UNIVERSITY OF CALIFORNIA 
 
 COLLEGE OF AGRICULTURE 
 
 AGRICULTURAL EXPERIMENT STATION 
 
 BERKELEY, CALIFORNIA 
 
 Economic and Legal Aspects 
 
 of Compulsory Proration in 
 
 Agricultural Marketing 
 
 E. A. STOKDYK 
 
 BULLETIN 565 
 
 December, 1933 
 
 CONTRIBUTION FROM THE 
 GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS 
 
 UNIVERSITY OF CALIFORNIA 
 BERKELEY, CALIFORNIA 
 
CONTENTS 
 
 PAGE 
 
 Introduction 3 
 
 Purpose of study 3 
 
 Proposals for effecting proration 5 
 
 Probable legal status of proration in agricultural marketing 8 
 
 The rule of reason ... 8 
 
 Legal status of cooperatives and trade restraint 9 
 
 Proration in oil reviewed by courts 12 
 
 Legal theories justifying proration 14 
 
 Proration and interstate commerce 16 
 
 Proration and price-fixing 16 
 
 Attempts to increase returns through voluntary proration programs ... 17 
 
 Lemon shipment proration 19 
 
 Valencia orange proration 20 
 
 Tokay grape proration 20 
 
 Lettuce proration 21 
 
 Cantaloupe proration 22 
 
 Watsonville apple proration 22 
 
 Canning-peach limitation program 22 
 
 California Grape Control Board operations 23 
 
 Summary of proration attempts 24 
 
 Problems of administration of compulsory proration programs 24 
 
 Determining an industry's desire for proration 24 
 
 Determining the extent to prorate 25 
 
 Distribution of benefits and burdens 25 
 
 Enforcement 27 
 
 Financing 27 
 
 Appraisal of the desirability and feasibility of proration programs .... 28 
 
 Summary 31 
 
 Acknowledgments 36 
 
 Appendix: Agricultural Prorate Act 37 
 
Economic and Legal Aspects of 
 Compulsory Proration in Agricultural Marketing 1 
 
 E. A. STOKDYK 3 - 4 
 
 INTRODUCTION 
 
 Purpose of Study. — The purpose of this study is to appraise the de- 
 sirability and feasibility of compulsory proration programs as a means 
 of increasing returns to the producers of some California agricultural 
 commodities. 
 
 The primary question which arises with reference to compulsory 
 proration is its legality, that is, whether or not it is constitutional. An 
 attempt was made to ascertain the probable legal status through an 
 analysis of legislative acts and court decisions that seemed pertinent to 
 the problem. At the same time, the economic possibilities of the plan 
 were considered. This was done through a survey of the attempts of 
 several groups of California producers to prorate the marketing of 
 their crops and by summarizing some of the studies made by the Giannini 
 Foundation of Agricultural Economics on the factors affecting the 
 prices of specific crops. 
 
 This study was made at the request of the California State Farm 
 Bureau Federation and the California State Chamber of Commerce. 
 Their request was an expression of the fact that numerous farmers have 
 reached the point where they are willing to recognize and enforce the 
 "right of the lot." This is not a new philosophy; it was manifested in the 
 practices of the early English merchant and craft gilds. These were 
 associations of persons enjoying a charter by public authority which 
 endowed them with an exclusive right to practice their craft in the com- 
 munity. Through it the "right of the lot" was recognized and enforced. 
 Since there was a narrow outlet available for the wares, each member 
 
 1 Beceived for publication July 10, 1933. 
 
 2 Paper No. 45, The Giannini Foundation of Agricultural Economics. 
 
 3 Associate Professor of Agricultural Economics, Associate Agricultural Econ- 
 omist on the Giannini Foundation, and Associate Agricultural Economist in the 
 Experiment Station. 
 
 * Mr. Spencer Sparks, Technical Assistant, aided in collecting and assembling 
 the data presented. 
 
 [3] 
 
4 University of California — Experiment Station 
 
 of a gild was held to a "stint" or a prorated allotment of the common 
 market opportunity of the gild. 5 To sell more than a specified allotment, 
 or stint, was forbidden. There was also a prohibition against employing 
 more than a specified number of journeymen and apprentices. Thus the 
 gildsmen, by means of group control, made sure of a common disposal 
 of economic opportunity. 
 
 Americans, surrounded on all sides by an abundance of natural re- 
 sources and expanding markets, have been slow in adopting the philoso- 
 phy that the individual needs to be controlled or restrained by his 
 fellows in the common interest and for his own protection. They have 
 held tenaciously to a philosophy of unlimited competition. It was be- 
 lieved that free access to production and free competition could be relied 
 upon to guarantee remunerative returns to producers. 
 
 The philosophy of unlimited competition contributed to the rapid 
 development of a growing nation. Many who have appraised it believe 
 that it was well adapted to pioneer conditions. 6 Now, however, that the 
 United States has attained a complex industrial structure and a special- 
 ized agriculture, problems of unbalanced production are becoming more 
 acute, and a number of groups have found, particularly in periods of 
 violent economic disturbances, that the remunerative outlets for produc- 
 tion are limited. Under these conditions the practicability of the 
 philosophy of unlimited competition is challenged. There is a call for 
 control of competition with administration by groups as in the period of 
 of the gilds in England. The trend toward this philosophy, although not 
 readily distinguishable until the post-war period, is now unmistakable. 7 
 
 s Perlman, Selig. A theory of the labor movement, p. 254-261. The Macmillan 
 Company, New York. 1928. 
 
 6 Pound, Roscoe. The spirit of the common law. 132 p. Marshall Jones Co., 
 Boston. 1921. 
 
 7 Justice Brandeis (in New State Ice Co. vs. Liebmann, 52 SC 371. 1932) sets 
 forth this trend in philosophy clearly in the following words: "The people of the 
 United States are now confronted with an emergency more serious than war. 
 Misery is wide-spread, in a time, not of scarcity but of overabundance. The long- 
 continued depression has brought unprecedented unemployment, a catastrophic 
 fall in commodity prices and a volume of economic losses which threatens our 
 financial institutions. Some people believe that the existing conditions threaten 
 even the stability of our capitalistic system. Economists are searching for the 
 cause of this disorder and are reexamining the bases of our industrial structure. 
 Business men are seeking possible remedies. Most of them realize that failure to 
 distribute widely the profits of industry has been a prime cause of our present 
 plight. But rightly or wrongly, many persons think that one of the major con- 
 tributing causes has been unbridled competition. Increasingly, doubt is expressed 
 whether it is economically wise or morally right, that men should be permitted 
 to add to the producing facilities of an industry which is already suffering from 
 over-capacity. In justification of that doubt, men point to the excess capacity of 
 our productive facilities resulting from their vast expansion without correspond- 
 ing increase in the consumptive capacity of the people. They assert that through 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 5 
 
 A few farmers' cooperative marketing agencies, although not pri- 
 marily organized for such a purpose, have endeavored to limit competi- 
 tion by restricting the volume marketed in the primary channels of trade 
 through a "growers' contract" in which the individual grower agrees to 
 further his own and group interest by taking part in such action. Other 
 groups of farmers have endeavored to accomplish the same objective 
 by forming "control" organizations which include all or most marketing 
 agencies, both cooperative and proprietary. See pages 17 to 24 for a 
 summary of some attempts. 
 
 One of the fundamental weaknesses of voluntary action in restricting 
 the quantity placed in the primary channels of trade is that nonpartici- 
 pating individuals derive the benefits of such action without bearing 
 any of the burdens. Such individuals usually consider only their own 
 self-interest and do not consider the possibility of loss to themselves 
 as well as to the industry as a whole if their lack of participation results 
 in the demoralization and. failure of industry-wide restriction programs. 
 Experience has shown that it takes only a small number of nonpartici- 
 pating growers to greatly impair programs which aim to limit or curtail 
 production or shipments. The failure of a few to participate induces 
 other growers to desert the programs or at least to lose some of their 
 enthusiasm. Therefore, it has been suggested that in order to obtain the 
 desired control in curtailment programs, benefits and costs be prorated 
 equitably among all growers in the industry by making participation in 
 a restriction program compulsory if two-thirds or more of the growers 
 desire to engage in such action and if such compulsion is essential to the 
 welfare of the industry. 
 
 PROPOSALS FOR EFFECTING PRORATION 
 
 Three possible administrative set-ups for making supply limitation 
 effective have been mentioned and considered by persons interested in 
 production or marketing restrictions. First, the production and market- 
 ing of certain agricultural crops might be made public utilities; that is, 
 it might be shown that public welfare was sufficiently involved to justify 
 the fixing of the prices, the volume of production, the number of pro- 
 
 improved methods of manufacture, made possible by advances in science and in- 
 vention and vast accumulation of capital, our industries had become capable of 
 producing from thirty to one hundred per cent more than was consumed even in 
 the days of vaunted prosperity; and that the present capacity will, for a long 
 time, exceed the needs of business. All agree that irregularity in employment — 
 the greatest of our evils — cannot be overcome unless production and consumption 
 are more nearly balanced. Many insist that there must be some form of economic 
 control." 
 
6 University of California — Experiment Station 
 
 ducers and handlers, and the maximum profits in the same manner as 
 the gas and electric and railroad companies and other public utilities 
 are regulated. Second, it might be made mandatory for all producers 
 to market through one marketing agency, 8 this agency to be grower- 
 owned and controlled. The products would then be sold through one 
 organization which would have authority, in periods of excessive sup- 
 plies, to divert a part to by-products or allow a part to remain un- 
 harvested. At the end of the marketing season the proceeds from the 
 quantity sold would be divided among the growers on an equitable 
 basis. Third, it has been suggested that a governmental agency be set up 
 to determine the quantity to be placed in the primary channels of trade 
 and that this quantity be prorated among all the growers in a fair 
 manner, participation in the proration to be compulsory if two-thirds of 
 the producers of a specified commodity desired to engage in such action. 
 
 There are several important differences between the three proposals. 
 Under a compulsory proration program the marketing of the products 
 is left in the hands of existing agencies. Growers may sell their crops 
 through any agency they wish, at any place, and for any price that they 
 care to accept. The only restriction, except with some perishable com- 
 modities the production of which is highly seasonal and where the time 
 of shipment or delivery would be regulated, is on the volume of ship- 
 ments or deliveries with the view of receiving a greater net return for 
 the whole industry than by marketing the entire quantity produced. On 
 the other hand, a compulsory association program might mean that a 
 single marketing agency would have complete authority over all phases 
 of the elementary marketing process. Under public-utility status, the 
 number of producers or the number of handlers of specific commodities, 
 or both the number of producers and handlers would be restricted, the 
 prices to be charged would be fixed and profits limited. 
 
 It is doubtful whether, at the present time, either the application of 
 public-utility status to the production and handling of agricultural com- 
 modities or compulsory marketing through a single agency would be held 
 constitutional. Recent decisions indicate that the courts are not favor- 
 able towards broadening the field of industries to be classed as public 
 utilities. 9 A case that arose in Oklahoma shows their present position. 
 The State of Oklahoma, in 1925, enacted a statute which forbade any 
 person to engage in the ice business without first obtaining a license from 
 
 s The term "compulsory association" may be applied to making mandatory the 
 marketing of products through a single grower-owned and controlled agency. 
 
 9 New State Ice Co. vs. Liebmann. 52 S C 371. 1932; a like decision in Bourland 
 Ice Co. vs. Franklin Utilities Co. 22 S W (2d) 993. 1929. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 7 
 
 the Corporation Commission. The Commission was specifically author- 
 ized to deny applications for a license if the existing licensed facilities 
 were sufficient to meet the public needs. The Corporation Commission 
 was further authorized to determine the prices at which ice might be 
 offered for sale. The Supreme Court held the Oklahoma statute uncon- 
 stitutional under the Fourteenth Amendment of the Federal Constitu- 
 tion. The court said (in part), "There is nothing in the product that we 
 can perceive on which to rest a distinction, in respect of this attempted 
 control, from other products in common use which enter into free com- 
 petition, subject, of course, to reasonable regulation prescribed for the 
 protection of the public and applied with appropriate impartiality." 10 
 
 Aside from the opposition of the courts toward the extension of the 
 field of public utilities, a question arises concerning the feasibility of 
 accomplishing the objective of shipment restriction under public-utility 
 regulation unless such regulation were accompanied by authority for 
 proration. For example, even though the acreage and the number of 
 producers of vine and tree crops were limited, climatic variations from 
 year to year would cause variations in production. Then in years of large 
 crops or low consumer purchasing power, prices would be low unless 
 there was restriction on the quantity marketed. In addition, public- 
 utility regulation of production would raise numerous complex adminis- 
 trative problems. 
 
 Compulsory marketing through a single agency or under the direction 
 of a governmental agency has been undertaken in several countries 
 including England, Australia, and South Africa, all of which have a 
 constitutional organization that permits such legislation without raising 
 the question of constitutionality. In Canada, however, where govern- 
 mental structure is similar to that of the United States, compulsory 
 association in marketing has been held unconstitutional. The Canadian 
 courts in February, 1931, declared the "Produce Marketing Act" to be 
 ultra vires of the Provincial Legislature (unconstitutional). Under the 
 Produce Marketing Act, as amended in 1930, all shippers, proprietary 
 or cooperative, were obliged to turn over to the committee of direction 
 copies of all invoices for fruit sold. It was intended that the prices re- 
 ceived for all fruit of the same grade and variety should be averaged and 
 
 !o Numerous other cases show that the courts are opposed to extending the field 
 of public utilities. 
 
