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The potato marketing scheme in Great Britain
THE POTATO
MARKETING SCHEME GREAT BRITAIN
C. J. Deputy
Secretary,
Potato
Marketing
WOODLAND,
Board,
TN
F.C.I.S.
50 Hans
Crescent,
London
SWI,
Great
Britain
(Received: 25 January, 1974)
SUMMA
R Y
Following a thumb-nail sketch of the potato industry in Great Britain, this article describes the constitution of the Potato Marketing Board, and gives an account of its principal functions designed to provide a framework of stability to an otherwise perfectly free market. Reference is made to the special relationships between the Board and the Government on the one hand, and between the Board and potato producers on the other. Also described are the factors which influence a producerelected Board to operate with regard to the interests of all sectors of the industry and of the nation generally. The article refers to the services operated by the Board for the benefit of the industry and ends with a reference to the stability in both producer and consumer prices which has been maintained since the Boards inception. This has been achieved without destroying the right of all the market partners to utilise their business skills in commercial bargaining.
INTRODUCTION
The area of potatoes being planted in Great Britain (England, Scotland and Wales) has diminished from approximately 340,000 ha in 1956 to about 212,000214,000 ha in 1973. During that period the average yield has been increasing steadily, with one or two very startling jumps, so that average yields of between 16 and 20 t/ha in the 1940s and early 1950s have increased to over 29 t/ha in recent years. During the same period, the number of producers registered under the Potato Marketing Scheme has fallen from 83,000 to fewer than 39,000, illustrating the trend towards concentration of production in larger, more viable units. Total production has remained very stable at about 6,720,OOOt. 155 Agricultural
Administration
Printed in Great Britain
(1) (1974)-a
Applied Science Publishers Ltd, England, 1974
156
C. J. WOODLAND
The bulk of potatoes sold in Great Britain for human consumption moves in the traditional manner through wholesale merchants, although some changes in the old pattern are being seen. The traditional retail outlet obtains its supplies from wholesale markets and displays them for sale in bins. However, the advent and growth in recent years of the self-service store and the supermarket has led to a demand for washed or dry-brushed potatoes prepacked into paper or polythene bags of convenient sizes. This development now accounts for about 13 % of the crop. A demand is also growing, particularly from the catering industry, for prepeeled potatoes. and this process, although at an early stage of development, is applied to roughly 100.000 t of potatoes each year. The most dramatic changes, however. have been felt in the realm of processed potato products. Between 1955 and 1966 this industry expanded threefold and has continued to increase so that in the year 1971-72 about 15 g/, of the home potato crop went for processing. It is hoped that the overall effect will be to increase the total consumption of potatoes as has happened in the USA, where the proportion of processed potato has been rather greater than in Great Britain to date. To sum up so far, although there is a constant change in the pattern of supply to meet changing demand, and an equally apparent change in the pattern of production brought about by improved husbandry methods, there is nevertheless a stability of production and, by inference, demand which is engendered by orderly marketing within the framework of the Potato Marketing Scheme with which the remainder of this article will be concerned.
HISTORY
In the 1920s and early 1930s markets fluctuated wildly and farmers’ returns were often disastrously low. In 1930 many thousands of tonnes of good potatoes were left unsold to rot down on farms or virtually to be given away. The situation in potatoes was merely indicative of the state of farming generally. In 1931 and 1933 Agricultural Marketing Acts were passed which enabled bodies of producers to prepare schemes for the marketing of their produce and provided that if such schemes were approved by a substantial majority of producers, they should be enforceable under the authority of Parliament. Potato producers, growing a commodity for which demand was inelastic, had suffered as much as any from the depression of the 1930s and were among the first to set a marketing scheme in operation. Unlike those for certain other commodities, the potato scheme did not involve an organisation buying and selling the entire crop, but rather a regulatory body preventing market forces from getting out of hand. The Board which was appointed to administer. the Scheme assumed its full powers in March 1934. With these powers the Board was able to influence the
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MARKETING
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IN GREAT
BRITAIN
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level of production, to impose grading (quality) standards, to license reputable merchants to handle supplies from producers and to induce a degree of stability which hitherto had never been known. Under wartime conditions (1939-45) the Government assumed full responsibility for food production, taking over the Board’s main functions. In fact, potatoes were not freed from control until 1955 when a new Scheme was approved by Parliament.
