i*' "K/, A Publication of The College of Agriculture 
 
 \ \ \J UN 
 
 I V E R S I T Y 
 
 O F 
 
 CALIFORNIA 
 
 MARKETING PROBLEMS 
 for CALIFORNIA GRAPES 
 
 GUY BLACK 
 
 3.5 
 30 
 2.5 
 o 2 0 
 
 I 15 
 
 1.0 
 5 
 0 
 
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 """JS***" " | - | Table varieties 
 
 I******* 1—1 I I I I I I I I I I I I 1 I I L 
 
 1930 1935 1940 1945 1950 
 
 Crop year 
 
 Production of California Grapes by Varietal Classes, 1927-1952. 
 
 35 
 
 3.0 
 2.5 
 
 m 
 
 2 20 
 
 i is 
 
 I 
 
 NIVERSITY OF CALIFORNIA* 
 DAVIS 
 
 MAR 18 
 LIBRARY 
 
 -/\-a ^v^y r ,A- 
 
 v 
 
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 v 
 
 Table and canned- 
 
 V 
 
 I 
 
 i i i * * * * * i * 
 
 _l I I L_ 
 
 ' ' ' I 1_ 
 
 1930 
 
 1935 1940 
 Crop year 
 
 1945 
 
 1950 
 
 >roduction and Utilization of All California Grapes, 1927-1952. 
 
 iource of data: S. W. Shear, mainly from reports of U. S. Crop and Livestock 
 ieporting Service. 
 
 CALIFORNIA AGRICULTURAL EXPERIMENT STATION 
 
 GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS 
 
 LIBRARY 
 
 « UNIVERSITY O," CALIFORNIA 
 DAVIS 
 
 Mimeographed Report No. 144 February 1953 
 
MARKETING PROBLEMS FOR CALIFORNIA GRAPES 
 
 by 
 
 Guy Black 
 
 Table of Contents 
 
 Page 
 
 I. Introduction 1 
 
 II. The Grape Industry Surplus Situation £ 
 
 III. Allocation Problems 16 
 
 IV. Analysis of Surplus Removal Proposals 27 
 
 A. Requirements of Programs to Remove the Surplus 27 
 
 Bi Types of Surplus Removal Proposals ^Tiich Have Been Suggested . . 3lj 
 
 C. The Dessert w ine Control Plan kl 
 
 D. Quality Standards for the Dessert w ine Industry US 
 
 E. Surplus Control with a Stabilization Fund Ii9 
 
 F. Conclusions on Surplus Control . £3 
 
 V. Allocation Improvement and Other Programs £8 
 
 VI. Conclusions 65 
 
' . » / 
 
 i t l i 4 
 
MARKETING PROBLEMS FOR CALIFORNIA GRAPES 
 
 by 
 
 Guy Black V 
 I. Introduction 
 
 The Grape Situation 
 
 With the 19^1 harvest the California grape industry again found itself in 
 a disturbed economic situation, comparable to that in a number of previous years 
 when large crops were experienced — 3j22lt,000 tons were more grapes than could 
 easily be managed. This record-breaking tonnage was one-third greater than 
 193>0's moderate sized crop. In all, 1.8 million tons of raisin variety grapes, 
 770 thousand tons of table variety grapes, and 650 thousand tons of wine variety 
 grapes were produced. Early actions of growers and buyers, unduly influenced 
 by the price relationships of 1950, reflected the expectation of a moderate 
 sized crop, and an especially profitable winery outlet. When marketings were 
 completed, it was discovered that many growers would have received more for their 
 grapes if they had marketed them differently, and that they, as well as the 
 handlers, suffered considerable loss from misjudging the crop. 
 
 The burden of carrying the 1951 crop fell upon the wine industry. Over 
 1.6 million tons were crushed commercially, and by December, 1951* wine inven- 
 tories had increased by nearly 25 per cent over inventories held the previous 
 year. Despite the shortness of the 19u9 and 1950 crops, maintained at high 
 prices since the middle of 1950, the wine industry already had substantial in- 
 ventories. At average rates of shipment, which is our best estimate of con- 
 sumption, the new 1951 crop increased inventories as follows: 
 
 Number of Months' Supply on Hand, California Table and Dessert Wine 
 December 31> Assuming 19H9-50 Average Consumption Rates 
 
 
 19525/ 
 
 1951 
 
 1950 
 
 Table wine 
 
 28 months 
 
 2lt months 
 
 19 months 
 
 Dessert wine 
 
 27 months 
 
 20 months 
 
 16 months 
 
 Source: Wine Institute's "Annual Wine Industry Statistical Survey." 
 a/ Special preliminary estimates. 
 
 Coincident with the crushing of the new crop, wine prices dropped sub- 
 stantially, wiping out gaims realized in the value of inventories since the 
 
 1/ Assistant Agricultural Economist in the Experiment Station and on the 
 Giannini Foundation, University of California, Berkeley. 
 
rts. 
 
 PCS OA J 
 
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2. 
 
 fall of 19h9 and threatening a low return to growers for the 1951 crop. Prices 
 for dessert wine, as reported by the Market News Service, dropped from an early 
 1951 level of 85 cents per gallon to 32 cents in the summer of 1952.. Table 
 wine prices moved down also but remained higher than the prices of dessert 
 wine despite the usual postprohibition price relationship between these two 
 classes. With large tonnages of the 1951 crop crushed by the wineries, prices 
 paid for grapes for crushing took a nose dive. Growers who delivered to co- 
 operatives or under cooperative crushing contracts also were hard hit. 
 
 Although the wine industry was hardest hit by the surplus and the decline 
 in prices, throughout the grape industry concern was felt over the surplus 
 problem. A flooded dessert wine segment in one year can mean potential dif- 
 ficulty for the raisin and fresh segments in the next* 
 
 Control Programs as a Remedy 
 
 This new demonstration of a long-standing problem stirred the grape in- 
 dustry to the contemplation of vigorous action. Committees which were set 
 up previously to study the problem and seek a solution, dormant since the 
 appearance of a strong market in 1950* were reactivated and expanded. A more 
 intense interest in a unified industry effort developed than had been evident 
 for some time. 
 
 Considerable time was spent attempting to determine why the grape industry 
 operated so unsatisfactorily. It was not only that profits were not all that 
 were desired but that price and marketing instability made the grape industry 
 hard to live with and thwarted the ambitions and incentives of many for 
 steady technological and quality improvement. Growers and handlers wanted 
 less uncertainty, less necessity for making uninformed decisions, and a better 
 possibility of long-run planning paying off. 
 
 Market control programs have been widely debated as a means of attacking 
 the grape industry's problems. To evaluate the merits of these proposals, we 
 first need to consider objectively just what the problems and objectives of 
 the grape industry are- and what market controls or any other proposed remedies 
 can hope to accomplish. 
 
 As for the problems, their long existence suggests that there is something 
 inherent in the structure of the grape industry which needs attention. It 
 would be reasonable to suppose that the difficulties are the sort that have 
 to be worked on over a period of time and could not be solved by a shot-in- 
 the-arm type of program, 
 
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3. 
 
 It is not hard to state in general terms what the ultimate objectives of 
 any improvement program might be. What is wanted in the long run is a smoothly- 
 operating, self-sufficient grape industry, profitable and devoid of crises. 
 Growers of grape varieties which are capable of shifting from one utilization 
 channel to another should be enabled to make informed marketing decisions. A 
 stable industry should have worked out the problems of smoothly adjusting a 
 somewhat variable supply to a somewhat differently variable demand. Year in, 
 year out, a fairly even flow of wine and raisins should be consumed. Excess 
 production from large crop years should be stored and marketed over a period 
 of several years without depressing markets unduly. Year-to-year price fluctua- 
 tions should be reduced below what is experienced at present because of 
 industry-wide policies of short-run inventory liquidation. It might be cheaper 
 to even out production than to tolerate uneven production and compensate for 
 it by storage operations. 
 
 For most markets, prices are the mechanism by which a free economy directs 
 the flow of raw material into various uses. But for prices to do this in the 
 grape industry, growers and marketers would have to know prices which would be 
 received in each segment in advance. A stable grape industry will need a more 
 efficient pricing system which will encourage rational allocation of the crop 
 without the exaggerated and unstabilizing excessive price swings sometimes 
 now experienced. 
 
 The essential feature from which many of the benefits of a satisfactorily 
 stabilized industry would flow would be the substantial increase in the ability 
 of industry people to base their economic decisions on accurate estimates of 
 the future. This would permit and make worth while the laying of long-range 
 plans. It would make it less dangerous to hold inventories. Laborsaving 
 machinery and plants could be installed with reasonable assurance of recovering 
 the investment over a long period. Advertising, pricing, and quality improvement 
 programs whose effectiveness depends in part on stability would be encouraged. 
 
 We can ask two questions about control programs as they concern these long- 
 run objectives: can programs be designed to further the achievement of the 
 objectives; does the operation of a control program with short-run objectives 
 reduce or delay the possibility of a satisfactory long-run adjustment. 
 
 Exactly what programs can accomplish depends on circumstances which must 
 be closely studied. Only with sound information can the capabilities of pro- 
 grams be adequately analyzed with a view to increasing profitability and reducing 
 uncertainty, Before sponsoring a program, it would be well to make sure that 
 the specific objectives pursued are actually possible. 
 
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One example of an impossible objective is the desire that returns in the 
 grape industry should for a long period of time be higher than returns in com- 
 parable agricultural and business enterprises. This is impossible so long as 
 growers and businessmen are free to enter the grape industry and compete with 
 those already established on an equal basis. Under such conditions, a control 
 program cannot produce abnormally high returns. 
 
 The various possible objectives of programs are not independent. If the 
 elements of uncertainty were reduced, after any long quiescent period, returns 
 to investment, wage rates, and entrepreneurial profits would be expected to be 
 comparable to those in alternative types of farming and processing, and the 
 grape industry would have boiled itself down to those firms and farms which 
 could supply demand efficiently at normal profits. 
 
 The fact that remedial efforts are most pushed in periods of stress has 
 tended to suppress interest in the long-run aspects of control programs or 
 the development of long-run industry plans. Yet there is a need for long-run 
 plans. Control programs are likely to have undesirable effects which grow in 
 significance. For this reason, short-run programs are most likely to be success- 
 ful, but the process of inaugurating a control plan is rather long run in 
 character, even where the plan itself is short run in character. Before the 
 design of a proposed control is undertaken, consideration should be given to 
 how that program fits in with the long-run objectives which the grape industry 
 will favor. 
 
 Such programs as surplus removal are specially contrived market devices. 
 They tend to create problems by their own operation so that the body of regu- 
 lation and control necessary to keep them going tends to become more unwieldy 
 and less adaptable to changing conditions. For such reasons, many favor con- 
 trol programs only as short-run palliatives for temporary difficulties. How- 
 ever, such programs as quality controls, advertising, research, and regulation 
 of unfair practices may well achieve permanent place and be continued indefi- 
 nitely with beneficial effect. 
 
 Whether or not there is a place for long-run surplus control programs 
 depends on whether the occurrence of surpluses is a temporary difficulty from 
 which the grape industry will eventually recover, whether it is a perennial 
 difficulty arising out of conditions inherent in the industry, and whether 
 the existence of a program creates problems of its own. It is doubtful if 
 we could ever achieve a completely free enterprise economy in the modern world, 
 if a completely unregulated marketing would work for the grape industry, or if 
 
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5. 
 
 grape markets could be so regulated and supplied with marketing information 
 that a satisfactory pricing mechanism would be the result. It would seem, 
 therefore, that some reliance will continue to be placed on market controls. 
 But whether the programs can solve the organizational problems necessary for 
 their own continued long life, even with governmental assistance, is also 
 problematical. It may be that periodic suspension and reinaugeration, much 
 as some states periodically replace their constitutions, are necessary to pre- 
 vent hardening of the arteries in a control program. 
 
 II. Ihe Grape Industry Surplus Situation 
 
 Definition of Surplus 
 
 The popular usage of the term "surplus" is to apply it to any part of a 
 crop which is not wanted. A more precise definition of the term is needed, 
 however, and can be derived from basic economic concepts. 
 
 A meaningful definition of surplus is bound up with the issue of what is 
 an adequate price level. For example, it would not be satisfactory to define 
 surplus as what could not be sold regardless of how low prices fell; through 
 the movement of prices, the market usually brings supply and demand into 
 equality so that everything on the market is sold. 
 
 A good definition of surplus identifies as a surplus situation the condi- 
 tion when the available supply and the level of demand produce a price lower 
 than some accepted standard. Thus, when price is below such a standard, it may 
 be taken as an indication of the existence of a surplus and the size of the sur- 
 plus would be the quantity whose nonexistence would have permitted a "standard" 
 price. 
 
 The crux of the definition is the manner in which the price standard is 
 developed. Parity prices are one possible standard. Some price may be picked 
 out of the air to be accepted as the standard perhaps by a program committee. 
 How high or low the standard is set is the key to how large the surplus is 
 judged to be in any given situation. 
 
 One possible standard price which has a great deal of economic logic be- 
 hind it may be called the "long-run normal price." This price may be defined 
 as that which eventually would prevail after a long period of economic stability 
 devoid of changes in such things as tastes, technology, costs, and income distri- 
 bution. On the assumption that all of such factors will continue indefinitely 
 to be what they are at present, we could calculate a long-run normal price to 
 fit present conditions. With given assumptions regarding these factors and 
 
6. 
 
 providing that we have an economy meeting the tests of theoretical perfection, 
 the long-run normal price is an absolute standard which may be calculated for 
 use in estimating the amount of surplus. 
 
 The significance of this long-run normal price is that it is the essence 
 of the long-run equilibrium position toward which the economy is always being 
 directed by the automatic action of the market place. It is the only price 
 consistent with long-run economic stability and, whenever actual prices deviate 
 from it, as they usually do, economic forces tend to bring them back into line 
 although not necessarily at a rate which irons out shorter run economic fluctua- 
 tions. For example, a price above the long-run normal may be the result of a 
 short supply, in which case that high price itself leads producers to expand 
 the supply of the item by devoting more of the resources of the economic sys- 
 tem to its production. A price lower than the long-run normal would have the 
 opposite effect. The long-run equilibrium price is that which, after the re- 
 sults of all economic disturbances have been smoothed out, would provide pro- 
 ducers, taken as a group, neither with economic incentives to expand production 
 nor reason to contract it. This equilibrium situation, characterized by an 
 absolutely stable long-run supply, can exist only itfhen the price is enough 
 just to yield producers returns which cover costs of the most efficient pos- 
 sible means of production plus a rate of profit equivalent to what might be 
 obtained in any possible alternative enterprise. 
 
 It is this last fact which justifies the use of the long-run normal prices 
 as a standard. Clearly, a standard cannot be used which provides for either 
 exhorbitant profits, or losses, or which does not penalize inefficiency in 
 production, or which is inconsistent with the normal clearing of the market 
 by the equating of demand and supply at the long-run normal price. Given the 
 long-run stability which produces the lon^-run normal price, this is the only 
 price which enforces maximum efficiency, normal profits, and long-run sta- 
 bility in production and consumption. 
 
 Evidence of a Long -Run Surplus 
 
 A surplus can be detected not by only comparing consumption with production 
 but also through a consideration of prices. Unless there is dumping, waste, or 
 diversion, the price mechanism will operate to insure that there will be no 
 substantial difference between average consumption and production rates. Season 
 average returns per ton to growers for bulk fruit at first delivery point have 
 
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7. 
 
 averaged, in the period X9h1 to 1951, 11*1*30 per ton, equivalent fresh weight.^/ 
 We have no precise figures on cost of production, but it is doubted that such 
 a rate of return could be claimed to be too low to support the present level 
 of production. It must be borne in mind, however, that this rate of return 
 is the result of federal support which, by financing the disposition of surplus 
 raisins, has eased the burden of removing them from domestic commercial markets. 
 
 While raisin production has averaged 238,700 tons, sweatbox basis, in 
 recent years, on the average about 70,000 tons per year has been absorbed by 
 federal purchase or moved by federal subsidy. Without that assistance the 
 commercial raisin price would have been considerably lower. Some of the raisins 
 supported by government purchase would have appeared in other sectors of the 
 grape industry as other grape products. 
 
 How much of the 70,000 tons of raisins sold per year with federal aid 
 should be called surplus would depend on (a) how much might have moved into 
 the nonsubsidized foreign outlets for raisins even without the federal subsidy, 
 and (b) how much below the average rate of return actually obtained during the 
 period was the "maintenance" rate of return. If we grant that the actually 
 experienced rate of return of was, on the average, adequate in postwar 
 years, it would be reasonable to assume that the volume of grapes, which could 
 be called surplus, could not be any more than the equivalent of 70,000 tons of 
 raisins and probably would be less. 
 
 How much adjustment in production or consumption or how much surplus 
 removal would be necessary to maintain the postwar rates of return is indicated 
 by contrasting postwar consumption in normal markets with total production. 
 So far, federal aid has served to remove the surplus without strong action 
 on the part of the industry itself. Through the purchase of surplus raisins, 
 it has influenced the level of prices of the entire grape industry. The 
 alternatives open to the industry are continual federal aid, adjustments in 
 either consumption or production rate to close the gap, a surplus removal 
 program, or temporary acceptance of prices low enough to squeeze out surplus 
 production. 
 
 2/ T '7hen broken down by types, equivalent fresh weight returns per ton for 
 wine varieties averaged $4-2. 60; for table varieties, SUO.UOJ for raisin varieties 
 sold fresh, $hl.£o; for raisin varieties dried, %1.20j or $16$ per ton of 
 raisins; 3 n Source of data: "Calif ornia^Crop and Livestock Reporting Service, 
 "California Fruit and Nut Crop Annual Survey as of December, 1951." 
 
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8. 
 
 Fresh Grape Consumption 
 
 Recently, fresh table use in the United States has averaged about U00,000 
 tons per year of California grapes and about 35,000 tons of grapes produced 
 out of state. There is evidence of an upward trend in table grape shipments. 
 In general, postwar shipments have exceeded those of before the war, and there 
 has been an expansion of cold storage facilities which makes fresh grapes 
 available on a round-the-calendar basis. 
 
 Wine Consumption 
 
 The wine consumed in the United States comes from foreign and domestic 
 commercial sources, and substantial quantities are homemade. The commercial 
 vintners are, of course, the most important outlet for domestic wj.ne grapes. 
 
 Since the end of World War II, net table wine production in the United 
 States has averaged nearly 30 million gallons per year, of which an average 
 of 21 million came from California wineries. However, out-of-state wineries 
 are increasingly important, so that the season 1950-51 saw the smallest 
 California production of table wine since before the war and also saw out-of- 
 state production nearly equal to California production for the first time. 
 This total of United States production probably accounted for about 150,000 
 tons of grapes. 2/ 
 
 Consumption of dessert wine, which averaged 97 million gallons from 191*6 
 to 1950, has shown a tendency to increase. It is consumed at rates consider- 
 ably in excess of prewar consumption, although fluctuating considerably. 
 Somewhat over a million tons of grapes are used each year in dessert wine 
 production. 
 
 Foreign supplies of wine for the United States market are small compared 
 to the domestic supply. In recent years, imports have averaged around 2 million 
 gallons of table wine and 700,000 gallons of dessert wine, plus about one and 
 a half million gallons of vermouth aid 600,000 gallons of sparkling wine. 
 Foreign supplies of fine table wines are an increasingly significant competitor 
 for the better grades of domestic table wine but are of lesser importance for 
 the standard wines, especially the dessert wines. Some wine is also made from 
 grapes grown in states other hhan California, about 115,000 tons being crushed 
 annually to make table wine, grape juice, or other products. 
 
 3/ On the assumption that California wineries produced 175 gallons of table 
 wine to the ton and out of -state where much "Kosher" wine is produced from 
 blends of grape juice, sugar, and water, the average was 250 gallons to the ton. 
 
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9. 
 
 TABLE I 
 
 Federal Assistance to the California Grape Industry, 19li7-195l 
 
 
 191*7-1*8 
 
 19h&-k9 
 
 19U9-50 
 
 1950-51 
 
 1951-52^/ 
 
 Crop size 
 
 aa xxx_lujli ouiio uj. gr dues 
 
 d. .0 
 
 2,9 
 
 2.5 
 
 2.4 
 
 3.2 
 
 Federal purchase or 
 subsidy- 
 Raisins, 1,000 of tons 
 
 118.0 
 
 6U.0 
 
 9li.O 
 
 
 72.0 
 
 Fresh grape equivalent, 
 1,000 tons 
 
 1*72.0 
 
 256.0 
 
 376.0 
 
 
 288.0 
 
 Crop marketed with no 
 
 federal help 
 
 Million tons of grapes 
 
 
 2.6 
 
 2.1 
 
 2.1i 
 
 2.9 
 
 Per cent of total grape 
 crop receiving help 
 
 17.0 
 
 8.0 
 
 15.0 
 
 
 9.0 
 
 Some data preliminary. 
 
 Sources: Compiled by Fruit and Vegetable Branch, Production and Marketing 
 Administration, United States Department of Agriculture, and S. W. Shear, 
 "Grape Industry Statistics as of November, 1951." 
 
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TABLE II 
 
 Federal Government Expenditure and Tonnage Involved in 
 Assistance Programs on Raisins, July, 1947, to August, 1952 
 
 Year 
 beginning 
 July 
 
 Total 
 
 Direct purchase 
 
 Export subsidies 
 
 Diversion payments 
 
 School lunch and 
 institutional feeding 
 
 Export disposition 
 
 Quantity 
 
 Expendi- 
 ture 
 
 Quantity 
 
 Expenditure 
 
 Quantity 
 
 Expenditure 
 
 Quantity 
 
 Expenditure 
 
 Quantity 
 
 Expenditure 
 
 
 1,000 
 tons 
 
 million 
 dollars 
 
 1,000 
 
 tens 
 
 million 
 dollars 
 
 1,000 
 tons 
 
 million 
 dollars 
 
 1,000 
 tons 
 
 million 
 dollars 
 
 1,000 
 tons 
 
 million 
 dollars 
 
 1947-48 
 
 118 
 
 19.0 
 
 7 
 
 1.1 
 
 111 
 
 17.9 
 
 
 
 
 
 1948-49 
 
 64 
 
 9.8 
 
 4 
 
 0.7 
 
 55 
 
 8.9 
 
 4 
 
 .2 
 
 
 
 1949-50 
 
 94 
 
 8.1 
 
 2 
 
 0.2 
 
 
 
 74 
 
 6.3 
 
 18 
 
 1.5 
 
 1950-51 
 
 
 
 
 
 
 
 
 
 
 
 1951-52 
 
 72.0 
 
 4.2 
 
 
 
 
 
 71.7 
 
 4.2 
 
 
 
 Source: Compiled by Fruit and Vegetable Branch, Production and Marketing Administration, United States Department of 
 Agriculture. 
 