 Williams vs. Standard Oil of Louisiana. 278 U. S. 239. 1929. 
 
 Chas. Wolff Packing Co. vs. Court of Industrial Relations. 262 U. S. 522. 1923. 
 
 John F. Jelke vs. Emery. 193 Wis. 311. 1927. 
 
 Fairmont Creamery Co. vs. Minnesota; 274 U. S. 1. 1927. 
 
 Adams vs. Turner. 244 IT. S. 590. 1917. 
 
8 University of California — Experiment Station 
 
 all expenses for freight, storage, and special packing for foreign ship- 
 ments be deducted from the pool. Each grower contributing the same 
 grade of fruit, in the pools, would be paid the same amount for his fruit 
 regardless of whether it was sold on the domestic or foreign market, or 
 was sold in season or after storage. 
 
 Although compulsory marketing through one agency has not been 
 attempted in this country, the nearest analogy indicates that it would 
 not be upheld by the courts. The United States Supreme Court held the 
 Oregon Compulsory Education Act, which, when practically construed, 
 required all normal children between the ages of eight and sixteen to 
 attend public schools, to be in violation of the Fourteenth Amendment 
 of the Federal Constitution in that it deprived parents and children of 
 their rights in the matter of the selection of schools. 11 Such an act might 
 be looked upon as compulsory education through a single agency. If such 
 action is contrary to the Federal Constitution, it is probable that com- 
 pulsory marketing of agricultural products through one agency would 
 likewise be held unconstitutional whether enacted by state or federal 
 statute. 
 
 In view of the foregoing decisions concerning the status of public- 
 utility regulation and compulsory association in marketing and the fact 
 (as is shown below) that compulsory proration has been considered 
 more favorably by the courts, attention from this point will be centered 
 upon it. 
 
 During the past eight years (1925-1932) the producers of several 
 specialty crops have undertaken voluntary proration in marketing. 
 The lemon growers, the Imperial Valley lettuce and cantaloupe growers, 
 the Watsonville apple growers, and the Valencia orange growers have 
 attempted voluntary proration of shipments. The cling-peach growers 
 and the grape growers, through the California Grape Control Board, 
 have attempted other methods of restricting the volume marketed in the 
 primary channels of trade. A summary of these attempts is made in 
 pages 17 to 24. 
 
 PROBABLE LEGAL STATUS OF PRORATION IN 
 AGRICULTURAL MARKETING 
 
 The Rule of Reason. — Although it is impossible to forecast a decision 
 of the courts on a specific proposal, such as compulsory proration of the 
 shipment of agricultural products, one may ascertain the attitude of 
 the courts towards the control of economic activities through a review of 
 their decisions. 
 
 ii Pierce vs. Society of Sisters. 268 U. S. 510. 1927. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 9 
 
 As far as the author knows there has been no judicial review in which 
 the legality of the proration of the marketing of agricultural products 
 entered into voluntarily by growers has been a specific point, but it may 
 be inferred that if such practices do not increase prices beyond a reason- 
 able return to the producer and if they are temporary measures in 
 the face of economic necessity for the well-being of an industry, they 
 would be considered within the rule of reason by the courts. The case of 
 the Standard Oil vs. United States 12 throws some light on this point. 
 Here the language of the Supreme Court, in discussing limitations of 
 competitive practices, is as follows : 
 
 It is equally true to say that the survey of the legislation in this country on this 
 subject from the beginning will show, depending as it did, upon the economic con- 
 ceptions which obtained at that time when the legislation was adopted or judicial 
 decision was rendered, that contracts or acts were at one time deemed to be of 
 such character as to justify the inference of wrongful intent which at another 
 period was thought not to be of that character. But this again, as we have seen, 
 simply follows the line of development of the law of England. 
 
 Commons 13 shows that the foregoing language of the court is an out- 
 growth of the influence of economic forces on judicial opinion. He also 
 shows that, in turn, the courts have modified or changed their views 
 towards attempts to control economic activities through their inter- 
 pretation of what is reasonable. In this connection Commons remarks : 
 "From the court decisions it seemed that anything 'reasonable' would 
 be sustained, and so we had to use the words reasonable value, reasonable 
 safety, reasonable wage, and fix up reasonable conduct for public officials 
 and private citizens, whether we knew what it meant or not." 
 
 Legal Status of Cooperatives and Trade Restraint. — Although pro- 
 ration in agricultural marketing, either voluntary or compulsory, is 
 distinctly different from cooperative marketing, the attitude of the 
 courts towards agricultural cooperative-marketing organizations may 
 be of aid in appraising their probable position on proration. Their 
 present position on cooperative marketing is that a group of producers 
 may bind themselves together to maintain their own selling agency if 
 they do not unduly increase prices. At the same time, the courts hold 
 that collective bargaining by agricultural producers is not contrary 
 
 12 Standard Oil vs. United States. 221 U. S. 1. 1911. In this case an elaborate 
 argument was made in the opinion to show that according to the "rule of reason" 
 the act (Sherman Anti-Trust Act) as passed by Congress should be interpreted as 
 if it contained the word "unreasonable" or the word "undue." 
 
 is Commons, John E. Legal foundations of capitalism. Preface. The Macmillan 
 Company, New York, 1924. 
 
10 University of California — Experiment Station 
 
 to public policy. The development of collective-bargaining privileges by 
 labor unions no doubt aided in gaining its acceptance in agriculture. 
 
 The trend in the cooperative marketing of agricultural products has 
 been towards organizations of a larger scope and to more complete con- 
 trol over the member and his product. Commodity control 14 has tended 
 to develop out of commodity marketing, since the emphasis has been on 
 making the quantity of the product handled by a single agency large 
 enough to constitute a significant factor in the determination of prices. 
 Obviously, commodity control is, and is definitely intended to be, a 
 restraint on unlimited competition. The position of the agricultural 
 cooperative with commodity control has been clearly established as a 
 legitimate form of business organization. 
 
 The Capper-Volstead Act, passed February 18, 1922, broadened and 
 supplemented the Clayton Anti-Trust Act in the excepting of agricul- 
 tural associations of a particular type from anti-trust restrictions. This 
 act removes agricultural associations from the original jurisdiction of 
 the Department of Justice and places them under the jurisdiction of the 
 Secretary of Agriculture. The act also charges the Secretary of Agricul- 
 ture with the responsibility of protecting agricultural cooperatives 
 from unwarranted prosecution on the charge of increasing prices as 
 might be brought against them for the purpose of handicapping them 
 in carrying on their business. The Federal Trade Commission, however, 
 may review the action of a cooperative the same as any other business 
 organization if there is evidence that they have engaged in unfair trade 
 practices or exercised an unreasonable restraint of trade. To the present 
 time no cases involving the Clayton Act or the Capper-Volstead Act 
 in their application to cooperatives have come in review of the United 
 States Supreme Court. 
 
 Other federal acts also have made an exception of agricultural co- 
 operatives. 15 For example, the Food Control Act of 1914 made strong 
 prohibitions against any action tending to raise the price of food, but 
 made special exception of the action of farmers. Various appropriation 
 bills, from 1914 on, in setting aside certain funds for the use of the 
 Attorney General to prosecute violators of the anti-trust laws, ex- 
 
 14 A marketing organization with control of a large percentage (70 per cent or 
 more) of the commodity produced may be said to have commodity control. An 
 agency with such control can distribute supplies among market areas to put equal 
 pressure in all areas. It can also exert considerable influence on prices through its 
 bargaining strength. Furthermore, it can often operate at a low cost per unit of 
 product handled. In shipment-restriction programs, however, it is essential that 
 90 per cent or more of the commodity be within such a program. 
 
 is Nourse, Edwin G. The legal status of agricultural cooperation, p. 249. The 
 Macmillan Company, New York. 1927. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 11 
 
 pressly stipulated that none of these funds should be used for the 
 prosecution of producers of farm products and associations of farmers 
 who cooperate and organize in an effort and for the purpose of obtaining 
 a fair and reasonable price for their products. 
 
 State legislatures have also authorized the formation of cooperatives 
 which enable groups of producers to gain a substantial degree of control 
 of the marketing of their commodities. Furthermore, the attempt has 
 been made in many instances not merely to pass an enabling act covering 
 associations of the cooperative type, but also to declare it to be a matter 
 of public policy that such associations be set up and operated and to 
 recognize in advance certain methods of operation such as collective 
 bargaining, pooling, exclusive contracts, and special enforcement de- 
 vices as a necessary and proper part of their machinery. For example, 
 the California Anti-Trust Law was amended in 1909 to provide : 16 
 
 That no agreement, combination or association shall be deemed to be unlawful 
 or within the provisions of this act, the object or business of which is to conduct 
 its operations at a reasonable profit or to market at a reasonable profit those 
 products which cannot be otherwise marketed. 
 
 In the Liberty Warehouse vs. Burley Tobacco Growers case 17 the 
 United States Supreme Court said : 
 
 Certainly the statute (Kentucky Cooperative Marketing Act) impaired no 
 right of the warehouse company guaranteed by the Fourteenth Amendment by 
 merely authorizing corporations with membership limited to agriculturists and 
 permitting contracts for purchase and resale of farm products. This is also true 
 of the declaration that such associations shall not be deemed monopolies, com- 
 binations or conspiracies in restraint of trade and that contracts with members 
 shall not be illegal.is 
 
 In this same decision the court went further in declaring its attitude 
 toward collective action of farmers by saying : 
 
 is Calif. Stat. 1909. Chap. 26. 
 
 17 Liberty Warehouse Co. vs. Burley Tobacco Growers Cooperative Assn. 276 
 U. S. 71. 1927. 
 
 is See also Eifle Potato Growers vs. Smith (78 Colo. 171), 1925, giving agricul- 
 turists right to make contracts for cooperative marketing; held not violative of 
 the Constitution as class legislation. "The legislature may reasonably classify for 
 the purpose of legislation, and a law is not local or special when it is general 
 and uniform in its operation upon all in a like situation." 
 
 An interesting contrast in the present and earlier attitude of the courts to- 
 wards cooperative marketing organizations will be obtained by comparing the 
 foregoing decision with Georgia Fruit Exchange vs. Turnipseed (1910), 9 Ala. 
 App. 123: 62 So. 542, where it was held that an agreement to take a share of stock 
 in an association to market fruit which contemplated handling at least 60 per cent 
 of the fruit grown in the state was invalid. 
 
12 University of California — Experiment Station 
 
 If restrictions on production are to be accomplished by voluntary agreements 
 entered into pursuant to statutes authorizing them there would be no objection 
 thereto from a state or a federal standpoint unless a state statute was construed 
 as authorizing what was forbidden by a federal act. A state or federal govern- 
 ment is undoubtedly free to declare what its public policy shall be in matters 
 of this kind. 
 
 The lower court 19 in passing npon the same case summarized suc- 
 cinctly the present attitude of the courts towards group effort on the 
 part of agricultural producers in the following : "Public policy does not 
 ask those who till the soil to take less than a fair return for their labor. 
 Public policy safeguards society from oppression; it is not an instrument 
 of oppression." 
 
 Proration in Oil Reviewed by Courts. — Several decisions involving 
 compulsory proration of oil indicate that the compulsory proration of 
 agricultural products would be looked upon favorably by the courts. In 
 the states of Oklahoma and Texas compulsory proration of oil production 
 has been in effect for several years. The legality of this procedure was 
 tested in the lower courts and came before the United States Supreme 
 Court in the Champlin Refining Co. vs. Corporation Commission of 
 Oklahoma, 20 in May, 1932. 
 
 The Supreme Court upheld the statute of the State of Oklahoma 
 under which the Corporation Commission was given the power to pro- 
 rate the amount of oil that each producer from a given field might take 
 therefrom in order to prevent unnecessary loss and waste. A few of the 
 restricted oil companies contended that they had been deprived of their 
 legal rights without due process of law and therefore such production 
 limitations by the state were unconstitutional. However, the proration 
 activities of states have been upheld by the courts on the grounds that 
 the public has sufficient interest to justify reasonable legislation under 
 the "police power." 21 The court said : 
 
 It is common knowledge that petroleum products have become indispensable 
 not only to railroads but also to automobile travel. Inhabitants of the cities are 
 dependent upon natural gas for fuel. Also a large acreage of land set aside for 
 educational purposes contains large oil deposits. In addition, taxes derived from 
 oil production now constitute a large part of the state's revenue. These facts em- 
 phasize the importance of conservation of these resources for the general welfare 
 of the people. 
 
 19 Liberty Warehouse Co. vs. Burley Tobacco Growers Cooperative Assn. (Ky. 
 1925) 271 S W 695. 
 
 2 Champlin Eefining Co. vs. Corporation Commission of Oklahoma. 286 U. S. 
 210. 1932. 
 
 2i Danziger Oil and Refining Co. vs. Texas E. R. Commission. 49 S W (2d) 837. 
 1932. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 13 
 
 It must be recognized, however, that the courts have pointed out in 
 their decisions concerning oil proration that the purpose of curtailment 
 was not to increase unduly the market price of oil, but to conserve a 
 natural resource. In the case of MacMillan vs. the Railroad Commission 
 of Texas 22 the court said : "The policy of artificial forcing of prices by 
 government action in cooperation with the oil industry by either stimu- 
 lating demand or keeping supply in bounds has never been attempted 
 by the legislature itself and has been forbidden by positive penal 
 laws . . . ." 
 