ORGANISATION
The Board is made up, for the most part, of elected representatives of potato producers. For the purposes of the Scheme, Great Britain is divided into a number of districts each of which is represented by one or more members, as laid down, who have been elected by producers growing potatoes in the district. This method accounts for 25 of the 33 members of the Board. Of the remainder, four are elected by potato producers, but on a national instead of a district basis, whilst the other four ‘independent’ members are appointed to the Board by the Government by virtue of their wide commercial experience, knowledge of public administration, a close connection with organised trade unions or a special interest in the consumer of the produce. Members are normally elected or appointed for three-year terms of office subject to re-election or reappointment. Each year the Board is obliged to send to the Government and to every registered producer a copy of its accounts and balance sheet and also a report as to the operation of the Scheme. The Board is also obliged to convene an annual general meeting of registered producers. The Board maintains a number of divisional and area offices. Its regulations take the form of prescriptive resolutions, copies of which are sent to all registered producers with explanatory notes. Also circulated are advisory pamphlets and booklets, and press releases are issued whenever important matters need to be publicised quickly. Thus, communication with, and ultimate accountability to, registered producers is effected through the election of members and their proximity to the ‘electorate’, through the annual report and the annual general meeting, through postal and press communication and through personal contact by the divisional and area staffs. It might be considered unusual that an organisation apparently so heavily weighted in favour of the producer should enjoy statutory powers. However, wholesale, retail and processing interests are represented on statutory committees which the Board is obliged to consult periodically and before making any major change in policy. Whilst these committees are simply consultative and advisory bodies, the Board would clearly be most unwise to force upon the industry any policy which met with stiff opposition from the potato traders at the consultative stage. One of the major strengths of the Scheme is that, generally speaking, it has
158
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the support of the traders, and it is perhaps debatable how effective it could be without that support. The influence of these committees is therefore rather greater than their terms of reference might suggest. The interests of consumers are watched over by a Consumers’ Committee of Great Britain. This is a committee appointed by the Government, and quite independent of the Board, which periodically examines the operation of agricultural marketing schemes, particularly the effects of the schemes on the supply, quality and price of the product to the consumer. The committee reports direct to the Government. An adverse report could set in motion a statutory procedure leading to intervention by the Government in the Board’s affairs or, at worst, revocation of the Scheme. Finally, the national interest is protected by a provision that every proposal by the Board in the exercise of its major powers must be notified to the Government which may, if it considers such proposals to be contrary to the public interest, direct the Board to act in some different way. Fortunately, the Board has preserved a close and amiable working relationship with the Government. This close relationship springs, for the most part, out of the operation of the price guarantee arrangements which the Board administers on behalf of the Government. PRICE
STABILISATION
The concept of the guarantee price and assured markets for the prime agricultural products forms a key plank in the structure of orderly marketing. The potato guarantee consists of two quite distinct systems. The mainspring for each is the Agricultural Review, which the Government and the Farmers’ Unions carry out each year. This Review determines inter alia the standard or guarantee price for potatoes sold for human consumption during the following season. If the average price per tonne obtained by producers is actually lower than the guarantee price, the Board is entitled to receive from the Government a sum equal to the difference between the two prices multiplied by the tonnage of potatoes sold for human consumption (around 4,000,OOOt). This sum (deficiency payment) goes into a reserve fund which can be drawn upon only for support buying operations-which leads us to the second part of the system. This deficiency payment would be very expensive for the government because for every pound sterling by which thp average price per tonne was lower than the guarantee price, a sum of approximately &4,000,000 would become payable to the Board. So in any season when a deficiency payment is likely to be incurred, the Board may, with Government consent, operate a support buying programme. The Board aims to find an outlet for potatoes offered to it under this programme and which are surplus to human consumption requirements. These are sold principally for cattle feed. The effect of these market support operations is a better balance between supply and demand.
