What are agricultural cooperatives?

A 2002 USDA report entitled "Agricultural Cooperatives in the 20th Century" described agricultural cooperatives in the following glowing terms:

Cooperatives are user-driven businesses that have contributed greatly to the development of one of the world's most productive and scientific-based agricultural systems. They have played an important role in strengthening market access and competitive returns for independent farmers during the 20th century... Cooperatives have also played an important role in rural communities, where they are an integral part of the social fabric. They encourage democratic decision making processes, leadership development and education.

In Puget Sound Plywood, Inc. v. Commissioner, 44 T.C. 305, 306 (1965), the tax court articulated the standard legal definition of cooperatives:

Cooperative[s] [are] organization[s] established by individuals to provide themselves with goods and services or to produce and dispose of the products of their labor. The means of production and distribution are those owned in common and the earnings revert to the members, not on the basis of their investment in the enterprise but in proportion to their patronage or personal participation in it.

Cooperatives are businesses that are operated consistently with the following principles:

1. Subordination of capital -- In businesses organized as corporations, persons who invest money (i.e., capital) in the business receive profits from the corporation and control the corporation. At least in theory, investors (i.e., shareholders) control corporations. Investors vote annually for directors, and these directors oversee the corporation to ensure that the corporation is manages in the best interest of investors. In contrast, in businesses organized as cooperatives, the amount of money a person invests in the business determines neither the person's profits nor the person's control.


2. Democratic control by farmer members -- Each member of an agricultural cooperative has an equal voice in the control of the cooperative. Each has an equal voice in determining how the cooperative is managed.


3. Not for-profit -- Cooperatives are run for the benefit of farmer members and do not earn profits. Any income received by agricultural cooperatives in excess of costs is paid to farmer members, in proportion to the amount of business that each farmer member does with the cooperatives.

Puget Sound Plywood, 44 T.C. at 308. To form a cooperative, persons must file articles of incorporation and agree to comply with state requirements for cooperatives. Although state requirements for cooperatives vary by jurisdiction, the requirements are generally consistent with the three aforementioned principles.

There are a variety of types of agricultural cooperatives. Supply cooperatives are businesses that sell inputs (e.g., seed, fertilizer, etc.) to farmers. Marketing cooperatives are businesses that provide processing or packing services for farmers (e.g., produce milk, cheese, yogurt and other dairy products for dairy farmers). Marketing cooperatives can also advertise farmers' products and engage in collective bargaining on behalf of a group of farmers. There has been a trend of agricultural cooperatives merging and forming increasingly larger cooperatives that provide a variety of services for members (e.g., Cenex-Land O'Lakes, Dairy Farmers of America, and Farmers Cooperative Company).

Farmers decide to join agricultural cooperatives for several reasons. First, by joining agricultural cooperatives, farmers may be able to increase their profits. Without agricultural cooperatives, farmers have very little market power and receive only a small fraction of each dollar that consumers spend on food. With agricultural cooperatives, farmers can, in theory, acquire greater market power and receive a greater fraction of each dollar that consumers spend on food.

Second, by joining agricultural cooperatives, farmers can avoid dealing with for-profit input providers, packers, and processors. For-profit input providers, packers, and processors have substantially greater bargaining power than farmers and can often dictate the terms under which they will sell to or buy from farmers. Farmers will be more likely to receive fair terms when dealing with agricultural cooperatives than when dealing with for-profit corporations.

Third, by joining agricultural cooperatives, independent farmers ensure that they have willing buyers and sellers to do business with. Independent farmers often have a difficult time finding willing buyers and sellers with whom to conduct business. Willing buyers and sellers for independent producers are in short supply both because input providers, packers, and processors have been merging and because input providers, packers, and processors have been conducting an increasing proportion of their business with contract farmers.

Animal Welfare and Labeling

Professor Chen’s interesting and provocative posting, The Carnivore’s Dilemna deserves some additional comment. In this post, Professor Chen considered meat product labeling that provides consumers information about the methods by which the animals were raised, such as the new “animal compassionate” label. While one might quibble with the term compassionate, I suggest that these types of labels have arisen as a result of two trends moving rapidly in opposite directions.

On one hand, in recent years, animal husbandry practices in agriculture have followed a model that is increasingly cruel to the animals produced. The cost efficiencies promised by intensive animal production (disputed by Michael Pollan in Modern Meat and by Eric Schlosser in his recent article, Cheap Food Nation) have been used to move animal agriculture to an industrialized model that now produces most of the meat found in our grocery stores. Animals are produced with means similar to the industrialized production of non-living products with the driving emphasis being more product, faster and at less direct cost. Any person who has ever walked among chickens in a backyard flock and then entered a modern chicken house with 40,000 birds, each allotted .68 square feet or less of space understands the animal welfare problems. But, these are not the concern of the industrialized model.

On the other hand, as agriculture has gone in one direction, public concern about animal welfare has gone in the opposite direction. Americans express increasing concern about the well-being of animals. Readily apparent examples abound. We spend more on our pets, we enact stronger anti-cruelty statutes for animal abuse, and we even dare to regulate farming practices through referendum. Our concerns are fueled by scientific studies that show that animals have far greater intelligence, and more capacity to suffer than has ever before been realized.

In light of these conflicting trends, I suggest that the new labeling is not a plot hatched by farmers, but the natural result of consumer concerns about the direction that agriculture has taken. American farmers as well as policy-makers who have become accustomed to consumers who did not meddle in farm or food policy may well be caught off guard. As Professors Jeff Leslie and Cass R. Sunstein write in their article Animal Rights without Controversy, and discuss in the University of Chicago Law School blog, the labeling of meat products is an opportunity to “bring our practices and our moral judgments into closer alignment.” They argue that “consumers should be informed of the treatment of animals used for food, so that they can make knowledgeable choices about what food to buy.”

I, for one, see this as an exciting development for agriculture. It provides us with an opportunity to evaluate our food system openly and for the consumer of food to once again connect to the producer of food. Surely, together we can do better than we can do apart.

The carnivore's dilemma

Whole Foods Market, according to a report in the New York Times, will carry meat that is labeled "animal compassionate," in a bid to win business from consumers who want to to ensure that the animals they eat are humanely raised before slaughter. The Times accurately reports that this new label "comes as a growing number of retailers are making similar animal-welfare claims" such as "'free farmed,' 'certified humane,' 'cage free' and 'free range.'"

Who exactly is supposed to benefit from this shift in standards for livestock and poultry production? The animals themselves, to be sure. Among human beneficiaries, the picture gets a bit more complicated.

As with any other labeling regime, in agricultural law as elsewhere, maximizing consumer welfare through the disclosure of information is supposed to be the paramount interest. As Morgan Holcomb has noted on this forum, however, consumer interest rarely triumphs. Humane slaughter increases the price of food; the Times reports figures in the neighborhood of 30 to 40 percent. On the other hand, fully informed consumer choice, whether exercised in favor of lower price or in favor of some other benefit, is just that: the realization of consumer welfare.

I suspect that there is, as usual, a farmer-oriented interest at stake. On this model, consumer welfare is a secondary consideration (nice to have in the abstract, but readily sacrificed if producer welfare dictates a different direction in policy). In the interstices of Amy Broadmoore's insightful taxonomy of regulatory rationales in agricultural law lies the hint of the prime mover in American agricultural policy: avoiding excessive concentration and comprehensive vertical integration in agricultural production markets.