 At the same time, however, the courts recognized the effect of curtail- 
 ment on prices by stating that although the curtailment of production 
 tended incidentally to increase the price of petroleum, it was not suffi- 
 cient evidence to invalidate the proration order. The language of the 
 court in the Danziger oil case emphasizes this point : 
 
 The Commission has no authority to issue an order which had for its purpose 
 the control or regulation of economic conditions, or which was designed to affect 
 prices or to prevent economic waste but such limitation is not a denial to the 
 Commission of the power to take into consideration an economic standard or eco- 
 nomic conditions, if such conditions bear a direct or reasonable relationship to 
 physical waste. 
 
 The court in the Champlin Refining case 23 also pointed out : 
 
 If the statute enforced as it has been by the commission strictly in accordance 
 with legislative intent has incidentally tended to promote the prosperity of the 
 oil industry in Oklahoma, or of the state generally, or to prevent economic de- 
 moralization, it is not to be condemned but rather upheld for that reason. 
 
 The foregoing decision would seem to put the court on record as justi- 
 fying proration from the standpoint of preventing physical waste; 
 however, there is definite recognition of the fact that it is desirable to 
 prevent economic waste. 2 * One may inquire concerning the difference 
 between physical and economic waste whereupon he encounters the 
 difficulty of drawing a fine distinction. There are several forms of waste, 
 
 22 MacMillan vs. Eailroad Commission of Texas. 51 F (2d) 400. 1931. See also: 
 Peoples Petroleum Co. vs. Smith. 1. Fed. Sup. 400. 1932. Sterling vs. Constantin. 
 53 S W 190. 1932. 
 
 23 Champlin Kenning Co. vs. Corporation Commission of Oklahoma. Federal Re- 
 porter 51 F 823. 1931. 
 
 24 Those familiar with the oil industry state that the proration of production 
 to prevent physical waste is a "thinly veiled pretense." In fact, "in pools where 
 the major expulsive agent is gas, given a scientific spacing of wells, maximum 
 recovery (less waste) is more likely to be obtained with an unrestricted flow. . . . 
 In those rarer instances where water drive is the expulsive factor, the situation is 
 likely to be reversed." See: Stocking, George Ward. Stabilization of the oil in- 
 dustry: its economic and legal aspects. Amer. Econ. Rev. 23(1) :65, 67. 1933. 
 
14 University of California — Experiment Station 
 
 i.e., waste in consumption (vice, crime, harmful drugs), waste of man 
 power (unemployment), waste in the technique of production and dis- 
 tribution, and waste of produced and natural resources. They all involve 
 economic waste and physical waste. The degree of physical waste or the 
 degree of economic waste in each case is incalculable, yet either one may 
 appear more important than the other at a particular time or place. 
 For example, certain timber, which rots and decays in the forests, is 
 looked upon as a physical waste at the point of production. In cities 
 this same timber would be valuable for fuel, if for nothing else, and it 
 would be considered an economic waste to allow the timber to rot there. 
 The principal reason for the change in point of view is that at the point 
 of production the timber is valueless but in the cities it has a definite 
 value. 
 
 In numerous California agricultural industries there is likely to be a 
 high degree of physical waste as well as economic waste whether or not 
 some degree of control is exercised over the volume marketed. During the 
 past year (1932) a considerable volume of several specialty crops was 
 unharvested because prices at the point of production were so low that it 
 would not pay to harvest them. In fact, producers of several crops found 
 themselves indebted to transportation agencies at the end of the market- 
 ing season because their products did not sell for enough in terminal 
 markets to pay the freight. The uncertainty caused by such a situation 
 probably resulted in both a larger physical and economic waste than 
 would have occurred if definite steps had been taken to market limited 
 quantities during each week of the shipping season and prorate such 
 marketings among all producers. When no restriction is placed upon 
 marketings each individual hopes to market as much as possible before a 
 drastic fall in prices occurs. When the inevitable crash comes nearly all 
 growers cease marketing. Prices again recover and then shipments are 
 again forwarded in excessive volume and another price decline ensues 
 when they reach destination. In the meantime, considerable quantities 
 go out of condition or spoil, both at the point of production and in 
 terminal markets. 
 
 Legal Theories Justifying Proration. — The legal theory upon which 
 the proration of oil came before the courts in the Champlin Refining case 
 was under the police power which reserves to the government the right to 
 exercise restrictions upon individuals or groups in the welfare of society 
 as a whole. The proration of oil has also been reviewed by the courts 
 under the legal conception of the protection of the correlative rights of 
 individuals within a group. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 15 
 
 In Bandini Oil Co. vs. Superior Court 25 it was held that the state could 
 regulate and adjust the coexisting rights of the surface owners of under- 
 lying oil and gas. This is recognition of the principle adopted by the 
 gilds (pages 3 and 4) of restricting the activities of individuals in the 
 interest of the group. 
 
 Similar measures to restrict the action of individuals to protect the 
 opportunities of a group have come before the courts in situations some- 
 what analagous. A city government may establish zones. Individuals 
 within the zones may not construct buildings (market their property) 
 which will destroy the value of surrounding property. 26 Irrigation or 
 reclamation districts have been granted authority to compel individual 
 conformity to the group desire. In fact, in a California case 27 the court 
 went so far as to hold that all land within an irrigation district need not 
 be directly benefited by irrigation in order to come under the regulations 
 of the district. A California act 28 also provides for the growing of one 
 variety of cotton and prohibits the growing of any other variety or 
 species with the purpose of benefiting the California cotton industry. 
 
 The most drastic action to protect the group from the individual we 
 have seen is the restriction on the withdrawal of deposits from banks 
 (March, 1933). It became necessary to prorate the amount which each 
 depositor could withdraw from his economic reserve in order to protect 
 the correlative rights of all depositors. Chester Rowell, 29 commenting on 
 the withdrawal restrictions, put the case of unrestricted individual 
 action versus the interest of the group clearly in the following : 
 
 It is all a question of "I" or "we." If there is danger of other people drawing 
 their money out of banks, "I" would be better off if "I" drew all my money out 
 first and put it in a box. But if "we" try that, we cannot get our money, and it 
 would do infinitely more harm if we did. So laws have to be passed to prevent 
 each of us from trying to do separately what it would be self-destructive for all 
 of us to do together. 
 
 Similarly, among banks themselves. If one bank is in a specially fortunate 
 position of liquidity or location, it might be an advantage to it separately to grant 
 its depositors more privileges than banks generally should give. It might thereby, 
 if it were the only bank, secure advertising by which it could later get business 
 
 25 Bandini Oil Co. vs. Superior Court. 72 Law ed. 246. 1932. 
 
 26 Euclid vs. Amber Realty Co. 272 U. S. 365. 1926. See also: Baker vs. Walker 
 204 U. S. 311. 1904. 
 
 27 Fallbrook Irrigation District vs. Bradley. 164 U. S. 112. 1896. See also: Noble 
 State Bank vs. Haskell. 219 U. S. 104. 1911. Statute of State of Oklahoma upheld 
 under which the banks of that state were subject to assessments for a depositors' 
 guarantee fund for paying the depositors of insolvent banks. 
 
 28 California Stats, p. 491. 1925. 
 
 29 Rowell, Chester. World comment. The San Francisco Chronicle, March 7, 1933. 
 
16 University of California — Experiment Station 
 
 for itself, away from other banks. But if one bank is permitted to do this, com- 
 petition will compel others to try it, and then none can do it. So again, a law has 
 to be passed to prevent any bank from doing separately what it would be destruc- 
 tive for all to do together. 
 
 . . . looking beyond this emergency to the permanent conditions to follow, it 
 should be recognized that the age of "I" is gone and the age of "we" has come. 
 The slogans of individualism no longer fit the facts. It was once true that if each 
 of us did what was best for himself the sum of these separate goods was the com- 
 mon good. Competition was the life of trade, and individual initiative, in the 
 hope of personal gain, was the stimulus. Small business sought to grow large and 
 each ambitious employee hoped to "go into business for himself." Because these 
 things were once true, our fathers formulated them into phrases, which we still echo. 
 
 Proration and Interstate Commerce. — A question arises whether pro- 
 ration under state regulation would be invalid because it interfered with 
 interstate commerce. 30 The Champlin Refining case 31 throws some light 
 on this point : "To conflict with- congressional power to regulate inter- 
 state commerce, there must be a direct burden thereon. . . . Congressional 
 power to regulate interstate commerce attaches only when interstate 
 transportation has begun." One may infer from this statement that pro- 
 ration programs would not be considered interference with interstate 
 commerce if such measures were effected before products were loaded. 
 
 Proration and Price-Fixing. — The primary motive in proration is to 
 influence prices by restricting the quantity marketed in the primary 
 channels of trade. This method of influencing prices differs, however, 
 from collusion among producers or marketing agencies to name a going, 
 or prevailing, price. Under proration programs there is a flexibility of 
 prices by reason of the competition of various marketing agencies which 
 market the products. 
 
 The courts have generally held that agreement among competitors as 
 to prices to be charged for the articles manufactured by them is a vio- 
 lation of the Sherman Anti-Trust Act. 32 The Supreme Court in the case 
 of Ribnik vs. McBride also held that it was beyond the legislative power 
 to fix the "prices for food or clothing, of house rental or of wages to be 
 paid, whether minimum or maximum." 33 On the other hand, the oil pro- 
 
 30 This question does not arise when the action is under federal regulation be- 
 cause the Supreme Court has repeatedly held that Congress has the power to 
 regulate interstate commerce. See: Chicago Board of Trade vs. Olsen. 262 U. S. 1. 
 1923. 
 
 3i Champlin Eefining Co. vs. Corporation Commission of Oklahoma. 286 U. S. 
 210. 1932. 
 
 32 Addyston Pipe and Steel Co. vs. United States. 175 U. S. 211. 1899. United 
 States vs. Keystone Watch Case Co. 218 F 502. 1915. 
 
 33 Kibnik vs. McBride. 277 U. S. 350. 1931. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 17 
 
 ration programs were not considered price-fixing, although it was recog- 
 nized that prices would be influenced by them. The court said : ". . . the 
 fact that such orders tend to prevent the oversupply of gas and oil in 
 excess of market demand and indirectly affect prices thereof, does not 
 make them price-fixing in character and for that reason invalid." 34 
 
 ATTEMPTS TO INCREASE RETURNS THROUGH VOLUNTARY 
 PRORATION PROGRAMS 
 
 The experience of numerous groups of agricultural producers in Cali- 
 fornia has been that a greater output will not compensate for a lower 
 price per unit. For example, as shown in column 7 of table 1, returns to 
 Tokay grape growers under conditions prevailing in 1932 would de- 
 crease as the volume of shipments increased. 
 
 The returns which might have been expected by shipping the quanti- 
 ties shown in column 2 were calculated as follows : An analysis of the 
 factors affecting annual delivered prices for Tokay grapes was made. 35 
 From this analysis an estimate was made of the probable average annual 
 delivered price for Tokay grapes in 1932 with the shipment of quantities 
 shown in column 2. Deductions were made from the delivered selling 
 price for harvesting, packing, transportation, and selling costs as shown 
 in columns 4, 5, and 6. The prices shown in column 6 are, then, the net 
 prices for grapes on the vines which growers might have expected by 
 marketing the quantities shown in column 2. 
 
 A comparison of columns 1 and 7 shows that under 1932 conditions 
 the total returns to growers would decrease as the volume of shipments 
 increased. It also shows that the shipment of a quantity in excess of 5,500 
 carloads would be likely to result in losses from marketing. In other 
 words, growers would not receive harvesting and marketing costs. The 
 last two items in column 7 may appear extreme for it may be argued 
 that growers would not continue to harvest and market their grapes if 
 the costs incurred in these operations were not recovered. It is probable 
 that growers would cease harvesting if delivered prices were constantly 
 low; however, delivered prices during the season fluctuate considerably. 
 A period of ten days to two weeks elapses before shipments from Cali- 
 fornia reach eastern markets. Prevailing prices often induce growers 
 to ship heavily, but when the shipments reach destination, severe price 
 
 34 Champlin Kefining Co. vs. Corporation Commission of Oklahoma. Federal 
 Reporter 51 F 823. 1931. 
 
 35 Stokdyk, E. A. Factors affecting annual Tokay grape prices. Blue Anchor 
 9(7) :2. 1932. 
 
18 
 
 University of California — Experiment Station 
 
 declines are experienced. The result is that at times growers do not 
 recover harvesting and marketing costs and in some cases not enough 
 to cover transportation expenses. 
 