THE POTATO MARKETING SCHEME IN GREAT BRITAIN
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The finance for their operation comes partly from the Government and partly from the Board. Each year a registered producer must pay to the Board a contribution calculated on the basis of potato area planted (at present &lo.38 per ha). Any drawings from the resultant market support fund attract a corresponding government contribution broadly in the ratio of f3.00 from the Government to El.00 from the Board. At first sight it would appear that these arrangements benefit the producer at the expense of the nation through heavy drawings on public funds. In fact this is not the case. The income to producers in the surplus years, both from the market and from the Government’s guarantee arrangements, has been less than their income from the market alone in years when balanced supplies have resulted in higher market prices and no support activities. Put another way, the public have paid less for their potatoes out of their pockets as consumers and through taxation in the surplus years than they have been required to pay from their pockets alone in the balanced years. Moreover, the retail price of potatoes in Great Britain has neither fluctuated nor risen very much during the past ten years-and there are very few commodities for which a similar claim could be made. Another aspect of the present guarantee arrangements is that they do not provide each producer with an assured market in all circumstances. But he is provided with an alternative market when his difficulties are clearly beyond his control. However, the present-day guarantee arrangements do not apply to an unlimited quantity of potatoes. PRODUCTION CONTROL
The level of production is loosely controlled through the Board’s basic acreage and quota prescriptions, which have the effect of influencing the level of plantings rather than of regulating it. This measure of production control is the quidpro quo accepted by producers in return for a supported market. The Board is therefore expected to exercise its powers to influence plantings by registered producers to a level agreed with the Government as being the area in hectares which is calculated to produce the quantity of potatoes required to meet anticipated demand, with the emphasis, as a safety margin, on small surplus rather than shortage. Each registered producer is allotted a basic potato area based on his level of plantings in the immediately preceding years. New entrants are allotted basic areas which the Board thinks appropriate. When the Board, having regard to the target set by the Government, feels it necessary to influence producers’ plantings it prescribes a quota expressed in terms of a percentage of each producer’s basic area, which percentage must be the same for all producers. If, in a given year, a registered producer plants more than his quota area he will have to pay to the Board an additional contribution, known as ‘excess area contribution’; this is currently at the rate of f61.78 per ha over and above the ordinary contribution payable on the
C. I. WOODLAND
160
whole of his potato area. Thus, the Board cannot prohibit plantings any more than it can compel them, but the excess area contribution tends to act as a reasonably effective deterrent against large-scale over-planting. Thus, for the 1971 crop year the target area set by the Government was 226,623 ha. The total basic area allotted was 266.880 ha and the Board prescribed a quota of 87.5% of basic area, which meant that 233.520 ha could have been planted inside quota. In fact, only 216,514 ha of quota were planted, but some producers planted excess area amounting to 9308 ha. The net result was a planted area of 225,822 ha, 810 ha below targetabout as near as it would be possible to get. This shows how the Board’s prescriptions influence rather than regulate plantings and do not take away from the producer the responsibility of making his own decision. But they do provide him with a clear pointer as to what his policy ought to be in the context of the national requirement. Such restraint on the quantity of the home-grown product implies some control of imports, and the policy of the British Government has been to bar the importation of potatoes, other than early (or new season’s) potatoes, except in years when the home product is in short supply. The stabilising factors described above would not be effective if they were vulnerable to the onslaught of surpluses grown elsewhere. QUALITY
AND
MARKETING
CONTROL
For quality control and administrative reasons, the scheme requires registered producers to sell potatoes only to licensed merchants, and the conditions of their licences require merchants to buy only from registered producers. There are also conditions requiring merchants to ensure that their businesses are financially sound and are managed by experienced persons and also requiring them to supply to the Board certain statistical information. Producers can deal with licensed merchants with reasonable confidence, and the system is acceptable to merchants because it ensures that trade is always conducted through reputable houses which have a permanent stake in the industry. Minimum quality standards are prescribed by the Board. These set out the degree to which various types of fault must be excluded from potatoes sold and the minimum and maximum sizes to which potatoes must be dressed and graded. Registered producers and licensed merchants are required to comply with grading standards so prescribed, and supervision is effected by a programme of inspections at farms and at wholesale and retail premises carried out by the Board’s staff acting under the direction of a committee of the Board whose members themselves visit main markets from time to time to check on the standard of samples being offered. Opportunity is taken in the course of these visits to meet the local leaders of wholesale and retail organisations and to discuss their problems. The Board now has a compulsory identification regulation so that all potato containers must be
THE
POTATO
MARKETING
SCHEME
IN GREAT
BRlTAIN
161
marked with a number or other approved symbol which will identify the person responsible for packing and grading the potatoes. This makes it possible to trace back sub-standard samples to those responsible. The regulation has been generally welcomed by producers, wholesalers and retailers alike and has resulted in a marked improvement in standards. DISCIPLINARY
PROVISIONS
The Board is a statutory body, and its prescriptions are therefore enforceable on all registered producers and, so far as the licensing conditions are concerned, on licensed merchants. There are some 38,000 registered producers and about 3000 licensed merchants. The effectiveness of the Scheme depends upon compliance by all and the welfare of the many cannot be jeopardised by the unchecked wayward activities of the few. To this end the Board carries out as large a checking exercise as its resources permit. Grading standards are supervised as already explained. Certain audit activities are carried out in relation to merchants, and the acreage returns submitted by producers are subject to very comprehensive checks involving aerial photography. In the event of a breach of the regulations being found it would be possible to bring legal action against the miscreant in the ordinary courts. This procedure would be time-consuming and very expensive. It would also subject the offender to the indignity of a prosecution which could be thought to involve disproportionate adverse publicity for what might be considered a ‘domestic’ breach of regulations. The Scheme therefore makes provision for a domestic matter to be dealt with domestically, and a Disciplinary Committee is constituted to consider breaches of the Board’s prescriptions by registered producers. The committee consists of a number of Board members sitting under the chairmanship of an independent person who is a legally qualified person and whose appointment has been approved by the Government. Where it is alleged that a breach of a prescription has occurred, the registered producer concerned is entitled to appear before the committee and be heard in person, or to be represented by counsel or solicitor or by any other authorised person. Where, after considering the evidence presented, the committee finds a case proved, they may impose a monetary penalty which they consider appropriate in the circumstances up to limits laid down in the Scheme. This penalty becomes a legal debt due to the Board. This kind of internal discipline is by no means unique and is similar in some respects to that administered in certain professions and in many institutes and associations. In the case of licensed merchants, the possibility of loss of licence is an effective discipline.
