O L A Agricultural Commodity

Councils
Topic Selection Background Paper
BACKGROUND
Minnesotas 13 agricultural commodity councils focus on researching and promoting specific commodities. State law authorizes the establishment of such councils, which are formed once a petition is signed by a particular number of farmers.1 The commodity councils enable agricultural producers (farmers) to collectively fund research and generic advertising to enhance the demand for their products. Many of the councils work closely with federal, regional, and state industry associations on joint efforts. In Minnesota, separate commodity councils exist for producers of barley, beef, canola, corn, dairy, dry beans, potatoes (two councils), soybeans, sunflowers, turkey, wheat, and wild rice. Most Minnesota councils have been in existence for more than 20 years, although the sunflower council was established in 2010. The revenue of individual councils ranged from $21,900 (canola) to $17.3 million (soybean) in 2011. For most councils, nearly all revenue comes from fees, referred to as check-off fees, which are paid upon the sale of the commodity to the first purchaser. Purchasers transfer the check-off fees to the councils. The check-off rate is set by each council and voted on by farmers. For six councils, the check-off fees are refundable by request; for the other councils, the fees are not refundable. Some councils receive investment income, but none receive state funds. Producers elect the board members for each commodity council, which makes financial and programmatic decisions. The Minnesota Department of Agriculture (MDA) has a limited role in the oversight of the commodity councils. Specifically, MDA oversees councils contracts and elections. MDA staff also process refund
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April 2013

paperwork and review council audits. Councils reimburse the department for its council-related work, which amounts to about $100,000 annually.

POSSIBLE EVALUATION ISSUES

1. How much money has been collected through the agricultural commodity check-off program? How has the money been spent? 2. What types of oversight and accountability are provided relative to these funds? 3. To what extent do the commodity councils measure their effectiveness? How effective have the councils been in meeting their goals?

DISCUSSION
In 2011, there were 79,800 farms in Minnesota. According to MDA staff, most farmers pay one or more of the councils check-off fees. Nationally, some have questioned the effectiveness of generic advertising and whether the benefits of such efforts are enjoyed by the producers who pay the fees. To evaluate the agricultural commodity councils, we would examine the role of MDA, the process of collecting check-off fees, and the activities of the councils. OLA could determine farmers satisfaction with the councils work through a survey of a sample of farmers. We could also analyze select activities of particular councils to gauge the effectiveness of their programs. However, our findings may be limited, depending on how feasible it is to isolate the activities of the councils from affiliated organizations and to attribute outcomes to the councils efforts. Agricultural commodity councils were last examined by OLA more than 30 years ago. Because the councils do not receive public funding, the states role with respect to the councils is minimal. Therefore, an evaluation by OLA might have a limited impact on the councils activities.

Minnesota Statutes 2012, 17.51-17.69.

MINNESOTA OFFICE OF THE LEGISLATIVE AUDITOR

651-296-4708