 Studies of the relations between shipments and prices of several other 
 California commodities show a similar situation, namely that a greater 
 output will not compensate for a lower price per unit, and that in some 
 cases the marketing of the entire quantity produced results in direct 
 losses to growers. 36 
 
 TABLE 1 
 
 Probable Prices for Tokay Grapes and Probable Total Keturns by Shipping 
 
 Varying Quantities in 1932* 
 
 Shipment 
 
 s of Tokays 
 
 Probable 
 annual 
 
 delivered 
 
 auction 
 
 price 
 
 Price after 
 
 deducting 
 
 7 per cent 
 
 selling 
 
 charge 
 
 Price after 
 deducting 
 
 $0.65 
 freight and 
 
 icing 
 
 Price after 
 deducting 
 $0.30 for 
 picking, pack- 
 ing, loading, 
 and hauling 
 
 Probable total 
 
 Carloads, 
 882 lugs 
 
 Packages, 
 31 pounds 
 
 returns 
 on the vines 
 
 1 
 
 2 
 
 S 
 
 4 
 
 5 
 
 6 
 
 7 
 
 3,500 
 
 3,087,000 
 
 $1.54 
 
 $1,432 
 
 $0,782 
 
 $0,482 
 
 $1,567,934 
 
 4,000 
 
 3,528,000 
 
 1.38 
 
 1.273 
 
 0.623 
 
 0.323 
 
 1,139,544 
 
 4,500 
 
 3,969,000 
 
 1.26 
 
 1.172 
 
 0.522 
 
 0.222 
 
 981,118 
 
 5,000 
 
 4,410,000 
 
 1.15 
 
 1.069 
 
 0.419 
 
 0.119 
 
 524,790 
 
 5,500 
 
 4,851,000 
 
 1.06 
 
 0.986 
 
 0.336 
 
 0.036 
 
 174,636 
 
 6,000 
 
 5,292,000 
 
 0.98 
 
 0.911 
 
 0.261 
 
 -0.029 
 
 -153,468 
 
 6,500 
 
 5,733,000 
 
 0.90 
 
 0.837 
 
 0.187 
 
 -0.113 
 
 -647,829 
 
 7,000 
 
 6,174,000 
 
 $0.83 
 
 $0,772 
 
 $0,122 
 
 $-0,178 
 
 $-1,098,972 
 
 * Assuming shipments of California table grapes (other than Tokays and Emperors) at 11,000 carloads 
 and the index of wholesale prices at 65. 
 
 Source of data: Stokdyk, E.A. Marketing Tokay grapes. California Agr. Exp. Sta. Bui. 558: 18. 1933. 
 
 The foregoing situation has led to attempts on the part of growers to 
 restrict the total quantity marketed in the primary channels of trade. 
 In order, however, to exert much influence on the quantity marketed in 
 these channels there must be a control of a large part, if not the whole, 
 of the supply. Such control is possible in the case of many California 
 products, because numerous crops are produced almost exclusively 
 within the state. 
 
 The possibility of increasing total returns by restricting supplies 
 varies, however, from commodity to commodity. The perishability of 
 the product, the size of the market area, the probability of substitutes 
 taking the place of the commodity in question, the probability of produc- 
 tion expanding in other areas, and the elasticity of demand are factors 
 
 36 Shear, S. W. California Bartlett pear situation. Giannini Foundation of Agri- 
 cultural Economics. Dec. 15, 1932. (Mimeo.) Also: Wellman, H. E. Some aspects 
 of surplus control with particular reference to the summer orange industry of 
 California. Giannini Foundation of Agricultural Economics. January, 1933. (Mimeo.) 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 19 
 
 which influence it. It is not the purpose of this study to analyze these 
 factors in detail. Such factors usually have been given careful consid- 
 eration before proration programs were undertaken. The following 
 record of voluntary proration programs will show the influence of some 
 of them and bring out some of the problems involved in such programs. 
 
 Lemon Shipment Proration. — California lemon producers have pio- 
 neered in shipment proration. As early as 1924-25 the quantity of 
 lemons produced in relation to the existing demand was such that if all 
 the crop were marketed fresh, prices would be unremunerative to the 
 majority of the growers. In several years since then, a quantity of 
 lemons has been diverted from the fresh market to by-products with the 
 result that total returns to growers have been increased. At the present 
 time, about 25 per cent of the crop is so diverted. This procedure is possi- 
 ble because lemon growers market more than 90 per cent of the crop 
 through one selling agency, The California Fruit Growers Exchange, 
 which holds contracts with its members to apportion the quantity each 
 is to sell in the primary channels of trade. Each week of the marketing 
 season an estimate is made of the number of carloads of lemons to be 
 shipped, which will result in a reasonable price to the producers and 
 consumers. Each member of the Exchange is then allotted his proportion 
 of the total number of carloads on the basis of the quantity of lemons he 
 has in his packing and storage sheds. 
 
 The principal difficulties encountered are (1) the unrestricted ship- 
 ments of nonmembers of the Exchange, and (2) the problem of fore- 
 casting the quantity to be marketed each week which will result in 
 reasonable prices. The first difficulty is one which is inherent in all 
 voluntary restriction programs. It is a difficulty which compulsory 
 proration aims to overcome. Nonparticipating growers who ship the 
 entire quantity which they produce in the primary channels of trade 
 gain benefits from the restriction program at the expense of the partici- 
 pating members; they take more than an equitable share of the market 
 opportunity. The second difficulty is one which would be encountered in 
 compulsory proration programs as well as voluntary proration pro- 
 grams. This can be and is being met by analyses of the factors affecting 
 seasonal prices and by combining the results with the experience and 
 judgment of experienced dealers and handlers. It is important to 
 remember that this difficulty will always be present. There will be 
 conflict of opinion concerning the exact quantity to be marketed, mis- 
 takes will be made, and those who are not in sympathy with proration 
 programs or the administration of such programs will emphasize the 
 mistakes of such a nature. 
 
20 University op California — Experiment Station 
 
 Valencia Orange Proration. — Unlike lemons, the supply of Valencia 
 oranges in relation to existing demand has usually resulted in prices 
 remunerative to the majority of the producers. However, early in 1932 
 indications were that the California Valencia orange crop, in relation 
 to the low purchasing power of consumers, was such that if all the crop 
 were marketed fresh, prices to growers would be extremely low. 37 A 
 Valencia orange proration agreement among the growers selling through 
 the seven largest shipping organizations was prepared and effected on 
 June 19, 1932. It was agreed to determine from week to week the num- 
 ber of carloads of Valencia oranges during the 1932 Valencia shipping 
 season that could be sold at reasonable prices and to prorate between 
 the parties to the agreement this total number of cars on the basis that 
 the percentage of fruit controlled by each signer of the agreement bore 
 to the total amount of the fruit yet to be shipped, as of the date June 
 15, 1932. 
 
 This agreement was in effect approximately thirty days. The prices 
 of oranges in auction markets advanced steadily throughout the time 
 the agreement was in effect and when the prorate ended prices were 55 
 cents a box higher than when the prorate started. 
 
 However, after operating for a month, the agreement was terminated 
 because of the withdrawal of two of the shipping organizations. This 
 action destroyed the limited-market opportunity for the whole group. 
 The majority of the producers were willing to participate in the pro- 
 gram, but a minority were responsible for its cessation. It has been esti- 
 mated 38 that if this plan had continued in operation the remainder of the 
 season and if the price during the last week of the program had been 
 maintained, the returns to Valencia growers would have been increased 
 by approximately $4,000,000. 
 
 Tokay Grape Proration. — The growlers of Tokay grapes 39 in San 
 Joaquin County, California, conducted a voluntary proration program 
 in 1932. They had witnessed a crop of 7,670 carloads sell for an average 
 delivered price of $1.14 a package in 1930, while in 1931, a year of low 
 production, 4,109 carloads were shipped with a resulting price of $1.59 
 a package. This meant that the large crop of 7,670 carloads in 1930 
 netted the growers approximately $750,000, while the much smaller 
 
 37 Valencia proration agreement fails. Orange County Farm Bureau News 15:8. 
 August, 1932. 
 
 38 Anonymous. Growers' committee announces termination of proration agree- 
 ment. California Citrograph 17(10) :382. 1932. 
 
 Wellman, H. R. Factors affecting orange prices and economics of surplus con- 
 trol. California Citrograph 17(7) :274. 1932. 
 
 39 Stokdyk, E. A. An experiment in surplus control. Blue Anchor 10(1) :6. 1933. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 21 
 
 crop in 1931 netted more than $2,000,000. The 1932 season promised to 
 be another large crop year, and the purchasing power of the consumers 
 was known to be less than in the two previous years. The analysis pre- 
 sented in table 1 indicated that the shipment of the entire crop of Tokays 
 would result in marketing losses. The growers and shippers realizing 
 the seriousness of the situation organized a shipment-restriction plan. 
 The plan adopted was that of rating the productive capacity of each 
 grower's vineyard and allotting shipments on the basis of the percentage 
 that each grower's rating was of the total rated capacity of all vineyards. 
 The Tokay proration program was conducted without contracts with 
 growers or marketing agencies. It was in effect for four weeks, then 
 abandoned because nonparticipating growers and shippers marketed in- 
 creasing quantities as the participating growers and shippers restricted 
 the quantities they marketed. 40 The Tokay prorate demonstrated, how- 
 ever, that prices for this variety of grapes would respond to the volume 
 marketed and that returns to growers could be increased by restricting 
 the quantity marketed. 
 
 Lettuce Proration. — Since 1929 the Imperial Valley lettuce growers 
 have at times prorated their shipments. This Valley furnishes a large 
 part of the winter lettuce for the United States, which is grown by about 
 70 firms or individuals who plant all the way from 50 to 3,500 acres each. 
 The proration of shipments is conducted under the direction of a 
 clearing-house association. Each shipper signs an agreement giving the 
 secretary of the clearing-house authority to order empty cars from the 
 railroad. By so doing the clearing-house can regulate the number of 
 carloads that are to be shipped from the Imperial Valley on a given day. 
 The proration is based on the acreage the shipper has, the number of 
 carloads he has shipped up to the time the prorate goes into effect and 
 the yield per acre. Proration of lettuce shipments is not operative, how- 
 ever, until it is apparent that the volume of shipments is likely to be such 
 as will result in extremely low prices. 
 
 The lettuce proration programs have been conducted with little fric- 
 tion through voluntary action. The area is small, the number of growers 
 comparatively few, and the growers are mostly grower-dealers who have 
 had wide experience in the growing and handling of the crop. However, 
 some difficulty is encountered in effecting the proration programs with 
 growers who are inexperienced. 
 
 40 A similar experience was reported in the proration of the shipments of 
 Florida grapefruit. See: Anonymous. Prorating discontinued in grapefruit emer- 
 gency. Florida Clearing House News 5(16) :5. Winter Haven, Florida. May 15, 
 1933. 
 
22 University of California — Experiment Station 
 
 Cantaloupe Proration. — In 1932 41 the Imperial Valley cantaloupe 
 growers were confronted with a large crop and low consumer purchasing 
 power. A clearing-house comparable to that of the lettuce growers was 
 organized. The clearing-house limited shipments by prorating on the 
 basis of each shipper's daily packings in relation to the total quantity 
 which the clearing-house decided should be marketed. The results of 
 this program were that large losses were avoided which would have been 
 incurred if the entire crop had been marketed. 
 
 Watsonville Apple Proration. — During the 1930-31 season the Wat- 
 sonville apple growers and shippers had such a quantity of apples in 
 storage that if no restriction were placed on the quantity withdrawn at 
 a given time prices would be extremely low throughout the marketing 
 period. An agreement was made among those having apples in storage 
 to limit the quantity withdrawn from storage each week and to prorate 
 the quantity each grower and shipper was to market on the relation 
 which the quantity he held in storage bore to the total quantity in 
 storage at the beginning of the proration period. This action resulted in 
 an increase in price of nearly $10 a ton. The following year, however, 
 when a similar situation confronted the Watsonville growers and ship- 
 pers, it was impossible to obtain similar action because the few who had 
 not participated in 1931 had received benefits at the expense of the 
 participants. 
 
 Canning-Peach Limitation Program. — The California cling-peach 
 growers restricted the quantity canned in 1930 and 1931 through a pro- 
 gram whereby the limited quantity canned was assessed to establish a 
 fund to indemnify some producers for not harvesting their crops. The 
 unharvested crop was appraised for quantity and quality and growers 
 were compensated accordingly. This procedure was effective in reducing 
 the quantity canned to a point where canners were willing to pay a much 
 higher price to growers than would otherwise have prevailed. 
 
 The experiences of the 1930 and 1931 curtailment programs showed 
 that some savings could be made by appraising the crops that were to 
 remain unharvested early in the season and thus avoid the expense of 
 bringing them to maturity. 
 
 In 1932 42 a plan was proposed which called for the buying of some 
 fruit at thinning time instead of at maturity and the reducing of acre- 
 age by approximately 20 per cent by tree removal. It was estimated that 
 
 4i Jackson, W. L. Controlling shipments helps cantaloupe deal. California Cul- 
 tivator 79(6) :83. 1932. 
 
 42 Anonymous. Slash peach production. Western Canner and Packer 24(1) :5. 
 1932. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 23 
 
 the earlier allotment of production would save growers approximately 
 $3 a ton in irrigation, cultural, and thinning expenses. In addition, 
 growers who agreed to cut off or remove their trees before the crop 
 reached maturity were to be paid $4 a ton on the average tonnage of 
 No. 1 peaches produced during the 1930 and 1931 seasons. It was 
 expected that such a payment would induce growers to remove a larger 
 acreage than would be removed if no payments were made and that the 
 cost of compensating the growers would not greatly exceed the cost of 
 buying the same fruit. 
 