OTHER
SERVICES
The Board also provides a number of ancillary services to the industry. It maintains, for instance, a market intelligence service comprising not only a formal price-
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C. J. WOODLAND
reporting service available on subscription, but also telephone answering services on market conditions and regular reports to press, radio and television. To stimulate consumption of potatoes the Board organises stands at exhibitions and food fairs, cookery demonstrations, stands at agricultural shows, a women’s desk press service, point-of-sale publicity material, recipes, catering manuals, films showing practical ways of reducing damage, etc. Direct advertising in the press or on television may be used on occasions in connection with specific projects. The Board feels that this is a service which it can provide for producers and the trade since, as individuals, they would be unable to mount extensive campaigns of this sort themselves. The Board also supports research and development in two ways. Firstly, by grant-aiding universities and research institutions which undertake research projects of practical value to producers. Such grants amount currently to about E57,OOOannually and do not assist fundamental research, which is felt to be the responsibility of others. Secondly, the Board undertakes research and development work itself, utilising two experimental stations, one being a small plant in Scotland concerned mainly with the problems of using dehydrated potato for inclusion in high-grade diets for young sheep, cattle and pigs. The other is a larger, purposebuilt station incorporating many different forms of controlled storage as well as dressing, brushing and washing lines. The work there is concerned with the handling, storage, packing and marketing of potatoes; all operations are costed and the results of investigations made available to the industry as a whole. From time to time, international demonstrations of potato harvesting and handling machinery are organised by the Board so that those interested can compare machines and observe latest developments. These, again, are fields of activity which would be beyond the means of individuals and which ensure that continuous research is carried out on vital matters which are not the subject of Government grant.
CONCLUSION
As explained earlier, the prime function of the Potato Marketing Scheme is to bring a degree of stability to an otherwise free market. It is impossible to prove the extent of stability induced by the Board’s operation when the degree of instability which might otherwise have occurred cannot be measured. There are, however, certain indications that the system has been successful. Firstly, there is the remarkable stability in the price of potatoes to the consumer over the years. Secondly, there is the general level of satisfaction of those affected by the Scheme. Thirdly, there is the behaviour of producer prices over the years which, particularly since the market support arrangements have been in operation, have been remarkable for the absence of sharp fluctuations which have been so apparent in potatoproducing countries with no comparable marketing arrangements of their own.
THE
POTATO
MARKETING
SCHEME
IN GREAT
BRITAIN
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Problems may well arise out of entry into the European Common Market whose other members operate different types of marketing arrangements. There is, as yet, no common regulation for potatoes in the European Economic Community, and while that continues to be the case the British Government can, if it wishes, maintain the Scheme in operation. Ultimately, Britain’s marketing arrangements may have to comply with the requirements of a common EEC regulation and difficulties might conceivably arise through free trading between countries affecting our philosophy of self-sufficiency and regulated marketing, and also from the Community’s concept of fair competition. However, if stability is to be secured for the whole industry it must first be secured for the producer, for he has to deal not only with unpredictable natural forces in producing his crop, but also with its marketing. By means of research into improved husbandry methods, more efficient machinery, effective fertilisers and healthier seed we can assist him to a limited extent in his production problems. Moreover, he can be helped to a very great extent in marketing his crop without interference in his normal business dealings. This, in a nutshell, is what the Potato Marketing Scheme in Great Britain is all about.