The instinct is simple: Holding down farm sizes and minimizing agribusiness influence should, ceteris paribus, maximize the number of entrepreneurial opportunities in production agriculture. But of all the weapons in agricultural law's regulatory arsenal, consumer-oriented labeling of meat, poultry, and eggs may be the least effective in structuring the industry.

The answer lies in basic agricultural economics. Like dairy production without rbST, avoidance of genetically modified seed, or organic production writ large, humane animal husbandry raises gross production costs. Preexisting economies of scale remain intact. To be sure, there may be learning curve advantages that favor specialists who have shunned conventional production techniques. But if anything the mass marketing of foods based on specific production techniques levels the learning curve, and over time the bigger players will regain or even strengthen their dominant position. Moreover, higher costs ex ante will put a premium on borrowing and leverage, and smaller producers and entrants may find that they have no option besides contract production. The only difference is the identity and perhaps the corporate philosophy of the purchaser: Whole Foods Market rather than, say, Cub Foods.

If organic production, integrated pest management, and free-range techniques are worth pursuing because they advance environmental goals or enhance consumer welfare, then the law has a meaningful role to play in ensuring the veracity of labeling that touts the use of these techniques. But smallness has no monopoly on virtue. The Mall of America is a leader in integrated pest management -- how else can the megamall control the insects that accompany all those plants and rule the atriums and corridors of the United States' largest enclosed shopping space? Gallo and other mass-market vintners have embraced organic viticulture.

Ultimately we can't, and shouldn't, expect alternative agriculture to change market structures that are mistakenly attributed to the adoption of conventional production techniques. Market dominance in agriculture, as everywhere else in the economy, arises from the relative cost of independent organization vis-à-vis vertical integration or coordination. Raising costs across the board, if anything, makes expansion and integration more rather than less attractive. In any event, economies of scale in agriculture are surprisingly modest, and few if any production markets approach the levels of concentration observed in other segments of the economy. Concentration in agribusiness is arguably a different matter, but again the law's concern often arises less from the sorts of microeconomic concerns that motivate antitrust and more from agricultural law's abiding interest in maximizing the economic independence and political power of farming's entrepreneurial class. Whatever the legitimacy of that interest, fancy labeling won't advance it much.

Purity At A Price

Europeans tend to pride themselves on the quality of their food. From the hundreds of cheeses that Charles De Gaulle thought made France ungovernable to the hundreds of obscure cuts of meat one can choose from in a German butchershop, European food and culture are often seen as inextricably linked. This commitment to artisanal food may go some distance towards explaining why the European Union ("EU") continues to fight to prevent imports of genetically modified ("GM") food.

Recently, discovery of LL Rice 601, a genetically-modified rice strain resistant to some herbicides, among rice destined for the EU has further harmed the image of food imported from the U.S.. Particularly damaging was the fact that the USDA had previously certified the rice to be non-GM. The EU now looks certain to raise the barriers to non-EU agricultural imports even further.

However, Europeans may find that their even more stringent import standards can be met by fewer and fewer countries with exportable food surpluses. The reason for this is that GM-crops are increasingly displacing non-GM crops not just in the U.S., Canada, Brazil, and Argentina - major sources of agricultural imports into the EU - but also in the Ukraine, Russia, China, and other developing countries to whom the EU might turn as replacement sources for wheat, rice, corn, and soy. In fact, the EU recently discovered another strain of GM-rice, BT63, in imported food. However, this time the U.S. was not to blame; this GM-rice came from one of the EU's fastest growing non-US food sources: China.

As the EU's options for non-GM food imports narrow further and further, prices of EU food will likely continue to rise. It will be fascinating to see just how much Europeans are willing to pay for their culture of pure food.

Not Exactly Ag Law

At the risk of entering the fray about breastfeeding (remember the brouhaha when the Health and Human Services ran the pro-breastfeeding commercials comparing the decision not the breastfeed with the log rolling while 9-months pregnant? If you don't, the transcript is available here) I couldn't help from commenting on this development.

Premature babies and critically ill infants in NICUs (like Minnesota's Children's) are more likely to thrive when they get breast milk. Babies whose moms can provide a full supply of expressed milk are the lucky ones (if "lucky" is an appropriate term for any baby in a NICU). For lots of reasons, though, some moms can't meet the demand. Babies whose moms can't fully supply breastmilk benefit enormously from donor milk.

Women have nursed each other's babies since, well, probably since women have nursed. In the past few decades, donor milk banks around the country have supplied NICUs with donor milk. The Human Milk Banking Association of North America quarterbacks the effort (see the website for a quick and interesting history of milk-banking in the US). These milk banks are not-for-profit. Lactating moms (who are screened) donate expressed milk, the milk is minimally processed, and dispensed by prescription to hungry babies around the country.

The University of Minnesota just announced (click for web press release) a collaboration with Prolacta Bioscience, which will set up milk banks around the country. The set-up seems a lot like the not-for-profit donor milk banks already in action. There's a critical difference, though. Prolacta Bioscience is a for-profit organization.

This leads me to a couple questions. But I'll start with a disclaimer. My hat is off to any organization willing to do research on human milk. Futher, to the extent Prolacta Bioscience gets more donor milk into the bellies of preemies who need it, great.

Now the questions: How much is Prolacta Bioscience making per ounce of milk? Shouldn't some of that be going back to the donor moms to compensate them for their time and energy? (Ask any nursing mom, it takes a hell of a lot of energy, not to mention time, to feed your own baby and pump besides.) My guess is that most donor moms are donating out of a sense of altruism. In fact, it looks like that's what Prolacta Bioscience is relying on. On the page of their website dedicated to donor information, they list as a benefit donor moms will receive: "Share in the satisfaction that your donation may save the lives of infants in need." How can you argue with that? At least, how can you argue with that without looking like a jerk? At the risk of looking like a jerk, I submit that the donor model works when the milk banks are not-for-profit. But it doesn't translate as well when the donors are the only unpaid leg of the stool. It doesn't translate as well when patients (more likely, insurers) are being charged upwards of $20 an ounce for milk that Prolacta got for free. (Donors also receive the necessary supplies, and the screening (which apparently involves a blood test) is free).

This issue came to my attention via an article in the Minneapolis Star Tribune. In the article, Lora Harding Dundek, the Fairview person in charge of family education and support services, is quoted as saying that donors aren't paid because "we don't want to provide any incentive to give us milk instead of giving their baby milk." Hmmm. Maybe. But couldn't that concern be taken care of in another way. Like, for example, careful donor screening? The donor mom profiled in the Strib article is an attorney, and mother of three. Somehow, I'm not real worried she'll be starving her baby for the extra dough.

As deep a concern, for me, is the attitude that breast milk needs to be improved upon. Dundeck is quoted on Fairview's website as follows: "By partnering with Prolacta, we can help make a superior human milk product." (Emphasis added). Wow. Sounds a lot like the rhetoric formula companies used to use to convince women to forego breastfeeding entirely. Of course, we now know they couldn't have been more wrong.

I understand that extremely low birth weight babies do need supplemental nutrients, and I understand, too, that breastmilk varies in caloric content as well as nutritional content. It would be tragic, though, if the idea of "improved" breastmilk interfered with women's feeding decisions for their full-term babies.

It's not exactly ag law, but to the extent readers of this Blog are interested in how we feed ourselves, I hope this is interesting as well.