 • 
 
 
 
 
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11. 
 
 On the average, about lUi,000 tons of wine grapes are shipped annually 
 from California vineyards for the home plus out-of-state manufacture of wine. 
 While use in homes seems to be decreasing, out-of-state commercial crushing 
 is growing more important. 
 
 Raisin Consumption 
 
 For the postwar period the United States market has been the one on which 
 domestic raisin and currant production must depend. Canada has usually been 
 considered part of the American market but often imports substantially from 
 other areas. Domestic and Canadian consumption has run rather steadily at 
 about l5£,000 tons per year for a long time, thereby accounting for about 
 620,000 tons of grapes. Exports other than those federally subsidized have 
 been very small in recent years although prior to the war the commercial export 
 market was of importance, accounting for up to 85,000 tons per year. 
 
 Other Grape Products 
 
 Brandy accounts for about 60,000 tons of grapes per year, and canning, 
 principally as an ingredient of fruit cocktail, accounts for 20,000 tons. Of 
 United States grape production about 25,000 tons are consumed by the growers 
 of the farm, mainly in the states outside of California. Relatively minor uses 
 such as wine, vinegar, grape juice, and grape concentrate have not been a sig- 
 nificant market outlet, although marketing experience with all of them has 
 indicated the existence of potential sales outlets. 
 
 Summary 
 
 Although recent experience is useful as an indication of what kind of 
 consumer buying behavior to expect, patterns of consumption do change. Trends 
 and crosscurrents in trends of demand appear if we give consumption data 
 close scrutiny. Changing tastes, price levels, increased population, increased 
 national income, and changes in the export market all have effects, and they 
 are sometimes hard to untangle. 
 
 We may estimate in a rough way reasonable expectations for United States 
 consumption of grapes and grape products if we first make the following assump- 
 tions: (1) that there are no drastic changes in conditions effecting demand 
 and (2) that prices remain at levels which will return about $1*0 a ton on the 
 average to the grower. Given these assumptions, total United States demand for 
 all grapes, plus Canadian demand for raisins, is as follows: 
 
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12. 
 
 Thousands of tons, 
 fresh basis 
 
 Table grapes u35 
 
 Wine grapes shipped lUU 
 
 Domestic consumption of raisins and currants 620 
 
 California table wine 150 
 
 California dessert wine 1,000 
 
 Beverage brandy 60 
 
 Grapes for canning 20 
 
 On-f arm grape consumption 25 
 
 Processing and crushing outside California 115" 
 
 Normal United States annual grape utilization 2,56° 
 
 Of this 2.57 million tons consumption, however, about 175,000 tons is. 
 normally supplied by grapes produced outside of the state of California, mostly 
 of Concord and other Labrusca varieties. This includes most of the 35 , 000 tons 
 used fresh, the 115,000 tons processed or crushed outside California, and an 
 estimated 25,000 tons is used on the farm. That leaves the total normal United 
 States commercial market for California grapes at about 2.k million tons. 
 
 For a period of about six years, therefore, California grape production 
 has exceeded disappearance in normal domestic commercial channels by an average 
 of about 370,000 tons per year. It seems reasonable to conclude that this 
 amount represents production in excess of what these markets will accept at 
 prices which will return the grower an average of $b0 per ton. 
 
 The grape industry has been cushioned against the full impact of this 
 370,000 tons, however, There is still a small regular commercial export market 
 for raisins, and some wine, brandy, and fresh grapes are exported. Some of this 
 surplus is being held as wine inventories. Most important, however, is the 
 removal by federal purchase and subsidy of, on the average, the equivalent of 
 280,000 tons of grapeel per year. 
 
 The period of time involved suggests that there is a long-run surplus 
 situation of the type representing excess capacity in the grape industry. The 
 validity of this suggestion depends entirely, however, on whether the normal 
 long-run average return which would maintain production and consumption in 
 balance (not counting year-to-year variations) was above or below $1*0 per ton. 
 At a higher rate of return, some contraction in demand would be expected, and 
 the surplus would appear even larger than 370,000 tons. At a lower rate, the 
 surplus would be somewhat less. However, we do not know, nor is there any easy 
 way to find out, exactly what the long-run surplus would be if the normal long- 
 run return were $35, &30, or even less. 
 
•.is- 
 
 Ivor, a rue cp s 
 
 to 5ruuai;io 
 
 ■' : I - I, 
 
 ■ 
 
 . ■ ■ 
 
 .nod icq Qu0 1o DB-'yiptrs nx towot*! ordt rratwfc)*! IXi 
 iTn^X.ovxjfpo onj » sjy^iC'V.''. Offer no »1o vbi;idi/3 bns 3?.5ffoi£K T Xcx^ 
 
2.01 — I 1 1 1 1 1 1 1 1 i i i_ 
 
 1942 43 44 45 46 47 48 49 50 51 52 53 
 
 Crop year 
 
 Fig. 1.— Total California Grape Production, 1941-1951. 
 
 Sources of data: S. W. Shear, "Grape Industry Statistics as of November, 1951," California Agr. Exp. Sta., Giannini 
 Foundation Report No. 125, and U. S. Federal-State Market News Service, "Calif. Grapes, Raisins, Wine Marketing, 
 1951," and 1952 estimate from U. S. Crop Reporting Board. 
 
Opinions that the surplus averages between 200,000 and 330,000 tons have 
 been expressed by various industry people. This means that the estimaters 
 consider normal demand to be no more than 2.1*5 to 2.55 million tons of grapes. 
 The long-run average price we have chosen of $h.O per ton has maintained an 
 average production of 2.96 million tons and an average unsubsidized consumption 
 of about 2.U million tons. 
 
 Inventories as an Indication of Surplus Condition 
 
 Carry-overs in excess of what the trade considers normal are one of the 
 commonly accepted signs of a surplus condition. Storage of table wine on 
 June 30 has in recent years equaled approximately 18 months' consumption at 
 the normal rate. Recently, the volume of dessert wine in storage at the be- 
 ginning of the new season has exceeded somewhat the yearly rate of consumption. 
 These levels may have been slightly influenced by the storage requirement 
 provisions of the Marketing Order for Wine Processors, under which the per- 
 missible volume of sales for each vintner was related to his June inventory. 
 
 Raisin inventories, in contrast with wine inventories, reflect a hand-to- 
 mouth inventory policy. At the beginning of the new crop year, inventories 
 generally are less than one-tenth of a year's normal consumption. Inventories 
 which are much larger are likely to have an adverse effect on the price re- 
 ceived for a new crop. 
 
 The importance of the price effect of a given carry-over in any field 
 depends on the willingness of the industry to hold it. Raisin packers are 
 not generally willing to undergo the risk of holding large inventories, and 
 it is generally believed that for this reason any substantial carry-over has 
 an adverse price effect. 
 
 In certain years, notably l Q li7, the carry-over of wine from the previous 
 year had an adverse effect on the price paid for grapes for crushing. With a 
 small commercial crush in 19^9, inventories were reduced, and prices moved 
 upward again. 
 
.aeqsns la. srtod - - noi-XX iff' » ft o<r <J4,£ -nerit ,«ioa oa ed ocf fonsmah XBirror? Hsbizi 
 ns b9niectaX£jn as.ri no3 iaq- Cxi§ to naaodo svxxi ©w soxitq eg&vsnre • ntrr^nol * 
 ■ zisqmzmo b9sxbx adt/anx/ ej&ncosr^ xia bns axxci noxXXXm.O^.^ lo. noxcroirboaq- 9gan 
 
 ,enoi rcoxXXxj? doo'fe 
 
 aoxilbnoVj- ?,sjL<i*ssj?. le noxaEoibnl no. as aoiiovrnb 1 
 
 no snxw Qlcfccf ?o :-i3s'xot2 .noxJXbnoa sxjX<yxife £ 3o jangis bstfcoaoB YXctoffinon 
 Ag nol-jCffxiGiKjo 'arScnxorc 81 ■^X9±<%.TLbco'sqq^ bsLoVpe aicsx .Sueo&t nx asxi C£ anxxk 
 adt Qgoiois ax srixw inaseeb "Jo snwlov -od-J .ylinsoaS '»9*6tt Xexaroxt $d-f 
 iqx-tqmi/gnos sAsi ^Xiest ftrf* ^srli-'araoa bofrsdox© ssri. eoasse wsir.sxltf "Jo gnxnrtxs 
 . dnscisixupoi ©gsiocte aitf" ^ be.oflsirXioi •jXArisxla n9©d &vsd r £eia slsval ©aodT 
 »'xr<( arlJ' doXdv 'x&bxux c ?.*xo3390O'.i c l snxVJ nox isr.aO gflx^solifiM axfx lo anoia.cvo'jq 
 ...•X^sitasvrii srwt> aid c*t ba^XaT am? rxoninxv xioc9 iol aaXse lo ©jayXov eXdtasxm 
 •c r-baorf k doel'le? . aelu Jnwai snxw riJ-tw Aac idno? nx t 8«J: r ro;fff3Vfix itiaxofl 
 
 ssxTocxftyvXix t iB9\" qoio wan 9x!.t *.o y r.'r.nv.iffid axi-l 't.x\ .ys^Xcq .Y^o.tnxiVfii.' x'^xxonj 
 i9xto*n9v.ii ^noJ'.Jqm.v.fioo Jfeanor: .a^sY b lo-£Mfl©*-eno nsrij - aeaX ©ia YXXsisn* 5 !? 
 -9'x oox'iq sdi no >ro9H,9 .©aiavfcn ns ©vsri oA t$X9>{xX sob isgnsX xfoian oie riaXdw 
 
 «qo*io W9fi b iol boviso 
 fcXett vrie ni: 'xev-o-vT^o fisvx§. s lo db©Tl« boxiq ©d»t lo eooschtoqmi: 9x11 
 3t<5 Eie^oeq .iiiax&fl ,1}. biocl ot y^&vsjb^.i lo as-jnarix tXxx^ axid- no ebn^qefo 
 bxig t f>9j "'xod'nsvit ^ 9s*isJ bXo/i "lo *''3xi 9x1^ o^i9bf- , ix ^1X^1^"./ v EXf»ifvsj9 >ton 
 5sxi x9y&-y^t'tfio XBxJ"xxB' : iacfixc: vxib noajjoi BJuIt iol. t^xivl bsvailocf' YXiET5n9s ax d'x 
 
 . .do9'ii9 aoxrrq osi^/bis xts 
 axxoxv9iq 9d.v moYi 9nxw lo 19vo-yiibo sxIj ^YxlQX vIcfsjonr >&iS3Y nxs<r^9o ni 
 b xiitXW »^nxxl:,rjio 'xoi ssqfii^ *tox bxsq ooi'xci rtrfu - no iifo9ilG* sarsvbr xib bf?xi is?y 
 b9vo.^ esox-a bfis .bsanb-A siavr . asito^ovni nx xiauto Xeio-xa^oo XXaas 
 
15. 
 
 TABLE III 
 
 United States Stocks on Hand of Major Grape Products, Selected Dates, l#ti-195>2 
 
 Year 
 
 Dessert winej^/ 
 June 30 
 
 Table wineii/ 
 June 30 
 
 Raisins 
 September 1 
 
 Beverage and neutral 
 brandy June 30 
 
 
 1 
 
 2 
 
 3 
 
 h 
 
 
 millions of gallons 
 
 onous etnas ox x-ons 
 
 
 19U1 
 
 76.7 
 
 Ul.2 
 
 35.7 
 
 lo,9 
 
 19h2 
 
 86.6 
 
 U6.6 
 
 6U.O 
 
 lo.U 
 
 19h3 
 
 %A 1 
 
 36.9 
 
 U5.7 
 
 TO 7 
 
 I9bk ■ 
 
 53.7 
 
 U0.6 
 
 71.6 
 
 ii.5 
 
 
 56.8 
 
 16. 0 
 
 32.9 
 
 12. U 
 
 19U6 
 
 61.6 
 
 Uo.U 
 
 8.1 
 
 13.3 
 
 I9kl 
 
 108.7 
 
 51.U 
 
 17.3 
 
 lii.9 
 
 1918 
 
 97.8 
 
 U9.9 
 
 23.2 
 
 15.2 
 
 19U9 
 
 111.7 
 
 50.8 
 
 
 13. h 
 
 1950 
 
 83.0 
 
 U3.9 
 
 20.8 
 
 11.3 
 
 1951 
 
 92.0 
 
 U2.0 
 
 18.7 
 
 11.5 
 
 1952 
 
 120.5 
 
 5o.i 
 
 
 1U'. 3 
 
 a/ Stocks in bonded premises only, vermouth and sparkling wines excluded. 
 
 b/ Including. 9.2 thousand tons held for the United States Department of Agriculture. 
 
 Sources: Cols. 1, 2, U: Wine Institute, "Annual Statistical Survey, Part III" 
 
 Annual. 
 
 Col. 3: United States Bureau of Agricultural Economics, un- 
 
 published data released November 22, 19U9, revised by 
 S. W. Shear, and reports of Federal Raisin Advisory 
 Committee . 
 

 
 
 
 
 
 - 
 
 : 
 
 i - ■ • * ** to ?. {r 3? c - 
 
 
 
 
 
 
 •• 
 
 
 
 
 
 
 
 
 
 ii 
 
 
 
 
 
 
 
 
 
 
 
 
 otpr 
 
 • 
 
 
 
 
 • 
 
 * 
 
 ; .- 
 
 
 
 
 
 
 
 
 ■ 
 
 
 
 
 • 
 
 
 
 
 * 
 
 
 ■ 
 
 > 
 
 
 ■. 
 
 
 
 . L 
 
 
 
 ■ 
 
 - 
 
 
 
 
 \ • 
 
 
 
 > 
 
 
 
 - 
 
 
 
 
 
 
 i 
 
 • 
 
 - 
 
 •> 
 
 • - 
 
 
 
 ■ 
 
 • 
 
 — 
 
 ■ • 
 
 
 
 
 
 » ■ 
 
 
 
 3-1 frial .vavt/iE/ Irt 
 
 - 
 
 
 
 
 * 
 
16. 
 
 III. Allocation Problems 
 
 The same data which suggest that, provided prewar commercial raisin exports 
 could be regained, no serious surplus would exist also suggest that short-run 
 surplus situations existing for one or two years may continue. While a kind 
 of everynormal granary operation would smooth out the difficulties, such an 
 operation is by no means easy. It is most important to be able to judge the 
 market and the production-consumption balance objectively if the pitfalls of 
 such an operation are to be avoided. There is, of course, no assurance that 
 every year of heavy production will be followed by years of light production. 
 
 Sector surpluses arise for the additional reason that the grape industry 
 often overloads one particular sector in an uneconomic manner. While sector 
 surpluses are most likely to occur in years of over-all surplus, they can also 
 occur due to bad allocation even when there is no over-all surplus. 
 
 Difficulties in Efficient Allocation of the Crop 
 
 The multiplicity of markets in which grapes are used is recognized as 
 complicating the problem of orderly marketing. While some grapes are special- 
 ised for certain special uses, the diversity of markets for which most grapes 
 are suited is one of the most striking characteristics of this crop. Besides 
 being one of the most popular fresh fruits, grapes are used for canning, wine, 
 brandy, concentrate fresh fruit-juice, and vinegar. When dried as raisins, 
 they are eaten as raisins or used in baking and other cooking purposes. 
 
 All grapes including the wine varieties, the most specialized of all, have 
 several market outlets, and every year the California grape industry is faced 
 with the problem of dividing up the available supply among the many uses. 
 Because marketing organization is as flexible as the crop itself, there may 
 be great differences in the way the crop is utilized in any two seasons. 
 
 The evidence is strong that the competitive forces of supply and demand 
 will not produce an efficient utilization of the grapes harvested in any one 
 season. 
 
 What is meant by an efficient allocation can be stated fairly precisely. 
 It means the allocation of the crop among all possible markets in such a way 
 that maximum net income is received by the industry as a whole. Obviously, in 
 the absence of a control program, returns are not being maximized if a grower 
 is selling his grapes in one market for less than he might receive in another 
 since income could be increased by shifting his grapes to a market where they 
 would bring higher returns. These shifts would, of course, affect prices when 
 done in sufficient volume, which would tend to make the returns in the two 
 
tsegguS. ©ale /Jsixs. klpow aulq^m siioi-ise on. .tfeaniega? ad b 
 ,9«ni:Jf<0o .ys«i a'JB-sy ouJ to eiio sol • gnicteixa anoiJattJia a»X 
 rdluoilliF: add Jtio Aiooam b£u^- nqxinteqci y^rtG^/.^^on^v 
 
 t 9eiuoo lo t ai siariT ifcdfciovs 3d o« alB noi^K-iaqo rtfi dct»a 
 
 bib ay ni: iir?oo OJ yl9>i£i. Jaom 
 9*x*rid Ttariw ri^ve no£j'i>ooIi>, bs( 
 
 as boslnaooei: si beao ots, aaqp-ig doidv ni sdatfnRrcs lo ^iiaiiqiiltf/B ad? 
 iaiaaqa are aaqstg 91803 olid*,'! .gnx je^-ianr yX«iafe3Q lo fasIdoTq add aniteaxlqmoo 
 
 ■ 
 
 l BiT£eirt5t as boxib xjsrW f ixjj}9fliv brie f*?iut-thi?'x daanl adfiTttfncwtoo • ,^bi^std 
 . • bfeef 
 ait t Xia $n -.feast Isxooqa tfaa« add tsaidsj-iav aniw s:i.t gnibx'Xani saqB*ig XXA. 
 
 • ■ . : .- • 
 
 } - - 
 
 ana Tp» ni bsieansd aeqsi;-, arte!' lo floidasiliii* dnai-aills- «a aotfboiq don XXiw 
 
 t noea-ee 
 
 ^yX&aipa'sq yXixal ba^BiJ-a ad -nso noiifiO©Xlfi #tt9$pilla ns yc{ drusatt ax 4bdW 
 X«Tt b dou? n^ s .«ia»lt »ici .alefiaaoq Xia ••gnosis qo r za arid lx> neidsaoXXa 'add- pas am il 
 i tYXat/cjiydO «sXor(w a •aa yid?,Hbn£ eifi yd bavx"-oa*t si -empani iafj .mtflJibcsai dgrfd 
 ■ >..••■• , . 
 
 ■ ■ ■ ■ d?j/-' . '. 
 
 ygrf? spfsdw £$)foB8t ;. ; oi ^y/is axv. gnidliria yd baasaionx 9d-bX«ou atipcfii aonia 
 adw p.9oi«iq ^allg t 9siifaa la • ^feJkfow ad lid a •esarif- iarfx#da-'i nedgirt jjni'jcf bleow 
 ;o-.« sdtf nx mv&i&i adA-.ajtei? od" bnad. bXoew dqi^f ; .yw**iov. dnpioillx/a ni snob 
 
PRODUCTION 
 
 Table Varieties Produced 
 (573,600 tons) 
 
 Wine Varieties Produced 
 (595,600 tons) 
 
 Raisin Varieties Produced 
 (1,592,000 tons) 
 
 47.9% 
 
 0.1% 
 
 99.8% 
 
 52.0% 
 
 65.7% 
 
 34.3% 
 
 22.0% 
 
 0.2% 
 
 43.8% 
 
 34.2% 
 
 
 
 
 61.9% 
 
 / 29.1% 
 
 
 
 
 
 f 99.9% 
 
 Fresh Shipping 
 (and Canning) 
 ( 418,000 tons) 
 
 Commercial 
 and Home Crushing 
 (1,360,000 tons) 
 
 Drying 
 (984,000 tons) 
 
 *less than .05 
 
 UTILIZATION 
 
 Fig. 2.— California Grapes, 1945-49 Average. Production and Utilization by Varietal Class. Utilization 
 by Percentages of Each Varietal Class, and Varietal Composition by Percentages of Each Major 
 Utilization Class. 
 
 Source of data: U. S. Crop and Livestock Reporting Service, Annual Crop Reports. 
 
PRODUCTION 
 
 Table Varieties Produced 
 (768,000 tons) 
 
 Wine Varieties Produced 
 (651,000 tons) 
 
 Raisin Varieties Produced 
 (1,805,000 tons) 
 
 Fresh Shipping 
 (and Canning) 
 (485,000 tons) 
 
 Commercial 
 and Home Crushing 
 (1,774,000 tons) 
 
 Drying 
 (965,000 tons) 
 
 : less than .05 
 
 UTILIZATION 
 
 Fig. 3.— California Grapes, 1951. Production and Utilization by Varietal Class. Utilization by Percent- 
 ages of Each Varietal Class and Varietal Composition by Percentages of Each Major Utilization Class. 
 
 Source of data: U. S. Crop and Livestock Reporting Service, Annual Crop Reports. 
 
19. 
 
 markets more nearly equal. So long as returns in any one outlet exceeded 
 returns in any other, a shift to the higher priced markets would be an in- 
 crease in allocation efficiency. If the crop were perfectly allocated, 
 growers would have no basis for claiming at the end of the season that, if 
 they had known in advance what prices would have been obtained in various 
 markets, they would have marketed differently. 
 
 Efficient allocation does not necessarily mean equal prices but means 
 equal returns in all markets since costs of harvest and marketing, not to 
 mention cultivation, differ, and the differences must be taken into cons 
 sideration. Also, there will be varietal, qualitative, and geographical 
 price differences remaining. 
 