MARKETING SCHEME GREAT BRITAIN
C. J. Deputy
Secretary,
Potato
Marketing
WOODLAND,
Board,
TN
F.C.I.S.
50 Hans
Crescent,
London
SWI,
Great
Britain
(Received: 25 January, 1974)
SUMMA
R Y
Following a thumb-nail sketch of the potato industry in Great Britain, this article describes the constitution of the Potato Marketing Board, and gives an account of its principal functions designed to provide a framework of stability to an otherwise perfectly free market. Reference is made to the special relationships between the Board and the Government on the one hand, and between the Board and potato producers on the other. Also described are the factors which influence a producerelected Board to operate with regard to the interests of all sectors of the industry and of the nation generally. The article refers to the services operated by the Board for the benefit of the industry and ends with a reference to the stability in both producer and consumer prices which has been maintained since the Boards inception. This has been achieved without destroying the right of all the market partners to utilise their business skills in commercial bargaining.
INTRODUCTION
The area of potatoes being planted in Great Britain (England, Scotland and Wales) has diminished from approximately 340,000 ha in 1956 to about 212,000214,000 ha in 1973. During that period the average yield has been increasing steadily, with one or two very startling jumps, so that average yields of between 16 and 20 t/ha in the 1940s and early 1950s have increased to over 29 t/ha in recent years. During the same period, the number of producers registered under the Potato Marketing Scheme has fallen from 83,000 to fewer than 39,000, illustrating the trend towards concentration of production in larger, more viable units. Total production has remained very stable at about 6,720,OOOt. 155 Agricultural
Administration
Printed in Great Britain
(1) (1974)-a
Applied Science Publishers Ltd, England, 1974
156
C. J. WOODLAND
The bulk of potatoes sold in Great Britain for human consumption moves in the traditional manner through wholesale merchants, although some changes in the old pattern are being seen. The traditional retail outlet obtains its supplies from wholesale markets and displays them for sale in bins. However, the advent and growth in recent years of the self-service store and the supermarket has led to a demand for washed or dry-brushed potatoes prepacked into paper or polythene bags of convenient sizes. This development now accounts for about 13 % of the crop. A demand is also growing, particularly from the catering industry, for prepeeled potatoes. and this process, although at an early stage of development, is applied to roughly 100.000 t of potatoes each year. The most dramatic changes, however. have been felt in the realm of processed potato products. Between 1955 and 1966 this industry expanded threefold and has continued to increase so that in the year 1971-72 about 15 g/, of the home potato crop went for processing. It is hoped that the overall effect will be to increase the total consumption of potatoes as has happened in the USA, where the proportion of processed potato has been rather greater than in Great Britain to date. To sum up so far, although there is a constant change in the pattern of supply to meet changing demand, and an equally apparent change in the pattern of production brought about by improved husbandry methods, there is nevertheless a stability of production and, by inference, demand which is engendered by orderly marketing within the framework of the Potato Marketing Scheme with which the remainder of this article will be concerned.
HISTORY
In the 1920s and early 1930s markets fluctuated wildly and farmers’ returns were often disastrously low. In 1930 many thousands of tonnes of good potatoes were left unsold to rot down on farms or virtually to be given away. The situation in potatoes was merely indicative of the state of farming generally. In 1931 and 1933 Agricultural Marketing Acts were passed which enabled bodies of producers to prepare schemes for the marketing of their produce and provided that if such schemes were approved by a substantial majority of producers, they should be enforceable under the authority of Parliament. Potato producers, growing a commodity for which demand was inelastic, had suffered as much as any from the depression of the 1930s and were among the first to set a marketing scheme in operation. Unlike those for certain other commodities, the potato scheme did not involve an organisation buying and selling the entire crop, but rather a regulatory body preventing market forces from getting out of hand. The Board which was appointed to administer. the Scheme assumed its full powers in March 1934. With these powers the Board was able to influence the
THE
POTATO
MARKETING
SCHEME
IN GREAT
BRITAIN
157
level of production, to impose grading (quality) standards, to license reputable merchants to handle supplies from producers and to induce a degree of stability which hitherto had never been known. Under wartime conditions (1939-45) the Government assumed full responsibility for food production, taking over the Board’s main functions. In fact, potatoes were not freed from control until 1955 when a new Scheme was approved by Parliament.
