to be found in regulated produc tion by the walnut growers themselves.44 44. Personal interview with Mr. A. W. C hristie, Field Manager, C alifornia Walnut Growers A ssociation, Los Angeles, December 14, 1035. "* “ 1 1 9 APFuron: TABLES Humber Page I. WAUTTO ACREAGE A11D PRODUCTION FOR CROP YEARS 1920.1934...... 120 II. CALIFORNIA W A m E raODUCTIOH (ORCHAI® HUH) , 1895-1928, TREND OF PROBWTIOH AND DEPAOTURE FROM TREND...... -181. III. SHELLED WALNUTS AVAILABLE FOR CONSUMPTION IN THE UNITED STATES, POUNDS...... 122 IV. EUROPEAN WALNUT PRODUCTION COMPARED WITH UNITED STATES PRODUCTION (ORCHARD RUN, POUNDS) ...... _____...... 125 V. PRINCIPAL COUNTRIES FROM WHICH WALNUTS ✓ ARE IMPORTED INTO THE UNITED STATES...... 124 VI. SUMMARY OF AVAILABLE COUNTY COST STUDIES SINCE PRESENT TARIFF WENT INTO EFFECT... 125 VII. MERCHANTABLE UNSHELLED WAOTUTS AVAILABLE FOR CONSUMPTION IN THE UNITED STATES (POUNDS)...... 126 VIII. VIII. ADVERTISING EXPENDITURES OF CALIFORNIA WALNUT GROWERS ASSOCIATION...... 127 120 TABLE I WAUTOT ACREAGE AND PRODUCTION FOR CROP NEARS 1920-1934 (Crop Year begins Oct. 1 of fcho year shown) California Oreg«a and Washington Total Acres, Orchard Rmi Orchard Acres, Non* Total Production Orchard Run Run Year Bearing Bearing Acreage (Pounds) 1920 58,963 14,000 72,963 42,000,000 400,000 42,400,000 1921 61,781 20,868 82,643 30,000,000 600,000 30,600,000 1922 65,530 21,546 87,076 54,000,000 700,000 54,700,000 1923 66,951 26,000 91,951 50,000,000 800,000 50,800,000 1924 68,578 29,084 97,656 45,000,000 800,000 45,800,000 1925 69,629 36,700 106,329 72,000,000 1,000,000 73,000,000 1926 71,779 43,079 114,858 50,000,000 1,600,000 31,600,000 1927 81,118 47,354 128,472 102,000,000 2,000,000 104,000.000 1988 84,934 47,351 132,295 50,000,000 2,600,000 52,600,000 1929 89,155 45,054 134,209 78,000,000 2,200,000 80,200,000 1930 97,453 40,111 137,564 60,000,000 1,300,000 61,300,000 1931 102,575 35,026 137,601 58,000,000 4,400,000 62,400,000 1932 107,198 27,596 134,794 88,000,000 5,600,000 93,600,000 1933 110,743 23,000 133,743 63,452,000 1,800,000 65,252,000 1934 115,000 16,900 129,900 83,113,500 4,405,400 87,518,900 NOTE: The foregoing statistics are for orchard run produc tion. In preparing for market, substantial quantities of culls are removed and the remaining walnuts are commonly described as Merchantable Walnuts. NOTE: No acreage records have been kept for Oregon and Wash ington, but the 1930 Census shows 11,594 acres in bearing and 12,533 mere# non-bearing in Oregon, The same census reported 25,295 walnut trees in Washington, or approx imately 1,000 acres additional. Sources: 1, 2 and 5— California State— Federal Crop Reporting ■ Service. . ■ - .. • : . 