 This plan failed to get the necessary support from all factions, hence 
 there was no planned limitation of the quantity canned in 1932. 43 Al- 
 though most of the canners and growers were willing to participate in 
 the curtailment program and some growers marketed only half of their 
 crops, a number of canners declined to participate in the crop curtail- 
 ment and certain groups of growers developed their entire crop for 
 delivery to such canners. These groups no doubt anticipated that they 
 could market their full crop without carrying a share of the curtailment. 
 As a result, the curtailment program was not effected and growers 
 received only $6.50 a ton (barely enough to cover their harvesting costs) 
 for the fruit delivered to canners and nothing for the portion which 
 was unharvested, whereas in 1931 growers received $14.50 a ton for 
 fruit delivered to canneries and $9.00 a ton for the unharvested tonnage. 
 
 California Grape Control Board Operations. — Similar to that of the 
 canning-peach limitation, a program was attempted by the California 
 grape growers in 1930. The quantity marketed by growers signing the 
 contracts was assessed and the funds so received were used to purchase 
 the quantities in excess of normal requirements. The control organiza- 
 tion attempted to dispose of some of the excess in the form of by- 
 products. 
 
 The control was conducted during the 1930 and 1931 seasons but 
 abandoned in 1932. 44 Several factors brought on its abandonment. 
 Some growers failed to fulfill their contracts. Insufficient funds were 
 available to purchase the quantities of all varieties of grapes which were 
 in excess of normal market requirements. The by-products did not 
 return as much as was originally anticipated. In addition, it was found 
 
 43 Anonymous. Peach control fails. Western Canner and Packer 24(4) :16. 1932. 
 California Canning Peach Growers — Eleventh Annual Eeport. Dec. 6, 1932. 
 
 44 In 1930 considerable quantities of grapes were unharvested and paid for as 
 in the cling-peach control. In 1931 when the vine crops were small no control of 
 this kind was undertaken. 
 
24 University of California — Experiment Station 
 
 that table, raisin, and juice grapes differed so widely in use and in 
 methods of marketing that administrative problems were extremely 
 complicated. 
 
 Summary of Proration Attempts. — The foregoing proration pro- 
 grams have demonstrated that with some commodities returns to pro- 
 ducers can be increased by restricting the quantities marketed in the 
 primary channels of trade. At the same time, it is significant that none 
 of these restrictions has been attacked as being contrary to public policy 
 on the grounds that they unduly increased prices to consumers. 
 
 Each of the programs mentioned was undertaken only when it was 
 obvious that returns to growers would be extremely low or severe 
 losses would be incurred in harvesting and marketing if all of the crops 
 were marketed in the primary channels of trade. It is doubtful whether 
 growers would undertake proration programs if it were probable that 
 returns would be sufficient to cover much more than cash costs of pro- 
 duction and marketing because of the fear that proration programs 
 under such circumstances would be likely to stimulate plantings. 
 
 Each of the foregoing programs encountered the difficulty of obtain- 
 ing and maintaining participation by a large proportion of the growers. 
 Numerous growers who have participated in such programs recognize 
 the economic gains to the industry, yet refuse to participate again unless 
 all growers participate. This situation has led many to believe that it is 
 desirable to make participation compulsory for all growers if two-thirds 
 or more of the growers are willing to conduct a restriction program. 
 
 PROBLEMS OF ADMINISTRATION OF COMPULSORY PRORATION 
 
 PROGRAMS 
 
 The principal administrative problem in compulsory proration pro- 
 grams would be to adjust equitably benefits and burdens among all 
 parties concerned. Other problems would be: (1) determining an 
 industry's desire for such a program, (2) determining the volume to 
 market or the extent to which to prorate, and (3) financing and enforc- 
 ing the program. 
 
 Determining an Industry's Desire for Proration. — There would be a 
 difficulty, as is the case with any democratic expression of opinion, in 
 ascertaining the attitude of growers towards proration. Although the 
 activities of a few enthusiastic individuals might seem to indicate that 
 a proration program had the support of the majority, there would be a 
 possibility of unorganized opposition. This difficulty could be overcome 
 by submitting the question of compulsory proration to the qualified 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 25 
 
 growers through election or by asking the sponsors to obtain signatures 
 to a petition. The positive endorsement of two-thirds of the growers 
 should be reasonable assurance of a desire on their part for a proration 
 program. In this respect the action would follow precedent in matters 
 of great importance where more definite expression of opinion than a 
 majority expression was desired. The foregoing procedure might be 
 conducted under the supervision of a duly appointed commission. 
 
 Determining the Extent to Prorate. — If the producers of a specified 
 commodity were in favor of compulsory proration, the next problem 
 which would arise is that of determining the volume to market or the 
 extent to which to prorate. The commission referred to above might 
 appoint representatives from within the industry requesting com- 
 pulsory proration to determine the quantity to be marketed and to 
 formulate the procedure for prorating this quantity among growers, the 
 actions of such representatives to be subject to the approval of the 
 commission. Such a procedure would give assurance that experienced 
 judgment would be available when a specific program is undertaken. 
 
 Distribution of Benefits and Burdens. — The determination of the 
 method of proration to distribute benefits and burdens equitably is a 
 problem that would need most careful consideration in each industry 
 which contemplated such action. 
 
 One of the principal factors which would influence the method of 
 prorating would be the possibility of disposing of the quantity which 
 would not be placed in the primary channels of trade. If it were possible 
 to market this quantity in the form of by-products at prices which would 
 return harvesting expenses, proration might be made on the basis of 
 the total quantity delivered to marketing agencies or on the quantity 
 sold in secondary channels. On the other hand, if harvesting costs could 
 not be recouped on the quantity marketed as by-products, proration 
 might be made on the basis of each grower's normal production. 
 
 Another factor which would influence the method of prorating of 
 fruits and vegetables would be the distribution of the production of and 
 the quantity of various grades and sizes. The marketings in primary 
 trade channels might be restricted to first grades and/or desirable sizes. 
 Such a method might be feasible and equitable if the production of the 
 lower grades and undesirable sizes were fairly well distributed among 
 all growers and if the quantity in excess of the amount which an indus- 
 try desired to eliminate from the primary channels of trade coincided 
 with the quantity of lower grades and undesirable sizes. However, if 
 there were wide variation in grades and sizes among producers and if the 
 
26 University of California — Experiment Station 
 
 quantity which had to be eliminated from the primary channels to obtain 
 reasonable prices were far in excess of the quantity of lower grades and 
 sizes, such a method of proration would be unlikely to gain the support 
 of the majority of the producers. For example, if it were apparent that 
 only half of a specified crop (as was the case with Tokay grapes in 1932) 
 could be marketed at prices which would return more than harvesting 
 and marketing expenses, a considerable portion of the best quality would 
 have to remain unharvested if shipments were restricted to one-half of 
 the crop. If a large portion of the growers were not producing crops at 
 least half of which were of best quality, they would oppose a restriction 
 program which would permit only the growers of the best quality to 
 market any portion of their crops. 
 
 A third factor would be the degree of perishability of the crop. If 
 it were possible to store the commodity, proration might be made on 
 the quantity packed and held in storage, whereas if the commodity were 
 highly perishable it would be impracticable to adopt such a method of 
 prorating. 
 
 A fourth factor would be the period of time covered by the prorate 
 and whether the crop were annual or perennial. The most feasible pro- 
 cedure with perennial crops, where a prorate program was to apply for 
 a period of three or four years might be to prorate on the basis of the 
 average production for previous years. Then each grower could abandon 
 a portion of his acreage and not incur the expense of bringing that por- 
 tion of his acreage to maturity each year; or he could remove a portion 
 of his acreage from cultivation. On the other hand, with some annual 
 crops the proration might be made on an acreage basis in advance of 
 planting time. 
 
 In addition to the problem of the method of prorating, other problems 
 would arise in connection with distributing benefits and burdens equita- 
 bly, such as the extent to which restriction should be employed during 
 short periods of time, and, in the case of highly perishable commodities, 
 the problem of whether to prorate on the basis of the amount of the 
 product remaining to be marketed when the restriction becomes effective 
 or on the basis of the total tonnage produced. For example, it might be 
 advisable to restrict shipments to a greater extent early in the season 
 than late in the season because of the seasonal changes in demand. If 
 so, the problem of making adjustments between those producers whose 
 crops were early and those whose crops were late would arise. On the 
 other hand, it might not be necessary to restrict shipments early in the 
 season because the volume available for marketing early might be small. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 27 
 
 Then the question arises whether or not to count the early shipments as a 
 portion of the individual grower's allotment or to exclude them from 
 individual proration calculations. 
 
 Each of the foregoing problems would have to be considered and 
 decided in the light of the circumstances peculiar to each industry. The 
 experience and judgment of those within the industry would have to be 
 relied upon in this connection. It is probable, however, that no matter 
 what method of proration were adopted or how equitably a proration 
 program were conducted, some growers would contend that they had 
 been treated unequitably. This situation is inherent in any attempts to 
 restrict or regulate individuals in the interest of the entire group ; it is 
 common to all phases of regulation. Growers should anticipate some 
 inequalities and weigh these against the probable returns they would 
 receive if there were no regulations. 
 
 Enforcement. — In order to facilitate enforcement of a proration pro- 
 gram, certificates might be issued to each producer which stated the 
 quantity 45 and the time each producer should market his proportion of 
 the total quantity to be marketed. It might also be made unlawful for 
 any producer to deliver to any dealer, or for any dealer or handler to 
 have in his possession, within the state, any commodity upon which a 
 proration program had been instituted without an accompanying cer- 
 tificate issued under authority of the prorate commission. 
 
 Any person who violated any provision of a proration program might 
 also be enjoined in action brought in the superior court for the county 
 in which the violation is alleged to have occurred. 
 
 Financing. — The financing of proration programs might be accom- 
 plished by collecting fees for the certificates referred to above. Some 
 degree of assurance that the expenses of conducting a specific prorate 
 would not be excessive would be given if each program were made self- 
 sustaining, that is, if provision were made that each would be financed 
 by the industry requesting it. This requirement would impel serious 
 consideration on the part of those who sponsored a program for a par- 
 ticular industry. In fact, the probable cost of administering a proration 
 program might in some cases preclude its initiation. If a program were 
 under way, it would be in the interest of every participant to assist 
 rather than to hinder enforcement in order to keep the expense of 
 administration at a minimum. 
 
 45 It is possible that in some situations the exact quantity each producer would 
 be entitled to market during a specific period of time could not be stated on the 
 certificates far in advance of the inauguration of a proration program. Certificates 
 might show each producer's share as a percentage of the total quantity to be 
 marketed during designated periods. 
 
28 University of California — Experiment Station 
 
 APPRAISAL OF THE DESIRABILITY AND FEASIBILITY OF 
 PRORATION PROGRAMS 
 
 The principal question which arises in connection with the desirability 
 of proration programs is whether such action is preferable to allowing 
 the long-time effect of low returns to producers of certain commodities, 
 such as tree and vine crops, to bring about a reduction in production. 
 The latter procedure is one to which numerous persons subscribe. It is 
 argued that in the long run the function of price is to control production; 
 consequently attempts to restrict marketings go contrary to long-run 
 forces and operate to destroy the tendency of economic forces to reach 
 equilibrium. The first part of the argument is generally accepted. How- 
 ever, there is serious question regarding the second part. If the varia- 
 tions in prices of agricultural commodities were caused primarily by 
 the volume of production, the most economical way (assuming that costs 
 of production and marketing were at an irreducible minimum and that 
 it was impracticable to attempt to increase demand) to bring remunera- 
 tive returns to growers of perennial crops and at the same time assist in 
 bringing about equilibrium of economic forces would be to reduce the 
 production of the crop in question. Since 1929 one of the principal 
 factors influencing prices has been the low purchasing power of con- 
 sumers. If it is agreed that their purchasing power will increase in the 
 future (as it has done after previous periods of depression), it would 
 be uneconomical to reduce the production of many perennial crops to 
 meet the present low purchasing power conditions. Such a reduction of 
 production would be carried too far for periods of higher purchasing 
 power, and then plantings would be likely to be unduly stimulated. 
 The ultimate result would be large capital losses and an unbalancing 
 of economic forces. For this reason, it appears desirable to prorate the 
 marketings of some perennial crops to meet the situation which con- 
 fronts numerous California agricultural industries. 
 
 With annual crops, the production of which can be expanded or con- 
 tracted fairly easily through an increase or decrease in acreage, the 
 logical procedure is to attempt to adjust acreage to existing demand. 
 A planned adjustment such as the proration of acreage before planting 
 has several advantages over unplanned adjustment, because experience 
 has shown that the majority of producers are influenced in their adjust- 
 ments by prevailing prices rather than prospective prices. 46 Adjust- 
 
 40 Bean, L. H. The farmers' response to price. Jour, of Farm Econ. 9:368-395. 
 1929. Also: Smith, Bradford B. Forecasting the acreage of cotton. Jour, of Amer. 
 Statis. Assoc. 20:31-47. 1925. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 29 
 
 ments of acreage prior to planting, whether planned or unplanned, could 
 not, however, bring about a perfect adjustment in production because 
 the volume of production is influenced by factors other than acreage. 47 
 For this reason it may be desirable to restrict the quantity marketed in 
 primary channels, as has been done in the Imperial Valley with lettuce 
 and cantaloupes, in seasons when supplies are excessive. Such restric- 
 tion must, however, be exercised with extreme caution with annual crops 
 because if carried to a point where production is highly profitable in 
 years of short crops and where losses are avoided in years of large crops, 
 acreage is likely to increase rapidly. 
 