Lynn A. Hayes Named Program Director of Farmers’ Legal Action Group

Farmers' Legal Action Group, Inc. (FLAG), recently announced that Lynn A. Hayes has become FLAG's Program Director. FLAG—a nonprofit law center that works on behalf of family farmers and rural communities—was founded in 1986 in response to the farm crisis then sweeping the country. Hayes was one of FLAG's founding attorneys.

During her tenure at FLAG, Hayes was lead or co-counsel in several nationally significant lawsuits, including Coleman v. Lyng, a national class action lawsuit against the Farmers Home Administration that resulted in an order that protected more than 80,000 farmers from foreclosures for 18 months; the Minnesota Milk Producers Association's challenge to federal milk marketing order provisions that discriminated against Midwest dairies; and the challenge of federal commodity checkoffs that was ultimately decided by the U.S. Supreme Court. Hayes has presented at hundreds of workshops for farmers and their advocates on agricultural credit, contract farming, environmental issues related to farming, commodity pricing, and antitrust issues.

"We are thrilled to have Lynn, one of the first and most tireless legal advocates for family farmers, back at FLAG and leading our legal work," said Susan Stokes, FLAG's Executive Director.

Hayes left FLAG in the spring of 2002 to move to Pittsburgh, Pennsylvania. After working remotely for three years for the Office of the Monitor reviewing African-American farmers' claims in the race discrimination case against USDA, Pigford v. Veneman, and acting as "Of Counsel" for FLAG, Hayes rejoined the organization as a Senior Staff Attorney for FLAG in February 2006. She resumed her previous position of Program Director on September 1.

Hayes received her B.A. in English from Coe College in Cedar Rapids, Iowa, and her J.D. from Columbus School of Law, Catholic University of America, in Washington, D.C.

FLAG works to support a strong agricultural economy that supports vibrant rural communities, protects the environment, and promotes a safe, diverse, and stable food supply. The American Agricultural Law Association (AALA) recently presented FLAG with a special award acknowledging their twenty years of service to the agricultural community.

How Long Can We Sustain Yield Increases?

Science Daily reported interesting findings from the University of Wisconsin-Madison regarding ealier crop plantings and future yields. Corn yields have increased precipitously over the past couple of decades. In the fifties, corn yields were something around seventy to eighty bushels an acre. As of 2003, average corn yields jumped to 142.2 bushels per acre. (Yield statistics from the Purdue University Department of Agronomy).

Lots of factors have contributed to the staggering increase, including earlier crop plantings. The U-Madison scientists warn, though, that farmers can't expect increasing yield attributable to earlier planting to continue indefinitely. Christopher Kucharik (terrestrial ecologist) warns that you can fool Mother Nature only so long, and suggests that there is a risk to getting a plant too out of sync with the seasonal climate it is accustomed to. Another interesting aspect of the study is that global warming, according to Kucharik, has less to do with the earlier planting than factors such as improved land management practices and advances in biotechnology.

The full article is available on-line via the Agronomy Journal.

Estate Tax Relief for Some Family Farmers: The Williamson Family Farm Story (cont.)

In Williamson v. Commission 974 F.2d 1525 (9th Cir. 1992), the 9th Circuit Court of Appeals held that the special use valuation provision did not apply to the Williamson family farm (described previously). The Court held that the special use valuation provision only applies if the heir to farmland is farming the farmland (or is engaged in another qualified use of the farmland). The special use valuation provision does not apply if the heir rents the farmland to someone else with a cash lease—even if that someone else is another family member. In the case of the Williamson family farm, the heir and the decedent's son, Beryl Williamson, was not farming the farmland. Instead, Beryl was renting the farmland to the decedent's grandson, Harvey Williamson.

Beryl argued that Congress had not considered the possibility that an heir to a family farm would rent the farm to another family member and that imposing lower estate taxes on the Williamson family farm was consistent with Congress’s purpose in enacting the special use valuation provision. The court rejected Beryl’s argument. The 9th Circuit emphasized that Congress had spoken, and the Court was required to enforce the statutory language as written. “Congress has drawn a line, permitting cash leases by some family members and not by others. To the extent Williamson argues that this line seems arbitrary and could just as easily have been drawn to encompass his situation, he is preaching to the converted. That we might disagree with a legislative distinction Congress has made…does not empower us to rewrite the statute…” The Court found that the statutory language suggested “deliberate congressional line-drawing, rather than mere legislative oversight.”

Beryl had originally paid the lower estate tax rate (based on the farmland’s special use value). After the 9th Circuit Court’s decision, Beryl was faced with having to pay an additional $42,026 in estate taxes (based on the farmland’s fair market value). Beryl had to make a choice between paying this $42,026 out of his own pocket or selling the family farm.

The 9th Circuit’s interpretation of the special use valuation provision was not entirely unreasonable. The purpose of the special use valuation provision is to protect family farmers, and Beryl, who was employed off of the family farm, was not a family farmer. Furthermore, by entering into a cash lease with Harvey, Beryl had not assumed any of the financial risks of farming. The 9th Circuit reasoned that Harvey, the person who had assumed the financial risks of farming, would not benefit if Beryl were permitted to pay lower taxes. This is not entirely true; Harvey would benefit indirectly because it would be more likely that Harvey would have the opportunity to farm—less likely that Beryl would sell the family farm—if Beryl were not charged an additional $42,026 in estate taxes. On the other hand, the 9th Circuit correctly noted that Beryl could avoid paying the higher estate tax rate by assuming some of the financial risks of the family farm. Beryl could take advantage of the special use valuation provision if he shared the financial risks of the family farm with Harvey by entering into a crop-share lease, rather than a cash lease, with Harvey.

While the 9th Circuit’s interpretation of the special use valuation provision did not generate absurd results, it was unclear whether the result in Williamson reflected congressional intent. It was unclear whether the special use valuation provision's text was the product of deliberate congressional line-drawing or legislative oversight.

Shortly after Williamson was decided, Congress attempted to overrule the 9th Circuit’s decision by passing the Revenue Act of 1992. Both the House and Senate passed the Revenue Act of 1992, but President Bush vetoed the bill. In 1997, Congress successfully overruled Williamson by passing the Taxpayer Relief Act of 1997. The Taxpayer Relief Act of 1997 added Section 2032A(c)(7) to the special use valuation provision, 26 U.S.C. § 2032A. Section 2032(c)(7) states: “A surviving spouse or lineal descendent shall not be treated as failing to use qualified real property in a qualified use solely because such spouse or descendent rents such property to a member of the family member of such spouse or descendent on a net cash basis.” 26 U.S.C. § 2032A(c)(7).

Under current law, heirs of family farms have several options if they want to take advantage of the special use valuation provision. They can 1) actively farm the family farm, 2) rent the farm to a family member, using either a cash lease or crop-share lease, or 3) rent the farm to someone who is not a family member, using a crop-share lease. Furthermore, if an heir inherits a family farm and does not want to farm or lease the farm, the heir can sell the farm to another qualified heir of the decedent, who can then take advantage of the special use valuation provision. Thus, under current law, heirs of family farms are not faced with having to sell their family farms to pay high estate taxes.

Estate Tax Relief for Some Family Farmers: The Williamson Family Farm Story

In 1976, Congress created an exception to estate tax rules -- special use valuation -- to enable family farmers to pass their farms from one generation to the next. Prior to 1976, heirs who inherited family farms were often forced to sell the family farms in order to pay high estate taxes. Family farms were (and are) often worth a lot of money because farmland, the main farm asset, is worth a lot of money. For family farms worth more than $600,000, heirs were required to pay between 37% and 55% of the farm’s fair market value in estate taxes. The modest incomes generated by family farms were often insufficient to pay these high estate taxes.