 One reason the market structure is inefficient is that it gives the grape 
 grower no guide as to which of the several kinds of markets open to him will 
 give him the best return. The grower often does not have definite price offers 
 from various market outlets to guide him because in many circumstances the 
 price received is not determined until after harvest and delivery have taken 
 place. This is the situation for cooperatives which are important in every 
 segment, for cooperative crushing contracts, and for open price contracts. 
 
 Market reports indicating price trends and utilization are not available 
 rapidly enough to let growers or handlers know what markets are being over- 
 loaded and what markets have a short supply in time to take advantage of them. 
 Possibly they cannot. Variations in over-all grape production, inventories, 
 and demand complicate the problem of planning a sound utilization pattern. 
 The almost inevitable result of these marketing uncertainties, within the 
 scope of which the grape industry must operate, is a swinging from excessive 
 wine crush in one year to excessive raisin lay the next. 
 
 Figures k through 7 illustrate the relation between average or "normal" 
 consumption and volume marketed in each sector of the grape industry and in 
 conjunction with Figure 1 on page 13 indicate how faulty allocation can create 
 a sector surplus situation even in a nonsurplus year. 
 
 In the record-breaking year of 19U6, the wineries paying high grape 
 prices took a disproportionate share of the crop, leaving the fresh table and 
 raisin sectors with fewer grapes than the normal consumption requirement. In 
 the next year, 19U7, total grape production was down, but with large inven- 
 tories of wine on hand, it developed that fresh table and raisin markets were 
 offered more grapes than in the peak production year of 19U6.. In 19U8 the 
 cycle had swung around in part, and there was an overnormal supply of dessert 
 
■ 
 
 - . 
 
 • ■ 
 
 noi'lo ooxiq- sixnx'isb 9vac! ion esob n&tfto *cswo*xg' adKF" .muz,: 
 
 • ■ 
 
 .sjtsfiitfnoo aoxiq. ftoqo" ic'i brie t ?JoRrtfcioo '^nrr'snio wxc 
 
 ... 
 
 .cfcvat orid" vjb! ixaiB'c evil's aoxs> o& if 
 
 JIXXD 90 
 J3 9flO 
 
 i on T3w 
 
 donas o' Y-rid - 
 
 . ■ • • . 
 
 100 Isrrtof: 9. 
 
 rioca n£ bS&GfctSKtr. dtttfloV bns noidqiwsrioo 
 :on e tix flays noxifii/Jxs aulqwa lod-o^a 6 
 *u : '' ' - • 
 
100 I I I I I I I I I I I I I 
 
 1942 43 44 45 46 47 48 49 50 51 52 53 
 
 Crop year 
 
 Fig. 6.— California Raisin and Currant Production, Short Tons, Dry Weight. 
 
 5 00 
 
 I ' ' ■ i ' I I I 1 1 J 1 
 
 1942 43 44 45 46 47 48 49 50 51 52 53 
 
 Crop year 
 
 Fig. 7.— Production for Fresh Table Use of California Grapes, All Varieties. 
 
 Sources of data: S. W. Shear, "Grape Industry Statistics as of November, 1951," Calif. Agr. Exp. Sta., Giannini 
 Foundation Mimeo. Report No. 125, and U. S. Federal-State Market News Service, "Calif." Grapes, Raisins, Wine 
 Marketing, 1951." (Mimeo.) 
 
20. 
 
 wine. Again in 19^9 and 1950, certain markets were oversnpplied despite the 
 fact that the grape crop was not sufficiently large to meet all normal re- 
 qairejjienfeai . 
 
 Stability in Marketing 
 
 The supply of grapes in any one sector is more significantly determined 
 by the tendency of growers to shift from one market to another in response to 
 price experience and price expectations than it is by any tendency to change 
 the over-all level of production because of the same cause. 
 
 These shifts are important and not very predictable. How extreme they 
 can be illustrated by war years' experience, when unusual restrictions and 
 incentives existed. They disrupt marketing in most major sectors of the grape 
 industry. No single sector succeeds in stabilizing the volume it handles by 
 leaving the brunt of carrying the surplus on the other sectors. This is illus- 
 trated by Figures h through 7. Statistically, in the period 193U to 19h9 (ex- 
 cluding the war years), the number of tons of raisins dried deviated from the 
 average in one year out of three by at least 20 per cent. As for raisin grapes 
 crushed, in one year out of three, deviations exceeded 58 per cent. The variation 
 in drying and crushing of raisin grapes exceeds the variations in total pro- 
 duction of raisin variety grapes. 
 
 It would be reasonable to expect that prices paid in various uses would 
 be a major determinant of utilization. Perhaps they are, but the statement 
 needs interpretation. The prices which can affect utilization are the prices 
 which the grower is receiving or expects when his decision as to where he will 
 sell his crop becomes irrevocable. Naturally, price expectations of processors 
 have an important bearing on what prices they offer growers. The erratic 
 character of grape allocation traces back to the fact that grape growers and 
 processors must make their marketing decision before they know what average 
 returns will be. When marketing through cooperatives, the time between 
 decision making and settling returns to be received is especially long. Having 
 three major outlets aggravates the difficulty. Growers are also aff :cted in 
 their marketing decisions by promptness of payment, labor availability, and 
 willingness to accept grapes at a given time. Seme may market through co- 
 operatives as a matter of principle. Harvest costs differ according to use, 
 and cultivation costs differ also. The extra risk of rain involved in drying 
 for raisins is a real cost which growers probably do not ignore. 
 
 There is evidence to suggest sound marketing decisions by growers are not 
 really possible under present conditions. According to Table IV, raisin grape 
 
Mi II -<7B3h mliquBPtfivo siaw ecfaohiyR nistfaoo t 03?I ores Qt'^I ai nlegA , Qn.hr 
 Ismon lis ioora ©sisX Y-C^toxo.c'ilud .ton 3sw qo*jo oqsig ori* tori* tfosl 
 
 ■ 
 
 ■ 
 
 t a3tiso a&sa ontf lo osi/sooo' noxdoirbo^q 'io lovsi IXe-isvo sricf 
 
 fens ma£&tst%tB.zi laofsaaa noriw t dou9j&dqxs 1 &tr<*^ ibw yd bsietJeirXIi 9d nap 
 
 i . 
 
 »ouIXt ex nxriT ,3iotfoQB loritfo srli no aulmwa orid gaJhpHFdo lo &nutd edtf saftrsel 
 
 !90 iyq 8<i fo^heooxa znoxiaxv-gb .saxdef lo tuo jz&y snc ai t f)9ri8ulo 
 1 erroichsxiftv orfj ebsaoxs asqsng ttteXen lo 3aj.jrtje.cnt0 bns g-nxyxb ux 
 
 loxif'V ni bxrcT cooxici Jcrid" d'O'xncf; o-t rXtfc>noPB3i scf bXuow A I 
 
 i aoitexiliJis Goalie nso rfsidw ssoina 9riT .ricita;t«'icr<-3 l tat > 
 
 ■ 
 
 riolriw 
 
 1 lo 3noj.Ji5Jo?!qxo 90xiq ^iletu^jsil ..sldboovsT-xi ecanoood qoi 
 
 - '. 
 
 5 *sriw wo*^ XQri^ -'tolocf noiexo9b ^id-ajfrxsra .-xxsrid- sjisn izsm 
 lie oris stjj btcwolD .^dliroillib oriit 39t&vj> "tnjiH ^tfafthyo i 
 
 Xfi 
 
 &Xd&T otf gnxotoooA •anox^i'bnoo in.B.p.dici tsbnu sidl 
 
21. 
 
 TABLE IV 
 
 Where Raisin Variety Grapes Were Sold, 193U-1951} Per Cent Dried 
 and Crushed Separated According to Market Bringing Highest Returns 
 
 \sl UjJ y U cil 
 
 Raisin returns higher 
 
 Crushing returns higher 
 
 Dried 
 
 Crushed 
 
 Dried 
 
 Crushed 
 
 
 per cent 
 
 193U 
 
 
 
 Ik 
 
 15 
 
 w& 
 
 65 
 
 2h 
 
 
 
 1936 
 
 
 
 79 
 
 7 
 
 1937 
 
 
 
 69 
 
 19 
 
 1938^/ 
 
 
 
 
 
 1939 
 
 
 
 75 
 
 lh 
 
 19U0 
 
 5U 
 
 33 
 
 
 
 19U 
 
 
 
 
 
 1 ol.A 
 
 
 
 U7 
 
 U3 
 
 19li? 
 
 72 
 
 16 
 
 
 
 19U8 
 
 55 
 
 32 
 
 
 
 19U9 
 
 73 
 
 m 
 
 
 
 1950 
 
 
 
 U7 
 
 u 
 
 19£lV 
 
 29 
 
 
 
 
 Average j 
 
 1 
 
 58 
 
 29 
 
 65 
 
 23 
 
 Jf Omitted — returns equal in each use. 
 h/ Preliminary. 
 
 Sources: Shear, S. W. "Grape Industry Statistics." Appendix C of 
 Giannini Found. Ag#. Econ. Mimeo Report No. 107, and "Grape Industry 
 Statistics as of November, 1951." Giannini Found. Agr. Econ. Mimeo. 
 Report No. 125. 
 

 •xarikB eat'jiot ctialsH ! 
 
 1 , Z , _ , , J 
 
 
 
 
 
 
 11 " * " ■" ■ ' 
 1 , . , .... 
 
 
 r~^~ T 
 
 
 
 
 \ 
 
 
 
 ii££X 
 {&£ 
 
 ■ 
 
 
 
 
 
 
 
 
 
 Xitex 
 
 
 
 ] : 
 
 ! 
 
 
 
 ■ 
 
 
 K ! 
 
 
 
 
 
 * . i 
 
 
 
 
 
 ' Li. * 3 
 
 
 
 ! : . 
 
 
 ■ ^ l 
 
 : Z i 
 
 f 
 
 8£ 
 
 
 .obit rionfc r«.c isx/ 
 
 +P V«T-|'S>flh^' 
 
22. 
 
 growers often fail to choose the outlet which, as it turns out, would provide 
 the best return. According to this table, in those seasons in which returns 
 from drying exceeded returns from crushing, growers actually dried a smaller 
 per cent of the crop than in other years. When returns from crushing were 
 higher , growers actually crushed only 23 per cent of their grapes, but when 
 returns from crushing were lower , they crushed 29 per cent. Regardless of 
 relative harvest and other costs, this behavior is just the opposite of what 
 would bring the best returns for their crop. Because they tend to make their 
 marketing decisions on the basis of such inadequate evidence at last year's 
 prices, carry-over, the statements of individuals, estimates of governmental 
 policies, and their own intuition, growers often do not succeed in guessing 
 which market will bring the best return. However, there is a strong tendency 
 for the bulk of growers to guess the same way. This produces a kind of "herd 
 reaction" which, in itself, can cause the outlet to which the "herd" turns to 
 be oversupplied and therefore to produce lower returns than other outlets. 
 How important such an effect might be is suggested by Table 17. 
 
 In view of the difficulties, it is not too surprising that growers do not 
 succeed too well in marketing their crop in the most profitable uses. Their 
 best information concerning returns is inadequate, and they are often influenced 
 by unfounded ideas. Furthermore, that most important factor in determining 
 relative prices, the utilization of the crop, cannot be known until growers 
 make their marketing decisions, and, in turn, growers do not want to make their 
 marketing decisions until they know what the utilization of the crop will be! 
 Because of the element of time between the start of the harvest and the knowledge 
 of utilization, it is open to question whether this situation could ever be 
 adequately corrected by more complete market information service. 
 
 With effective, competitive markets throughout the grape industry for each 
 grower, efficient allocation would mean that, at the conclusion of the harvest 
 and marketing of the crop, the returns actually received in the alternatives 
 originally open to him were nearly equal. The market alternatives of individual 
 growers would vary, of course, according to variety, quality, and location. It 
 is not true that an efficient market would assure equal return to all growers, 
 but only to all growers in similar circumstances. 
 
 When this situation is not obtained, there must be surplus situations and 
 economic loss in individual sectors, even when actually there may not be an ex- 
 cessive over-all production of grapes and with scarcities arising in other 
 sectors. Where extreme differences in returns result, there may be a marketing 
 
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23. 
 
 stampede in the opposite direction the next year. The idea that there may be a 
 vicious spiral of sector surpluses and price effects year after year is worth 
 further study. Regardless of whether there is any attempt to remove over-all 
 surplus, marketing allocation efficiency should be improved. 
 
 Problems Created by Annual Variations in Production 
 
 Volume of grapes produced is to some extent under the control of the grower 
 and is not entirely due to variations in weather conditions, disease control, 
 etc. Besides changing his acreage, the grower can influence yields by changing 
 the particular cultural practices he chooses to follow, and it is possible that 
 he might be contributing to year-to-year variations in production of grapes. 
 
 To the extent that his economic expectations influence his cultural prac- 
 tices and efforts to get a high yield from his vineyards, year-to-year variations 
 in production may reflect price movements or price expectations. At best, how- 
 ever, this influence must be appreciably less than with annual crops, especially 
 those grown in areas where shifting from one crop to another is relatively easy. 
 
 The significance of this situation is that, while a certain amount of pro- 
 duction variation is unavoidable because of natural causes, a certain amount 
 may be man-made. And while we cannot do anything about the weather, a marketing 
 program might be concocted to minimize the influence of the man-made variations. 
 
 It would be well worth attempting to minimize production variations. The 
 grape and grape product marketing system is imperfect, and as has been stated, 
 it is doubtful if conditions exist which would permit it ever to do an efficient 
 job of grape allocation. The jobs which the marketing situation does least 
 well are coping with variations in production and the allocating problem pro- 
 duced by having an uncertain sized crop. If there are limits to how much the 
 marketing system can be improved, then it might be a good policy to attempt 
 reducing the fluctuations with which the marketing system cannot easily cope. 
 Even a fairly inefficient marketing system might work satisfactorily in^an 
 essentially stable situation. 
 
 While little can be done to eliminate the variations and uncertainties 
 caused by weather, there is always the possibility of reducing those which 
 arise from differences in grape growers' cultural practices. Probably the most 
 important determinant of yield under the control of the grower is the pruning 
 and the thinning of bunches, customarily done to improve quality and speed 
 maturity. Pruning is used wherever grapes are grown to limit the number of 
 grapes, while thinning is usually limited to grapes destined for the fresh 
 market. The differences in yield which result from different amounts of pruning 
 
2 U. 
 
 and thinning are important, and although there is little information on the 
 economics of the thinning operation, except with table varieties, it is reason- 
 able to expect the amount of thinning to be affected by economic prospects. We 
 do not know, however, enough of grower psychology to be certain what the effect 
 of a good prospect or a bad prospect will be. 
 
 It has been argued that the best viticultural practices call for pruning 
 and thinning vines to a certain volume of bunches per vine, depending on con- 
 templated table, wine, or raisin use. Since 1933* according to expert opinion, 
 the set of bunches on vines nearly always exceeded what good practice would 
 permit to reach maturity, but by a varying amount. If so, perhaps the continued 
 encouragement of year-in year-out good cultural practices would have the effect 
 of reducing the fluctuations in yield to even less than the purely natural 
 fluctuations arising from weather alone since with a very heavy set there would 
 be a heavy thinning and a compensatingly smaller thinning of a light set of 
 buds. Average yield would also be decreased, but average grape quality increased. 
 
 Over-all grape production is rather variable, and in some years more grapes 
 are produced than can be marketed with satisfactory returns. Such years as 
 19U6, 19li7, 19ii8, and 1951 are examples of surplus production. The grape in- 
 dustry has not been successful in regulating the volume of grape production to 
 meet the volume of demand. Short-run surpluses, arising out of the inability 
 to tailor production to demand, are one of the main causes of grape marketing 
 difficulties. 
 
 The problem of efficient utilization of grapes and the surplus problem 
 are intimately connected with each other. Even without an over-all surplus, 
 surpluses and shortages may be created in particular sectors because of poor 
 allocation of the available crop, and over-all surpluses in turn break down 
 the ability of the market to do an efficient job of allocation. 
 
 With a long-run surplus situation as large as we apparently have, it would 
 not be possible to remedy the situations created by short-run excess supplies 
 by carrying over inventory into years of shortage. Averaging out the valleys 
 and the peaks of production will still leave surpluses in excess of what could 
 easily be disposed of in commercial markets on a long-run basis. 
 
 Summary 
 
 At the present time there is in existence a long-run surplus which creates 
 serious problems when means are not available to handle it. So far federal 
 support for raisins has been reasonably effective. Average returns to grape 
 growers since the war have been reasonably high. Typically, however, year-to- 
 year variations in over-all production far exoeed the amount of the over-all 
 
'jrio v 'BcT 
 
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25. 
 
 surplus. A satisfactory marketing situation would require something to com- 
 pensate for or control these variations in production, even if there were no 
 over-all surplus. And, in addition, sector surpluses can arise as a result 
 of difficult marketing conditions. The reason is basically the difficulty 
 encountered in arriving at a satisfactory division of the crop. The price 
 mechanism does not work well, probably for the reason that anticipations rather 
 than actually received prices influence the division of the crop. How the crop 
 is being misallocated does not become apparent until it is too late to do any- 
 thing about it. 
 
 Probably we do not know enough about the industry and the possible effects 
 of untried solutions to prescribe a remedy at the present time. Taken together, 
 the difficulties of present marketing conditions and the difficulties of 
 remedying these present difficulties make an impressive list. Neither long- 
 nor short-run problems will be easily solved by market improvement plans. In 
 working for a solution, however, the following summary of the underlying causes 
 of present difficulties might be borne in mind: 
 
 1. Long-run production is somewhat in excess of what can easily be 
 marketed at prices as high as the average received since World War II. 
 
 2. Year-to-year fluctuations in production and demand for grapes and 
 grape products which do not always coincide, sometimes production being more 
 and sometimes less than the market will demand at normal prices. The relative 
 inelasticity of consumption habits tends to aggravate the marketing difficulty. 
 
 3. The grape industries have not developed rational techniques for handling 
 the excess production such as storing the excess of some years to permit market- 
 ing normal volume in the short ones. Resulting price fluctuations probably 
 discourage storage still further and make it difficult for a firm to develop 
 long-run plans .V 
 
 k* A very fundamental fact in the grape situation is the multiplicity of 
 outlets for most grapes. Shifts in allocation are not only possible but common 
 
 k/ It should be noted that price fluctuations themselves are considered 
 by marketing experts to have a depressing effect on the rate of consumption 
 of a product. Consumers are less likely to develop steady consumption habits, 
 and middlemen are rather reluctant to carry adequate inventories of products 
 on which they seem to be in danger of taking an inventory loss. Price 
 fluctuations complicate their business generally, but at least for fresh 
 grapes they are probably inescapable. 
 
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26. 
 
 and are not readily predictable since they are based on uncertain expectations 
 rather than actual market conditions. An outgrowth of this flexibility is the 
 frequent failure of the grape industry to achieve the most useful allocation 
 of its product. 
 
 S» Implications of marketing programs are not fully understood. It is 
 sometimes economically sound for an individual to do something as part of an 
 industry-wide plan when it would not be sound for him to do so on his own. 
 Withholding part of the crop from the market is an example. Sometimes it is 
 difficult to see how actions which are foolish when done separately suddenly 
 become sound when done en masse . 
 
 6. It is hard for individual growers and packers to know during the 
 course of the season which sector is likely to be oversupplied and which 
 undersupplied. Market information has not developed to the point of pro- 
 ducing an adequate running account of the harvest and, of course, grapes 
 do not move into all channels at the same time. 
 
 7. Variations in the capacity of markets to buy grapes and grape 
 products, due to changes in national income, competition from other products, 
 and difficulties in foreign markets have caused difficulty in disposing of 
 grapes • 
 
 8. There is a wide-felt need for organized programs for improvement 
 in marketing efficiency, merchandising, dealer promotion xrork, advertising, 
 and quality in all sectors of the grape industry, and many feel it to be 
 essential to a healthy industry. 
 
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27. 
 
 IV. Analysis of Surplus Removal Proposals 
 
 There are good reasons for feeling that the present economic conditions 
 and kinds of market organizations in which grapes and grape products are sold 
 will not produce stable marketing conditions without special remedial action 
 or continued federal assistance. A few basic types of proposals may be dis- 
 cerned among the many remedial programs which have been proposed and tried in 
 the grape industry and other agricultural industries to improve such situa- 
 tions. The differences in basic types arise at least as much from different 
 diagnoses of the ills of the industry and its marketing system as they arise 
 from different ideas as to how to cure any given basic difficulty. 
 
 The most popular idea is that there are too many grapes, and the remedy 
 usually suggested is to restrict the volume of grapes sold or to remove the 
 surplus. There are many ways of attempting to achieve this reduction. They 
 all assume that the demand conditions in grape markets are such that a smaller 
 volume of sales will bring a higher total revenue to the producers. 
 
 A second type of program often proposed simultaneously with the first 
 suggests that economic uncertainty is the problem because it leads to poor 
 utilization, and the way to better marketing is through steps to improve 
 utilization. 
 
 A third type of proposal looks to stimulating demand and market expan- 
 sion as a remedy. 
 
 There are occasional program suggestions which are rather different in 
 character. A proposal which was once important but has not received serious 
 consideration by grape growers for some time is that growers might increase 
 their average returns by acting as an united group when bargaining with buyers. 
 One other type of program, of major importance in other agricultural indus- 
 tries, seeks mainly to improve the efficiency of physical handling of the prod- 
 uct through research, new facilities, and technical innovations. 
 
 A. Requirements for Programs to Remove the Surplus 
 Where the possibility exists that restriction of output can increase 
 total revenue, achieving this restriction may still be difficult. A success- 
 ful surplus control program must satisfy many criteria, and a survey of past 
 control attemptshas shown that is has seldom been possible for a program ade- 
 quately to meet all the standards for any long period. The four criteria 
 which a successful program must meet are: 
 
• ,.y 
 
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28. 
 