 That proration programs to meet emergency situations are desirable 
 has been the concensus of opinion of numerous groups; this is evidenced 
 by the several voluntary attempts. The question of the desirability of 
 making such programs compulsory, in the event that a large proportion 
 of the producers of a particular commodity desired to engage in them, is 
 another matter. This question brings to a focus a subject of continual 
 controversy in the history of the United States; namely, the degree to 
 which it is desirable for government to regulate and control individuals 
 in the interest of sopiety as a whole. Strenuous arguments are raised 
 against the extension of governmental control. It is held by some that 
 governmental action impairs individual rights and is susceptible to 
 undue favoritism. It is also contended that there is the possibility of 
 political abuses; furthermore, that it is difficult to ensure adequate 
 supervision of governmental regulations. 
 
 The foregoing difficulties are recognized by those who favor extension 
 of the activities of government. However, they show that the trend of 
 legal and economic thought has been towards control of individual 
 economic activities because the well-being of groups is of general con- 
 cern and the group interest should take precedence over the special 
 interests of certain individuals. If compulsory proration operates to 
 bring about general economic stability by increasing present returns to 
 a particular industry without unduly increasing prices to consumers, it 
 should be favored. The unlimited freedom of action of a small minority 
 is not sufficiently important to impair the progress of the whole group. 48 
 
 4 7 Stokdyk, E. A. Some factors influencing the mid-season potato market. Kansas 
 State College of Agriculture and Applied Science. Tech. Bul. 28:26-28. 1931. 
 
 48 A question may be raised concerning the desirability of compulsory proration 
 from a social point of view. Some hold that such action is contrary to the interests 
 of society because prices for some commodities will be somewhat higher with pro- 
 ration of these commodities than without proration. On the other hand, some be- 
 lieve that even though this is true the ultimate result will be a social gain. They 
 point out that the producers of one commodity or a group of commodities are con- 
 sumers of other commodities and that if these producers have such quantities 
 
30 University of California — Experiment Station 
 
 A program in which participation is made compulsory by an act of 
 the state legislature, organized for the purpose of limiting and prorating 
 the quantity that might be placed on the market at any time, is not an 
 unwarranted restriction on individual rights since it spreads the bene- 
 fits and burdens on every grower in the particular industry. At the same 
 time, there is reason to believe that there is sufficient public interest 
 connected either directly or indirectly with the economic well-being of 
 a particular industry to sanction group control. 49 
 
 The long-run adjustment of agriculture will probably be left for the 
 most part to the unplanned operation of economic forces. We may, how- 
 ever, seek to guide the operation of these forces in such a way as to 
 minimize the hardships of the transition to a new point of equilibrium. 
 The physicist does not repeal natural laws but has gone far in showing 
 us how we can live with them in comfort. Through wise group control the 
 producers of agricultural products may also seek to accommodate them- 
 selves to economic forces. 50 
 
 The feasibility of voluntary proration programs has been clearly 
 established with some California agricultural commodities (see pages 
 17 to 24), and it is probable that proration programs would be feasible 
 with numerous products produced in California because many corn- 
 
 available for market and they get no returns or suffer severe losses they cease to 
 be purchasers of other commodities. Such a situation reacts on the prices received 
 by other producers (who were the consumers of the first commodity or commodities 
 in question) and the general effect is the lessening of the flow of goods among the 
 whole of society. In other words, in a society of specialized production and liberal 
 exchange the mere production and marketing of products does not fulfil the re- 
 quirements for maximum social welfare. The crux of the problem is how much 
 production and marketing of each type of goods will cause the greatest total flow 
 of goods. 
 
 Those who hold the view that any restriction of production and marketing of 
 any product is antisocial because prices for it will be higher usually also hold the 
 view that, if restriction of production or marketing is applied to one commodity, 
 this implies restriction of the production or marketing of all products and that if 
 total production is decreased, society loses. Those who hold an opposing view 
 point out that the restriction of production or marketing of one commodity or 
 a group of commodities with the resulting purchasing power in the hands of the 
 producers of these commodities may mean that producers of other commodities 
 can expand production, whereas they might be forced to contract production if 
 the producers of the first group of commodities had no purchasing power. Hence, 
 each group in society must be interested in the purchasing power (not the greatest 
 volume of production) being obtained by all groups, and it may be to the ultimate 
 advantage of consumers to pay slightly higher prices for a particular commodity or 
 group of commodities in order that the producers of these commodities may pur- 
 chase other commodities. 
 
 49 The court in the Danziger Refining case (page 12) pointed out that the stability 
 of a particular industry was of public interest. 
 
 so The Agricultural Adjustment Act passed by the Seventy-third Congress 
 (Public No. 10-73D) is an attempt to plan production in agriculture under gov- 
 ernmental direction. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 31 
 
 modities are produced almost exclusively in this state. It would be im- 
 practicable, however, for California producers alone to attempt such 
 programs with numerous products, such as wheat, cotton, barley, hogs, 
 cattle, and eggs, because their production is widely scattered through- 
 out the United States and foreign countries. Similarly, it would be im- 
 practicable to limit the marketing of products, a considerable portion of 
 which was produced in one or two other states without participation on 
 the part of the producers in these states; for example, canning pears. 
 
 The feasibility of compulsory proration programs has not been demon- 
 strated in agriculture in the United States but has been shown in certain 
 areas in the oil industry. From experience in the latter industry it may 
 be inferred that such programs would be feasible in the former industry. 
 In fact, in some respects the administrative problem of distributing the 
 benefits and burdens of proration programs would be less complex in 
 agriculture than in the oil industry. For example, the difficulty of mak- 
 ing adjustments in the allotments of individuals because of an under- 
 ground flow of supply does not arise in agriculture. On the other hand, 
 some phases of administration in agriculture are likely to be more com- 
 plex because of the numerous trade channels through which the products 
 move from producer to consumer. It is the author's view, however, that 
 the problems of compulsory proration in agriculture, although complex, 
 are not insurmountable. 
 
 SUMMAEY 
 
 The philosophy of proration is not new; it was manifested in the prac- 
 tices of the early English merchant and craft gilds. Each member was 
 held to a stint, or allotment, to protect the limited market opportunity 
 for all. 
 
 Although the philosophy of unlimited competition was dominant in 
 the United States during the period of rapid development, now that 
 there is developed a complex industrial structure and a specialized agri- 
 culture this philosophy is challenged. It is believed by numerous persons 
 that the new conditions call for control of competition with administra- 
 tion by groups as in the period of the gilds in England. 
 
 A number of groups of agricultural producers have endeavored to 
 limit competition by restricting the volume marketed in the primary 
 channels of trade in periods of excessive supplies or low consumer pur- 
 chasing power or both. One of the fundamental weaknesses of their at- 
 tempts has been that nonparticipating producers derived more than an 
 equitable share of the benefits of such action. This situation has caused 
 
32 University of California — Experiment Station 
 
 abandonment of several of such programs, but has raised the question 
 of the desirability and feasibility of making participation in them com- 
 pulsory if the bulk of the producers desire to engage in shipment limita- 
 tion and if such compulsion is essential to the welfare of the industry. 
 
 Three distinct administrative set-ups have been proposed to make 
 compulsory restriction of shipments effective: (1) placing the produc- 
 tion and marketing of certain agricultural crops under public-utility 
 regulation, (2) making marketing through one agency mandatory, and 
 (3) giving a governmental agency the power to administer proration 
 programs. At the present time, it is probable that the courts would con- 
 sider the third proposal more favorably than either the first or the 
 second. 
 
 Although it is impossible to forecast a decision of the courts on a 
 specific proposal such as compulsory proration of the marketing of agri- 
 cultural products, it may be inferred from previous decisions if such 
 a procedure does not increase prices beyond a reasonable return to pro- 
 . ducers and if it is a temporary measure in the face of economic necessity, 
 it will be considered within the rule of reason by the courts. 
 
 The present position of legislative bodies and the courts toward at- 
 tempts of farmers to improve their economic status is exceedingly 
 liberal. Farmers' associations are no longer looked upon as monopolies, 
 combinations, or conspiracies in restraint of trade, and their contracts 
 with members are binding. The Supreme Court has also stated that if 
 restrictions on production are to be accomplished by voluntary agree- 
 ments entered into pursuant to statutes authorizing them there is no 
 objection thereto from a state or a federal standpoint. This court also 
 declared that a state or federal government is free to declare what its 
 public policy shall be in matters of this kind. 
 
 Compulsory proration of oil production has been undertaken in Okla- 
 homa and Texas. This action has been upheld by the courts as reasonable 
 exercise of the police power to conserve a natural resource. However, the 
 court stated that if such action tended to promote the prosperity of the 
 oil industry or of the state generally, or to prevent economic demoraliza- 
 tion, it was not to be condemned but rather upheld for that reason. This 
 decision would seem to put the court on record as justifying proration 
 from the standpoint of preventing physical waste; however, it recognizes 
 the desirability of preventing economic waste. 
 
 In numerous California industries there is likely to be a high degree 
 of physical waste as well as economic waste whether or not some degree 
 of control is exercised over the volume marketed. During the year 1932 
 a considerable volume of several specialty crops was unharvested be- 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 33 
 
 cause prices at the point of production were so low that it would not pay 
 to harvest them. In fact, producers of several crops found themselves 
 indebted to transportation agencies at the end of the marketing season 
 because their products did not sell for enough in terminal markets to 
 pay the freight. The uncertainty caused by such a situation probably 
 resulted in both a larger physical and economic waste than would have 
 occurred if definite steps had been taken to market limited quantities 
 during each week of the shipping season and prorate such marketings 
 among all producers. 
 
 The compulsory proration of oil production has been reviewed by the 
 courts under the legal conception of the protection of the correlative 
 rights of individuals within a group as well as under the theory of the 
 proper exercise of the police power to promote the welfare of society as 
 a whole. This is recognition of the principle, adopted by the gilds, of 
 restricting the activities of individuals in the interest of the group. 
 Similar measures to restrict the action of individuals to protect the op- 
 portunities of a group have come before the courts in situations some- 
 what analagous. A city government may establish zones and place re- 
 strictions on the construction of buildings; irrigation and reclamation 
 districts have been granted authority to compel individual conformity 
 to the group desire; and in California it is illegal to plant other than one 
 variety of cotton in certain areas. 
 
 The most drastic action to protect the group from the individual we 
 have seen is the restriction on the withdrawal of deposits from banks. 
 It became necessary to prorate the amount which each depositor could 
 withdraw from his economic reserve in order to protect the correlative 
 rights of all depositors. 
 
 Although the primary motive in proration is to influence prices by 
 restricting the quantity marketed in the primary channels of trade, this 
 method of influencing prices differs from collusion among producers or 
 marketing agencies to name a going or prevailing price. Under prora- 
 tion programs there is a flexibility of prices by reason of the competition 
 of various marketing agencies which market the products. 
 
 Analyses of the factors affecting the prices of many California crops 
 show that there are distinct possibilities of increasing the returns to 
 the producers of numerous California crops by limiting shipments in 
 periods of excessive supplies or low consumer purchasing power or both. 
 
 The possibility of increasing returns by restricting supplies varies, 
 however, from commodity to commodity. The perishability of the prod- 
 uct, the size of the market area, the probability of substitutes' taking the 
 place of the commodity in question, the probability of production ex- 
 
34 University of California — Experiment Station 
 
 panding in other areas, and the elasticity of demand are factors which 
 influence it. These factors have usually been given careful consideration 
 before proration programs were undertaken. 
 
 Among the groups of California growers who have undertaken to 
 limit supplies in the primary trade channels in periods of excessive sup- 
 plies are the lemon growers (1925-1932), the Valencia orange growers 
 (1932), the Tokay grape growers (1932), the Imperial Valley lettuce 
 and cantaloupe growers (1929-1932), the Watsonville apple growers 
 (1930-1931), the canning-peach growers (1930-1931), and the raisin, 
 table, and juice-grape growers (1930). Each of these groups demon- 
 strated that returns to growers could be increased by such action. Each 
 undertook such action only when it was obvious that returns would be 
 extremely low or severe losses would be incurred in harvesting and 
 marketing if all of the crops were marketed in the primary channels of 
 trade. However, each group encountered the difficulty of obtaining and 
 maintaining participation by a large proportion of the growers. 
 
 The principal administrative problem in compulsory proration pro- 
 grams would be to adjust equitably benefits and burdens among all 
 parties concerned. Other problems would be (1) determining an in- 
 dustry's desire for such a program, (2) determining the volume to 
 market or the extent to which to prorate, and (3) financing and enforc- 
 ing the program. 
 
 The method of distributing the burdens and benefits would depend 
 upon several factors including (1) the possibility of disposing of the 
 quantity which would not be placed in the primary channels of trade at 
 prices which would return harvesting expenses, (2) in the case of fruits 
 and vegetables, the distribution of the production of and the quantity 
 of first grades, and/or undesirable sizes, (3) the degree of perishability 
 of the product, and (4) the period of time over which the proration 
 program would apply. 
 