To address this threat to family farms, Congress enacted a special use valuation provision. The special use valuation provision permits persons who inherit family farms to elect to have estate taxes calculated based on the farmland’s value when used for farming rather than on the farmland’s fair market value (an estimate of the farmland’s value if used for its most profitable use). In exchange for paying lower estate taxes, persons inheriting family farms must agree to use the farms for farming purposes for at least 10 years.

In Williamson v. Commissioner, 974 F.2d 1525 (9th Cir. 1992), the 9th Circuit Court of Appeals was asked to decide whether the special use valuation provision applied to the Williamson family farm. The Williamson family farm seemed to be the type of farm that Congress intended to protect by enacting the special use valuation provision. The elder Williamsons, who initially owned and operated their family farm in Chippewa County, Minnesota, intended to pass on their farm to younger family members. While their son, Beryl Williamson, was not interested in farming, their grandson, Harvey Williamson, was interested in taking over the family farm. Thus, at some point, either when the elder Williamsons decided to retire or when the elder Mr. Williamson died, their grandson Harvey began operating the farm.

At the time of Mrs. Williamson’s death, Harvey was operating the family farm and leasing the land from Mrs. Williamson under a crop-share lease. The crop-share lease benefited both Mrs. Williamson and Harvey; the lease provided a source of retirement income for Mrs. Williamson and enabled Harvey to take over operational control of the farm before he had sufficient money to purchase the farmland. When Mrs. Williamson died, she devised her most valuable asset, the farmland from the Williamson family farm, to her only son, Beryl. Beryl continued to lease the farmland to Harvey (now with a cash lease), and Harvey continued to operate the farm.

In Williamson, the 9th Circuit held that the special use valuation provision did not apply to the Williamson family farm. Next, I’ll explain the court’s reasoning in Williamson and Congress’s response to the Williamson decision.

Compromise Results in Ineffective Corporate Farming Legislation

Due to their lack of clarity of purpose, state corporate farming laws are largely ineffective at accomplishing their goals. The goals of state corporate farming laws are numerous and include: 1) restricting absentee landownership and tenant farming, 2) stabilizing land prices, 3) restricting vertical integration and preserving markets for independent farmers, and 4) preventing direct competition from packers and processors engaged in agricultural production.

State corporate farming laws are ineffective at preventing absentee landownership and tenant farming. Farmers support permitting absentee landownership and tenant farming in at least some circumstances. Farmers want the freedom to pass on interests in farmland to their off-farm heirs when they die. Off-farm heirs who inherit farmland become absentee landowners. In addition, farmers want to be able to retire, continue to live on their farm, and rent their farmland to someone who lives off-farm (a “tenant farmer”) as a source of retirement income. To accommodate farmers’ interests, while corporate farm laws restrict absentee landownership by many corporations, they do not restrict absentee landownership by individuals, “family farm corporations,” or “authorized farm corporations.” Despite the goal of environmental interest groups to restrict absentee landownership, there has been a steady increase in absentee landownership and corporate farming laws have done little to counter this trend.

State corporate farming laws are ineffective at stabilizing land prices. Corporate farmers with sufficient financial resources want the option of purchasing farmland either to expand their operations or as a source of rental income. These farmers view the acquisition of farmland as a business investment. To accommodate the interests of these farmers, corporate farm laws permit “family farm corporations,” “authorized farm corporations,” and unincorporated farms with sufficient financial resources to acquire land. In addition, corporate farm laws permit individuals to acquire farmland with the intent to use the land for non-farm purposes. Despite the goals of small to mid-sized farmers of stabilizing land prices, corporate farm laws have done little, if anything, to reduce demand for farmland and to slow the trend of rapidly rising land prices.

State corporate farming laws are ineffective at restricting vertical integration and ensuring that independent farmer have a market for their products. While corporate packers and processors are prohibited from directly engaging in agricultural production, corporate packers and processors are free to enter into production contracts with producers that dictate the methods producers must use to produce agricultural products. Many agricultural sectors have become vertically integrated via the use of contract farming. Interest groups representing farmers are conflicted about whether to lobby for restrictions on contract farming. Some farmers, who value retaining independent control over their farms, oppose contract farming. As contract farming becomes more prevalent, independent farmers have fewer buyers willing to purchase their products. Other farmers, who value financial security, view contract farming as an opportunity. In exchange for giving up control over their farming operations, farmers who enter into production contracts are guaranteed income. Thus far, corporate farming laws have done nothing to restrict vertical integration via the use of contract farming.

State corporate farming laws do prevent direct competition from packers and processors in some agricultural sectors. However, interest groups representing the poultry, hog, and beef packing and processing industries have convinced state legislatures to adopt numerous corporate farming law exemptions. Nearly all corporate farming laws permit corporations to engage in poultry production. In addition, Oklahoma’s corporate farming law permits corporations to engage in hog production and dairy production. Okla. Stat. tit. 18, sec. 951 et al. Kansas’s corporate farming law permits corporations to engage in hog and dairy production, if counties vote in favor of these exemptions. Kan. Stat. Ann. sec. 17-5903 et al. Minnesota’s corporate farming laws permits corporations to engage in hog and beef cattle production, if 80% of the corporation’s revenue comes from agricultural production. Minn. Stat. sec. 500.24 et al. Corporate farming laws have been effective at preventing direct competition from packers and processors, but only in non-exempt sectors.

Paradoxically, compromise seems to explain both the success and failure of state corporate farming laws. State corporate farming laws may not have been adopted absent substantial compromise among interest groups. At the same time, the compromises embodied in these laws have made state corporate farming laws entirely ineffective.

Note: The argument that state corporate farming laws have been largely ineffective comes from Fred Morrison, State Corporate Farming Legislation, 7 U. Toledo L. Rev. 961 (1976). Interest group compromise seems to explain in part the ineffectiveness of corporporate farming laws, that Morrison identified.

Anti-Corporate Farming Law in Nebraska

Amy Broadmoore's post (immediately below) is quite interesting and I look forward to her further insights. Nebraska's version of that legislation (embodied in our State Constitution) is currently in the throes of litigation. Jones v. Gale is the case, and the district court recently ruled that it was unconstitutional on dormant-commerce-clause grounds and unlawful under the Americans with Disabilities Act. It is on appeal to the Eighth Circuit, and the oral argument (from late last month) can be accessed here. The case number is 06-1308.

Aside from its normative basis, the Nebraska provision is interesting for a couple of reasons. First, it was passed by ballot initiative. In the context of interpretation then, the intent that underlies the initiative is hard for a court to discern and a particularly weak basis upon which to argue for particular interpretations.

But, when it comes to discriminating against out-of-staters (one question dormant-commerce-clause doctrine raises), intent--specifically, discriminatory intent--is important. Thus, the second interesting point: the district court found that even if the provision's text did not discriminate against out-of-staters, it was unconstitutional because the ballot initiative language asked voters whether they wanted to ban non-Nebraska family farm corporations from owning farm land. Therein was the unlawful discrimination. The voters, of course, said yes. But the text of the provision does not really do that. It bans only non-family-farm corporations from owning agricultural land. So (among other things) discriminatory intent, without discriminatory language in the provision or discriminatory effects, has led to its downfall. And while intent or purpose may be relevant for some inquiries, it is not as helpful for others.