 1. Economic Feasibility (both short- and long-run) 
 
 2. Administrative Practicability 
 
 3. Legal Soundness 
 
 U. Grower, Handler, and General Public Acceptability 
 
 Economic Feasibility 
 
 The most important aspect of economic feasibility is whether or not the 
 demand for the product being controlled and the quantity normally supplied are 
 such that restriction of output or sales will increase the total revenue which 
 can be obtained from the sale of that product. Unless they are, restriction 
 is not a sound objective for a program. To stress this all-important point, 
 we here state the basic principle behind restriction of marketing. 
 
 That the price received for a commodity depends on the volume offered for 
 sale is well understood. Volume is not, of course, the only factor which 
 changes prices, but where there is an open market, in the normal course of 
 events short-run fluctuations in price are more commonly attributable to varia- 
 tions in volume sold than to any other factor. 
 
 The extent to which an increase in quantity offered for sale will affect 
 price depends on how consumers react, and this reaction differs according to 
 the product and the circumstances. A 10 per cent increase in grape shipments 
 will not necessarily produce the same proportionate price effect as a 10 per 
 cent increase in peach shipments, nor will a 10 per cent increase have the 
 same price effect at all times of the year or in different years. 
 
 High prices do not necessarily mean maximum revenue for an industry nor 
 does large volume always mean high profits. Total revenue is average price 
 times volume, and a large volume at a low price may bring either more or less 
 revenue than a small volume at a high price. This can be illustrated quite 
 simply. Suppose one or the other of the two price-quantity (demand curves) 
 relationships shown in Figure 8 applied to the wine market. 
 
 For different quantities offered for sale, total revenue received with 
 each of the two different price-volume relationships would change with quan- 
 tity sold as shown in Figure 9. 
 
 The curves show that too much or too little offered for sale will return 
 a total revenue smaller than maximum possible. Therefore, it is very impor- 
 tant to know what the demand curve is if revenue is to be maximized. 
 
 It follows then that, in a program restricting marketing, the most impor- 
 tant economic qualification is that the demand response be such that decreasing 
 supply will usually increase total returns. This condition will be met if 
 
♦c. 
 
 .6 
 
 •10 « 
 
 .^niJojhsm 1o aoLto it-test bnirfad 9X#toflii£ aieed arte sis^e sie 
 lo snu/XoV f ri-t n^abrfei^b "^tibofeacofl £ iol b^vi'aoai -aoiiq grief d"exiT 
 
 . OOO-T, 
 
 ifi#jB-v;.in 
 
 a Las 
 
 ■ 
 
 ■ i 
 
 joe* -tarijo ynt 
 
 ■ 
 
 ■ • 
 
 .soxiq rigid j> is aurtfXov' IXfit 
 ■ 
 
 ■ 
 
 9?.39ionf -trrao 
 oi^iq rigJfcH 
 
 ■ 
 
 ■ - 
 
 teas ed ilUw nottibrtoo eJtriT «&a*Kf*9i Xstci aassioai ^TXaosju XIrw AjXqqoa 
 
Fig. 8.— Two Hypothetical Relationships between Quantity of Grapes Offered for Sale 
 
 and Price Received. 
 
 Grapes, thousand tons Grapes , thousand tons 
 
 Fig. 9.— Relationships between Quantity of Grapes Offered for Sale and Total Revenue Received, 
 Assuming the Price-Quantfty Relationships of Fig. 8. 
 
30. 
 
 people do not greatly decrease their use of grapes when the price goes up and 
 if there are no alternative supply sources to which they can turn. 
 
 It goes without saying that to be economically feasible a program must be 
 able to discover some way of restricting the quantity of a product marketed, 
 whether this is done by reducing production, by surplus set-asides, by mar- 
 keting quotas, or some other way. The means of restriction must meet other 
 criteria of legality, administrative feasibility, and acceptability. 
 
 Economic feasibility depends on other conditions, too. First, to accom- 
 plish an increase in returns by restriction, a program must have substantially 
 complete control over the supply of a product available to the market which it 
 is to control. If control is incomplete, others will supply what the control 
 group might withhold, reaping considerable benefits, while the control group, 
 withholding supplies, might lose rather than gain by their action. 
 
 The market which a grape industry program would attempt to control would 
 be the entire TTnited States market for wine, raisins, and fresh grapes. It 
 would be able to control this market because production is concentrated in the 
 state of California, and competition from fresh grapes produced in other 
 states, South American imports, wine from other states and foreign countries 
 does not affect California's ability substantially to control the market price 
 of its own product. (Raisin imports are perhaps conceivable, also.) 
 
 One of the important long-run limitations on a market control program is 
 that the longer the program has been in operation, the more likely external 
 competition is likely to be built up. If there were substantial numbers of 
 grape producers outside of California, only a nation-wide control program 
 could be successful in raising the rate of returns. There is always a pos- 
 sibility of benefiting by someone else's restriction. For this reason a volun- 
 tary program will not succeed; inevitably, a large number of growers find it 
 profitable not to submit to control if they can avoid it. Under the stimulus 
 of high prices resulting from control, imports tend to increase, and new areas 
 outside the zone of control come into production. 
 
 Although it may be sound to store short-run surpluses of excess produc- 
 tion years for use in years of short supply, no program is economically fea- 
 sible which does not provide for the permanent removal of a long-run surplus. 
 It must be destroyed, diverted to some noncompeting use, or stored under such 
 restrictions that buyers will not treat it as part of the potential supply. 
 However, one of the serious dangers which many programs have encountered is 
 that often control boards are unwilling to recognize and destroy the long-run 
 surplus but continue to treat it as if it were a short-run surplus. 
 
90Xlq and nea?; r;sqBfg 
 
 ■I ! • ' . . 
 
 .tnut nsa yarid rfdiftV oi 
 
 ed dawn fna-isoicr 
 
 fcrus da aaog eoiict s>rt"l hsrfw aatf£*t&' lb Seu ixarfd aaBatnob yXd89*rg .ton ob aXcrosq 
 
 aii-'oe yXaqi/s ".>vxdBfl , i9dX6 *on 916 'stsrfi IX 
 yXXB">£RK>noo9 scf d^rfd gnxysa' juoridiw ar 09 dT 
 
 tbsiistfisar jaxtbotq 6 lo ydiins/xp add gnidoX-idaad: lo ^sw 9inas isirobztJa of e»XdB 
 -ism yd t sabxa£~4ee eulqiba yci '• t no'l?ox , boiq ghicvba*! yd snob zi sidd' **rfdarfw 
 HjpWo daam dsuin noxcfoxidEai lo ansan adT " .ydrf f ydic 'antoa' 10 t&aJox/p Sftti'sM 
 .yfxXxd.RlqscT^- b'ns t yiXXXcrXeBal evxisi^T.lnx'mbs ' ^ydHBgal. lo Bitedx'io 
 -nooos od t de*ixT" .oocf t erioWxbnbo tarido no ebnaqeb y^xxr.dXBBal oimoriooS 
 yXXsi.tnBi-adx/B" avarf 'dawn insigolq s tfloidaxidea-i \6 ahiuie-r rii aeBsionx rm delta 
 ti rtoxrfy danism arid od oXo'sXXbvb Jox/boiq' s lo yXqqtra'- add iav<? Xcidnoo 9daXqmcr> 
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 blxfow Xcrcdntfo oJ dqnaddB bXi/ow aBijjoiq ytdaxfbnx *qa*i§ b rfoirfw dwhan sriT 
 
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 arid nf bsdBidriaanpb eX ncxdoflbo^ izuBond tezli&is zidi Xoidnoo 0.+ aXdB ad bXirow 
 narido nx baci/fcoiq aeqs'ig daa-icl noil noXJXdatgnoo bos ^BlrrjoliXfe-") lo adsda 
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 erxdq da*ism arid- Xo'xiaoo c-d tiXfixdniiadtra ydxlX& a'aXittoliXsO doalla .ton seoV 
 ( »p6Xb f aXdBvxaonoo aqsriiaq s*ra adnoqnx niaxBB) .Jodboiq nwd adX^o 
 ax' .TiB-r^oiq Xoddnoo d-jfrfen a no 'sncxdfidinxX mn-griol dnBd'foqnf i-rid lo 'anO 
 
 t n6x^B*isqo nx naad efirf fnB*rgb*rq 'arid"' lagridX sdd isdi 
 
 ass"C£ iiran bxu 
 
 'dua 9*tair 9i9dd U iO£f'iXi 
 sbx-V-noldan a yXno ,6.cn'xoli 
 rsxIT ;3rnxfdoT; Id ■^ds'X ertJ 
 if 
 
 rodiEiin agtsX £ t yXdB-fivani 
 
 .x od bn9d &dioqmi' t Xotdno;. 
 
 .noxdouboaq 6dni" 'an 
 
 !• xnaiscrtq on ,yXqqi r ?- ' ianda 
 
 ax noidiisqraoo 
 laddbibiq aqE ! f«f 
 
 xmdira Od' J- on ol 
 
 9d yan dX djtforfdXA 
 
 ! 
 
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 . suxq ix 
 
 ■ 
 
 t' 
 
31. 
 
 Feasible programs require pronouncement of the specific actions of the 
 control board before the time of harvest. These actions must depend on crop 
 reports and other advance information. Good crop and utilization estimates 
 are essential to the operation of a program, and the more accurate they are, 
 the better the control board can approximate the volume of sales which will 
 maximize industry returns. However, we know that estimates will sometimes be 
 off, and the programs must be able to overcome the inconvenience of such 
 errors. Program success depends on sufficient flexibility to accommodate 
 errors in judgment. 
 
 The program must be such that it is possible for the burdens and benefits 
 to be shared on an equitable basis. This requirement is as much a matter of 
 grower acceptability as it is economic feasibility. As an illustration of the 
 difficulty that is sometimes encountered in meeting this requirement, it is 
 noteworthy that in control programs quality standards, or minimum fruit sizes, 
 often have an "escape clause" to prevent undue hardship on the part of those, 
 the majority of whose produce fails to meet the standards. The impact of any 
 standards varies from one grower to another, often for reasons which the 
 grower can only imperfectly control. 
 
 A program which has been successful for a few years may fail in the long 
 run if its operation causes growers to increase their productive capacity to 
 any substantial degree, and thereby increase the surplus. Although any pro- 
 gram which makes the grape industry more profitable and attractive than alter- 
 native opportunities will tend to cause expanded production in the long run, 
 some provisions are especially likely to be dangerous as, for example, estab- 
 lishing marketing quotas on the basis of acreage which gives an added incen- 
 tive to plant more acres. Even successful trade promotion programs are of 
 questionable long-run benefit since, if they are successful, they also en- 
 courage in-movement of new growers and producers and expanded production from 
 the old. 
 
 Administrative Practicability 
 
 Administrative practicability provides many stumbling blocks, some of 
 which also are related to the problem of economic feasibility. In a workable 
 restriction program, there must be means for handling several administrative 
 problems s 
 
 1. There must be means of auditing records and checking compliance with 
 the terms of the program so that evasion or noncompliance cannot go undetected. 
 
'se not; 
 
 a$y'oB .tyrfio .fans ad 
 
 XXxw rioirf*' a9i£5 lo 9jnuXov ^efw ©dajB.EXoiqqs fl£.p bi^od...tol ; tnoo srfd laddatf 3d* 
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 3dobr>mpio336 od ydx-tidixoXl dflsioi'ilifa. no eJbnoqab saaoot/a ats-i-piq ,atOTie 
 
 , dnsnsjbif f, ni .STKyri?? 
 adxlsned yna enabled sfi^J" •ip1-«Xdisaoq .ax-ii d£rid rfotfa ed daxim jns*xaotq srfT 
 
 lo aaddaijj s rirxi/ja aa.si dxiamsrux/ps'i^ixiT .aiasd vldejiupa /is rro b&isrfe ad od 
 add -lo noidfiidauXXi ns sA .xdiXicfi8fial oxrcoaooa .ax dx as ^diX MBdqaoou lewpia 
 ax dl t i«sa»T.xjjptn airid snxdsara nx bsiedouoono, aamjdwoa ai .dadd .xdiiraixlxb 
 <a«2ia Jx//il aumxflx$i r xo t eb*rsbn>r;Ja . Y*xXscp eam^oic Loidnoo nj-darfd ■^d^fowsdofi 
 t 9&odd 'lo d'luq »di ,no .qidabusri ?irbntr dnsvarq ox M aau£i.C' aqsoaa" (Tb evsrf asdic 
 *^ie lo d?sqfiii odT .3b*f.f;brr£d3 ..add dassr od.i?.X.Lsl aoffbong aaorfy 70 ^dJc-roraoj add 
 edd . Jfoidw eno aaa-* "so* fiadlo t *j3rfdon£, od le/rot j eno .noil aeiosv ebrebrTeds 
 
 ...Xoridfloo YXdool-taqmx ^;I«o.. nso iswo-rg 
 gnoX sdd. ni Xisl ybib aresv y/al e iol XuIce^ooxe naed aad rfoxrivr. ms-tgoiq A 
 od" v.dioaqao avidaeJbo'iq iiadd aa#9toii± od aiovfctg .aeauso noxdAtsqc adX ix nij'i 
 -oiq ^ii£-flgiJc-r{dJA. ,B.«Xqiu& arid asaa-ronr ydaisrid bxts 4,99739b Xsxdnsded^E ^ns. 
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 t (it.'i §poX. add ni no.idirf/feo'xq babnaqxs seirao od bned XXiw a9idiflJ5htoqqo av id/to 
 -dads* t j>XqiHSxs . ro'l t ss. atfoiggnab &d od ^IsjCxX ^XXetos.qaa ata anoxaivo^q oropa 
 -aaoni babfea ns eavxg doirf?? asaaiaa lo axacd odd /to aadonp gnxdetfnam gcideiX 
 lo s'ts euns^goiq. npxdo/aoiq sbsid it/laassaus npv3 ,89-ioa v<om ditsiq od 3vx.t 
 -no oaXa v^dd t Iale8sootfii aoa-^dd li ^sacixa di'lanacf nin^aol aldftnoideayp 
 moi'l noidox/botq b&biteqxe bnr> ?i90iiboTq- bf;£ ai9 , vo-T9 v«n lo dneixovonr-ni. o^Etifoc 
 
 oXd-fiXio'V a 
 
 sMocId rjnxXdffitfda '{flfil 
 mb£ Xj?'i9Vde gniXbnad 
 
 ado bnr> aoi 
 
 YdxXxdfco. 
 cvoiO YdrXxdeoxtf fi£*i' 
 
 rsixni aiadd ,m£iaoic rro.h 
 
 nn«o 3; 
 
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 to noiasva 3ed<i oa ais^sjoiq add lo acnad sdd 
 
32. 
 
 2. The program must be able to impose penalties sufficiently severe to 
 prevent nearly all noncompliance. 
 
 3. It must be possible for a managerial staff to administer the program 
 by following a set of specific and understandable rules and regulations estab- 
 lished by a control board. 
 
 h. Rules and regulations must be fair and equitable, treating all alike. 
 
 5. Administrative costs must be reasonable and the program operable with 
 a reasonable amount of clerical work, inspection, etc. 
 
 6. The program must not impose too much regimentation or interfere ex- 
 cessively with normal business operations. 
 
 7. The program cannot be overly dependent on the accuracy of crop and 
 other advance estimates unless special estimates can be made as in cling 
 peaches. 
 
 8. The program must be flexible enough not to break down in unexpected 
 or unusual situations. 
 
 9. The program should not interfere with the process of dynamic change 
 and improvement in methods of production and marketing which every industry 
 undergoes. 
 
 Legal Soundness 
 
 Legal soundness depends on adherence to simple basic principles of the 
 law and also compliance with many legalistic and less easily understood de- 
 tails. Legal soundness means first of all that a program must operate under 
 the provisions of one of the state or federal marketing laws; otherwise, the 
 kinds of control and agreement which the programs contemplate are likely to 
 be in violation of other federal or state laws. Also, unless operated under 
 one of the special marketing laws, surplus control programs are not likely to 
 be administratively practicable since these laws provide the only means for 
 both enforcing a control program on an entire industry and effectively insur- 
 ing continued compliance by those who agree to the program. High lights among 
 the requirements of legal soundness are: 
 
 1. The marketing order (or agreement) must fully meet the provisions of 
 the laws and constitutions of the state and federal government, both in the 
 manner in which the marketing order is drawn and in the administration of the 
 program. 
 
 2. The order must be so drawn and the program so administered that in- 
 junctions and stay orders can be disposed of without unduly delaying or render- 
 ing inoperative any significant part of the program or excluding any persons 
 whose inclusion is essential to the success of the program. 
 
ol sisvea xltavtaiYlmi a*Jr?£ s$oq • ^zoqmit-jbt sXcte sd -taynr ffleigr.tq ariT ,S 
 
 . •> ic BiX crmponcn JXs. ^X^son ^oevsicr 
 meragtfia sit* tsisxxtcnifaB o* zlajrfe' l&ih^ttBn . b tol -^Xdrneoq. od Jex/m J-I .£ 
 -osjbs Enortfill/ysi bn« eaXtrt «IdBbnr jei&bnif 'bnfi oilxooqa xc Joe- e gnXwoXXo"; 
 
 .bsaod XoiJnco .« ^rf barfs if. 
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 rfXr,- ©idfeioqo ms-tgdiq drf.t- bras aXdsnoasaa' sd ^eato acteoo evxXs^~,in&nbA . 
 
 .0*© ^noxzcsqanx ^lavr XsdXioXo r lo .jfli/oms sldsnosBan b 
 -xs 9lts1hi£id'«*l io riox-xa&tMRjkgsx rfoxrm oo* osoqrri .Ion ism njsi^eiq 9flT .d 
 
 .anoid-js'iaqo aaoflxsnd XBnnon diiw ^svxaeso 
 tee qcvrb To Yoartifoas ' srid" flo'to|f»^ yl-ievo gd .tcnofio /^ig&iq onT ..V • 
 gnilo nx-36 obsjfr ad rrsc eesisaiMro Icxogqs saslri;; aorsaXd-Ba oonjsvbsiedJo 
 
 .sarioBoq 
 
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 .■eno&mttis Lfiijzisctu io . 
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 .aeogtabta/ 
 
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 erf ^TgiiiX ton eis -eiiiB^Mq Xotinoo -eaXqiwa lt swBX aftxxajiism Xr, X osqa.- erfi eno 
 lot aassr. ^jXno sdi obiV-otq ewbX dagrfi soitia ftXcfsoiJ-as^q vXovx^s^-taxnx.-nbjs ed 
 -tuani ^X-sViio&lle bns ^axfbnx ^aiins' m no nxsi§oiq Xcriinoo s anxoiains rfiod 
 ^nrtins airigXX dgXH ,cts'i§mq-9rfj ocf 99tgfi oriw ^s$rf,tJ.Yd *?9nBxX0ctc«o S&xrnX^coo ^nX 
 
 :9XB seanbiTvoa Xb3»X Io aingrrailflpsw ariX 
 lc J encXaXvoiq sAt Seen xXLul iswra (inaiteg-r^s -to) ^isbtc snXiy>ixsin aril .X 
 srfX rrX riihsd ,*ri9rn£itovoa Xaiobel bfiB.aJ-Bia sri+ pfioWfttHahftn h-tr awaf 
 
 xanosm 
 
 -a;vbrt9'f io 3TxYBX9b ^XLfbnu .itroti+xw lo b&aoqaxb 
 
33. 
 
 3. Due process of law must be provided for with special care in every 
 situation where private rights are affected in some unusual way, such as where 
 the dissenting minority in a marketing program is compelled to adhere to the 
 will of the majority. 
 
 U. All those regulated by a program must have a voice in its operation 
 and, when the program is being considered, must be given an opportunity in an 
 open hearing to make their interests and position known and to have them taken 
 into account. 
 
 E>. The program must be demonstrated to contribute to the public good, to 
 be consistent with the stated objectives of the basic law, and to be a legiti- 
 mate use of the power of the state to regulate private citizens in such a way 
 as to further the public welfare. 
 
 6. The program must be nondiscriminatory and must treat all in the program 
 according to the same rules and regulations. 
 
 7. The program cannot be retroactive in character. 
 
 8. The program must provide for supervision and control by the public 
 officials who administer the laws under which the program is operated. 
 
 Public Acceptability 
 
 Programs which do not meet the criteria of economic feasibility, adminis- 
 trative practicability, or perhaps even legal soundness might still be put 
 into effect and operated briefly if they met the one criterion of industry 
 acceptability. On the other hand, a program which met every other criterion 
 perfectly and was not acceptable to growers and handlers would never even be 
 put into effect. 
 
 A program must regulate and regiment if it is to do anything that justi- 
 fies the cost and trouble of a formal program organization. Regulation and 
 regimentation will be acceptable so long as those regulated think the benefits 
 derived outweigh the disagreeable features of regulation. Programs are origi- 
 nated in the hope that they will. The belief that they do keeps them going. 
 Therefore, the success of a market control program has a great deal to do with 
 its being acceptable. 
 
 There is no system which can determine precisely if a given program will 
 or will not be acceptable. Chance circumstances or the influence of key per- 
 sonalities might make acceptable a program which otherwise would be unaccept- 
 able, or the other way around. 
 
itfmr-emoB fix baJoa^s ats ?Jrf§.'ci ait 
 
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3h. 
 
 A program probably will not exist long if the principles and manner of its 
 operation are obnoxious to any large portion of the general public, the state 
 legislature, the United States Congress, or the persons directly involved in 
 the program. A program cannot violate the principles of public policy followed 
 by those public officials under whose general supervision the program must 
 operate. A program will be endangered if it is opposed by even a small minor- 
 ity with enough common interest to permit it to form an organized opposition. 
 
 A program cannot be successful if it puts too great a strain on the 
 honesty of those regulated. It will not continue to be acceptable if some 
 persons are permitted to gain substantially and obviously by remaining outside 
 the program, or to violate regulations with impunity. It will create serious 
 difficulties if those who deal with program participants become inconvenienced 
 and oppose the program or if trade channels are seriously disrupted. 
 