ORGANISATION
The Board is made up, for the most part, of elected representatives of potato producers. For the purposes of the Scheme, Great Britain is divided into a number of districts each of which is represented by one or more members, as laid down, who have been elected by producers growing potatoes in the district. This method accounts for 25 of the 33 members of the Board. Of the remainder, four are elected by potato producers, but on a national instead of a district basis, whilst the other four ‘independent’ members are appointed to the Board by the Government by virtue of their wide commercial experience, knowledge of public administration, a close connection with organised trade unions or a special interest in the consumer of the produce. Members are normally elected or appointed for three-year terms of office subject to re-election or reappointment. Each year the Board is obliged to send to the Government and to every registered producer a copy of its accounts and balance sheet and also a report as to the operation of the Scheme. The Board is also obliged to convene an annual general meeting of registered producers. The Board maintains a number of divisional and area offices. Its regulations take the form of prescriptive resolutions, copies of which are sent to all registered producers with explanatory notes. Also circulated are advisory pamphlets and booklets, and press releases are issued whenever important matters need to be publicised quickly. Thus, communication with, and ultimate accountability to, registered producers is effected through the election of members and their proximity to the ‘electorate’, through the annual report and the annual general meeting, through postal and press communication and through personal contact by the divisional and area staffs. It might be considered unusual that an organisation apparently so heavily weighted in favour of the producer should enjoy statutory powers. However, wholesale, retail and processing interests are represented on statutory committees which the Board is obliged to consult periodically and before making any major change in policy. Whilst these committees are simply consultative and advisory bodies, the Board would clearly be most unwise to force upon the industry any policy which met with stiff opposition from the potato traders at the consultative stage. One of the major strengths of the Scheme is that, generally speaking, it has
158
C. .I. WOODLAND
the support of the traders, and it is perhaps debatable how effective it could be without that support. The influence of these committees is therefore rather greater than their terms of reference might suggest. The interests of consumers are watched over by a Consumers’ Committee of Great Britain. This is a committee appointed by the Government, and quite independent of the Board, which periodically examines the operation of agricultural marketing schemes, particularly the effects of the schemes on the supply, quality and price of the product to the consumer. The committee reports direct to the Government. An adverse report could set in motion a statutory procedure leading to intervention by the Government in the Board’s affairs or, at worst, revocation of the Scheme. Finally, the national interest is protected by a provision that every proposal by the Board in the exercise of its major powers must be notified to the Government which may, if it considers such proposals to be contrary to the public interest, direct the Board to act in some different way. Fortunately, the Board has preserved a close and amiable working relationship with the Government. This close relationship springs, for the most part, out of the operation of the price guarantee arrangements which the Board administers on behalf of the Government. PRICE
STABILISATION
The concept of the guarantee price and assured markets for the prime agricultural products forms a key plank in the structure of orderly marketing. The potato guarantee consists of two quite distinct systems. The mainspring for each is the Agricultural Review, which the Government and the Farmers’ Unions carry out each year. This Review determines inter alia the standard or guarantee price for potatoes sold for human consumption during the following season. If the average price per tonne obtained by producers is actually lower than the guarantee price, the Board is entitled to receive from the Government a sum equal to the difference between the two prices multiplied by the tonnage of potatoes sold for human consumption (around 4,000,OOOt). This sum (deficiency payment) goes into a reserve fund which can be drawn upon only for support buying operations-which leads us to the second part of the system. This deficiency payment would be very expensive for the government because for every pound sterling by which thp average price per tonne was lower than the guarantee price, a sum of approximately &4,000,000 would become payable to the Board. So in any season when a deficiency payment is likely to be incurred, the Board may, with Government consent, operate a support buying programme. The Board aims to find an outlet for potatoes offered to it under this programme and which are surplus to human consumption requirements. These are sold principally for cattle feed. The effect of these market support operations is a better balance between supply and demand.