One other interesting fact about Nebraska's provision. When passed, there was little evidence of detached corporate ownership of agricultural lands in Nebraska. The political motivation for the initiative came from the landholdings of an insurance company that had acquired its interest through foreclosure (this was the late-80s after all). But significant questions exist concerning the necessity for this type of provision (aside from its purpose)--i.e., the real-world likelihood of what some would call "evil" corporate ownership.

The list of exceptions is quite interesting, and I look forward to Ms. Broadmoore's further comments.

Why support state corporate farming laws?

Compromises embodied in state corporate farming laws are responsible both for the success and failure of these laws. Compromises have resulted in corporate farming laws that garner the support of a variety of interest groups. Compromises have also resulted in corporate farming laws that lack a single, clear purpose and are largely ineffective.

State corporate farming laws are laws that generally prohibit corporations from farming or owning farmland, with some exceptions. State corporate farming laws permit corporations to farm and own farmland if they qualify as either a “family farm corporation” or an “authorized farm corporation.” While the definitions of these terms vary by state, a “family farm corporation” generally has shareholders who are related to one another and at least one shareholder actively engaged in farming. An “authorized farm corporation” has a limited number of unrelated shareholders (e.g. five) and at least one shareholder actively engaged in farming. Roughly eleven Midwest states have adopted corporate farming laws. Interest groups support corporate farming laws for a variety of reasons.

Environmental interest groups support corporate farming laws because these laws tend to restrict absentee landownership. Absentee landowners, according to some environmentalists, make less-sustainable management decisions than do on-farm landowners.

Large corporate farmers, who wish to retain independent control over their farming operations, support corporate farming laws because corporate farming laws restrict vertical integration. By preventing corporate buyers from engaging in farming, corporate farming laws force buyers to purchase agricultural products from independent producers and, thereby, preserve markets for independent farmers.

Small unincorporated farmers, like large corporate farmers, support corporate farming laws because these laws help preserve markets for independent farmers. In addition, small unincorporated farmers support corporate farming laws because these laws reduce direct competition from corporate farms. Lastly, corporate farming laws are thought to stabilize land prices. Small unincorporated farmers are interested in stabilizing land prices because rapidly increasing land prices have made it impossible for these farmers to purchase additional farmland. Corporate farming laws theoretically help stabilize land prices by preventing corporations from bidding on farmland (i.e. by reducing demand for farmland).

All interest groups purport to support corporate farming laws because corporate farming laws protect “family farms.” However, each interest group seems to have a different view of what the essential characteristics of family farms are.

Environmentalist View – Family farms are farms owned and operated by the same person and passed from one generation to the next. Family farmers tend to make sustainable management decisions because family farmers have an interest in preserving resources for future generations.

Large Independent Corporate Farmer View – Family farms are farms owned and managed by families. The fact that a farm expands, hires farm laborers, or becomes a corporation or limited liability company (L.C.C.) does not undermine the farm’s family farm character.

Small Independent Unincorporated Farmer View – Family farms are relatively small farms, where all farm labor is provided by the farm family. Family farms are organized as sole proprietorships or partnerships between family members.

Corporate farming laws, like other pro-family farm laws, garner support from persons with all three views. Interest groups support corporate farming laws because each interest group believes that protecting "family farms" will tend to advance one or two of its members' goals. The goals of persons who support corporate farming laws are numerous and include: 1) restricting absentee landownership and tenant farming, 2) stabilizing land prices, 3) restricting vertical integration and preserving markets for independent farmers, and 4) preventing direct competition from packers and processors engaged in agricultural production.

Next, I will consider why corporate farming laws have been largely ineffective at achieving these goals.

Briefly Noted: "Eat Here: Reclaiming Homegrown Pleasures in a Global Supermarket"

It's not every writer who can get away with calling downtown Lincoln, Nebraska "hip," but Brian Halweil pulls it off. Halweil, a senior researcher at the Worldwatch Institute, studies the social and ecological impact of our food supply.

His recent book, "Eat Here: Reclaiming Homegrown Pleasures in a Global Supermarket" (2004, 236 pp.) argues that eating local "is better for your health, for farmers, and for the planet." (vii.) Halweil describes the economic, environmental, and health problems associated with agribusiness. He sees a solution to the broken agricultural system in the burgeoning local food movement, which shortens the distance between farmers and the people who buy their food. Halweil argues that the local food movement will benefit family farms, and offer substantial health, safety, and environmental advantages.

The Fuel Cost of Fuel?

Some attention has been paid of late to the fuel cost of food. By this measure, critics mean to draw attention to the number of fossil fuel calories consumed not only in producing the food (primarily in the form of fossil-fuel based fertilizer) but also the fuel costs of getting food from the fields of Iowa, or California, or Argentina, to consumer's plates. The local food movement emphasizes the fuel cost of food as a way to encourage folks to eat locally.

University of Minnesota scientists recently took a different angle, and took a stab at calculating the fuel cost of fuel. Specifically, the U of M researchers considered whether producing ethanol from corn requires more energy to produce than it delivers. (If so, we should just feed it to President Bush, and forget about corn as a source of ethanol).

Good new (initially anyway) for ethanol boosters. The Minnesota researchers determined that ethanol produced from corn delivers 25% more energy than it costs to produce. The good news, though, is tempered by the reality that even if all of our corn crop was dedicated to ethanol, we would offset only about 12% of our gasoline usage. As recent commentators have pointed out, switchgrass or mixed prairie grasses offer a better alternative. Since both can grow on marginal land with minimal fossil fuel-based inputs.

U of M researchers included Jason Hill, David Tilman, Stephen Polasky, Douglas Tiffany and Erik Nelson.

What, if Anything, Makes Agriculture Unique?

Previously, I posed the following question: How can we justify according agriculture special legal treatment? What, if anything, makes agriculture unique? Today, I offer one answer.

I believe that the following characteristics make the agricultural industry unique:

1. Farmers’ Lack of Market Power

Farmers have very little economic power in comparison to powerful packers, processors, retailers, and input providers. In 2000, the nation’s four largest beef packing companies controlled 81% of the U.S. cattle slaughtering market, while the nation’s four largest hog processing companies controlled 56% of the U.S. hog processing market. Joseph Weber, Will Agriculture Plow Under the Family Farm?, Business Week, October 23, 2000. Packers and processors exercise oligopoly power and can lower prices paid for agricultural products below economically efficient price levels. Input providers exercise oligopsony power and can raise prices charged for agricultural inputs above economically efficient price levels. Farmers, who have very little market power, must accept the prices and terms offered by buyers and input providers. These market failures warrant government intervention.

2. Environmental Harm Caused by Agricultural Production

Agricultural production causes substantial environmental harm. Agricultural production is the primary source of nitrogen and phosphorus to terrestrial and aquatic ecosystems. Stephen R. Carpenter et al., Nonpoint Pollution of Surface Waters with Phosphorus and Nitrogen, 8 ECOLOGICAL APPLICATIONS 559 (1998). Excess nitrogen and phosphorus harms natural ecosystems by causing algal blooms, depleting oxygen levels, causing fish kills, and reducing plant diversity. Id. Agricultural production is the primary source of fertilizers and pesticides to groundwater and surface water. David Tilman et al., Agricultural Sustainability and Intensive Production Practices, 418 NATURE 671 (2002). High-density animal production operations increase livestock disease incidence, increase the emergence of new, often antibiotic resistant diseases, and increase air and water pollution create by animal wastes. Farmers generally do not consider the costs imposed on society by emitting pollutants and causing other environmental harm. Absent government regulation, agricultural pollutants and other negative externalities will be overproduced. Id.