4- U. S. D. A. Yearbooks, except— 1933 and 1954 from California Walnut aeowers Association records. , 5- Estimated by North Pacific Nut Growers’Cooperative,Inc. 1 1. Views of the California Walnut Growers Association, Pro- 121 TABLE II .CALIFORNIA WALNUT PRODUCTION (ORCHARD RUN), 1895-1928, TREND OF PRODUCTION, AND DEPARTURE FROM TREND1 Actual Trend of Percentage which Year production* production** actual is of trend tons tons per cent*** 1895 3,385 4,127 82.02 1896 6,200 4,393 141.13 1897 4,610 4,678 98.54 1898 5,650 4,980 113.45 1899 5,580 5,302 106.24 1900 5,430 5,644 96.20 1901 6,900 6,009 114.82 1902 8,570 6,398 133.94 1903 5,500 6,811 80.75 1904 7,590 7,251 104.67 1905 6,400 7,720 82.90 1906 7,000 8,219 85.16 1907 7,400 8,750 84.57 1908 9,200 9,315 98.76 1909 9,350 9,918 94.27 1910 §,600 10,560 90.90 1911 12,500 11,220 111.40 1912 11,250 11,970 93.98 1913 11,350 12,740 89.08 1914 8,900 13,560 65.63 1915 14,825 14,440 102.69 1916 14,600 15,370 94.99 1917 16,500 16,370 100.79 1918 19,950 17,430 114.45 1919 28,100 18,550 151.48 1920 21,000 19,750 106.32 1921 19,500 21,030 92.72 1922 27,000 22,390 120.58 1923 25,000 23,830 104.90 1924 22,500 25,380 88.65 1925 36,000 27,020 133.23 1926 15,000 28,760 52.15 1927 51,000 30,620 166.56 1928 25,000 32,600 76.68 1929 34,710 1930 36,950 ' #*#-#'## * Kaufman, E. E., A California Crop Report for 1927. California Dept, of Agriculture Spec.Pub.86: 35.1928. ** The trend of production has shown a constant per centage Increase of about 6.5 per cent yearly. Actual calculations by method of least squares. The figures for 1929 and 1930 are not predictions. ^^Calculation by dividing actual by trend figures. 1, Erdman, il. k. and Fuhriir.an, V/. U'., Walnut Supply and Price Situation, p. 12. 1 2 2 TABLE III SHELLED WALNUTS AVAILABLE FOR CONSUMPTION IN THE .. UNITED STATES, POUNDS1 (Crop year beginning October 1) Total *i/.s. % of Tear U.S. Production Import Consumption Total •. 1924 1,356i694 23,365,023 24,721,717 5+49 1925 4,121,673 23,136,552 27,258,005 15.12 1926 1,867,822 20,879,378 22,747,200 8.21 1927 5,066,079 15,871,419 20,957,498 24.20 1928 2,798,374 17,935,833 20,734,207 13.50 1929 3,964,678 16,849,652 20,814,330 19.05 1930 2,332,726 16,326,879 18,669,605 12.50 1951 6,457,647 10,925,341 17,382,988 37.16 1932 4,966,721 5,559,502 10,526,223 47.18 1933 6,388,266 5,549,087 11,937,553 53.51 . Sources: Production--Estimated, considering known production by California Walnut Growers Association is 85^ of total United States production. Imports— United States Department of Commerce, Bureau of Foreign and Domestic Commerce. 1. California Walnut Growers A ssociation, Proposed Negotia tion of Foreign Trade Agreement with Italy, b p . p i t . P e 3iQ* 1 ^ ' ," 1 T' " " " '' * "r ,,'nT"'a " ' ~ ” " "1 " "~T TABLE IV EUROPEAN WALNUT PRODUCTION COMPARED WITH UNITED STATES PRODUCTION (ORCHARD RUN, POUNDS)1 Country 1929 1930 1931 1932 1933 France 103,730,000 66,550,000 103,730,000 65,450,000 62,700,000 Italy 35,200,000 28,050,OCX) 30,800,000 28,600,000 31,350,000 Rumania 12,760,000 23,760,000 33,000,000 13,200,000 19,184,000 Yugoslavia 11,000,000 17,050,000 22,000,000 19,690,000 8,800,000 Turkey 12,100,000 19^250,000 16,500,000 11,000,000 15,400,000 Hungary 4,620,000 9,020,000 9,020,000 3,300,000 3,300,000 Bulgaria 2,970,000 5,280,000 5,500,000 6,600,000 6,600,000 Total 1 I Europe 1 168,960,000 220,550,000 147,840,000 144,100,OCX) United States 80,200,000 61,300,000 62,400,000 03,600,000 