 B. Types of Surplus Removal Programs Which Have Been Suggested 
 Although a large number of different surplus removal proposals have been 
 made, there are only a few major types. The plans which have been advanced for 
 controlling surplus or limiting quantity marketed include the following: 
 
 1. Plans to limit the acreage of grape vines by preventing further plant- 
 ing and/or vine pulling. Compulsory vine pulling, voluntary vine pulling, 
 sometimes to be encouraged by incentive payments, have both been proposed. 
 
 2. Plans to reduce or limit production without limiting the acreage of 
 vines. Proposals for totally removing the grapes of a certain percentage of 
 vines, similar in nature to the peach- thinning program, have been suggested. 
 It has been suggested that crops be reduced by over-all thinning brought about 
 either by compulsory regulation, incentive payments, or quality standards 
 which could be met in an average year only with considerable thinning. 
 
 3. Plans limiting quantity harvested. Limitations might take the form 
 
 of: 
 
 a. Harvesting quotas, all grapes in excess of the quota to be left 
 in the field. 
 
 b. Compulsory or voluntary dropping, prior to or at harvest time, 
 perhaps accompanied by payments. 
 
 c. Enforcement of stringent quality standards. 
 
 d. Compulsory set-aside of a percentage of harvest into reserve 
 and surplus pools. 
 
 U. Programs establishing floor prices which, in effect, limit volume to 
 that which can be sold at the floor price. 
 
a,ti lo isnr^in bns asiqtr>nt«jn ortt il- Ijrffcl derxs .ton XXiw ^JxtedoTq •fftfi'igo-iq A 
 
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 .eoi'xq iooll ertt Woe 
 
35. 
 
 5. Programs to remove from commercial channels grape products already- 
 produced, either through storage operations or through buying up surpluses. 
 
 Acreage Limitation Programs 
 
 It is not legally possible, at the present time, to prevent anyone who 
 wishes to plant grapes from doing so, and there is a considerable amount of 
 land suitable for grape culture now used for other crops. Anything which 
 makes grape production more profitable will create incentives to increase 
 grape acreage and production programs for advertising promotion just as much 
 as vine removal programs. The possibility of expanded production is a limita- 
 tion to the long-run success of any program. 
 
 State law forbids the destruction under a market program of vines whose 
 yield is above the state average. Vine removal programs can, therefore, re- 
 move only the poor yielding vineyards which are either the unprofitable and 
 diseased ones which would likely be removed anyway, or the hillside wine grape 
 vineyards. No way has ever been found to limit payments for the removal of 
 vines only to those which would not otherwise have been removed. Under any 
 program making payments, this disadvantage would mean some and perhaps con- 
 siderable unproductive outlay and an unfair advantage to growers with poor 
 vineyards. 
 
 It has been suggested that bonuses might be paid to encourage removal of 
 vines, the fund to come from assessments on grape growers. However, nothing 
 is known about what sized bonus would be required to produce a substantial 
 pulling of high-yield vines. 
 
 There is no reason to believe that an agreement not to replant by those 
 who did pull vines would be of any use. Many growers would pull no vines and 
 would be free to expand. Those not previously grape growers would be free to 
 plant vines. 
 
 Acreage limitations are usually held to be not legally feasible and prob- 
 ably meet none of the other criteria of successful programs. Vine-pulling pro- 
 grams which would be legally feasible are not likely to be economically sound. 
 Compulsory vine pulling might be legally feasible and economically sound but 
 would be almost impossible to administer in a fair manner and would be gener- 
 ally unacceptable. 
 
 Growers with widespread interests may take a somewhat different view of 
 solutions to the surplus than growers who restrict themselves to grape produc- 
 tion or processors of grapes who do not have other agricultural interests. 
 Attempts to limit grape production by means which persuade growers to grow 
 
*Cbfo*t£* eJoflbow sqJB^ efaHM&lo JE»i>>tsinfi»»o ami avomai od amsigoi*! ^ 
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 lioflffl ae' da'&t noxdcmodq sniaxdisvbs' ¥ol snenseiq noidotfboiq brue assaion aq£iq 
 -sJiarx! a 3i noxdot/botq babricqxe lo yd'xXxrixasoq ori"F .airssiaoio; Xpvomoi anfv gs 
 
 .msigoiq yos So season nui-gnol <.>rid od noid 
 **od«r aorfiv lo ntB-tgoiq Julian b labntr noidotrtdaab srid- ebidTfol wfel adsdS 
 *ai ,-910191911* t n.<?.o empigoiq Isvomai anxV .agaiavs adsd's srfd gvodfi ax bl«rv; 
 bflfi aXdsdx'ieiqny srfd lorfdia sis doxxfo' abx:v;anxv* gnxbloxy iooq exit ylno avoar 
 aoaig snlrr sbiaXIxri arid 10 ,Y,i?w ( \_". b'sfrooai ad ^Is^xX bLiow riolri* 89ffd bsersfcxb 
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 ^sbie^anxv 
 
 lo Xsvoraai agsluo^fta od bijjq ed ddgx/n aas-Wfod dsiid badeaggue naotf ssrt dT 
 griirfdan t'fsvywo?? #8l-3troi3 aqaig no BdnaoBeaeas urail atfoo od bmfl ciild ^-^nxV 
 isxdrfededua e yot'boiq od bsixupai 9d Mwm eiiaod basis dfiriw duods irrt-ort?? ax 
 
 <8sni.v blsxy- rfyM lo grffXXrjq 
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 od 9911 9d bldbv/ eiowoiy eqfiig yXawoxvsiq don aaoriT .bncdJca od 99il ad fcIi;ow 
 
 »89niv dnsXq 
 
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 dod Brttfoa xLlstiwoftzos hn& aldxassx TtllflgaX ad ddgxm gnxlljuo 9f»iv \,io 8 X u opfaD 
 -i9n©3 9d bltfow bns isnnsoi il/?l s nx isdainxnhB od glrJiEsoqmx daomlt? 9d hlnov 
 
 . aid f;dcrs- *)0 odu ^XI s 
 
 lo w9xv dnsialxib tedwsrrfoa 9 sii&f -^sm ad39i9dni baaidaabx^f ridiw aiavfciO 
 -ot'bcnq 9cbi^ od asvls&aeild doiideei odw aiawoig nerid attlcfitte arid od anoxdiflos 
 igdaaiadiix XjSfltrdXuOiigfl larido sveri don ob odw saqslg lo aioaaaooiq 10 noxd 
 v/013 od ai9woi§ absi/aiod. rioidw sncairr ^d noxdoubodq fiqBi^ difnjl od adqrmdd.A 
 
36. 
 
 something else may be attempts to shift surplus from one agricultural industry 
 to another. Since those California farmers producing the alternative crops may 
 think the shift to be no gain for them at all, such growers may benefit by con- 
 sidering surplus problems in a wider context than the grape industry alone. 
 Growers and handlers who find it easy to find profitable alternatives to grapes 
 are, of course, less vitally concerned than those who have no suitable oppor- 
 tunity to shift their land and equipment to other crops. 
 
 Limitations on Production 
 
 Acreage allotments and marketing quotas, similar to those which have been 
 applied with fair success in cotton and tobacco, have been suggested for grapes. 
 Growers would be allotted the number of acres on which they could grow or har- 
 vest their crop. Often marketing agreements and acreage agreements are used 
 jointly. Growers could be given a marketing quota to accommodate normal yield 
 from their allotted acreage and denied permission to market anything in excess 
 of the quota. 
 
 Programs of this sort have been continued in the cotton and tobacco indus- 
 try because the law makes them a prerequisite for receiving substantial finan- 
 cial support from the federal government. Whether they would be continued 
 without that support, or with the kind of support that the government is likely 
 to give the grape industry, is impossible to tell. 
 
 Because grape vines are a perennial, whereas cotton and tobacco are annual 
 crops, a program designed for grapes would have to be more complicated and 
 would encounter more severe administrative problems. The regulation of acreage 
 would be less flexible. Grape growers would be unable to use the acres re- 
 stricted from production of the controlled crop for something else as can cotton 
 and tobacco growers. 
 
 Even where this plan has worked best, for cotton and tobacco, there are 
 undesirable features. Where there are acreage allotments, there may be a 
 tendency toward intensive cultivation and higher than average yields on the 
 allotted acreage, thereby placing a large burden of sales restriction on the 
 marketing quota part of the program. 
 
 Acreage allotments tend to stifle shifts to other crops in response to 
 changing conditions. They may provide extra incentives for discovering ways to 
 get high yields per acre. Allotments are made on the basis of acreage in the 
 crop at some given time in the past. If quotas were based on acreage in grapes, 
 there would be a tendency to freeze the pattern of land use so as to encourage 
 continuously producing surplus grapes. Also, if experience in other fields 
 
•it/a rf'i *if> 44. 
 
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37. 
 
 would apply here, in time such a system would develop to a point where land 
 would be sold, not for its value in production but for the marketing quota 
 rights that go with it. This has happened primarily in tobacco raising areas. 
 
 Production could be reduced by total stripping of a certain percentage of 
 all vines at some early date. This system certainly would limit production in 
 almost the same proportion as vines were stripped and should achieve the de- 
 sired economic result. It would be legal and has been applied to peaches. 
 A grower might, for example, strip every fifth vine or every fifth row, and 
 here checking at a glance by untrained person would be simple. If a grower 
 were to strip one plot equal to 20 per cent of his vineyards, he would save on 
 cultivation, harvest, spray, and other costs j but it would be necessary to sur- 
 vey, measure, and determine ownership of all acreage and stripped acreage. 
 Spot checking would not be so readily possible as with alternate vine or row 
 stripping. 
 
 Such programs would require nc other funds than administrative costs if 
 done on a compulsory basis. If attempted as a system of voluntary stripping 
 encouraged by incentive payments, the results would be less certain, and prob- 
 ably the cost would be so high as to require a substantial stabilization fund. 
 Also, while under either voluntary or compulsory programs different standards 
 for different grape varieties would be highly desirable, it might easily prove 
 to be impossible to devise a set of standards which would adequately satisfy 
 equity considerations. 
 
 An argument has been advanced that grape growers are gamblers at heart, 
 and a reasonable though small possibility of high returns would make them re- 
 luctant to sell unripe grapes at a low figure. If the argument is correct, it 
 might not be possible for a voluntary green dropoing program to buy unripe 
 grapes at any saving, and perhaps it would not be at all possible to remove a 
 surplus early in the season by a voluntary program. 
 
 If a surplus purchase program were not to buy grapes until the harvest 
 time and then leave them on the vines, there would be the additional complica- 
 tion that it would be hard to check compliance and prevent bootlegging. 
 
 From the economic standpoint, it would be preferable to require pruning 
 and thinning of all grapes rather than complete stripping of a certain per- 
 centage. Such practices could improve the quality of grapes, raisins, and wine 
 as well as reduce the volume harvested. However, it would be extremely diffi- 
 cult, if not impossible, to establish, administer, or check compliance with any 
 adequate standards, and only if sound standards were established would legal 
 
haM- eseriw *$aloq s ttf qbXsvsb bIj/ow'ffladaY.a a rfoxra sal* nc tstsrf yXqqs Mt«w 
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 ■ • ■ ■ 
 
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 -'xeq.'.niad'tarj a "So jniqq'Kda a-t alqrooo' aMt taddat saqedg XXa to gffinnxrid bqa 
 anxw.bna t s.ixaia-x t r -aqa-i-3 lo ^dxXaup add avoiqrai bltroo aaridoaiq rioxrS .agadnao 
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38. 
 
 objections and the need for grower acceptability be satisfied. The problem 
 of standards would be less severe in a voluntary program under which a bonus 
 was paid for restriction, but other problems would be worse. 
 
 Quality Limitations on Harvest 
 
 Because the quality standards which have been proposed recently have for 
 one of their prime objectives the establishment of incentives to prune and 
 thin, thereby to reduce production, they might also be considered a production 
 limitation program. Quality and quantity are linked. The main criteria of 
 grape quality are color, skin defects and disease damage, ripeness, and for 
 crushing especially sugar and acid content. Aside from defects, standards 
 have been established mainly in terms of sugar although the ratio of sugar-to- 
 acid has received considerable recent discussion. Both are believed to be 
 useful measures of the quality of fresh grapes, raisins, and wine. The more 
 heavily vines are loaded with grapes, up to a point, the lower they will be in 
 their content of acid in relation to their sugar. Therefore, to meet strict 
 standards growers must prune their grapes more heavily which usually will re- 
 duce over-all production. 
 
 Other quality standards are predicated on the theory that by setting cer- 
 tain minimum standards a certain portion of mature grapes can be eliminated 
 and the volume marketed can be regulated by varying the quality standards. 
 Where this type of restriction is contemplated, quality standards which cannot 
 easily be circumvented by improved cultural practices are preferable since in- 
 creased production of high-quality grapes would negate the contemplated con- 
 trol. Such standards are legal if it can be shown that they are reasonable and 
 necessary, but it is doubtful that programs whose legal justification is the 
 maintenance of quality can permit their quality standards to be manipulated 
 extensively for the ulterior motive of volume regulation. Volume regulation 
 must stand on its own feet. 
 
 Quality controls are popular in principle, but in practice they are likely 
 to bear very inequitably on different growers; often, in other agricultural in- 
 dustries, they have become unpopular when put into practice. In grapes there 
 are many different varieties, districts, and growing conditions. Because 
 grapes are not a homogeneous commodity, the same standards cannot apply for 
 all, and different standards, even where justified, are likely to be very 
 unpopular. 
 
1 
 
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39. 
 
 The popularity of grape quality standards in actual practice is perhaps 
 indicated by experience with those regulations which the grape industry al- 
 ready has. Standards exist for fresh grapes which fulfill a recognized need, 
 and they are generally supported by growers and shippers. However, these 
 standards have been lenient, and there has been little demand for strengthening 
 them, especially when good returns could be made from shipping even grapes 
 which did not meet existing standards of maturity. The moderateness of the 
 law seems to reflect the attitude of growers and shippers because the stand- 
 ards exist at the request of and are continued through the support of these 
 groups . 
 
 Likewise, although not defining what they are, the law requires that only 
 sound ripe grapes be crushed into wine.-^ There has been so little insistence 
 on the enforcement of this provision that the somewhat unsatisfactory defini- 
 tions in the law have never been improved upon by either administrative or 
 legal act — a necessary steD for stringent enforcement. Here, too, public 
 policy has reflected the desires of interested producers. It must be con- 
 cluded then that there is evidence that growers and processors like to have 
 quality standards available but less evidence of enthusiasm for their rigorous 
 enforcement 
 
 Quality standards can be devised that are economically sound from the re- 
 striction point of view, and there are other arguments for quality improvement 
 also. Further, standards can be legally sound and administratively practicable 
 if equity considerations are not thought too important. But they are not 
 likely to be popular in practice. 
 
 Other Limitations on Harvest 
 
 Marketing quotas are an old device. The main consideration in setting a 
 quota is the base used for setting the quotas. Three of the most popular are 
 acreage in production, volume harvested in some past year or years, and volume 
 actually delivered in the current year. The first two depend on accurate rec- 
 ords to set equitable quotas. With acreage-based quotas, there are a number 
 of special problems such as the treatment of unusually poor or good acreage 
 to which it might not be fair to assign the same quota as typical acreage. 
 Since absolute exclusion is not legally possible, there must be a way of pro- 
 viding marketing quotas for newcomers. 
 
 5/ See United States Internal Revenue Code, Section 30h.Ii, and California 
 Administrative Code. 
 
• - 
 
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bo. 
 
 Output restriction is possible with such a program. But while there may- 
 be short-run economic gains, such controls are likely to run into difficulties 
 in the long run. Historically based quotas may freeze production into a pat- 
 tern of vested rights and interests which foster and perpetuate inefficient 
 production and marketing. Such programs are administratively practicable al- 
 though the administrative costs are high. They are legal and have been ac- 
 cepted in some other industries. It may be possible to permit the use in 
 other ways of the land and labor not needed to raise the quota quantity. 
 
 Quotas based on volume marketed in the current year are known as set- 
 aside percentages, or prorates. The grower must harvest everything, a certain 
 portion of which is set aside for the account of a marketing board which may 
 later release it to the regular market or divert it into by-products or non- 
 competitive markets, usually at substantially lower prices. Any returns from 
 sale of this surplus are paid to the grower. This type of program is illus- 
 trated by the federal raisin program. 
 
 Where any restriction would be sound, these types of programs will be 
 economically sound at least in the short run. The administration is fairly 
 well understood and with the cooperation of handlers is relatively easy since 
 similar programs have existed in many agricultural industries. When dravm up 
 with the care and the provisions which administering agencies are led by ex- 
 perience to insist upon, the programs stand up in court. The chief difficulty 
 in connection with such programs is that they are not widely popular with 
 growers. 
 
 The acceptability of set-aside programs is most questionable when the 
 group to be regulated includes many diverse economic interests. This is a 
 very serious problem in the grape industry. The various sectors of the grape 
 industry are not independent, and the diversity of interests is extreme. It 
 is not possible to resolve the problem by restricting the operation of the 
 program to a small group since the various sectors of the grape industry are 
 economically related in a way which means that those in one group must take 
 into account what those in another group are doing. With market control pro- 
 grams in operation, the importance of market interrelationships is intensified. 
 
 If programs can remain operative for a long time, complications arising 
 out of the regulation itself may need to be coped with. One of the difficul- 
 ties of all quota plans is that they tend to maintain the surplus in produc- 
 tion. Quotas based on acreage give growers a reason not to reduce their acre- 
 age since then they would reduce their quota. Prorate programs mean that, to 
 get the largest possible marketable tonnage, a grower must harvest as many 
 grapes as possible. 
 
vgci aisrii straw jjju .m6T»a<-7iq a rtotfo-'riifw sidxaaoq ax ftoi.J-ori.t89T ix;qi:jG • 
 c-'xiXt^i'ilib. oiqi ,mri oi yXsijLcX si* e£oiitiio v ) rfoir? ' f Vnxsg oimonoo* .ftn^^rrorie sd 
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 riiiw lalxiqoq-.itlsbjh*!- ion 31a ysrii ieri.t gi' bineigoiq done riiir noxio?nno3 ni 
 
 ....... 
 
 srii nsdw sidsaciiiaexf j-som si amsi^oiq sbxas-^sa 10 yiiXidsiqgoos sifT 
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 -aios ixsrii soxrbsi oi ion -no as 91 e si9woig svig sgssios no bsssd asioaP .^aoit 
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la. 
 
 C. The Dessert Wine Control Plan 
 
 The dessert wine control plan which received much consideration early in 
 1952 was a set-aside plan for grapes made into dessert wine, brandy, and con- 
 centrate under which the products themselves would be set aside in reserve and 
 surplus pools. Table wine and grapes made into table wine would be exempt. 
 
 Grape growers would hold the equity in the reserve and surplus pools and 
 would receive no compensation for those grapes until the pools were sold. 
 Compensation from the eventual disposition of grapes delivered to the pools 
 would go to growers, the amount determined by standards which would insure 
 that a grower who delivered high-quality grapes would receive a greater per- 
 ton return from the pool than one who delivered low-quality grapes. A minimum 
 standard for crushing would be incorporated into the plan, which in later years 
 might be used to exclude some grapes from crushing outlets. 
 
 A control board would handle the disposition of the reserve and surplus 
 pools and make sales to vintners or others when it might consider that such 
 sales could be made with benefit to the industry. Reserve tonnage might be 
 withheld or transferred to surplus tonnage. Surplus tonnage might be made 
 into by-products, destroyed, or sold noncompetitively. While the proposal at 
 one time stated that surplus tonnage might be transferred to reserve tonnage, 
 this would be contrary to the existing law which provides that once tonnage 
 is declared surplus it can never be sold in regular commercial channels, even 
 if the only alternative is to throw it away.— ' 
 
 It is contemplated that growers who delivered to wineries making only 
 table wine would receive payment for 100 per cent of their grapes. Those 
 delivering to other wineries would receive payment for only the free tonnage 
 percentage, '"''here a winery made both table and dessert wine, some sort of a 
 division would be made by means not spelt out in the proposal. The wineries 
 would be compensated for the cost of handling of the reserve and surplus pools. 
 
 The program would be administered by a board of growers, grower members 
 of cooperative wineries, and vintners. The only assessments would be those 
 necessary to pay administration costs — perhaps as much as 25 cents per ton of 
 grapes. 
 
 6/ California Agricultural Code, 1300.15 (b) 6, "The contents of any sur- 
 plus pool shall not be marketed by the board in any form which would compete 
 directly with that portion of the commodity which is marketed in regular 
 channels of trade." 
 
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 .. .. 
 
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 .Dejcisig 
 
 j-sdd tS&lxr 
 
 lyfirtanr.. 
 
1*2. 
 
 Commentary on the Dessert Wine Control Plan 
 
 Although the program is stated to be a set-aside of grapes delivered for 
 the purpose of making dessert wine, it would in practice have to be a set- 
 aside of the wine itself because it would be inconvenient for growers and 
 vintners actually to make a physical separation of every load into free ton- 
 nage, reserve tonnage, and surplus tonnage and then to crush, store, filter, 
 and process each separately. Probably all grapes would be crushed, all wine 
 stored together, and the separation of control board-owned and vintner-owned 
 gallonage would be a bookkeeping transaction. 
 
 Unless there were some special provisions, a vintner would be free to 
 decide which of the wine he made he would call his own property and which 
 would be the reserve and surplus gallonage. He could choose the best wine as 
 being his own property and turn the rest over to the board. This would be 
 difficult to prevent. 
 
 A set-aside program could be developed with the help of the state Bureau 
 of Markets which would be perfectly legal and administratively feasible. Such 
 a program could reduce the volume of dessert wine available for free markets. 
 This reduction would come about in two ways. First, a set-aside percentage 
 would withhold from the market a portion of all dessert wine made. Second, 
 because there would be a set-aside from which growers would receive no imme- 
 diate return and possibly no return at all, growers would be led to prefer 
 outlets other than dessert wineries and less dessert wine would be made. If 
 some of that surplus actually were destroyed, it would also reduce the over- 
 all grape surplus, but in addition the Dessert w ine Control Plan would have 
 the effect of pushing the surplus into other markets. While the first effect 
 would benefit the entire industry, the second effect would tend to shift the 
 surplus burden from the dessert wine segment to others in the grape industry. 
 