3. Farmland’s Potential to Provide Public Goods

Farmers manage 52% of land in the United States—roughly 1 billion acres. As our number one land stewards, farmers have the opportunity to produce ecological services for society (i.e. “public goods”). Farmers who adopt land uses that provide flood control (e.g. planting buffer strips and terracing) and create wildlife habitat (e.g. planting cover crops and maintaining wetlands) provide valuable ecological services for non-farmers. Farmers who adopt farming method that increase soil fertility (e.g. using no-till and crop rotations and planting cover crops) and maintain health insect populations (e.g. planting buffer strips and not over applying pesticides) produce valuable resources that future generations will need to produce food. Farmers lack the economic incentives to provide flood control, maintain wildlife habitat, increase soil fertility, prevent soil erosion, and maintain healthy insect populations at economically efficient levels (levels that would maximize social welfare). Absent government regulation, these public goods will be under produced.

4. Unstable Agricultural Prices

Agricultural prices are relatively unstable in comparison to the prices of other goods. This instability is caused by several factors: crop yields fluctuate wildly in response to climate conditions, demand for agricultural products is inelastic, supply of agricultural products is inelastic, and globalization has led to agricultural prices fluctuating in response to global economic recessions, droughts in Brazil, and other tumultuous events. Market instability causes hardship for farmers and arguably reduces investment in new technology below economically efficient levels. Economic downturns cause farmers to go out of business. While economists would generally argue that society as a whole benefits when farmers go out of business in response to lower agricultural prices, this assumes that there are no barriers to entering the market. In fact, it is very expensive for new farmers to enter the market. Farmers are not able to reenter the market during economic upswings.

5. The Gap between Wealthy and Poor Farmers

The farm sector today is characterized by inequitable distribution of wealth. A small fraction of farmers are very wealthy and own substantial amounts of land, while most farmers earn small farm incomes and own little or no land. Mid-size farmers have steadily been going out of business.

6. Agriculture’s Role in Our National Heritage

The agricultural industry is unique because agriculture played a central role in our national heritage. It is arguably worth supporting farming and rural communities because farming and rural communities have value beyond the value of the food and other agricultural products produced. Farming and rural communities are a part of our national heritage and provide a rural life style (a sense of community, a connection to the land, etc.) that some people prefer to the city life style. Promoting farming and rural communities could be viewed as akin to city or regional planning—but at the state or federal level.

7. Public Health Concerns Associated with Producing Food

Lastly, agriculture is distinct from other industries because the main product produced is food. More stringent government regulation of agriculture is warranted to protect public health.

I do not believe that agriculture’s unique characteristics justify all or substantially all of the special legal treatment that agriculture has received. Many agricultural policies seem misguided. However, agriculture’s unique characteristics seem to justify some special legal treatment for agriculture.

I am curious to hear other thoughts on this subject. Are there compelling reasons to treat the agricultural industry differently from other industries? Or, should the law treat the agricultural industry the same as other industries?

Seminar proposal: The Potable Constitution

Looking for a new seminar? Or perhaps just some ways to jazz up your current constitutional law class? Even if you seek nothing more than a little humor and stimulation as you exercise your 21st amendment rights, you needn't look further than the Jurisdynamics Network. Herewith a modest proposal for a new offering.

The Potable Constitution

Malt does more than Milton can
To justify God's ways to man

A.E. Housman, "Terence, This is Stupid Stuff"

According to Richard Hofstadter, the United States was born in the country and has moved to the city. As a result, the quest to divine meaning from the United States Constitution might more profitably speak of farmers' intent rather than framers' intent. This article proposes a seminar on The Potable Constitution, a tour of American constitutional law using naught but cases involving liquor, beer, wine, and milk.

Here's the syllabus. And when you've drunk your fill, perhaps you might care to go around the world in eighty centiliters.

Bottoms up!

Cross-posted from Jurisdynamics.

Agriculture’s Special Legal Treatment

The law treats the agricultural industry differently from other industries in many respects. The federal government spends billions of dollars subsidizing farmers, when persons engaged in other professions are permitted to go out of business without any financial assistance. State laws prohibit corporations from farming, while corporations are permitted and encouraged to engage in other commercial activities. Furthermore, numerous laws, including labor laws, intellectual property laws, and tax laws, include agricultural exemptions.

How can we justify according agriculture special legal treatment? What, if anything, makes agriculture unique?

Tomorrow I will take a stab at identifying the most compelling arguments for according agriculture special legal treatment. I am interested in considering whether good reasons exist for treating the agricultural industry differently from other industries. I will not consider the related issue of which reasons have in fact led legislatures and courts to accord agriculture special legal treatment.

Final Thoughts on Interpretive Challenges Created by Changes in the Structure of the Agricultural Industry

    

Senators Arthur Capper and Andrew Volstead

In an ideal world, Congress and state legislatures would amend statutes such as the Capper-Volstead Act, the agricultural exemption to the National Labor Relations Act, and others to keep up with changes in the agricultural industry. Congress and state legislatures would define terms such as “farming,” “agriculture,” and “agricultural production,” so that courts would not be left with the task of determining the meaning of these ambiguous terms.

Given that Congress has failed to amend several agricultural statutes to keep up with changes in the agricultural sector, courts will continually be faced with whether they should update these statutes. I believe that the answer will vary by context. The answer will depend on the statutory scheme at issue and whether a universally accepted public policy exists that suggests that a particular amendment to a statute is in order.

With both the zoning statute at issue in Farmegg and the federal antitrust statutes at issue in National Broiler, I would interpret the meaning of “agricultural production” narrowly. In both cases, a narrow interpretation of “agricultural production” is consistent with my understanding of the purposes of the statutes and the intentions of the statutes’ authors. In both cases, courts were asked to interpret agricultural exceptions to general rules, and exceptions are generally interpreted narrowly to avoid swallowing the overarching rules. Furthermore, while courts are commonly called upon to update laws (for example, to update common law causes of action), courts generally lack the competence necessary to resolve the complex issues raised by changes that have occurred in the agricultural sector.

Lastly, with regards to the zoning statute at issue in Farmegg, there is a third alternative besides having the legislature or judges update the zoning statute. County zoning boards can and regularly do update zoning ordinances. While county zoning boards are sometimes criticized for making biased or arbitrary decisions, they are more knowledgeable about zoning ordinances and agriculture and more democratic than courts. Courts should interpret agricultural exemptions to zoning statutes narrowly to give county zoning boards flexibility.

Agricultural law and the law of universal service

This New York Times article on federal subsidies for rural commercial aviation serves as a reminder that the law of universal service, sprawling as it is, properly constitutes a branch of agricultural (or rural) law in its own right.

Agricultural law is rightly described as a body of legal exceptions. Boondoggles for the boonies thus beg the question: Are these benefits -- and the vast legal apparatus needed to sustain them -- even remotely justifiable in a world of scarce resources and urgent needs?

Exempting agriculture: The story of National Broiler Marketing Association v. United States

National Broiler Marketing Association v. United States, 436 U.S. 816 (1978), illustrates two possible approaches for interpreting the meanings of ambiguous terms such as “farming” and “agricultural production.” The issue in National Broiler was whether National Broiler Marketing Association (NBMA) members were “persons engaged in the production of agricultural products” and thereby exempt from federal antitrust regulations. NBMA members were processors and producers of broiler chickens, who employed independent contractors to raise the broiler chickens.