65,252,OCX) U* S. # of European 43.97 36.28 28.29 63.31 45.28 Sources: - 1. European Production— Federal -State Market New Service-rForeign Walnut Reports No. 63 and No. 67# 1. California Walnut (lowers Association, Rpopoaed Negotiation of Foreign Trade Agreement with Italy, op, pit"*','.p. &4. . ' 1 2 4 TABLE 7 PRINCIPAL COUNTRIES FROM WHICH WALNUTS ARE IMPORTED INTO THE UNITED STATES’ (Five Year Averages, 1929-1933, In Pounds) » - i ' t Shelled Total Converted to Imports Unshelled Basis on Unshelled Comitry Unshelled Shelled on 3 to 1 Ratio Basis France 517,665 4,900,115 14,700,543 15,218,008 China 409,427 4,405,136 13,215,408- 13,624,835 Italy 2,567,230 241,967 725,901 3,293,131 Turkey • • • • 489,943 1,469,829 1,469,829 Rumania 28,526 253,076 759,228 787,754 Source: Computed from monthly statements. No. 3054, from United States Department of Commroe, Bureau of Foreign and Domestic Commerce. 1. California Walnut Growers A ssociation, Proposed Negotiation of Foreign Trade Agreement with Italy, OP. oit., p.~5E7------=c------i 1 2 5 TABLE VI SUMMARY OF AVAILABLE COUNTY COST STUDIES SINCE PRESENT TARIFF WENT INTO EFFECT1 Humber of grove records & . . , . » . > . . . . . 591 Humber of Annual Acre records ...... 8,296.85 Average yield per acre ...... 1,127.47 lbs. Average Investment per acre ...... $1,375.19 Per lb. Per acre Average cost of production (ex cluding interest on investment) $.0708 | 79.80 Average income .1000 112.70 Average gross profit .0292 32.90 Average interest on investment .... 2.39# Figures cover lake, Los Angeles, Orange, San Bernardino, Stanislaus, and Ventura Counties and all records available for crop years 1930 to 1933, inclusive. 1. California Walnut lowers Association, Proposed Negotiation of Foreign Trade Agreement with Italy, bp. cit., p. 28. 1 2 6 TABLE VII MERCHANTABLE IJNSHELLED WALNUTS AVAILABLE FOR CONSUMPTION IN THE UNITED STATES (POUNDS)! (All statistics ar© for crop years beginning Oct. 1.) 1 2 3 4 5 California Oregon and Total Domes- Total Production Washington tie Supply Imports Available 1912 21,894,000 (No 21,894,000 18,936,443 40,830,443 191322,378,354 Records 22,378,354 26,857,812 49,236,166 1914 17,778,000 Previous 17,778,000 21,085,972 38,863,972 1915 29,654,000 To 1920) 29,634,000 25,596,731 53,230,731 1916 28,680,000 ...... 28,680,000 25,575,783 54,255,783 1917 30,246,000 ...... 30,246,000 11,121,981 41,367,981 191839,714,520 ...... 59,714,520 6,555,452 46,259,972 191956,896,000 ...... 56,896,000 24,445,342 81,341,342 1920 39,994,000 340,000 40,334,000 17,424,544 57,758,544 1921 40,136,000 510,000 40,646,000 38,716,292 79,362,292 1922 50,021,400 595,000 50,616,400 19,089,919 69,706,519 1923 48,810,020 680,000 49,490,020 19,230,596 68,720,616 192442,810,740 680,000 43,490,720 30,487,561 73,978,501 1925 57,748,640 850,000 58,598,640 22,784,809 81,383,449 1926 23,480,000 1,360,000 24.340.000 24,190,416 49,030,416 1927 83,501,400 1,700,000 85.201.400 9,887,604 95,089,004 1928 42,122,000 2,210,000 44.332.000 13,916,306 59,248,506 1929 65,620,400 1,870,000 67.490.400 6,980,934 74,471,334 1930 49,254,000 1,105,000 50.359.000 3,553,589 53,912,389 1931 37,721,000 3,080,000 40,801,000 6,024,325 46,825,323 1932 74,819,567 5,920,000 78,739,567 1,811,360 80,550,927 1933 50,931,200 1,045,500 51,976,700 8,583 51,985,283 1934 70,646,500 3,744,500 74,391,100 Sources; 1. Records of the California Walnut Growers Association. 