 All the growers who deliver to dessert wine-making vintners have alter- 
 native markets which would seem more attractive if the dessert wine control 
 program were in effect. There might be some increased fresh shipment of juice 
 grapes. Where vintners owned their own vineyards, they would be free to make 
 only table wine from what they owned and dessert wine from what they bought. 
 Cooperative members might insist that their wineries make only table wine. 
 The net effect would probably be an increased supply of table wine, and 
 growers probably would receive for grapes delivered to wineries making table 
 wine substantially lower prices than they would receive for free tonnage sales 
 to dessert wine wineries. 
 
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 f 99*1! otfnx beoX yiava lo fl:»x^s*iB(y9s XacievriQ s sjTsar nj vIJ 
 
 snhv lis .fcoriewc £d bX;ro\v aecfi~^ lis Ytdsdcyt*! 
 
 •->r ) .+ 
 
 , .rxo-rJoBsrisitt gocqaoHjlood a ed 
 
 - ■ . ■ • ■ - • - 
 
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 ' - .. . ■ •■ 
 
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 ■ ■ 
 
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 • v.. I 
 
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 EeXfia jSBflno^ 991X tol r ; visas* bii/OF /^orf-t n«d.t e?»i , sq 
 
h3. 
 
 Although the problem is confused by the fact that large makers of dessert 
 wine usually make a large volume of table vdne also, a set-aside order organ- 
 ized by table wine vintners for table wine alone might serve to protect them 
 against a great oversupply arising from such a dessert wine program. For 
 example, they might set quality standards for grapes for crushing into table 
 wine. It is doubtful, however, that there would be a legal basis for stand- 
 ards high enough to prevent use in table wine of valley-grown wine variety 
 grapes, even of varieties most suited for dessert wine. 
 
 A winery set-aside program would give Thompson grape growers an extra in- 
 centive to make raisins or to ship fresh Thompsons. The operation of a quality 
 standard would strengthen the effect. Similarly, growers of table grapes would 
 look for noncrushing markets which at this time could only be fresh shipments. 
 Emperor and Tokay grape growers might ship more or put more in storage. Tokay 
 growers might possibly protect themselves by a limitation of shipments under 
 the terms of their federal marketing order. 
 
 The economic soundness of the dessert wine control plan, so far as the 
 dessert wine people themselves are concerned, depends on how much it can en- 
 hance prices by the restriction of production and on whether it can find a 
 home for the reserve and surplus. 
 
 It is not absolutely certain that setting aside a part of a crush would 
 greatly enhance dessert wine prices under present conditions. Experience with 
 other market control indicates that merely holding the surplus in a reserve 
 pool, which may or may not reappear on the regular market, does not accomplish 
 very much. The trade knows that the surplus is there, and in pursuing inven- 
 tory and purchasing policies, it acts as if it were part of the supply. 
 
 Only if a reserve pool is definitely and irrevocably removed from the 
 market, or funds exist to buy it up, is a set-aside likely to have an upward 
 effect on prices. Under the federal raisin program, there is a provision 
 drawn up with exactly this problem in mind which forbids the sale of reserve 
 tonnage raisins at less than the season average price plus carrying costs at 
 the date of contemplated sale. 
 
 Finding a way to remove surplus wine from normal channels is a serious 
 difficulty of the dessert wine control plan. At present, the federal tax 
 must be paid although it has been hoped that it might be abated for wine de- 
 clared to be unmarketable surplus. There is no noncompeting market for wine 
 as such, nor does brandy seem promising. From time to time, experiments with 
 by-products have been conducted, but none appear promising. Industrial alcohol 
 
C7 u~M i y.7 9 V 7. C? ?. ' J i ; 
 
 n.i anxriBtrcs iol 
 
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 up £ 16 noiif>raqo 'ariT *anoeqi36riT xis«i3-' qxria'oi 
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 . , .. 
 
 I 
 
 at. r -..wfiri od 
 
 iBaqqasi 
 
 aLs^J- eri? 
 
 ilooq 
 i tiftf 
 
 ? qif i.c yud oi- Taxxe zbxon t 
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 rfoxrfvf bnJrm ni {^t•'Io'o^q sxrfi "tfcli'osxs rf+rvr qx; "nwcib 
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 <alae tosialqwoirtoo' lo siab sdi 
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 ^nXiacpaoonoii en ari ©teriT .ai/Iqtt/a s/daiejiiBinnx/ ad oi bstaXo 
 t «nxi oi ofltli a&ti igniefstcxq mnaa '■^bnaid ' aa'ob ' ion " ^dava as 
 i^niaxmoiq 'iaaqqa ancri iixd ^bsinrbnoo nead ?/vari eioxxboiq-iti 
 
hh. 
 
 has been investigated many times, and published reports have always been con- 
 cluded that the price is so low it is not likely to pay the cost of processing 
 grapes. Recent developments in processes of making industrial alcohol from 
 petroleum are reported likely to reduce its price still further. 
 
 Experience with other market control programs has indicated that growers 
 will not accept a program unless they get a substantial return from their re- 
 serve and surplus tonnage. So far as can be seen, the only unsubsidized way to 
 get any return at all from surplus wine would be to sell part of the reserve 
 tonnage into regular commercial channels, and this, in part, would defeat the 
 purpose of the program. 
 
 A set-aside program in wine would have the problem of carrying over inven- 
 tories from one marketing season into the next. Under the raisin program, one 
 season's raisin crop is almost completely cleared up before the beginning of 
 the next season. This would not be possible in wine. It would be necessary 
 to decide if the old wine reserve pool should be completely disposed of in 
 either regular or surplus markets before the new crushing season began, 
 whether it should have a priority over the new reserve pool, or whether the 
 new reserve pool should merely be added to the old to make one big reserve 
 pool. Because all growers would not have equal equities in new and old reserve 
 pools, it would probably be necessary to close out one pool before any steps 
 were taken to dispose of the next. 
 
 It has been suggested that standards of minimum sugar and minimum acid 
 content could be established for grapes for crushing (the sugar-acid idea) in 
 conjunction with a set-aside program. The most significant argument advanced 
 for this kind of standard is that it would reduce the quantity of grapes 
 eligible for crushing and, thereby, succeed .in reducing the size of the total 
 crush. It is argued, in addition, that, in their efforts to meet the standard, 
 growers would be obliged to follow cultural practices which would reduce the 
 size of the over-all crop and, incidentally, improve the quality of the grapes 
 and the resulting grape products. It has been urged that such standards be 
 instituted simultaneously with a set-aside program as a way of counteracting 
 those incentives to maintenance or expansion of production which sometimes 
 result from set-aside programs. 
 
 A qtiality program, which might be instituted along with a set-aside pro- 
 gram, could also be instituted separately with essentially the same advantages 
 and limitations as if operated in conjunction with a set-aside. 
 
a. lo .+srVo 
 
 ! J toe j"*' ' bade ilduq 
 
 js«j' at xfidiL 4 oft 
 
 eg 2X sciaq. ertt. 
 i isriio rfiivf son-; 
 
 atxh: BtrXqrx/k inorr 
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 If the objective of a quality program was to restrict volume produced, it 
 would increase the cost per ton of grapes. If the price of wine and other 
 grape products were increased sufficiently as a result, this restriction would 
 be sound policy. The gain mainly sought would be that resulting from the sup- 
 ply being shorted. 
 
 If it were true that increased sales and profits resulted from improved 
 quality and that using grapes of certain sugar-acid ratios was the most eco- 
 nomical way of obtaining this improved quality, vintners would probably now be 
 paying premium prices for grapes with those sugar-acid ratios so as to encour- 
 age growers to produce them and this without any marketing program. If it 
 would not pay, then the standard could be enforced only by a marketing order 
 and could be justified mainly by the price stimulation resulting from the de- 
 creased supply although there might be some concurrent benefit from quality 
 improvement . 
 
 D. Quality Standards for the Dessert Fine Industry 
 Early in 1952, the wine industry discussed standards for grapes for 
 crushing as a way of improving average wine quality and of limiting production. 
 Several arguments for such standards were advanced. One was that improved 
 quality would result and would increase the price at which a given quantity of 
 wine could be sold. A second was that quality standards would tend to stabi- 
 lize wine prices because, it was maintained, fluctuations in demand were in 
 part a reflection of changes in quality. A third was that quality standards 
 were an effective means of limiting the volume of wine available for sale and 
 that limiting volume would increase both the prices received and total returns 
 from the sale of wine. 
 
 Considering these arguments in the order in which they are given, the 
 first two have in common that they are based on the assumptions that consumer 
 tastes and buying habits were affected by wine characteristics. Actually, we 
 know too little about taste preferences and wine buying habits to pass judg- 
 ment on the validity of the idea. Taste-testing experiments indicate that con- 
 sumer preferences are highly variable, but depending somewhat on consumer's 
 age, cultural and national background, income, and geographical setting. The 
 results of some tasting experiments suggest that the general public does not 
 recognize any but the extreme quality differences. It seems clear that popu- 
 lar tastes are not the same as those of wine experts and that, to sell more 
 wine, esoteric expert opinion is not necessarily the proper standard for chang- 
 ing wine quality. We do not know very well what changes in wine characteristics 
 
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he. 
 
 will cause wine to meet with wider public acceptance. Probably, wine sales are 
 stimulated by the availability of a wide variety of sherries, ports, burgundies, 
 etc., as well as by their actual characteristics. 
 
 In addition, studies of marketing practices in many fields indicate that 
 most consumer buying is stongly influenced by factors other than the quality 
 of the product, such as advertising and other marketing practices. Modern 
 wine retailing makes it almost impossible for consumers to discover which of 
 the many brands available tastes best to them. Being unable to sample the 
 product, consumers must buy mainly by label, price, appearance, retailers' ad- 
 vice, and any information which comes their way. While wine characteristics 
 might be important factors in determining demand under certain conditions, 
 modern wine retailing does not provide those conditions. 
 
 The net effect of taste preferences and buying habits is that the merit of 
 arguments in favor of better quality cannot be judged. We do not know if any 
 changes in wine characteristics will be helpful, and in particular, we do not 
 know what changes should be tested first. 
 
 There is no certainty that changes in wine characteristics, which improved 
 sales for a single vintner, would also lead to increased sales for the entire 
 wine industry. Investigation might show that a given vintner's increased sales 
 were the result of shifting from other brands rather than of adding entirely 
 new line consumers. On the other hand, the failure of quality changes to im- 
 prove sales for a vintner should not be taken as evidence that industry-wide 
 quality programs would not work. The vintner might not have made the right 
 quality changes. It can also be argued that few new wine consumers will become 
 regular customers if they are disappointed in their first purchases, for they 
 will not be inclined to experiment to find the brands they prefer. The proper 
 solution for this dilemma, it is argued, is to make sure that all brands are 
 reasonably good. If this argument is valid, it would imply that an industry- 
 wide quality program might accomplish more than the uncoordinated efforts of 
 individual vintners. 
 
 The argument that quality variations create instability implies both that 
 consumers are strongly influenced by quality changes (about which we have said 
 we had little evidence) and that there actually were significant year-to-year 
 changes in quality. If so, quality changes could make prices either more or 
 stable. If there were a tendency for the quality of wine to be such as to 
 stimulate demand in years of large supply, the quality variations would actually 
 have a tendency to stabilize price. Many other factors besides quality have 
 
■ ■ 
 
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 influenced the demand and price of wine strongly enough to make the effect of 
 quality changes difficult to detect. The volume made and the level of national 
 income are particularly likely to be significant. 
 
 The third argument, that quality standards can be used to reduce the quan- 
 tity of grapes crushed, does not depend on demand stimulation which may result 
 from improved quality but concentrates on the more certain relationship between 
 prices and volume offered for sale. That a portion of the crop or product can 
 be eliminated by failure to meet quality standards is one argument. Another 
 is that not much actually would fail to meet standards but that, growing grapes 
 to meet the standards Cor produce a product that would meet them), growers 
 would be obliged to follow cultural practices that would produce smaller crops. 
 There has been some investigation of each point. It appears that no standards 
 for grapes based on defects, presence of disease, or sugar content which treat 
 growers and vintners in a fair manner are likely to eliminate many grapes. 
 Standards based on both the percentage of sugar and the percentage of acid 
 might be more effective. The evidence on this point is incomplete, being de- 
 rived from data collected mainly for other purposes. 
 
 That the enforcement of strict sugar-acid ratio in grapes crushed will 
 substantially reduce the yield of some grape varieties in some areas is sup- 
 ported by technical evidence that the sugar-acid ratio is affected by pruning. 
 The theory behind sugar-acid ratio standards is that, if announced early enough, 
 if the implications were widely understood, and if growers knew what standards 
 of thinning would produce the desired result, then a reduction of total grape 
 yield would result. 
 
 To evaluate the merit of the quality-volume arguments, it would first be 
 necessary to know far more about the information on which they are based. This 
 information is partly technical, such as relationships between sugar-acid ratio 
 and cultural practices. With further study, it might very well be discovered 
 that other variables affect the relationship in important ways. 
 
 Assumptions are made about the psychological behavior of growers when con- 
 fronted with a quality standard "ultimatum." Certainly the idea that, because 
 of standards to be applied at harvest time, they would reduce their yield by 
 pruning needs careful examination. Also, we should investigate whether or not 
 it is actually practicable for growers to aim for certain minimums of sugar 
 and acid content. The relationship between a given intensity of pruning and 
 ultimate grape characteristics may be so unpredictable as to make the meeting 
 of standards as much a matter of chance as of intention. 
 
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h8. 
 
 Important administrative and equity problems must be overcome in any pro- 
 gram designed to regulate volume by means of quality regulations. One adminis- 
 trative problem is the development of objective quality standards, field appli- 
 cation of which would be simple and unassailable . It would be necessary to 
 simplify these standards by concentrating on the objectively measurable fea- 
 tures of the grapes or wine, whether these features were the most important 
 for quality or not. The administrative problem of enforcement would be severe 
 because, regardless of the gains which programs might bring for the industry as 
 a whole, there would be strong economic incentives, both for vintners and 
 growers, to violate the quality standards. The more effective the program in 
 raising prices, the stronger would be the incentives to market substandard wine. 
 
 Quality standards could be applied to either wine or to grapes for crush- 
 ing. Each procedure has advantages and disadvantages. If wine, instead of 
 grape, quality standards were to be used, the resulting restriction of sales 
 might leave vintners with costly unsalable wine. Vintners would guard against 
 buying any grapes which could make only poor wine. On the other hand, it would 
 be an advantage that this control, more than a grape quality control, would 
 tend to make sure that only high-quality wine reached the consumer. The strict 
 federal control over wine manufacture would simplify enforcement problems. 
 Testing for quality and examination of records could be carried out in the 
 relative leisure of the postcrushing season. 
 
 To apply quality standards to grapes for crushing might prevent use of a 
 few low-grade grapes, but any wine made could be sold regardless of quality. 
 No doubt poor wine can be and is made from good grapes. Vintners would have 
 no unsalable wine, but growers would find themselves saddled with any grapes 
 produced, which did not meet the standards, and with no alternative outlets. 
 Since inspection would be necessary during the crushing season, the time and 
 personnel to enforce these standards would be harder to find than for wine 
 standards applied at the conclusion of the season, and the administrative prob- 
 lems would be multiplied by the shortness of time available for testing and ap- 
 pealing doubtful cases, fflnether or not adequate standards would be more or 
 less complex for grapes than for wine is difficult to tell. 
 
 The relationship between the date when accurate crop forecasts are on hand 
 and the date when marketing decisions must be made is highly important. It would 
 be very difficult to utilize standards as an effective control device if they 
 must be established well in advance of knowledge of the crop size. This is a 
 criticism particularly against grape standards. Fine standards could be estab- 
 lished much later — perhaps even after the conclusion of crushing. 
 
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Fair treatment of all is essential in any marketing program, and it is 
 especially difficult to obtain in a quality control program. Fairness requires 
 that the cost of removing the surplus be proportionate to the benefits which 
 result. It would be unfair if a larger portion of one grower's grapes, or one 
 vintner's wine, than another's were eliminated. Also, costs and benefits must 
 be shared by growers and vintners in a fair manner, an important consideration 
 in the selecting of the kind of quality control, particularly as to whether it 
 is to be applied to wine or to grapes. 
 
 It is sometimes argued that a grower or vintner who is affected more ad- 
 versely than average by a quality program does not deserve any special consid- 
 eration but that all have the same obligation to meet the standards. But many 
 growers could argue that new and necessarily arbitrary rules deprive them of 
 some of the value of their investment and that, with fair warning, they would 
 have invested otherwise. They could not be blamed for preferring the market- 
 place judgment of the quality of their grapes and thinking it more fair than 
 standards established by a board. In actual practice, standards bear down very 
 unequally since those in marginal areas, who before were able to sell their 
 produce on the free market for perhaps only slightly less than the average 
 price, may now find themselves unable to meet the new standards. Every indus- 
 try has such marginal cases. 
 
 To sum it up, quality control programs are supported by a number of incon- 
 clusive arguments. This type of control is not likely to be a panacea. It 
 gathers support from groups with quite different ideas and objectives, but 
 whether a single program could be developed to reconcile the points of view of 
 the many supporters remains to be seen. 
 
 The economic information available is so scanty that quality controls can 
 be attempted only if the industry is ^villing to try experiments for which the 
 results are unpredictable; it may well choose to do this since improved quality 
 has stimulated demand in other fields, and also quality standards have been 
 used with some success to restrict volume marketed. Intensive research, both 
 on demand as affected by wine characteristics and of quality and production as 
 affected by cultural practices, can be very useful and should improve the pros- 
 pect of future quality programs. 
 
 E. Surplus Control with a Stabilization Fund 
 It is possible to remove surplus by purchasing it with a stabilization 
 fund. The principle behind setting up such a pool is the same as if the pool 
 were created by a direct set-aside. That is, by removing 5 to 1$ per cent of 
 
.. . ' 
 
 .;■;•■> 
 
 - 
 
 ■ • 
 
50. 
 
 the supply from regular trade channels, prices may be increased by an even 
 larger percentage so that the net effect will be an increase in total revenue. 
 Proponents of stabilization funds consider that the expenditure of from 3 to 
 10 million dollars for surplus purchase may bring returns of an even greater 
 amount to the grape industry. A stabilization fund would be another way of 
 accomplishing what a compulsory set-aside program might accomplish without the 
 disagreeable regulation which set-asides involve. Which program would be most 
 successful depends on many factors. 
 
 The basic principle of surplus control is sound. Conditions in the grape 
 industry are probably suitable for the successful use of the principle, but 
 how well either a fund or a set-aside would work would depend on the skill and 
 judgment with which it was administered. Because money is a very flexible 
 weapon, a stabilization fund permits the accomplishment with relative ease of 
 many different kinds of surplus control, any one of which might be put into 
 effect directly and without a fund but only after complicated, difficult, 
 time- and energy-consuming referendums, hearings, and meetings. Besides being 
 used to buy up the surplus, a fund might be used for processing the surplus 
 into by-products, for export subsidies, for payments for preharvest vine 
 stripping and green dropping, for vine removal, for collection, analysis and 
 dissemination of improved market and outlook data, and for research. 
 
 A stabilization fund to be used in purchasing surplus is economically 
 sound if any kind of surplus removal is sound. Such use of a fund is legal 
 and probably more administratively practicable than any other proposal. The 
 use of a fund is more acceptable to the grape industry than any other proposal. 
 However, the collection of a fund, the necessary prerequisite, may not be so 
 acceptable. 
 
 Problems Which Must Be Solved for a Fund Program To Be Successfu l 
 
 One of the most difficult and important problems which a successful stabi- 
 lization fund program must solve is accumulating a fund large enough to do the 
 job. We do not know how large a fund would have to be to meet the situation of 
 the next few years. The need obviously depends on how high a level of support 
 is attempted. A good guide as to what might be needed is to consider what size 
 fund would have been necessary if such a program had been in effect in the re- 
 cent past. 
 
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SL 
 
 For the sake of illustration, let us assume that a stabilization fund pro- 
 gram had been in effect from 19h7 to 1951 and that the board administering the 
 fund had bought or removed from the market, as surplus, all production of 
 grapes, or the equivalent in grape products, which exceeded a given figure. 
 The board would attempt to segregate the surplus as early as possible by pay- 
 ing for green dropping and, possibly, for thinning and vine pulling. Key con- 
 siderations would be obtaining the surplus as inexpensively as possible and re- 
 moving it before it had a chance to depress the market. 
 
 Assume, for hypothetical purposes, that all production over 2.8 million 
 tons was purchased. When the volume produced exceeded that figure, only the 
 equivalent of 2.8 million tons of grapes and grape products would be permitted 
 flow to commercial markets, and the resulting price might be that associated 
 with a total supply of about 2.8 million tons. Purely for illustration, let 
 us assume that the price which resulted averaged $28 per ton, or the equivalent 
 price for grape products, and that the surplus tonnage was purchased at $28 a 
 ton. 
 
 Given these hypothetical conditions, Table V-A shows how it would work out 
 to have followed such a policy in the period 19U7 to 1951 if there were col- 
 lected the equivalent of $1 per fresh ton on all grapes. To begin 1951 opera- 
 tions, the fund would have had a balance of 7 million dollars, thanks to two 
 short crops, which would have permitted removing most of the large 1951 sur- 
 plus. There would be no funds to help out the 1952 crop. 
 
 Table V-A also shows that a higher level of support would not have been 
 justified with assessments of only $1 per ton. If, for example, the board at- 
 tempted to buy the equivalent of all production over 2.65 million tons and had 
 to pay an average price of $30 per ton, the necessary expenditures would have 
 bankrupted the fund almost at once. Table V-B shows what the result would have 
 been, and Table V-C shows that, with assessments of $2 per ton, purchase of all 
 production over 2.65 million tons at $30 per ton would have been about as prac- 
 ticable as purchases of all over 2.8 million tons with $1 per-ton assessments. 
 