It was unclear whether the agricultural exemption from federal antitrust regulations applied to NBMA members for a couple of reasons. First, NMBA members managed the production of broiler chickens but were not involved in the day-to-day operations of raising the broiler chickens. It was unclear whether NMBA members were sufficiently “engaged in the production of agricultural products,” given their lack of day-to-day involvement.

Second, NBMA members managed both the production and processing phases of producing broiler chickens for market. It was unclear whether the agricultural exemption applied only to persons solely engaged in agricultural production or whether the exemption also applied to persons engaged in both agricultural production and processing.

Both the majority and dissent in National Broiler recognized that the meaning of the term “agricultural production” was ambiguous. The National Broiler majority engaged in static interpretation, turning to the intent of the original authors to resolve this ambiguity. The intent of the original authors, according to the majority, was to protect individual farmers -- not processors:

Farmers were perceived to be in a particularly harsh economic position. They were subject to the vagarities of market conditions that plague agriculture generally, and they had no means individually of responding to those conditions….Farmers were seen as being caught in the hands of processors and distributors who, because of their position in the market and their relative economic strength, were able to take from the farmer a good share of whatever profits might be available from agricultural production. By allowing farmers to join together in cooperatives, Congress hoped to bolster their market strength and to improve their ability to weather adverse economic periods and to deal with processors and distributors.

National Broiler, 436 U.S. at 825-26.

In fact, according to the majority, Congress “roundly rejected” “several attempts” to expand the agricultural exemption to include some processors as well as farmers. Id. at 826. The National Broiler majority held that those NBMA members who were processors as well as producers of broiler chickens were not covered by the agricultural exemption from federal antitrust laws. That is, these NBMA members were not “persons engaged in the production of agricultural products” as this phrase was used in the statute. To interpret the agricultural exemption more broadly would conflict with the original authors’ intent to not protect processors.

In contrast, the National Broiler dissent engaged in dynamic interpretation, focusing on what seemed fair and workable in 1978 and was consistent with the statute’s purpose. The National Broiler dissent emphasized that the agricultural industry had changed substantially since the 1920s and asserted that the agricultural exemption should be interpreted in light of the changed economy. Specifically, the dissent noted that by 1978 processors were in a weak economic position in relation to economically powerful buyers (large retail chains and institutional food outlets).

Thus, the National Broiler dissent concluded that it was fair and workable to extend the agricultural exemption to protect persons who were processors/producers as well as persons who were solely producers. The dissent asserted that this interpretation was consistent with the purpose of the agricultural exemption, which the dissent identified as protecting all agricultural sellers (both individual producers and processors/producers) who were operating in a buyers’ market with boom and bust cycles.

The disagreement between the majority and dissent in National Broiler illuminates the main issue facing courts when interpreting terms such as “farming” and “agricultural production”: whether courts should update statutes to reflect changes in the structure of the agricultural industry when Congress has failed to do so. Neither the majority’s nor the dissent’s resolution of this issue feels satisfactory. The majority’s static interpretation approach is unsatisfactory because the public policies of 1922 legislators are unlikely to generate the best approach for regulating agriculture today, given the dramatic changes that the agricultural industry has undergone since 1922. On the other hand, the dissent’s proposal to extend the agricultural exemption is even more troubling. The dissent proposes amending the federal antitrust laws to accord with its own public policy preferences. The dissent is unconstrained by the statutory context in which the phrase “persons engaged in the production of agricultural products…” is used, the legislative history of the statute, past precedent, or the purpose of federal antitrust legislation.

Farmegg's Fate

As discussed earlier on Agricultural Law, the Iowa Supreme Court, in Farmegg Products, Inc. v. Humboldt County, 190 N.W.2d 454 (Iowa 1971), held that raising approximately 80,000 chicks for 22 weeks in two large confinement buildings was not a “use for agricultural purposes.” The Iowa Supreme Court interpreted the term “agricultural” in an Iowa zoning statute as having the same meaning as the term “agricultural” in the federal Fair Labor Standards Act (FLSA).

Prior to Farmegg, the U.S. Supreme Court had announced the following test for determining whether labor activities were “agricultural” and hence exempt from FLSA regulations: “Whether a particular type of activity is agricultural depends, in large measure, upon the way in which that activity is organized…The question is whether the activity in the particular case is carried on as part of the agricultural function or is separately organized as an independent productive activity.” Farmers Reservoir & Irrigation Co. v. McComb, 337 U.S. 755 (1949). In Farmegg, the Court held that the Farmers Reservoir definition of “agricultural” should be used to determine whether land uses were agricultural and hence exempt from county zoning ordinances. For 24 years, Farmegg remained the law in Iowa.

In 1996, the Iowa Supreme Court finally overruled Farmegg in Kuehl v. Cass County, 555 N.W.2d 686 (Iowa 1996). The Court noted that it had erred in Farmegg when it adopted the Farmers Reservoir definition of “agricultural”. “In reconsidering this issue,” said the Iowa Supreme Court in Kuehl, “we are satisfied that defining ‘agricultural’ as an occupation is an entirely different matter than attempting to define agricultural uses of buildings and other structures for purposes of zoning laws.”

While Farmegg is no longer good law, it remains an entertaining read. More importantly, Farmegg provides an example of a court's early attempt to grapple with the issue of whether changes in the structure of the agricultural industry should influence how courts interpret the term "agriculture."

Minnesota's unsung Nobel laureate

As Jurisdynamics has noted, it's Nobel Prize season. The roster of Nobel laureates for peace includes one figure who should be known to all readers of Agricultural Law. Indeed, he shares an institutional affiliation with two of the authors of this forum. And yet, even though this heroic figure is still alive and has a building on campus named in his honor, I would wager that a substantial majority of faculty members at the University of Minnesota would not recognize his name.

I speak, of course, of Norman E. Borlaug, the 1970 recipient of the Nobel Peace Prize. His accomplishment? Developing and deploying high-yield, disease-resistant cereal strains in the neediest corners of the world and thereby providing, in his words, "a temporary success in man's war against hunger and deprivation."

Norman Borlaug should be a hero and an inspiration to all of us who study and care about agriculture -- and, for that matter, to anyone who eats.

Introducing Guadalupe Luna

Agricultural Law welcomes Guadalupe Luna of the Northern Illinois University College of Law as a guest blogger. Guadalupe's primary areas of teaching, in addition to agricultural law, are property, jurisprudence, and remedies. Before joining Northern Illinois, she practiced as a litigator area for four years in San Antonio, Texas, and served as a law clerk for the Honorable Theodore McMillian, United States Court of Appeals for the Eighth Circuit. While in law school, she was editor-in-chief of Law and Inequality: A Journal of Theory and Practice.

Please join Agricultural Law in welcoming Guadalupe Luna.

Landmarks in Agricultural Law: Farmegg Products v. Humboldt County

Farmegg Products, Inc. v. Humboldt County, 190 N.W.2d 454 (Iowa 1971) illustrates two possible approaches for interpreting the meaning of ambiguous terms such as “farming” and “agricultural production.” The issue in Farmegg was whether Farmegg Products’ proposed land use—raising approximately 80,000 chicks for 22 weeks—was a “use for agricultural purposes” and thereby exempt from state and county zoning regulations. According to past precedent, “use for agricultural purposes” meant “use for agricultural production;” it did not include use for input manufacturing, packing and processing.