2. Supplied by North Pacific Nut Grower1 s Cooperative, except 1933 and 1934, from Agricultural Administration Act Walnut Control Board. 3. United States Department of Commerce, Bureau of Foreign and Domestic Commerco. 1. California v/alnut Growers Association, Proposed Negotia tion of Foreign Trade Agreement with Italy, op. cit. pelle ~ 1 2 7 TABLE VIII ADVERTISING EXPENDITURES OF CALIFORNIA WALNUT GROWERS ASSOCIATION1 1915 . I 5,179*08 1916 14,019.29 1917 541.10 1918 60,967.00 1919 120,471.32 1920 251,349.54 1921 163,557.34 1922 801,978.47 1923 127,741.75 1924 165,818.91 1925 160,461.99 1926 114,238.44 1927 525,817.32 1928 211,562.81 1929 315,340.87 1930 313,164.57 1931 247,851.96 1932 550,279.59 1933 250,589.10 1934 (Estimated) 240,000.00 Total $4,040,950.25 * 1. California Walnut Growers A ssociation, Proposed Negotiation of Foreign Trade Agreement with Italy, o p . clt. p. 15. " BIBLIOGRAPHY A. Books I • Byo f R# T • j Howltt p- lii• W* Applied Eeonomlcs. y. S.' Crafts arid Company, How York, 1934. 2. Curtis, Roy Emerson Trusts and Economic Control. McGraw-Hill Book Company, If. Y., 1931. 3. Jones, L. L. and Bertschi, L. B. General Business Science. - ^ Gregg Pub 1 ishing company, San FranciscCalif., 1950 4. Marshall, L. C. Industrial Society. University of Giiicago Press, 1918. 5. Morris, Robert T., Nut Growing. Macmillan Company, New York. 6. Hours©, Edwin G. Marketing Agreements Under The AAA. \ The Brookings institution, Washington, D. C., 1955. 7. Price, E. M. The Walnut. Jamss m . Anderson Co., Sacramento, California. 8. Studebaker, John W. The American Way. , McGraw-Hill Book Company, New York, 1935. 9. Ware, C. F. and Means, G. C . The Modern Economy in Action. Barcourt, Brace and Company, New York, 1936. B. B»kl®ts 1. Califoimia Wa Inut Growers As @eolation , Annual Report, Los Angeles,California, 1931. 2. California Walnut Growers Association, Annual Report, boa Angeles, California, 1932. 3. California Walnut Growers Association, Annual Report, bos Angolos, California, 1933. 4. California Walnut Growers Association, Annual Report, bos Angeles, California, 1934. 5. California Walnut Growrs Association, California Walnuts, liOSAngeies, 1931. 6. View of Callforala Walnut (Browers Association, Proposed Negotiation of Foreign Trade Agreement WIWTFaTy, — ;--- ^ ^ ------:--- Washington, D. C., Kerch 4, 1935. 7. View of Walnut Control Board, v Proposed Negotiation of Foreign Trade Agreement with Franco, "" ” ” " :. . Washington, 1). C., June 17, 1935. C. Bulletins 1. Batclmlor, b. D. Walnut Culture in California, bulletin 379, University of California, Berkeley, California, 192S* 2. California Agriemltural Extension Service, The 1934 Agricultural Outlook for California, Circular Bo, University of California, Berkeley, California, 1935. 