THE POTATO MARKETING SCHEME IN GREAT BRITAIN
159
The finance for their operation comes partly from the Government and partly from the Board. Each year a registered producer must pay to the Board a contribution calculated on the basis of potato area planted (at present &lo.38 per ha). Any drawings from the resultant market support fund attract a corresponding government contribution broadly in the ratio of f3.00 from the Government to El.00 from the Board. At first sight it would appear that these arrangements benefit the producer at the expense of the nation through heavy drawings on public funds. In fact this is not the case. The income to producers in the surplus years, both from the market and from the Government’s guarantee arrangements, has been less than their income from the market alone in years when balanced supplies have resulted in higher market prices and no support activities. Put another way, the public have paid less for their potatoes out of their pockets as consumers and through taxation in the surplus years than they have been required to pay from their pockets alone in the balanced years. Moreover, the retail price of potatoes in Great Britain has neither fluctuated nor risen very much during the past ten years-and there are very few commodities for which a similar claim could be made. Another aspect of the present guarantee arrangements is that they do not provide each producer with an assured market in all circumstances. But he is provided with an alternative market when his difficulties are clearly beyond his control. However, the present-day guarantee arrangements do not apply to an unlimited quantity of potatoes. PRODUCTION CONTROL
The level of production is loosely controlled through the Board’s basic acreage and quota prescriptions, which have the effect of influencing the level of plantings rather than of regulating it. This measure of production control is the quidpro quo accepted by producers in return for a supported market. The Board is therefore expected to exercise its powers to influence plantings by registered producers to a level agreed with the Government as being the area in hectares which is calculated to produce the quantity of potatoes required to meet anticipated demand, with the emphasis, as a safety margin, on small surplus rather than shortage. Each registered producer is allotted a basic potato area based on his level of plantings in the immediately preceding years. New entrants are allotted basic areas which the Board thinks appropriate. When the Board, having regard to the target set by the Government, feels it necessary to influence producers’ plantings it prescribes a quota expressed in terms of a percentage of each producer’s basic area, which percentage must be the same for all producers. If, in a given year, a registered producer plants more than his quota area he will have to pay to the Board an additional contribution, known as ‘excess area contribution’; this is currently at the rate of f61.78 per ha over and above the ordinary contribution payable on the
C. I. WOODLAND
160
whole of his potato area. Thus, the Board cannot prohibit plantings any more than it can compel them, but the excess area contribution tends to act as a reasonably effective deterrent against large-scale over-planting. Thus, for the 1971 crop year the target area set by the Government was 226,623 ha. The total basic area allotted was 266.880 ha and the Board prescribed a quota of 87.5% of basic area, which meant that 233.520 ha could have been planted inside quota. In fact, only 216,514 ha of quota were planted, but some producers planted excess area amounting to 9308 ha. The net result was a planted area of 225,822 ha, 810 ha below targetabout as near as it would be possible to get. This shows how the Board’s prescriptions influence rather than regulate plantings and do not take away from the producer the responsibility of making his own decision. But they do provide him with a clear pointer as to what his policy ought to be in the context of the national requirement. Such restraint on the quantity of the home-grown product implies some control of imports, and the policy of the British Government has been to bar the importation of potatoes, other than early (or new season’s) potatoes, except in years when the home product is in short supply. The stabilising factors described above would not be effective if they were vulnerable to the onslaught of surpluses grown elsewhere. QUALITY
AND
MARKETING
CONTROL
For quality control and administrative reasons, the scheme requires registered producers to sell potatoes only to licensed merchants, and the conditions of their licences require merchants to buy only from registered producers. There are also conditions requiring merchants to ensure that their businesses are financially sound and are managed by experienced persons and also requiring them to supply to the Board certain statistical information. Producers can deal with licensed merchants with reasonable confidence, and the system is acceptable to merchants because it ensures that trade is always conducted through reputable houses which have a permanent stake in the industry. Minimum quality standards are prescribed by the Board. These set out the degree to which various types of fault must be excluded from potatoes sold and the minimum and maximum sizes to which potatoes must be dressed and graded. Registered producers and licensed merchants are required to comply with grading standards so prescribed, and supervision is effected by a programme of inspections at farms and at wholesale and retail premises carried out by the Board’s staff acting under the direction of a committee of the Board whose members themselves visit main markets from time to time to check on the standard of samples being offered. Opportunity is taken in the course of these visits to meet the local leaders of wholesale and retail organisations and to discuss their problems. The Board now has a compulsory identification regulation so that all potato containers must be
THE
POTATO
MARKETING
SCHEME
IN GREAT
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marked with a number or other approved symbol which will identify the person responsible for packing and grading the potatoes. This makes it possible to trace back sub-standard samples to those responsible. The regulation has been generally welcomed by producers, wholesalers and retailers alike and has resulted in a marked improvement in standards. DISCIPLINARY
PROVISIONS
The Board is a statutory body, and its prescriptions are therefore enforceable on all registered producers and, so far as the licensing conditions are concerned, on licensed merchants. There are some 38,000 registered producers and about 3000 licensed merchants. The effectiveness of the Scheme depends upon compliance by all and the welfare of the many cannot be jeopardised by the unchecked wayward activities of the few. To this end the Board carries out as large a checking exercise as its resources permit. Grading standards are supervised as already explained. Certain audit activities are carried out in relation to merchants, and the acreage returns submitted by producers are subject to very comprehensive checks involving aerial photography. In the event of a breach of the regulations being found it would be possible to bring legal action against the miscreant in the ordinary courts. This procedure would be time-consuming and very expensive. It would also subject the offender to the indignity of a prosecution which could be thought to involve disproportionate adverse publicity for what might be considered a ‘domestic’ breach of regulations. The Scheme therefore makes provision for a domestic matter to be dealt with domestically, and a Disciplinary Committee is constituted to consider breaches of the Board’s prescriptions by registered producers. The committee consists of a number of Board members sitting under the chairmanship of an independent person who is a legally qualified person and whose appointment has been approved by the Government. Where it is alleged that a breach of a prescription has occurred, the registered producer concerned is entitled to appear before the committee and be heard in person, or to be represented by counsel or solicitor or by any other authorised person. Where, after considering the evidence presented, the committee finds a case proved, they may impose a monetary penalty which they consider appropriate in the circumstances up to limits laid down in the Scheme. This penalty becomes a legal debt due to the Board. This kind of internal discipline is by no means unique and is similar in some respects to that administered in certain professions and in many institutes and associations. In the case of licensed merchants, the possibility of loss of licence is an effective discipline.
