News Story

Feds Force Michigan Cherries to Rot – In Order To Raise Prices

Federal board micromanages tart cherries

Over the summer, millions of pounds of Michigan tart cherries were dumped on the ground and left to rot, thanks to a federal board. The dumping means fewer tart cherries in stores which means higher prices for consumers. And while American farmers are forced to keep their cherries off the market, some companies end up having to import cherries from other nations.

Photos of some of the dumped cherries went viral. The images troubled many people, who wanted to know why all that fruit was wasted.

The short answer is this: It’s complicated and involves government policies.

The Cherry Industry Administrative Board is given the power by Congress and the U.S. Department of Agriculture to control the prices of tart cherries (though not sweet cherries). It does this by restricting the amount of cherries that are processed and sold to consumers. When there’s a good crop that might drive prices down – a “surplus" in the eyes of the government — the amount of picked cherries that companies can process is limited by a numeric cap. One result is that millions of pounds of cherries rot on the ground. Another outcome is that consumers pay higher prices than they would have had the market been allowed to freely work.

One viral cherry photo was posted by Michigan cherry farmer Marc Santucci of Santucci Farms in Traverse City. He captioned the photo: “These cherries are beautiful! But, we have to dump 14 percent of our tart cherry crop on the ground to rot. Why? So we can allow the import of 200 million pounds of cherries from overseas! It just doesn't seem right.”

The Cherry Board says that the regulatory regime was set up “to assist the industry in dealing with the erratic production cycle of red tart cherries and to improve returns to the growers and processors of red tart cherries in the United States.”

The dumping and price controls are carried out through a “market order,” which must be approved by producers and the USDA. The stated goal is to “help provide stable markets for dairy products, fruits, vegetables and specialty crops.” The orders are also “tailored to the individual industry’s needs” yet “are a binding regulation for the entire industry in the specified geographical area,” according to the USDA.

After Santucci posted his opinion on social media, the Michigan Farm Bureau said it was ill-informed and left “a trail of destructive misinformation in its wake.”

A press release from the Michigan Farm Bureau said Santucci’s post was poorly informed and implied that Santucci was motivated by “politically charged interest.”

The cherry “surplus” for 2016 was expected to be 101 million pounds, “far too much for the market,” said Perry Hedin, executive director of the Cherry Board, in a press release. Because of the good harvest, the cherry marketing order required processors to keep 29 percent of the crop off the North American market.

The Cherry Board is made up of representatives of farmers and processors from seven states that are subject to the order. The representatives make industry decisions and send recommendations to the USDA, which then adopts or rejects the recommendations. In the 1990s, the marketing order was created by the USDA at the behest of the tart cherry industry. Every six years, the industry holds a referendum on continuing the marketing order; the last vote was in March 2014.

Although both farmers and processors have a say with the Cherry Board, the marketing order’s regulations only apply to processors (also called handlers) who prepare and can harvested tart cherries.

If processors cannot hold excess tart cherries in reserves or send them to alternative outlets, they can ask farmers not to deliver the cherries for processing. That leaves the farmers with cherries that spoil easily if they’re not processed. When processors won't take cherries, farmers like Santucci often end up dumping them, something the Cherry Board calls “in-orchard diversions.”

In his viral post, Santucci said that he knew people who would buy the discarded cherries if he could sell them. He also said, “Just to let everyone know we are not allowed to donate or in any way use diverted cherries.”

But Hedin disputes that contention, saying farmers can donate excess cherries.

“While it may be convenient to assert that growers cannot donate the surplus cherries, that simply is not the case,” he said. “There is a process by which surplus, aka excess, tart cherries can be donated to charitable organizations. Under the procedures of the order, growers can, in fact, arrange for their excess tart cherries to be donated to such charities.”

Those cherries must be processed before they are donated, according to Hedin.

In an email to growers and processors, Hedin asked rhetorically if some people in the industry were mad because “growers have been misled by other growers into believing that the surplus tart cherries could not be donated to charitable organizations?”

According to the cherry board, Michigan harvested 236.4 million pounds of tart cherries in 2016, accounting for 69 percent of national production. Michigan's cherry growers also diverted 14 million of their tart cherries in 2016, with another 12 million being diverted nationally.

Santucci, in an interview with the Mackinac Center for Public Policy, said the Cherry Board believes that by “limiting the domestic supply of cherries, that will act to support the price of cherries. That could happen in times where there was no international trade of cherries, but given that we have become a major importer of cherries, there is no way that they can support the price without drawing in more imports.”

Santucci added that the program makes it more difficult for U.S. farmers to compete with imported cherries. “Because of our program, we actually make it easier for (Eastern European) cherries to come into the country,” he said. “So what I want to do is either eliminate or at least suspend the program which causes us to dump some of our cherries so we can compete with them with all of our cherries — and they’re going to have to compete on price and quality with us — without one arm tied behind our back.”

Baylen Linnekin, a law professor at George Mason University who has written on the market order for, said the Cherry Board should be eliminated.

“The cherry board — as with similar USDA creations that hurt competition, artificially raise prices for consumers, and promote food waste — needs to be eliminated forthwith. Let farmers and consumers and the free market decide how many cherries should be produced each year,” Linnekin said.

But Jeremy Nagel, the spokesman for the Michigan Farm Bureau, said the marketing order garners support from growers and processors.

“Among the hundreds of cherry growers in our membership, some of them support the marketing order and some of them probably don’t,” he said. “That said, the marketing order as it exists today enjoys a comfortable majority of support among the growers and processors who regularly reaffirm its existence.”

It’s not just farmers like Santucci who are unhappy about the marketing order. Bill Sherman, the CEO of Burnette Foods, said the marketing order keeps his business from expanding.

“We want to expand our business and we can’t under these conditions,” he said in an interview with the Mackinac Center. “We can’t sell the cherries produced on the farm that my mother and father bought almost 60 years ago.”

The Elk Rapids food supplier filed a federal lawsuit in 2011 against the USDA — which oversees the Cherry Board — challenging the marketing order and asking to be exempted from its regulations.

Burnette Foods has thousands of cherry pie filling cans stocked in its warehouse that can’t be sold because of the marketing order. Since the company cans its cherries instead of freezing them, the shelf life of its pie filling is only one year. Because of this, the company has to import cherries for its pie fillings, according to a report by Bridge magazine.

“If you're in Michigan and market tart cherries, you basically have no choice but to follow the board's orders even if they make no sense for you or your customers,” Linnekin said, “and even if following the board's mandates creates tons of food waste.”

“They're not seeking to eliminate the board,” Linnekin said of Burnette’s lawsuit. “Rather, Burnette simply seeks an exemption from the board's rules. So even if their lawsuit against the USDA is successful — as it should be — the cherry board would largely continue in a business-as-usual manner.”

Sherman added: “Hopefully some reasonableness will prevail and we can stop the destruction of the crop, they will recognize that imports are a serious problem, and we can all live happily ever after.”

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.