3. California Agricultural Extension Service, The 1935 Agricultural Outlook for California, Circular yo/ University of California, Berkeley, California, 1934. 4. California Agriemltural E2*ensi 5. California Walnut Growers Association, Articles of Incorporation, Los "Angeles, Californla, April 1, 1926. 6. Erdr,an, H. E. and Fuhriman, W. U., University of California College of Agriculture, Walnut Supply and Price Situation, Bulletin 476, University of California, Berkeley, California, 1929. 7. Thorpe, Carlyle What Cooperation Has Done for 4,400 Walnut Growers, Los Angeles, California, 1924. ~ ' 8. The United States Department of Agriculture Adjustment Administration Marketing Agreement for Packers of Walnuts Grown in California, Oregon, and Washington, and amended license for same, Washington, D, C., 1934. 9. The United, States Department of Agriculture Adjustment Administration Marketing Agreement Regulating the Handling of Walnuts Grown In California, Oregon, and Washington, Washington, D. C,, 1935. D. Magazines 1. California Cultivator, Volume 1, 1877 Published weekly till IMS, now biweekly, Los Angeles, California. 2. California Walnut Growers Association, Diamond Walnut Hews, Volume 1, 1912, Published 4 to d times a year, Los Angelos, California. 3. Pacific Rural Press, Volume 1, 1871 weekly, Kan Francisco, California. E. Magazine Articles 1, Meals, F. C. "A Preview of Walnut Advertising for the 1954-35 Season," Diamond Walnut Hews, . August,' MM , " p. 6% . . 131 2. Thorpe, C. "Closing Payment on 1933 Crop to be made September 15,” Diamond. Walnut Hews, August, 1934, p • 1. F. Reports 1. Bur^ss, R. L« Questionnaire v/lth Answers, Agricultural Adjustment Administration, Washington, D. C., 1935. 2. Goodspeed, V/. E. Remarks Made to Control Board on Tuesday, lay" 7, 1935'. “ ' ^ Eos Angeles, California. 3. Walnut Control Board, Surplus as it Applies to the Grower, Released to Pacific Rural Press for Publieation, October 23, 1934. G. Personal Interviews 1. Batchelor, L. D. Professor of Orchard Manage3»nt in the Citrus Experiment station 'and 'Graduate "School^'of Tropical Agricultural and Horticulturist "in the Experiment station, kiveraicLQ, California, 1935. 2. Brown, E. P. Walnut Grower, t>an Bernardino, California, 1935. 3. Buvens, Margaret, Librarian, Citrus Experiment Stati 4. Allen, Irene Seeretary to Field Manager of California Walnut Growers Association, 193IH 5. Christie, A. W., Field Manager, California Walnut Growers Association, Los Angeles, California, "1935. . 1S2 6. Goodeall» Mrs. M. L. Walnut Grower, SanBernardlno, California, 1936. 7* Goodspood, 17. E., Manager, Walnut Control Board, Los Angolas, California, 1935. 8. Leonard^ Dr, J. L.s Chairman, Dept. of Economics, University of Southern California, . ; Los Angeles," . " - - 9. Searthout, Donald M., Assistant Field Manager, California Walnut Grov/ers Association, Los imgeies, California, . T ~ - : H. Exhibits :: 1. Walnut Cemtrol Board, / : Brief and Certain Exhibits Presented as Evidence at 1955 Walnut Hearing, ' ' Man Francisco, California. 50 34