 At the same time, even with as high an assessment as $2 per fresh ton, 
 no support higher than that contemplated in Table V-C could have been attempted. 
 Table V-D illustrates what the result of attempting support at a higher level 
 would have been. If such a level of support were desired, much higher rates 
 of assessment would have been called for. 
 
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52. 
 
 TABLE V 
 
 Hypothetical Illustrations of One Possible Use of a Stabilization 
 Fund If It Had Been in Effect, 19h7-l Q 5l 
 
 A 
 
 
 Assumptions : 
 
 
 
 
 
 
 
 
 a. 
 
 Assessment on all 
 
 
 
 
 
 
 
 
 
 grapes of &1.00 per 
 
 
 
 Production 
 
 
 
 
 Cumula- 
 
 
 ton. 
 
 
 Pro- 
 
 over 2.8 
 
 Re- 
 
 Expendi- 
 
 
 tive 
 
 b. 
 
 Purchase of equiva- 
 
 Year 
 
 duction 
 
 million 
 
 ceipts 
 
 tures 
 
 Balance 
 
 balance 
 
 
 lent of all grapes 
 
 thousands 
 
 of tons 
 
 
 millions 
 
 of dollars 
 
 
 in excess of 2.8 
 
 191*7 
 
 2,81*0 
 
 ho 
 
 2.8 
 
 1.1 
 
 + 1,7 
 
 + 1.7 
 
 
 million tons. 
 
 19U8 
 
 2,890 
 
 90 
 
 2.9 
 
 2.5 
 
 + 0.1* 
 
 + 2.1 
 
 c. 
 
 Average cost of pur- 
 
 19U9 
 
 2,1*90 
 
 none 
 
 2.5 
 
 0 
 
 * 2.5 
 
 + 1*.6 
 
 
 chases} $28 per fresh 
 
 1950 
 
 2,100 
 
 none 
 
 Ml 
 
 o 
 
 + 2,h 
 
 + 7.0 
 
 
 ton. 
 
 1951 
 
 3,221* 1 
 
 h2h 
 
 3-2 
 
 11.9 
 
 - 8.6 
 
 - 1.6 
 
 B 
 
 
 Assumptions : 
 
 
 
 
 
 
 
 
 a. 
 
 Assessment on all 
 
 
 
 
 
 
 
 
 
 grapes of $1.00 per 
 
 
 
 Production 
 
 
 
 
 Cumula- 
 
 
 ton. 
 
 
 Pro- 
 
 over 2.65 
 
 Re- 
 
 Expendi- 
 
 
 tive 
 
 b. 
 
 Purchase of equiva- 
 
 Year 
 
 duction 
 
 million 
 
 ceipts 
 
 tures 
 
 Balance 
 
 balance 
 
 
 lent of all grapes 
 
 thousands 
 
 of tons 
 
 millions of dollars 
 
 
 in excess of 2.65 
 
 T9U7 
 
 2,81*0 
 
 190 
 
 2.8 
 
 5.7 
 
 - 2.9 
 
 - 2.9 
 
 
 million tons. 
 
 191*8 
 
 2,890 
 
 2l*0 
 
 2.9 
 
 7.2 
 
 - U.3 
 
 - 7.2 
 
 c. 
 
 Average cost of pur- 
 
 19li9 
 
 2,1*90 
 
 none 
 
 2.5 
 
 0 
 
 + 2.5 
 
 - i*.7 
 
 
 chases of #30 per 
 
 1950 
 
 2,100 
 
 none 
 
 2.1; 
 
 0 
 
 + 2.1* 
 
 - 2.3 
 
 
 fresh ton 
 
 1951 
 
 3,22k 
 
 571* 
 
 3.2 
 
 17.2 
 
 -lU.o 
 
 -16.3 
 
 c 
 
 ■ — 
 
 Assumptions : 
 
 
 
 
 
 
 
 
 a. 
 
 Assessment on all 
 
 
 
 
 
 
 
 
 
 grapes of $2.00 per 
 
 
 
 Production 
 
 
 
 
 Cumula- 
 
 
 ton. 
 
 
 Pro- 
 
 over 2.65 
 
 Re- 
 
 Expendi- 
 
 
 tive 
 
 b. 
 
 Purchase of equivalent 
 
 Year 
 
 duc tion 
 
 million 
 
 ceipts 
 
 tures 
 
 Balance 
 
 balance 
 
 
 of all grape produc- 
 
 thousands 
 
 of tons 
 
 
 millions 
 
 of dollars 
 
 
 tion over 2.65 million 
 
 191*7 
 
 2,81*0 
 
 190 
 
 5.7 
 
 5.7 
 
 0 
 
 0 
 
 
 tons. 
 
 19U8 
 
 2,890 
 
 21*0 
 
 5.8 
 
 7.2 
 
 - l.l* 
 
 - 1.1* 
 
 c. 
 
 Average cost of pur- 
 
 19U9 
 
 2,1*90 
 
 none 
 
 5.0 
 
 0 
 
 + 5c0 
 
 + 3-6 
 
 
 chases of $30 per 
 
 1950 
 
 2, lOO 
 
 none 
 
 1*.8 
 
 0 
 
 + U.8 
 
 + 8.1* 
 
 
 fresh ton. 
 
 1951 
 
 3.221* 
 
 571* 
 
 6.1* 
 
 17.2 
 
 -10.8 
 
 - 2.1* 
 
 D 
 
 
 Assumptions : 
 
 
 
 
 
 
 
 
 
 a. 
 
 Assessment on all 
 
 
 
 
 
 
 
 
 
 grapes of $2.00 per 
 
 
 
 Production 
 
 
 
 
 Cumula- 
 
 
 ton. 
 
 
 Pro- 
 
 over 2.5 
 
 Re- 
 
 Expendi- 
 
 
 tive 
 
 b. 
 
 Purchase of equiva- 
 
 Year 
 
 duction 
 
 million 
 
 ceipts 
 
 tures 
 
 Balance 
 
 balance 
 
 
 lent of all grapes 
 
 thousands 
 
 of tons 
 
 
 millions 
 
 of dollars 
 
 
 in excess of 2.5 
 
 19U7 
 
 2,81*0 
 
 31*0 
 
 5.7 
 
 11.9 
 
 - 6.2 
 
 - 6.2 
 
 
 million tons. 
 
 191*8 
 
 2,890 
 
 390 
 
 5.8 
 
 13.6 
 
 - 7.8 
 
 -11*. 0 
 
 c. 
 
 Average cost of pur- 
 
 191*9 
 
 2,1*90 
 
 none 
 
 5.0 
 
 0 
 
 + 5.0 
 
 - 9.0 
 
 
 chases of f'35 per 
 
 1950 
 
 2,1*10 
 
 none 
 
 h.B 
 
 0 
 
 + 1*.8 
 
 - i*.2 
 
 
 fresh ton. 
 
 1951 
 
 3,221* 
 
 721* 
 
 6.1* 
 
 25.3 
 
 -18.9 
 
 -23.1 
 
itr., i ► 
 
 — ' ■ ; 
 
 
 tPH II ,IBJ PI | I.1J 
 
 
 j 
 
 no i'l' o yfooT*! ! 
 
 
 
 
 
 
 
 
 a r _ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 • 
 
 
 
 
 
 | .... .v.— 1 
 
 
 
 
 
 
 
 
 , HilO-. l-J BOU •.< '''7- . 
 
 
 
 
 
 
 
 
53. 
 
 It is clear that it will be difficult for an industry financial stabiliza- 
 tion fund to reach a sound financial position. What may seem to be adequate 
 reserves can be wiped out in a short period. Also, growers are not likely to 
 permit a fund to build up year after year with no immediate benefit. Further- 
 more, the upward trend in grape production means that a fund might find itself 
 trying to cope with larger and larger surpluses. 
 
 A fixed support policy probably could survive only if it pursued so con- 
 servative a support policy as to be unacceptable to the industry. A flexible 
 program with a more liberal support policy might have a chance for survival 
 and might actually contribute more to the industry. However, operating a 
 flexible program would call for a much higher level of statesmanship on the 
 part of board members. The advantage of a fixed policy is that it makes it 
 easier for a board to resist the temptation to set the level of support higher 
 than their stabilization fund warrants. 
 
 F. Conclusions on Surplus Control 
 
 The thought that there are too many grapes suggests the remedy of removal. 
 "Too many grapes" is really a statement that the laws of supply and demand have 
 worked out to the disadvantage of the grape industry. The "too many" is too 
 many for a satisfactory market price to result. 
 
 Although program development interest has been mainly in set-aside programs 
 and stabilization funds, there have been other suggestions. The thought that 
 price floors might be fixed has been expressed, but floors are probably not 
 legal nor could the prices be enforced outside of California boundaries. The 
 effect of price floors on normal marketing practices would be in many ways com- 
 parable to price control during World War II, with the danger of constant trouble 
 over secret rebates, price cutting, and other self-defeating defects. 
 
 Export subsidy and dumping plans are sometimes proposed as a cure-all. 
 Some have strongly favored a program devoted exclusively to vine pulling, and 
 quality standards are sometimes proposed as a complete program. While all of 
 these plans have some merit in an over-all program, it is usually a mistake to 
 think that any one can completely cope with the surplus situation. A flexible 
 set-aside or stabilization program would make use of any of these proposals as 
 the situation made it seem advantageous. 
 
 There are also some proposals which seek to restrict the sale of grapes by 
 excluding a portion of grape production from certain markets as, for example, 
 suggestions that only certain varieties of grapes be permitted in wine manufac*- 
 ture. Usually it is claimed that certain varieties have a prior right to wine 
 
ffiX Ml 
 .rrcii c; 
 
 " 
 
 tffi 'nsgd sen 
 
 ■ ■ 
 
 ■ 
 
5U. 
 
 markets, and no thought is given to compensating those whose grapes would be 
 excluded for the loss they would suffer. Despite the fact that such proposals 
 often are designed for the benefit of one group of grape growers at the expense 
 of some others, it is possible that a program developed along these lines would 
 actually reduce the volume of grapes marketed, thereby increasing net returns 
 enough so that those growers who benefited directly could share the gain with 
 those whose grapes were excluded in a satisfactorily equitable manner. Working 
 out a means for such sharing would be a novel experience in market control, as 
 nothing of this nature has ever been seriously considered. 
 
 Regardless of the particular techniques which set-aside or stabilization 
 fund programs use, with proper organization either type could reduce the average 
 size of the crop marketed and thereby increase returns to groivers. These pro- 
 grams are legal and can be made administratively feasible. Arguments about 
 their relative merits should revolve not so much about their basic economic 
 soundness as about such issues as their acceptability, their permanence, the 
 ease and cost of administration, upon whom the burdens and benefits fall, and 
 the workability of regulation. To a large extent, the problems of program 
 selection are noneconomic. 
 
 One economic consideration in selecting a type of program is that programs, 
 which permit the board to determine the amount of grapes and grape products to 
 be marketed, precisely will have great advantages. There is a particular quan- 
 tity which when properly utilized will insure maximum returns to the industry. 
 What it is will be difficult to determine, especially very far in advance. 
 
 This consideration has a bearing on the selection of either a set-aside 
 or a stabilization fund program. It means a set-aside program could not easily 
 be devised xvhich would permit only a certain precise amount of dessert wine to 
 be made. What the program can in effect say is that a certain per cent of all 
 dessert wine made must be set aside. This percentage should be set before the 
 size of the crush can be known and the quantity to be marketed as free tannage 
 can be determined by the board only with the same degree of accuracy with 
 which it can estimate the total dessert wine crush. 
 
 Because it oermits the decision to be made at the very latest possible 
 time, a program under which surplus is either set aside or purchased at the 
 time of harvest has an advantage over a program where the decisions must be 
 made far in advance as, for example, vine pulling or green dropping programs. 
 Reducing the over-all acreage would be an especially unprecise form of control 
 as it would leave us with nearly the same burden of uncertainty as before. 
 Thinning in the early spring to achieve a final crop of a certain size would be 
 very difficult too. 
 
ronx y< 
 
 tnbn «'bs 
 
 C1XO J Oft 
 
 iaq ti^iit ,"Y,}xI'lcisxq; 
 tsiisd bhe arraibrtt/cf sf>'. 
 
 3ny?i54'>tq ian^- sx innigoiq 10 sqyd 
 »nw;p isf uoiiisq r Sx i-:srfT .86 
 
 LIS 
 
 ■ ■ 
 
 .ract3oiq' b 
 
 xo 
 
55. 
 
 Comparison of Stabilization Funds and Set-Asides 
 
 The relative advantages of stabilization funds and compulsory set-asides 
 can be illustrated by a number of points: 
 
 1. Under most compulsory set-asides, some of every grower's grapes must 
 be committed to the surplus or reserve pool regardless of variety, grade, or 
 quality. Systems for grading the grapes that go into the surplus and compen- 
 sating growers according to grade are necessarily arbitrary and debatable. 
 However, when a surplus pool is created under a stabilization fund program with 
 no compulsory set-asides, perhaps purchasing grapes and grape products offered 
 to it at prices it announces it will pay, since all sales are voluntary, the 
 pool anpears to the growers as a new market rather than as a new regulatory 
 body. However, the feature which may be objectionable in such a plan is that 
 sellers tend to deliver to the stabilization pool the minimum grade which will 
 meet requirements. Under a compulsory stabilization pool program, the average 
 grade of the pool would tend to be a higher average, comparable to that of the 
 entire crop. 
 
 2. Under a stabilization fund pool, the grower could receive payment for 
 all of his grapes as soon as if there were no program at all. Growers would 
 not have to wait for sale of the stabilization pool. Cooperatives could liq- 
 uidate their marketing pools and distribute funds at least as fast as with no 
 program. On the other hand, if there were a compulsory set-aside, growers- might 
 not receive final compensation, and cooperatives would not be able to close 
 
 out their pools until the stabilization pool was finally liquidated. Also, 
 payments for the reserve and surplus tonnage would come from the control board 
 and not from the handler to whom the grapes were delivered. 
 
 3. Handlers have a special compulsory burden of regulation, record exami- 
 nation, and special obligations if there is a compulsory set-aside. Where 
 there is a stabilization fund, most of these are avoided, and no handler need 
 store the surplus for the stabilization program unless he wishes. His records 
 might still need to be examined to determine what volume each grower marketed, 
 and he might have to pay an assessment into the stabilization fund and be re- 
 quired to assist in collecting it. 
 
 1;. A stabilization fund provides the only practicable way in which the en- 
 tire grape industry can help carry the burden of the surplus when that surplus 
 descends on one particular segment, as it often does. Only with a fund is it 
 practicable for a program deliberately to direct the surplus into that sector 
 where it is easiest to handle. Otherwise, those who market in that sector 
 
a,eblss-*a*$ vna»Xflqs©o bpa._ abfy/l "no £* A 2 xt xHsfa* 'io '< 
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 J 
 
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 egaiSVS add - fffifin^fs^ xocq rtoj^aiX x.deie x^oaXuqmoo 
 ■ 
 
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 bXirov a'lwonO .11 c Ji? martsjoTrr on aiaw <<L? i tt , _'H 
 ■*-pxI bXifo:? 89vi /s'jsqooD »Xooq noi-fBS XX cd/kts ^d} 
 ■ ofl r^iH 33 t^t'i as isr^S i& abrafl sixidLHsteilb boa 
 
 soil 31300 bXiiow s^finrto* Bularusa bns s>vi! 
 
 i 
 
 ■—si 3d fane fxta 
 
 4 )• 
 
 : y^w 9XdsjxJ"paicr vj^no erid- as 
 ttfiux a ri.+r!-' vlxiO .s&ob nadlo ^x 36 
 
 ros*; jjsfk/ ojnx aj-U-'iius on' 
 icioaa 3s:d$ nx iajfcisaj orfv 
 
56. 
 
 would be unfairly penalized. Unless there were a way for all to help, the pro- 
 gram would be unfair to that segment which was given the biggest burden of 
 surplus to carry. 
 
 5. While both types of programs could set up surplus and reserve pools, 
 under a set-aside program every grower is anxious for the sale and payment of 
 his equity in the pool. With a stabilization fund, his equity is in the fund 
 rather than in the pool itself, and since growers probably would be willing to 
 agree that funds collected from the sale of surplus should be retained for 
 future emergencies as part of the stabilization fund, there would be no such 
 pressure. 
 
 6. A compulsory set-aside program probably could not survive if it were 
 necessary to dispose of a substantial surplus pool with no return to the 
 growers. However, a pool purchased by a fund could probably be disposed of 
 without as serious repercussions. 
 
 7. Because sales to a stabilization fund program board are voluntary, it 
 would never be as certain that it would actually be possible to acquire the 
 surplus under such a program as if there were a compulsory set-aside. If 
 prices were expected to go up as a result of surplus purchases by a fund, there 
 might be a reluctance to sell at market prices; this argument would not apply 
 to purchases made to maintain the going price level. 
 
 8. While growers may be willing to set aside a fairly large part of their 
 crop, the assessment which they would be willing to pay would, in all likeli- 
 hood, accomplish considerably less. Thus, while a 20 per cent set-aside might 
 be accomplished by a compulsory program, a comparable set-aside with a fund 
 would call for funds equal to about 2$ per cent of the value of the entire 
 crop (at the price it would bring if it were all sold). Such a fund could not 
 be collected in any one season. 
 
 9. Under a stabilization fund, it is possible to spread the burden of the 
 set-aside over several marketing seasons. Funds could be accumulated in years 
 of short crops and good prices, to be used in years of surplus. A compulsory 
 set-aside would not be able to do this. However, this argument is partly based 
 on an illusion since, under an effective program, it would never be a burden 
 
 to be required to set aside part of a crop. 
 
 when growers state that they cannot afford to contribute to a stabilization 
 fund, if the program is sound and the fund is competently used, they are always 
 wrong. If, for example, average prices for grapes were $20 per ton and growers 
 could not afford to accept less, then growers could very well afford to pay 
 assessments of &h to &8 per ton, provided the money were used to produce gross 
 returns considerably in excess of $2k to $28 per ton. 
 
5 . ■ ' • 
 
 ■ • : 
 
 ■ ■ - 
 
 li'.-^ij ' t.o &3'ist vJixSj. fi ooxsc js?. oj ^nxi-xxw 9fl vein Pi&woTtg eu.xq^ 
 
 esq 0 t;i"v 
 
 • . •■ • 
 
 . r..% '■ ■- • ' - i * ' ' 
 
 ■ . ■ . . ■ : ■ 
 
 ■ . . ■ . .■■■>.: 
 
 • • ■ - ' ■ • - ■ ■ '■ , 
 
 [X'S ' - ' ' ' 
 
57. 
 
 If paying an assessment to an effective program meant that a grower v;ould 
 have to accept less for his crop, there would be no justification for any kind 
 of surplus control program. The only legitimate" object of a program is to ob- 
 tain more, not less. 
 
 10. Money in a stabilization fund could be combined with funds from the 
 government or other sources. Use of the funds for export subsidization might 
 be more economical than the creation of a pool which could only be destroyed. 
 
 11. It may be necessary to start accumulating a stabilization fund well 
 in advance of the season in which the surplus is to be removed. Usually, it 
 will be difficult to remove any surplus until the money is in hand. Lending 
 agencies may sometimes extend credit. Few growers or handlers are in a posi- 
 tion to pay assessments until after receiving the proceeds from the sale of 
 their crops, and often, especially with cooperatives, there is a long delay in 
 receiving the proceeds of sale. 
 
 12. A fund always runs the danger of being exhausted by several successive 
 surplus years, whereas a set-aside could continue with more confidence in its 
 ability to cope with continuing difficult situations. This point is especially 
 apropos when there is no fund available and when none can be accumulated easily. 
 
 13. Past experience shows that with funds the danger is particularly 
 strong that a board may yield to the temptation to speculate. Rather than 
 dispose of surpluses, a board may like to hold them with the hope of achieving 
 a profit from its later sale. Such operations have been disastrous to stabili- 
 zation funds in other industries and to large cooperatives of the type or- 
 ganized in the late 1920' s. 
 
 Summary 
 
 One criticism leveled against all surplus control programs is that they 
 provide incentives to expand production and thereby increase the surplus. If 
 effective, these incentives could defeat a program in the long run. That they 
 might be a danger is indicated by the fact that even with low prices and un- 
 certain market conditions some surplus is produced. Once a surplus control 
 program had generated such an expanded production, the control program could 
 not be dropped without the danger of considerable economic distress. Only 
 when there is a means to prevent an expansion of production in the wake of 
 higher returns produced by a control program can this danger be avoided. In 
 the grape industry no obvious legal means exist. 
 
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 vadd dcdT ,nm gnoX 9rid- nx mfiTgoiq b +X3iob bXuoa aavldnaarti aaadd ^avidoalla 
 -m; bnn esoitq vpoX ridir/ nsva dsdd dosl 9dd bsi&oibat sx -iagiisii s ad dd3I.11 
 Imdnoo axflq'ix/e a asnO .baax/boiq si auXqiira 3iW>s snoxdibnoo d^Kam nisdiao 
 bltfoo .TiBiaoiq lo-rdnca arid ,nnxd5irboiq bebaaqx9 nS dowa badu-rana^ b/id inB-^otq 
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58. 
 
 On stabilization funds versus set-asides, there are pros and cons and many- 
 thorny problems in developing programs of either kind. The advantages of the 
 fund proposals tend to be associated with the flexibility of money as a device 
 for control, the lesser degree of intrusion into the affairs of program par- 
 ticipants, and the lesser need for arbitrary regulations. A stabilization 
 fund would have the greatest advantage where a program is to accommodate a 
 wide diversity of interests and economic situations. Under the set-aside ap- 
 proach, the surplus is certainly under control; and where money is not readily 
 obtainable, a set-aside can still be put into effect. Relatively speaking, 
 the advantage of a set-aside is strongest in industries where the crop is 
 most homogeneous, where most members are in the same position with regard to 
 marketing and production, and where regulations can be drawn which affect all 
 with reasonable equality. In the grape industry these conditions are far from 
 fulfilled, and a set-aside would be more difficult than in many more simply 
 organized industries. 
 