It was unclear whether Farmegg Products’ proposed land use was a use for agricultural production for a couple of reasons. First, Farmegg Products’ proposed operation differed from traditional farming operations in size and physical structure; chicks would be raised in cages suspended from the ceilings of two enormous buildings. In 1947, when the Iowa legislature passed legislation exempting “buildings . . . which are primarily adapted . . . for use for agricultural purposes” from all county zoning ordinances, Iowa Code § 335.2, legislators were certainly not envisioning enormous, factory-like facilities like the one proposed by Farmegg Products. Second, the 22-week chicks that Farmegg Products planned to produce were arguably not a final agricultural product but rather an input for an egg-laying operation located at another site.

To determine the meaning of “use for agricultural purposes,” both the majority and dissent in Farmegg looked for the “clear” meaning of the term “agricultural purposes” in dictionary definitions and past precedent. After citing several dictionary definitions of agriculture and farming, the Farmegg majority adopted a definition of agriculture that had been announced by the U.S. Supreme Court in Farmers Reservoir & Irrigation Co. v. McComb, 337 U.S. 755 (1949).

Farmegg adopted the following rule of law from Farmers Reservoir for determining whether a particular activity is “agriculture”:

“Whether a particular type of activity is agricultural depends, in large measure, upon the way in which that activity is organized . . . . The question is whether the activity in the particular case is carried on as part of the agricultural function or is separately organized as an independent productive activity.”

Farmegg, 190 N.W.2d at 458 (citing Farmers Reservoir & Irrig. Co. v. McComb, 337 U.S. 755, 760-61 (1949)).

In Farmers Reservoir, the U.S. Supreme Court had been interpreting the Fair Labor Standards Act. The Farmegg majority assumed that the term agriculture has a single meaning when used in various statutes. The definition of agriculture from Farmers Reservoir did not decide the case in Farmegg. Ultimately, the majority’s decision turned on its own assumptions about what constitutes “ordinary farming operations.” The Farmegg majority held that Farmegg Products’ proposed land use was not a “use for agricultural purposes” because Farmegg Products’ proposed factory-like methods for producing 22-week chicks did not fall within the majority’s understanding of “ordinary farming operations.”


Iowa Judicial Branch Building, Des Moines, Iowa
In contrast, the Farmegg dissent cited dictionary definitions of agriculture and evidence that agricultural production in 1971 included production in very large production facilities. The Farmegg dissent asserted that “agricultural production” means all activities between hatching chicks (i.e. producing inputs) and slaughtering pullets (i.e. packaging or processing agricultural products). Purportedly applying this definition, the Farmegg dissent concluded that Farmegg Products’ proposed land use was a “use for agricultural purposes.” The dissent found that raising 22-week chicks was a step in the production of an agricultural product rather than the production of an input.

Both the majority and dissenting opinions in Farmegg are fundamentally flawed because the authors failed to acknowledge that changes in the structure of the agricultural industry have rendered the meaning of the term “agricultural purposes” ambiguous. Both opinions turn on unexamined policy determinations. The majority opinion is based on a public policy of regulating very large, factory-like agricultural production facilities, so that such facilities do not become nuisances. The dissenting opinion is based on a public policy of promoting expansion of agricultural production facilities, to enable producers to maximize economic efficiency.

It seems important for courts to acknowledge that changes in the agricultural industry have rendered the meanings of terms such as “farming” and “agriculture” ambiguous. Rather than adopt definitions based on unexamined public policy determinations, courts should determine the meanings of these ambiguous terms by considering the statutory contexts in which the terms are used, the legislative history of statutes, past precedent, the purposes of the main statutory provisions at issue, and the purposes of the agricultural exemptions.

Next: Farmegg's fate.

Dwindling Heritage

This top-ten e-mailed NYT article struck close to home, in both the geographic and deeper senses of the phrase. Indeed, I (and possibly some other readers of this blog) have found other pursuits to occupy our lives. Particularly interesting aspects of the article are the comments about partisan politics and the toilsome isolation of farming.

And while that state line may be relevant for some purposes, this issue raises different group identities. Family farms, big farms, policymakers, career farmers, and curious youth are all players in this human story about the evolving (or devolving, in the views of some) nature of the industry.

Who's Counting?

Our friends over at Ratio Juris blogged about a New York Times article reporting that California is taking over as the largest domestic cheese producer. The post is complete with a great picture of a cheesehead.

Wisconsin, according to a quote in the story, is now focused on quality, not quantity. As Ratio Juris contributor Lori Ringhand asks, "when the numbers no longer work in your favor, stop counting?"

If that's the case, there's going to be a lot of no-counting going on, as California continues to dominate agricultural production. Those of you who like numbers can check out the USDA's current USDA estimates of U.S. exports by State and commodity group based on each State's share of U.S. agricultural production.

New Interim Co-Directors at the National Center for Agricultural Law

Agritourism, biofuels, agriculture and the environment, farm bills - keywords that lead almost any internet search engine to one of the leading sources of agricultural law, the website of the National Agricultural Law Center.

The Center has recently named two new interim directors, Doug O'Brien and Harrison Pittman, who will lead its mission to conduct legal research into the most critical issues facing agriculture and food today - issues such as food borne illnesses, food labeling and corporate farming laws.

"We are proud to have Doug and Harrison step up to become directors of such a prestigious national center during an exciting time for the Law School," said Dean Cyndi Nance, who appointed the two as interim directors for the academic year 2006-07.

For nearly 20 years, the National Agricultural Law Center has provided objective agricultural law research and information to the public. In recent years, they have done so through their widely acclaimed website.

O'Brien and Pittman have been around agriculture their entire lives. O'Brien grew up on an Iowa farm, while Pittman grew up in an agricultural community in eastern Arkansas. Both earned their masters' degrees in agricultural law at the University of Arkansas School of Law.


Doug O'Brien

O'Brien earned his J.D. from the University of Iowa School of Law and his LL.M. in agricultural law from the University of Arkansas School of Law. He clerked for Justice Jerry L. Larson of the Iowa Supreme Court and worked as a legal specialist in the U.S. Department of Agriculture's Grain Inspection Packers and Stockyards Administration's National Hog Office. He also served as counsel for the Senate Agriculture Committee in Washington, D.C., where he worked on the 2002 Farm Bill.

O'Brien began his work for the center in 2004 through a special arrangement with The Agricultural Law Center at Drake University School of Law in Des Moines, Iowa. He is employed jointly by the two Centers and teaches at both law schools. His agricultural law research emphasizes livestock marketing, biofuels, the farm bill and cooperative issues.


Harrison Pittman

Pittman hails from Helena, Arkansas. He earned his J.D. from the University of Arkansas at Little Rock William H. Bowen School of Law and his LL.M. degree in agricultural law from the University of Arkansas School of Law. He has a broad spectrum of research areas, including the Perishable Agricultural Commodities Act, the National Organic Program, corporate farming laws, pesticide regulation, and market concentration in the livestock industry, and agritourism. He recently led a conference on agritourism sponsored by The Winthrop Rockefeller Center in cooperation with the Arkansas Department of Parks and Tourism.

Pittman founded the agricultural law section of the Arkansas Bar Association, and he currently serves on the agriculture committee of the America Bar Association's section on administrative law and regulatory practice.

O'Brien and Pittman replace former director Michael Roberts, who now practices with the Venable Law Firm in Washington, D.C., focusing on food law and policy.