 The determination of an industry's desire to conduct a compulsory 
 proration program might be accomplished by submitting the proposal 
 to qualified growers through election or by petition under the direction 
 of a duly appointed commission. The extent of proration might be de- 
 termined by a committee from within the industry. The enforcement of 
 proration programs might be facilitated by the issuance of certificates to 
 each producer which stated the quantity and the time each would market 
 his proportion of the quantity to be placed in the primary channels of 
 trade. The financing of proration programs might be accomplished by 
 collecting fees for such certificates. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 35 
 
 Under present conditions proration programs are more desirable from 
 both an individual and social viewpoint than allowing the long-time 
 effect of low returns to producers of certain commodities such as tree 
 and vine crops to bring about a reduction in production. One of the 
 principal factors influencing agricultural prices since 1929 has been the 
 low purchasing power of consumers. If sufficient trees and vines were 
 pulled to reduce production to meet the present low purchasing-power 
 conditions, plantings would again be stimulated when periods of higher 
 purchasing power prevailed. The ultimate result would be large capital 
 losses. 
 
 With annual crops the logical procedure is to attempt to adjust acre- 
 age to existing demand. Such adjustment may not, however, bring about 
 the necessary adjustment in production because the volume of produc- 
 tion is influenced by factors other than acreage. For this reason, it is 
 desirable during seasons of excessive supplies to restrict the quantity 
 marketed in the primary channels of trade. 
 
 The desirability of making participation in proration programs com- 
 pulsory in the event a large proportion of the producers of a particular 
 commodity desire to engage in them brings to focus the question of the 
 desirability of the extension of governmental control over individual 
 economic activities. The author's view is that if compulsory proration 
 operates to bring about general economic stability by increasing present 
 returns to a particular industry, it should be favored. A program in 
 which participation is made compulsory is not an unwarranted restric- 
 tion on individuals' rights since it spreads the benefits and burdens on 
 every grower in the particular industry. 
 
 The feasibility of voluntary proration programs has been clearly 
 established with some California agricultural industries. Numerous 
 products are produced almost exclusively in this state. It would be im- 
 practicable, however, to attempt such programs with many products 
 without the cooperation of the producers in other states. 
 
 The feasibility of compulsory proration programs has not been demon- 
 strated in agriculture but has been shown in certain areas in the oil 
 industry. Numerous complex problems would arise in compulsory agri- 
 cultural proration, yet in the author's view these are not insurmountable. 
 
36 University of California — Experiment Station 
 
 ACKNOWLEDGMENTS 
 
 The author is indebted to Director H. R. Tolley of the Giannini Founda- 
 tion of Agricultural Economics for assistance in planning, conducting, 
 and appraising the materials of this study. He is also indebted to Dr. 
 M. R. Benedict and Dr. J. M. Tinley of the same organization for sug- 
 gestions made in the preparation of the manuscript. 
 
 Several other persons supplied information and rendered valuable 
 assistance. Among them are Mr. Edson Abel, Mr. Alex Johnson, and 
 Mr. H. Morrell of the California State Farm Bureau Federation; Mr. 
 Roy M. Pike, Manager of the El Solyo Ranch at Vernalis, California; 
 Honorable M. S. Meeker, Assemblyman from Fresno County, California; 
 Mr. Carlyle Thorpe, General Manager of the California Walnut Growers 
 Association; Mr. L. S. Hulbert, Principal Marketing Economist of the 
 United States Department of Agriculture, and Mr. Frank Evans, for- 
 merly a member of the Federal Farm Board. 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 37 
 
 APPENDIX 
 
 Agricultural Prorate Act si. 52 
 
 An act to conserve the agricultural wealth of the State of California, and to 
 prevent economic waste in the marketing of agricultural crops produced in the 
 State of California, and in that behalf creating an Agricultural Prorate Com- 
 mission; providing for the appointment of members of said commission; fixing 
 the term of office of the members of said commission; prescribing the powers, 
 duties and authority of said commission and the members thereof; providing for 
 the institution of proration programs with respect to agricultural crops; provid- 
 ing for the enforcement of such programs; providing penalties for violation of 
 such programs; providing for the creation of funds for the purposes of said act 
 and providing for the collection thereof; and making an appropriation therefor. 
 The people of the State of California do enact as follows: 
 Section 1. The unreasonable waste of agricultural wealth occasioned by the 
 harvesting, preparation for market and delivery to market of greater quantities 
 of agricultural commodities than are reasonably necessary to supply the demands 
 of the market is opposed to the public interest and the difficulty inherent in any 
 attempt by individuals to correlate within a reasonable degree the supply of any 
 agricultural commodity to current consumptive demands is creating chaotic eco- 
 nomic conditions in certain agricultural areas of the state of such severity as to 
 imperil the ability of agricultural producers to contribute in appropriate amounts 
 to the support of ordinary governmental and educational functions, thus tending 
 to increase and increasing the tax burdens of other citizens for the same purposes. 
 In the interest of the public welfare and general prosperity of the state, the 
 unnecessary and unreasonable waste of agricultural wealth, hereinafter referred 
 to as "agricultural waste," involved in the harvesting and/or preparation for 
 and delivery to market of agricultural commodities for which there exists only a 
 limited consumer demand should be eliminated while at the same time preserving 
 to all agricultural producers an equality of opportunity in the available markets. 
 Sec. 2. As used in this act: . 
 
 (a) The term "person" includes any individual, firm, association, or corporation. 
 
 (b) The terms "agricultural waste" — in addition to their ordinary meaning — 
 shall include economic waste, and waste incident to the harvesting and/or prepa- 
 ration for and delivery to market of agricultural commodities in excess of reason- 
 able market demands. 
 
 (c) The terms "product" or "commodity" mean any horticultural, viticultural, 
 or vegetable product of the soil, live stock and milk. 
 
 (d) The terms "proration zone" or "zone" mean any district or districts in which 
 a program of market proration is proposed to be or has been instituted. 
 
 (e) The term "commission" means the agricultural prorate commission unless 
 otherwise indicated by the context. 
 
 si Assembly Bill No. 1122. Chapter 754. Introduced by Messrs. Meeker, Scudder, 
 Clowdsley, Samuel E. Robinson, Alter, O'Donnell, and Zion. January 26, 1933. 
 Signed by the Governor, June 5, 1933. 
 
 52 A bill embodying the same provisions as this Act was introduced in the 
 Florida Legislature in May, 1933. See Florida House Bill 1112. 
 
38 University of California — Experiment Station 
 
 (f ) The term "handler" means any person receiving agricultural commodities 
 from the producer for the purpose of marketing the same. 
 
 (g) The phrase "primary channel of trade" shall mean that transaction in which 
 the producer loses physical possession of the commodity. 
 
 (h) The term "producing factor" means the unit of production specified in the 
 petition. 
 
 (i) The term "owner" means the person entitled to dispose of commodities for 
 marketing purposes. 
 
 (j) The term "proration" means the uniform percentage of their total produc- 
 tion which all producers may harvest and/or prepare for market. 
 
 (k) The singular includes the plural. 
 
 Sec. 3. The Agricultural Prorate Commission, consisting of nine members is 
 hereby created. The members shall be appointed by the Governor. Four of the 
 members of said commission shall be engaged at the time of their appointment 
 in the production of agricultural commodities, and representation shall be given 
 to the vegetable, dairying, citrus and deciduous fruit industries. Three of said 
 members shall be neither producers nor handlers of agricultural commodities but 
 shall be appointed, two to represent consumers generally and one to represent 
 consumers of agricultural commodities for processing purposes. One member shall 
 be an experienced commercial handler of agricultural products and one shall be 
 an experienced cooperative marketing handler of agricultural products. Their 
 terms of office shall be four years and they shall hold office until the appointment 
 and qualification of their successors, except that the terms of office of the mem- 
 bers first appointed shall expire as follows: Two members, January 1, 1934, two 
 members, January 1, 1935, two members, January 1, 1936, and three members 
 January 1, 1937. The members at their first meeting shall determine by lot the 
 relative order in which their terms expire. Vacancies shall be filled by appoint- 
 ment for the unexpired term. 
 
 All such appointments shall be by and with the consent of the Senate, but 
 shall be valid to all intents and purposes, subject, however, to the consent of the 
 Senate at its next regular session, and until such time, the persons so appointed 
 shall have as full and ample authority as though confirmed by the Senate. In case 
 the Senate, during its session, fails to act or refuses its consent to any such ap- 
 pointment, the Governor may, after adjournment of the Senate, appoint some 
 other person, which appointment shall be valid to all intents and purposes, sub- 
 ject, however, to the consent of the Senate at its next regular session, and until 
 such time, the person or persons so appointed shall have as full authority and 
 power as though confirmed by the Senate. 
 
 Sec. 4. Within thirty days after notice of his appointment each member shall 
 qualify by taking the oath of office and filing the same with the Secretary of State 
 in accordance with law. Within five days after all of said members shall have 
 qualified, they shall organize and elect a president from among their number. 
 The commission shall appoint a secretary and such other personnel as may be 
 necessary to carry out its duties, and may remove them at its pleasure and may 
 prescribe their duties and compensation. The members of said commission shall 
 receive no compensation but shall be reimbursed for their traveling expenses 
 necessarily incurred in the performance of their duties hereunder. 
 
 Sec. 5. The office of the commission shall be in the city of Sacramento and it 
 may meet at such times and in such places as may be expedient and necessary 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 39 
 
 for the proper performance of its duties. The commission shall have a seal, bearing 
 the following inscription "Agricultural Prorate Commission." The seal shall be 
 affixed to all orders of the commission, to authentications of copies of records and 
 to such other instruments as the commission shall direct. All courts shall take 
 judicial notice of said seal. 
 
 Sec. 6. The said commission shall constitute a body corporate and body politic 
 for the purpose of exercising the powers and performing the acts herein men- 
 tioned, and shall have power to sue and be sued. For the purpose of carrying out 
 the provisions of this act, the commission is authorized to adopt such necessary 
 rules and regulations as it may from time to time deem advisable. The conduct 
 of any hearing, inquiry or investigation which the commission has power to under- 
 take or hold may be delegated by the commission to any member thereof or to its 
 secretary and any finding, order or decision made by the commission pursuant to 
 such hearing, inquiry or investigation shall be and be deemed to be the finding, 
 order or decision of the commission. Each member of the commission and the sec- 
 retary thereof, in the conduct of any such hearing, inquiry or investigation shall 
 have power to administer oaths, and issue subpenas for the attendance of wit- 
 nesses and the production of papers, books, maps, accounts, documents and testi- 
 mony in any inquiry, investigation or hearing ordered or undertaken by the com- 
 mission in any part of the state. The superior court of the county or city and 
 county in which any such inquiry, investigation or hearing may be held shall have 
 power to compel the attendance of witnesses and to require the disclosure by such 
 witnesses of all facts known to them relative to the matters under investigation, 
 and the production of papers, maps, books, accounts, documents and testimony 
 as required by any subpena issued by the commission. All parties disobeying the 
 orders or subpenas issued under the authority of said commission shall be guilty 
 of contempt and shall be certified to any superior court of the state, which court 
 shall punish such contempt. 
 
 Sec. 7. A full and accurate record of business or acts performed or of testimony 
 taken by the commission or any member or members thereof or by its secretary in 
 pursuance of the provisions of this act shall be kept and be placed on file in the 
 office of said commission. 
 
 Sec. 8. A petition for the institution of a program of prorated marketing with 
 respect to a variety or kind of agricultural commodity may be presented to the 
 commission which shall be signed by not less than fifty producers of said variety 
 or kind of agricultural commodity within the proposed prorating zone; provided, 
 that if it be alleged in said petition that it is signed by two-thirds or more in 
 number of the producers within the proposed zone of the commodity as to which 
 it is proposed to institute a prorating program and by the owners of two-thirds 
 or more in number of the producing factors of said commodity in said proposed 
 zone, the number of signers shall be immaterial. 
 
 The said petition shall, among other things, contain: 
 
 1. A legal description of the district or districts comprising the proposed zone, 
 together with a map thereof. 
 
 2. A general statement of facts shoAving the necessity for the institution of a 
 prorating program; and, 
 
 3. A request that an election be called in said zone for the purpose of submit- 
 ting to the qualified producers therein the proposition of instituting a program 
 
40 University of California — Experiment Station 
 
 of proration; provided that, if the petition is signed by the owners of two-thirds 
 or more of the producing factors and two-thirds or more of the producers of the 
 commodity concerned, as hereinbefore specified, it need not contain a request for 
 an election. 
 
 There shall also be filed with said petition a good and sufficient undertaking to 
 be approved by the commission, in double the amount of the probable cost of con- 
 ducting the hearing of the petition by the commission, conditioned that the sureties 
 will pay all such costs in case the petition be denied. 
 
 The signatures to said petition may be either in person or by duly authorized 
 agent or representative and nothing herein shall be construed to prevent any 
 cooperative or other marketing agency from signing such petition if thereunto 
 properly authorized by producers for whom it purports to sign. 
 
 Sec. 9. Upon the presentation of any such petition, the commission shall hold 
 a hearing at some central point located within the district described in said 
 petition and proposed to be established as a proration zone. Notice of such hear- 
 ing shall be given at least ten (10) days prior thereto by publication in a news- 
 paper of general circulation printed and published in the district affected and by 
 posting in at least three (3) conspicuous places in said district. In case the pro- 
 posed proration zone includes more than one district the required notice shall be 
 given in each district and the commission shall hold hearings in each of said dis- 
 tricts. At said hearings, the commission shall receive and hear the evidence offered 
 by the petitioners in support of the petition and by any interested person in 
 opposition thereto. Said hearings may be adjourned from time to time and from 
 place to place as the circumstances may require. A transcript of the proceedings 
 at all such hearings shall be made by the commission and shall be opened to in- 
 spection by any interested party. 
 