 An over-all grape industry program will probably have to be a stabiliza- 
 tion fund type since no way can be set for equitable set-asides of raisins, 
 wine, fresh graoes, etc., under one program. Fhere a program is restricted 
 to one sector, either a set-aside or stabilization fund could probably be 
 made to work. 
 
 V. Allocation Improvement and Other Programs 
 Advocates of other types of programs point to the moderate size of the 
 long-run surplus. Severe economic distress is more associated with short-run 
 surpluses and variations in production than long-run surplus. It has been 
 noted that the long-run average rate of return for grapes has not been par- 
 ticularly low since the war; and when production has been no more than the 
 average of 2.8 million tons, a tolerable marketing situation usually has 
 existed. Distress is not continual, as might be expected with a substantial 
 long-run sumlus, but recurs when production greatly exceeds the average. 
 
 Those programs which are not primarily devoted to surplus control, but 
 which attempt to improve marketing by other means, are classified as follows: 
 
 1. Programs to smooth out year-to-year fluctuations in supply. 
 
 2. Programs to help growers make better marketing decisions. 
 
 3. Programs to stimulate demand for grapes and grape products. 
 U. Segmental control programs. 
 
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 ox nnijtxsoq amaa arid ni .am aisdoon £bop stexW .Eirosr 
 
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 aiif *io ssia siaipbocr arid- ,o<b inx^q araaisoiq "Jo- aeqyd *raffcto lo aa5h 
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 na<>d sari il . aulq-itr?. . xiif.x-3n« l nartd- ncxd-ouboici ni anoiiaiisv bn 
 -fiaq nasd ion sari gfsaatg .lo'l- n'UAisi xo eisi- asai^va fr(rr-3noX adt 
 sxij nsrii 9iom on : naad am ncKioiiboiq nstiw bnx- jiavr &oni« w» 
 asri xXXst'an noJtf/atfia ^fiii-ajhtaui aXdxtafoJ a - t anoi noxXXJm 8.S 
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 dxrd ,Xo7.tnpy nuiqu.3 oi b^joveb vlxtamxiq *on e'xs rioiAv g<nsi3^iq 
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 .\;Lqqtfa ni snoiJ-;ix;ioi;Xl ^laa'i-o.i-ic^ ii*.)- njooma o# a.nsigo: 
 .annisioab gniiajitraj isiisd arf^ai aia^oxs qi^rf pj- -amcigo 
 • e-toirboiq scmn^ bttn asqsig 10I. bnxunab ^ir.Umt&z .oi- smsigo; 
 
 i-ams'igoiq imfnoo Xain-5/ag 
 
59. 
 
 Smoothing Out Year-to-Year Fluctuations in Supply 
 
 Programs with this objective are designed to take care of short-run sur- 
 plus situations. They are based on the belief that no actual removal or des- 
 truction of surplus is necessary but that adequate prices will result if the 
 long supply year's surplus is carried over and marketed in the short years. 
 
 There is often great similarity between such programs and programs for 
 the removal of long-run surplus. The two types are confused in the minds of 
 many proponents, and a program to smooth out short-run variations in supply 
 is often favored by those who have not realized that actual destruction and 
 permanent removal of surplus would be essential in the case of a genuine long- 
 run surplus. 
 
 One way to smooth out variations in grape yield would be to prune and 
 thin grape vines each year to the point where only a "normal" yield would re- 
 sult, ^ith a given standard always applied, variations in yield would be re- 
 duced because growers would automatically prune and thin intensively in years 
 when indications of a heavy crop existed and lightly when a small crop was 
 indicated. This technique could do nothing, however, about yield variations 
 which were the result of summer weather conditions, sunburn, bud mite, etc. 
 
 That such a practice would tend to smooth out variation in year-to-year 
 production is suggested because some variation in annual production results 
 from differences in growing conditions early in the year. Almost every year, 
 vines develop more buds than they can bring to the state of mature bunches of 
 grapes. If, therefore, pruning were performed to reduce the number of bunches 
 to a standard "normal cropping" amount, some production variability would be 
 eliminated, and there would be an improvement in grape quality. An objective, 
 enforceable standard of cultivation practice would be extremely difficult to 
 develop. It has been maintained, however, that examination of mature grapes 
 would be a sufficient guide. Evidence on this point is not clear. 
 
 The other approach which has the advantage of being better understood sug- 
 gests that, with a stabilization fund, short-term storage operation could be 
 conducted for raisins, wine, or any other storable products. 
 
 Storage programs designed to promote price stability usually make use of a 
 stabilization fund to purchase short-run surpluses, with the expectation that 
 the funds will be recovered from sales at regular market prices in later years. 
 Stabilization funds for these programs differ from the so-called stabilization 
 funds of surplus removal programs in that, with surplus programs, funds are 
 spent not to be recovered, and the acquired surplus is either disposed of at 
 low prices or destroyed. 
 
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60. 
 
 A stabilization program which succeeded in evening out supplies would not 
 necessarily increase the average total returns to grape growers. It may be 
 that returns to growers are actually greater under conditions of variable 
 price levels. Some feel that in an unstable situation they are better able 
 to profit by their speculative skill (especially where government help is 
 available) . 
 
 A fund operated to promote price stability rather than surplus removal 
 is not likely to make a profit. If the management attempts to make profits 
 by price manipulation, the fund cannot successfully fulfill its purpose of 
 promoting stability; and while profits may be made, the gain to the fund is 
 likely to be less than what growers lose as a result of price manipulations. 
 
 Some thought has been given to the possibility of encouraging price-sta- 
 bilizing, storage operations among private operators. It is argued that the 
 grain trade illustrates how stabilization takes place automatically through the 
 operation of the futures market and other characteristic features of grain 
 trading. However, whether the grain futures markets have enhanced price sta- 
 bility is open to question, and it is also doubtful that conditions in the 
 grape industry are as suitable for a futures market. 
 
 Improving Allocation Among Uses 
 
 Inefficient allocation means lower returns to the grape industry. One of 
 the causes of grape industry distress is the tendency of the industry to shift 
 excessively from one market to another. The swings in allocation are actually 
 proportionately greater than the swings in varietal production. Allocation 
 among uses is so inefficient that even when there is no oversupply of grapes 
 there may well be segmental surpluses. Often, growers and processors as a 
 whole demonstrate by their actions that they have insufficient knowledge and 
 marketing information to pick the right markets. A more stable grape industry 
 and a more efficient allocation of the crop are objectives so entangled that 
 one probably cannot be achieved without the help of the other. 
 
 Several current proposals suggest that making better market news informa- 
 tion available would help allocation efficiency. Prompt information on ship- 
 ments of fresh grapes and reports of cars en route strikingly assist the fresh 
 shipping industry in making marketing decisions. Crush reports and raisin lay 
 reports give assistance to other segments, and it is felt that this sort of 
 information should be further developed. 
 
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61. 
 
 Purely statistical information is of relatively little use to growers who 
 lack the time or training to analyze the data. Therefore, some persons advo- 
 cate an extensive and improved grape marketing information service which would 
 collect more data and publish it faster than the funds available to government 
 agencies now permit. These agencies could then do much to make the signifi- 
 cance of their findings widely known. 
 
 How much could be accomplished by a market information and publicity pro- 
 gram is hard to predict, nor do we know if grape growers and handlers, even 
 with the best information and advice, would succeed in avoiding shortages in 
 some sectors and surpluses in others. 
 
 Improper allocation is not entirely the result of inadequate market in- 
 formation but also results from physical factors beyond the control of the 
 growers. Time of maturity is sometimes an unknown variable. Labor shortages 
 could be an important factor. Weather conditions may have a great deal to do 
 with crop allocation. Where processing facilities in one outlet are inadequate, 
 some growers may be forced into other markets which pay lower returns. 
 
 Demand Stimulation 
 
 Other proposals seek to improve the market for grape products by increas- 
 ing consumer demand. Demand-increasing programs are often proposals for ad- 
 vertising and trade promotion work, but other types seek improvement in the 
 quality of the product, improved packaging, or development of new products or 
 markets. These programs are often sponsored together with others since it is 
 generally believed that, while stimulating demand may be sound industry policy, 
 if it works at all, its effectiveness is long run. How advertising works is 
 obvious enough. Trade promotion work includes such activities as having 
 agents visiting wholesalers, retailers, and users of products, giving them 
 suggestions, helping solve difficulties, suggesting new ways of handling the 
 product, and so on. 
 
 Except where an area of common interest is found, an over-all trade pro- 
 motion program would necessarily be composed of essentially separate campaigns 
 for each product. Quite properly, trade promotion policies would be under the 
 control of those who are directly concerned with the marketing of that product. 
 An over-all board might attempt to coordinate policy or serve as an industry- 
 wide service bureau. 
 
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62. 
 
 Programs to stimulate demand by improving the quality of the product are 
 based on a solid principle. Before they can proceed, however, it is necessary 
 to determine what the taste preferences of consumers are. For example, it is 
 notorious that the popular "uneducated" taste for wine differs from that of 
 the expert, and it does not follow that producing a wine of high quality by 
 the expert's standards would increase sales in the mass market. 
 
 Segmental Marketing Programs 
 
 Much attention has been given to the problem of what scope a marketing 
 program must have to be effective. It has been argued that marketing problems 
 are, in the main, special for each segment of the grape industry and can be 
 handled better by programs operated independently by the groups most directly 
 concerned. In opposition to this claim is the argument that the surplus prob- 
 lem is an over-all problem which needs an over-all program to handle it. 
 
 The arguments in favor of an over-all program have received much atten- 
 tion, but there are also sound arguments in favor of segmental programs. When 
 trade promotion is the problem, it is generally agreed that it can be handled 
 best by the individual segments. 
 
 Another argument for segmental programs is that grape varieties differ 
 and all grapes cannot be treated alike. For example, the growers of wine 
 variety grapes have a price advantage which means that they may be in a fairly 
 satisfactory economic condition in years which bring distress to those deliver- 
 ing raisin and table variety grapes for crushing. It is perfectly understand- 
 able that such groups as the coastal grape interests or the table grape inter- 
 ests should consider program proposals in a somewhat different light than do 
 such groups as valley growers and processors. 
 
 Where possible, it is advantageous not to include groups with sharply con- 
 flicting interests in a control program. The more points of view to be accom- 
 modated, the more the effectiveness of the program is likely to be watered 
 down. Because they are restricted groups with relatively similar economic in- 
 terests, as contrasted to an industry-wide board, segmental program control 
 boards can probably operate with more harmony than can an over-all program 
 board. 
 
 It will be possible in some cases for a single segment to achieve im- 
 proved marketing conditions by operating its own control program. Under these 
 circumstances, that segment might find that an over-all program would either coi 
 tribute little to their well-being, or would even interfere with that segment's 
 
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63. 
 
 ability to use the remainder of the grape industry as a dumping ground for its 
 own surplus. One segment might find a segmental program more advantageous than 
 an over-all program so long as the remainder of the grape industry was not or- 
 ganized, but even if the entire industry were to become organized, the problem 
 of coordination between segments would be severe. 
 
 The need for coordinated surplus removal is a strong reason for having an 
 over-all program. The interrelationships between parts of the grape industry 
 mean that, with several segmental programs and all segments strongly interre- 
 lated, the situation is likely to degenerate into destructive jockeying for 
 position which would reduce the returns in all segments and nullify in some 
 measure the advantages of the program. To an extent, each program would be 
 forced to such jockeying for position in order to survive. Because the grape 
 industry has seldom had concurrent programs in major segments, these effects 
 have not been much experienced, but it is worth recalling that, in the raisin 
 and wine prorate programs of 1938, there were carefully drawn arrangements for 
 dividing the total grape surplus between the two programs. The failure of this 
 arrangement had a serious effect on both programs. 
 
 The idea that there should be separate sector programs seems to arise out 
 of the concept of the grape industry as a three-sector industry with somewhat 
 separate grape types and separate market outlets. To a large extent, this is 
 a fiction. Few would deny that, of the so-called raisin varieties, muscats can 
 be used to make good wine, and it is contended that the neutral character of 
 the Thompson Seedless grape makes it desirable for wine manufacture. The idea 
 that the three segments really are separate is strongly held among packers, 
 shippers, and vintners since these processors have far less in common that do 
 growers of the grapes they use. The argument for separate programs is strongest 
 on the processor and packer level, but at the grower level there is more justi- 
 fication for a principle of "one market, one program." 
 
 The position of the coastal county grape growers and vintners toward a 
 control program is known to be one of long-standing opposition. It is usually 
 based on the contention that there is no surplus of coastal wine variety 
 grapes. Arguments over this issue are usually confused by various sides making 
 quite different unstated and fundamental assumptions. 
 
 To the extent that a given grape market is supplied by grape varieties not 
 in surplus for which no other varieties can be substituted, that market will 
 not be affected by a surplus in the other varieties. Some table wine producers 
 are no doubt in this desirable position: the position of prestige label Grey 
 
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 Riesling, for example, is not going to be much affected by surpluses of emper- 
 ors, Thompsons, and Tokays. Much table wine is in this position to a limited 
 degree. Price relationships between coastal area dry wines and valley wines 
 suggest a significant level of independence. Apparently, it is customary to 
 make table wine, at least in part, from nonwine variety grapes, or from wine 
 varieties grown in the Central Valley which suffer the same excesses of pro- 
 duction as do other valley grapes. 
 
 The statement that there is no surplus of wine variety grapes has no mean- 
 ing if in fact it is possible to substitute grapes which are in surplus for 
 wine varieties, even though this must be done at lower prices. Such substitu- 
 tion is commonplace in dessert wines and is carried on to an unknown degree 
 for table wines. The vintners who are most clearly unaffected and who, there- 
 fore, have a legitimate claim to opposing their inclusion in an industry-wide 
 program are those who account for the small volume of fine table wine pro- 
 duced each year. Most table wine producers do not have a quality of product 
 or a class of discriminating consumers which permit them to isolate themselves 
 completely from the problems of valley production. They are nonetheless in a 
 relatively protected position with the possibility of achieving further pro- 
 tection through further educating the tastes of their consumers or improving 
 quality. 
 
 It is true that, if the coastal areas were affected by a surplus, they 
 would benefit most if they were able to avoid sharing the costs of a program. 
 However, it may also be true that, if an over-all program could be agreed upon 
 only provided that the coastal areas would carry a share, the economic gain 
 might exceed the costs of that share. So far, no finding of fact has been 
 made on this issue. 
 
 Miscellaneous Programs . 
 
 Two kinds of programs which loom large in the thinking of agricultural 
 groups deserve mention. The first is the collective bargaining type of pro- 
 gram, sometimes based on the idea that there is collusion among buyers which 
 must be fought by combinations among growers. This type of proposal has been 
 tried in the grape industry repeatedly. Such attempts are by their nature 
 one season long, and there is no easy way to judge their effectiveness. As a 
 general principle, bargaining strength of opposing parties depends on unity 
 in the face of resistance from the other side. 
 
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65. 
 
 Other programs often proposed seek improvement in the physical efficiency of 
 marketing processes. Private interests, the state and federal agricultural or- 
 ganizations, as well as colleges of agriculture, devote a good deal of time to 
 marketing efficiency. Up to recently, there has been relatively little scien- 
 tific research on the marketing of graoes and grape products. This situation 
 
 7/ 
 
 has improved recently so far as table grapes are concerned.— 
 
 VI. Conclusions 
 
 The marketing problems which disturb the grape industry are complicated 
 ones, and the ultimate solution probably cannot be simple. At least neither 
 the exact nature of the problem nor the solution is obvious. 
 
 The thought that the problem can be analyzed and a control program con- 
 cocted which can correct the difficulties is behind many of the proposals which 
 have been discussed in recent years. It is an idea worth pursuing since analy- 
 sis and planning are usually economical substitutes for a lengthier period of 
 trial and error. However, at best, a program will be an experiment whose re- 
 sults cannot be predicted with any accuracy. 
 
 There are many variants of a limited number of basic ideas about how mar- 
 keting and returns might be improved. By far the most important idea is sur- 
 plus control which might be accomplished by such means as compulsory set-aside 
 programs, programs for purchasing surplus on the open market, price-fixing pro- 
 posals, and proposals to exclude certain grape varieties from certain desirable 
 markets. Despite the similarity of their basic idea, these proposals differ 
 importantly in their details; and the success or failure of a program may de- 
 pend not so much on the merit of its basic idea as the competence with which 
 the details are worked out. 
 
 The basic ideas of most proposals are sound as general principles, but 
 they may not always apply to particular situations. With regard to the grape 
 industry, the ideas of surplus control, improved marketing efficiency, stimu- 
 lating demand, evening out the effects of fluctuations in supply and demand all 
 seem sound enough. Hammering out a workable program that meets the criteria 
 of legality, economic soundness, acceptability, and administrative feasibility 
 takes time and patience. 
 
 7/ See the series issued by Bressler, Sammet, and French of the Giannini 
 Foundation which deals with efficiency in fresh fruit packing. 
 
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66. 
 
 In earlier programs many costly errors were made which have given market 
 control a bad reputation with many. Too commonly, however, the objections are 
 directly against faults which could be corrected and need not appear in new 
 programs. 
 
 The fundamental principle behind a market program is that it permits a 
 number of free and independent individuals to do some of the things which they 
 would be able to do if there were in fact united under one management. Because 
 of this, the most than can ever be expected is what it would be reasonable to 
 expect a single unified management to be able to do; and, of course, even a 
 monopoly cannot come out on top of every situation. 
 
 If it could be determined that demand for grapes is such that a program 
 would be at least capable of increasing returns, the problem would become one 
 of developing a workable program to accomplish that objective. Growers and 
 handlers must agree to some kind of control by a committee which has the power, 
 once established, to enforce compliance upon the unwilling. This aspect of con- 
 trol makes many hesitate to accept marketing programs as it means inevitable 
 restriction on the desire of everyone to run his business to suit himself. 
 
 The basic problem of control is to frame a combination of control devices 
 which will produce an optimum balance of economic gain against regulation. 
 Skill in organizing a program consists of achieving this balance, and much con- 
 cerning the problems involved in achieving it can be learned from past programs. 
 
 One of the first things to become obvious about past marketing programs 
 was that gentlemen's agreements would not hold up for long. They broke down 
 when some few individuals were forced by circumstances to violate the spirit 
 of the agreement while others never intended to comply and said so from the 
 first. 
 
 Another lesson well learned in the 1930' s was that laws, which on paper 
 put considerable power in the hands of a control committee, will not in them- 
 selves guarantee success. This first became evident in 193k when the weakness 
 of a raisin program organized under the provisions of the original Agricultural 
 Adjustment Act brought it to a quick end. The 1938-19UO raisin proration pro- 
 gram and the 1938 grape proration program are other examples. 
 
 Still another lesson learned early was the fallacy of buying a surplus at 
 low prices thinking it possible both to support the market and sell the surplus 
 later at a higher price. At one time many cooperatives used stabilization funds 
 to follow this idea; those which survived have usually modified their policies. 
 While a stabilization fund may be used to stabilize prices, it cannot take care 
 of a long-run surplus situation. 
 
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67. 
 
 One of the most glaring lessons is the futility of attempting to organize 
 a control program once the grape season is under way. Agitation for programs 
 is typical of every year with low prices, but seldom does this agitation reach 
 the program stage for the reason that working out a program with a chance for 
 success means long negotiation with growers, packers, officials, and others 
 directly concerned. Inevitably, every proposal must undergo hearings, modi- 
 fications, and a complicated and timeconsuming procedure of approval which 
 guarantees that no one's constitutional rights are being violated. 
 
 Sound administrative procedures are essential and depend on skill and time 
 for adequate consideration. Poor organization, faulty drawing up of programs, 
 misunderstandings, and errors arise from excessive haste. Probably only a con- 
 tinuous program can be ready for an emergency. If growers are to have market- 
 ing programs to help them in the bad years, they must reconcile themselves to 
 the expense and trouble of maintaining a stand-by organization in the good ones. 
 
 • One lesson from past control programs is that despite every effort it is 
 seldom possible to convince everyone that he benefits from the program, and some 
 complaints usually will be justified. Quite likely any reasonable program will 
 be to the disadvantage of a few at the same time that it is to the advantage of 
 most. Preventing shipments of low-grade fruit, for example, may benefit most, 
 but it hurts the grower who usually raises it. This problem must be faced if 
 the grape industry is to have a control program. 
 
 One serious unsolved difficulty arises from a popular conception that 
 grapes, raisins, or wine in a surplus pool are worth as much as free market 
 supplies despite the fact that free market prices are often high because the 
 surplus has been removed from the market. Reselling the surplus would reduce 
 the price. Past experience has shown that, if a control program holds out 
 even the possibility that this might happen, handlers will shy away from build- 
 ing up any inventories. While surpluses can sometimes bring a good return 
 from noncompetitive uses, sometimes they will not. Yet, even if the surplus 
 is sold for next to nothing, setting aside a surplus may be an integral part 
 of a profitable program. 
 
 Another serious problem about which we learn from a study of past programs 
 is the importance of accurate preharvest information concerning the size and 
 disposition of the crop. If decisions as to the handling of the surplus must 
 be delayed for lack of information, then confusion, uncertainty, last-minute 
 decisions, inability to find a home for the surplus in time, general discontent, 
 and lack of confidence result. 1 "!here market information is imperfect, there is 
 a great advantage to flexible and simple methods of control. 
 
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68. 
 
 Another difficulty which has reappeared constantly in past programs has 
 been getting widespread participation by growers. Typically, the burden of 
 developing and operating a program is carried by a willing few. While the 
 grape industry is fortunate to have such men, their minority is still a serious 
 weakness. 
 
 Often, too much is expected especially in the first year. Growers are 
 intolerant of inevitable errors. A program committee is often put in the dif- 
 ficult position of being given little power to regulate and, yet, expected to 
 produce miracles. While the problem of marketing agreements is an economic 
 one, the study of past programs indicates that the major unsolved problems 
 are the noneconomic ones of organization within the industry to carry out 
 economic objectives. 
 
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