OTHER
SERVICES
The Board also provides a number of ancillary services to the industry. It maintains, for instance, a market intelligence service comprising not only a formal price-
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reporting service available on subscription, but also telephone answering services on market conditions and regular reports to press, radio and television. To stimulate consumption of potatoes the Board organises stands at exhibitions and food fairs, cookery demonstrations, stands at agricultural shows, a women’s desk press service, point-of-sale publicity material, recipes, catering manuals, films showing practical ways of reducing damage, etc. Direct advertising in the press or on television may be used on occasions in connection with specific projects. The Board feels that this is a service which it can provide for producers and the trade since, as individuals, they would be unable to mount extensive campaigns of this sort themselves. The Board also supports research and development in two ways. Firstly, by grant-aiding universities and research institutions which undertake research projects of practical value to producers. Such grants amount currently to about E57,OOOannually and do not assist fundamental research, which is felt to be the responsibility of others. Secondly, the Board undertakes research and development work itself, utilising two experimental stations, one being a small plant in Scotland concerned mainly with the problems of using dehydrated potato for inclusion in high-grade diets for young sheep, cattle and pigs. The other is a larger, purposebuilt station incorporating many different forms of controlled storage as well as dressing, brushing and washing lines. The work there is concerned with the handling, storage, packing and marketing of potatoes; all operations are costed and the results of investigations made available to the industry as a whole. From time to time, international demonstrations of potato harvesting and handling machinery are organised by the Board so that those interested can compare machines and observe latest developments. These, again, are fields of activity which would be beyond the means of individuals and which ensure that continuous research is carried out on vital matters which are not the subject of Government grant.
CONCLUSION
As explained earlier, the prime function of the Potato Marketing Scheme is to bring a degree of stability to an otherwise free market. It is impossible to prove the extent of stability induced by the Board’s operation when the degree of instability which might otherwise have occurred cannot be measured. There are, however, certain indications that the system has been successful. Firstly, there is the remarkable stability in the price of potatoes to the consumer over the years. Secondly, there is the general level of satisfaction of those affected by the Scheme. Thirdly, there is the behaviour of producer prices over the years which, particularly since the market support arrangements have been in operation, have been remarkable for the absence of sharp fluctuations which have been so apparent in potatoproducing countries with no comparable marketing arrangements of their own.
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POTATO
MARKETING
SCHEME
IN GREAT
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Problems may well arise out of entry into the European Common Market whose other members operate different types of marketing arrangements. There is, as yet, no common regulation for potatoes in the European Economic Community, and while that continues to be the case the British Government can, if it wishes, maintain the Scheme in operation. Ultimately, Britain’s marketing arrangements may have to comply with the requirements of a common EEC regulation and difficulties might conceivably arise through free trading between countries affecting our philosophy of self-sufficiency and regulated marketing, and also from the Community’s concept of fair competition. However, if stability is to be secured for the whole industry it must first be secured for the producer, for he has to deal not only with unpredictable natural forces in producing his crop, but also with its marketing. By means of research into improved husbandry methods, more efficient machinery, effective fertilisers and healthier seed we can assist him to a limited extent in his production problems. Moreover, he can be helped to a very great extent in marketing his crop without interference in his normal business dealings. This, in a nutshell, is what the Potato Marketing Scheme in Great Britain is all about.