 Sec.10. If upon such hearing it shall be made to appear to the commission : 
 
 (1) That the petition is signed in person or by proxy by the required number 
 of producers and by the owners of the required number of producing factors ; and 
 
 (2) That the economic stability of the agricultural industry concerned is being 
 or is about to be imperiled by prevailing market conditions; and 
 
 (3) That agricultural waste is occurring or is about to occur; and 
 
 (4) That the institution of a program of prorated marketing will conserve the 
 agricultural wealth of the state and will prevent threatened economic waste; and 
 
 (5) That the institution of a proration program as proposed in the petition will 
 advance the public welfare without injustice to any producer; and 
 
 (6) That the proposed program may be instituted and conducted without per- 
 mitting unreasonable profits to the producers and that the commodity named in 
 the petition cannot be marketed at a reasonable profit otherwise than by means 
 of such a program; and 
 
 (7) That the proposed zone of proration includes all of the producing territory 
 within this state reasonably necessary to render the proposed program feasible, 
 it shall make written findings to that effect. If in any case of any petition it 
 shall appear to the commission that the inclusion of territory additional to that 
 described in the petition is necessary to the feasibility of the proposed program, 
 it shall postpone further proceedings until notice shall have been given to the 
 producers within such additional territory in the manner provided for in section 8 
 hereof. Thereafter the commission may complete said hearings and make findings 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 41 
 
 in the manner hereinbefore provided. If the commission shall find against the 
 existence of any of the facts required to be present under this section, it shall 
 deny the petition. 
 
 Sec. 11. If it shall be alleged in said petition that it is signed by two-thirds or 
 more of the producers of the commodity named in the petition within the zone 
 described and by the owners of two-thirds or more of the producing factors in 
 said zone, proof shall be required in support of such allegation and the commission 
 shall make a finding with respect thereto. If it shall find such allegation to be the 
 fact, and shall also find to exist all of the other facts specified in section 10 of this 
 act, the commission shall forthwith make an order declaring the proposed program 
 adopted and specifying the zone in which the program shall be effective. 
 
 Sec. 12. If said petition shall have proposed an election in the proposed zone, 
 and the commission shall find to exist all of the facts specified in section 10 hereof, 
 thereupon it shall order an election to be held in the proposed original or modi- 
 fied zone. At any such election, the polling places shall be located in each of the 
 regular county precincts, any part of which are included in proposed zone affected. 
 At least twenty (20) days before any election called the commission shall cause 
 to be posted in three (3) public places in each election precinct notice of the time 
 and place of holding the election and also post in the office of the county clerk 
 of each county in which any part of the proposed zone affected is located a general 
 notice specifying the polling places of each precinct. 
 
 Sec. 13. At such elections only producers of the commodity named in the peti- 
 tion shall be entitled to vote and each producer shall be entitled to one vote for 
 each producing factor which it is determined in the manner hereinafter specified 
 he may be expected to utilize for production purposes in the ensuing season. At the 
 time of posting notices of election, the agricultural commissioners of each county 
 shall be notified thereof and it shall be the duty of such agricultural commissioners 
 to prepare lists of producers entitled to vote in each precinct in their respective 
 counties which lists shall be filed in the office of the county clerks of their re- 
 spective counties at least five (5) days prior to the day of the election. Such lists 
 shall also show the producing factors belonging to or controlled by each producer 
 used in the production of the commodity as to which a proration program is pro- 
 posed. Said agricultural commissioners shall at the same time notify by mail all pro- 
 ducers whose names appear on such lists of the number of votes to which they are 
 entitled. No irregularity in the mailing of such notices and no failure on the part 
 of any producer to receive such notice shall affect the validity of the subsequent 
 election. 
 
 Sec. 14. Any producer whose name does not appear on the proper list and any 
 producer claiming to be allotted an erroneous production estimate may make ap- 
 plication to the agricultural commissioner to be placed on said list, or to be 
 credited with the proper number of producing factors, as the case may be, and 
 upon substantiating his claim, is entitled to have the error corrected. In the event 
 any such producer shall be dissatisfied with the final action of the agricultural com- 
 missioner in that regard, he may appeal to the commission whose finding shall be 
 final. Producers may vote production only in the precincts in which it is listed. 
 Corporations and firms shall have their voting rights similarly determined. Votes 
 of producers may be cast either in person or by proxy through duly authorized 
 representatives, which shall include marketing agencies. 
 
42 University of California — Experiment Station 
 
 Sec. 15. At least five (5) days prior to the day fixed for the election, the board 
 of supervisors of each county in which any part of the district or districts affected 
 is situated shall appoint for each precinct from among those entitled to vote at 
 the election, one inspector and two judges, who shall constitute a board of elec- 
 tion for such precinct. If the board fail to appoint a board of election, or the 
 members appointed do not attend at the opening of the polls on the morning of 
 the election, the voters of the precinct present at that hour may appoint the board, 
 or supply the place of an absent member thereof. The polls shall be kept open for 
 the reception of votes from ten o'clock a.m. until six o'clock p.m. when the same 
 must be closed. The election board shall, before the opening of the polls, post in a 
 conspicuous place thereat a list of all persons entitled to vote in said precinct at 
 said election, together with the factors of production of such persons. The ballots 
 used at the election shall be provided by the commission and one of the clerks of 
 election shall deliver one of them to each person qualified to cast a vote, or to his 
 representative by proxy. The election board shall retain and file with returns of 
 the election all proxies presented at said election. At the close of the polls the 
 board of elections shall at once proceed to canvass the votes and declare the result 
 and shall forward its certificates of such result, together with all ballots used and 
 all documents and papers used at such election, to the clerk of the board of super- 
 visors of the county in which the precinct is located. A copy of said certificate 
 certified by said clerk of the board of supervisors shall be by him forwarded to 
 the commission. 
 
 Sec. 16. On the second Monday succeeding such election, the commission shall 
 proceed to canvass the votes cast thereat, and if upon such canvass it appears that 
 two-thirds or more of the producing factors in the proposed zone as shown by the 
 lists prepared by the agricultural commissioner, voted in favor of the institution 
 of a proration program, the commission shall declare such a program adopted. 
 In [an] order instituting a proration program, whether on petition or after election, 
 the commission shall define the zone affected and shall designate it by some title 
 indicative of the commodity concerned. 
 
 Sec. 17. Any order of the commission instituting a proration program and any 
 other order of the commission substantially affecting the rights of any interested 
 party may be reviewed by any court of competent jurisdiction. Any such action 
 must be commenced within thirty days after the effective date of the order com- 
 plained of or within thirty days after the injurious effect complained of. 
 
 Sec. 18. In the event of the institution of a proration program in a marketing 
 zone, it shall be the duty of the commission to forthwith select a proration pro- 
 gram committee of five producers and two handlers operating within the zone; 
 provided, that any marketing agency controlling more than one-fifth of the pro- 
 duction within the zone of the commodity subject to the program shall be entitled 
 to name such proportion of the producer members of said committee as it controls 
 of the production except that no such marketing agency shall be entitled to name 
 more than three of the producer members of said program committee; provided 
 further, that in the case of commodities, the bulk of which is processed before 
 consumption, one of the producer members of said program committee shall be a 
 processor. It shall be the duty of such committee to determine the method, manner 
 and extent of prorating. Such prorating program may be altered or modified from 
 time to time by such committee but the original program and any alteration or 
 
Bul. 565] Compulsory Proration in Agricultural Marketing 43 
 
 modification thereof must be approved by the commission before it shall be made 
 effective. Before approving any program or any alteration or modification thereof, 
 the commission shall hold a hearing in the zone and must find that the same is 
 reasonably calculated to maintain the existence of the facts specified in section 
 10 hereof. The members of such program committee shall not be entitled to 
 compensation. 
 
 The program committee shall appoint an agent, approved by the commission, 
 who shall administer the proration program in the zone on behalf of the commis- 
 sion. Such agent shall appoint such deputy agents and other assistants as may 
 be necessary to properly direct the program. 
 
 Sec. 19. In the event that a program committee shall fail within a reasonable 
 time to present to the commission a prorating program or shall present a program 
 which is not consistent with the conditions specified in paragraph 10 of this act, 
 the commission shall initiate a proper program or shall modify the program pre- 
 sented, as the case may be, in conformity with the provisions of section 10. If at 
 any time during the operation of any proration program, it shall appear probable 
 to the commission that the program being carried out has ceased to be in con- 
 formity with the provisions of section 10, it shall be the duty of the commission, 
 after hearing, to so modify such program as to obtain the conditions required by 
 said section 10. 
 
 Sec. 20. After any prorating program has been formulated and has been ap- 
 proved by the commission, the agent for the zone shall assume the administration 
 of the program and any subsequent modification thereof and the issuance of pro- 
 ration certificates thereunder. Such certificates shall be divided into primary and 
 secondary certificates. Each producer shall be entitled to one primary certificate 
 which shall indicate the quantities of the commodity as to which the program has 
 been instituted which the producer named in such certificate shall be entitled to 
 harvest or otherwise prepare for market and delivery into the primary channels 
 of trade. Said primary certificates shall also indicate from time to time the num- 
 ber of secondary certificates theretofore issued under it: Secondary certificates 
 shall be numbered consecutively and shall be used to control the time and volume 
 of harvesting or other preparation for disposal. Such secondary certificates shall 
 accompany all deliveries of the prorated commodity by producers into a primary 
 trade channel. It shall be unlawful for any commodity to be harvested, prepared 
 for market and/or marketed unless and until there shall have been an appropriate 
 secondary proration certificate issued therefor. It shall be unlawful for any 
 producer to deliver to any dealer and for any dealer or handler in the primary 
 channels of trade to have in his possession, within this state, any commodity 
 produced in an established proration zone upon which a proration program has 
 been instituted without an accompanying certificate issued under the authority 
 of the commission. Such certificates shall be negotiable between producers. 
 
 Sec. 21. The agent under each zone program shall collect for each certificate 
 issued to the producers, a reasonable and proportional fee to be fixed by the pro- 
 gram committee so calculated as to produce the expenses of the administration of 
 the program, the costs of the institution of the program, and a proper proportion 
 of the cost of the maintenance of the commission which shall not be less than 
 ten per cent of the fees collected for certificates, but may be such percentage in 
 excess of ten per cent as may be determined by the program committee. All such 
 fees shall be paid monthly by the commission into the state treasury to the credit 
 
44 University of California — Experiment Station 
 
 of the "Agricultural Prorate Commission fund" which fund is hereby created. 
 All moneys credited to such funds shall be used only for the purpose of defraying 
 the expenses of the organization and of administering and enforcing the program 
 under which they were collected. 
 
 Sec. 22. The commission have power to establish such rules and regulations con- 
 sistent with this act as may be necessary to carry out the purposes thereof, and 
 through its duly authorized representatives and agents shall have access, solely 
 for the purpose of investigating possible violations of any program, to the records 
 of producers, dealers, distributors, and handlers of a commodity as to which a 
 proration program has been instituted, and shall have at all times free and unim- 
 peded access to all buildings, yards, warehouses, storage and transportations or 
 any other facility or place in which any commodity under a proration program is 
 kept, stored, handled, or transported. All information obtained by the commission 
 shall be confidential and shall not be disclosed except when required in a judicial 
 proceeding. Any person who violates any provision of this act, or who wilfully 
 renders or furnishes a false or fraudulent report, statement or record is guilty of 
 a misdemeanor and each infraction shall constitute a separate and distinct offense. 
 
 Sec. 23. After the institution of any proration program, such program shall con- 
 tinue to remain in effect unless there shall be filed with the commission an appli- 
 cation for its termination signed by not less than forty per cent of the producers 
 or of the production of the prorated commodity ; provided, that the commission mi. i 
 at any time initiate an investigation on its own motion to determine whether or no 
 the facts specified in section 10 hereof continue to exist. Upon a finding that any one 
 or more of the prerequisite facts no longer exist, the commission shall terminate such 
 program ; provided, that programs may be terminated only at the end of marketing 
 seasons. 
 
 Sec. 24. Any person who shall market any commodity in violation of any pro- 
 visions of an original or modified proration program approved and made effective 
 by the commission may be enjoined by the commission in an action brought in 
 the superior court for the county in which the violation is alleged to be occurring. 
 There may be joined in the same proceeding any number of defendants alleged to 
 be violating the same program, although their properties and interests may be 
 situated in several counties and their actual violations of the program may be 
 separate and distinct. In any action for injunction brought hereunder, the pro- 
 cedure shall be governed by the provisions of Chapter 3, Title VII, Part II of the 
 Jode of Civil Procedure of the State of California. 
 
 Sec. 25. Any person who violates any provision of a proration program approved 
 and made effective by the commission shall be liable civilly in the sum of five hun- 
 dred dollars for each and every violation to be recovered by the commission in any 
 court of competent jurisdiction. All sums recovered under this section shall be 
 deposited in the state treasury to the credit of "Agricultural Prorate Commission 
 fund." 
 
 Sec. 26. There is hereby appropriated out of any funds in the state treasury not 
 otherwise appropriated the sum of ten thousand dollars to be expended by the 
 commission when, as and if necessary in the performance of the duties herein 
 imposed upon it. Said sum shall constitute a loan to said commission and shall 
 be repaid in ten equal annual installments without interest. 53 
 
 ss The foregoing bill was sponsored by the California Farm Bureau Federation. 
 
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