Questions from the Pacific Northwest

Q - Aren't NW growers better served by the Market Expansion idea for the Calif. market ?

A - Several states have good promotional programs in place. A checkoff would not replace them, but enhance them. If a national checkoff includes a provision to have some of the funds be eligible for use by the state/regional associations, it would reduce or eliminate the need for the state/regional associations to have to collect voluntary donations for these programs.

Q - How many geographic areas would be created by the national check-off?

A - The task force has looked at several options. The current thinking is that a small board ( 9 - 12 directors ) would help keep administrative costs low, so the task force is looking at options with 3 or 4 regions and 9 to 12 directors. A couple of options are shown here:

Q - Why not just a NW check-off?

A - Some industries have state checkoff programs in addition to -- or instead of -- a national program. However, if everyone works together:

• Programs could be funded by the entire industry, not just one area
• The industry would only have to fund one effort to get a checkoff program approved
• Only one checkoff board (administrative costs) would be needed -- not one for each state or region
• The national Checkoff board could help to coordinate consistent messaging to consumers
• State/regional associations could receive a proportionate share of the funds to increase promotion in target areas and fund additional promotional programs

Q - Do all national areas benefit the same?

A - The Checkoff board would have to decide how and where the available funds are spent. They would likely take a look at target audiences and consider how to best reach the demographics most likely to be receptive to positive Real Tree messages, as well as geographic locations.

Q -How have similarly sized commodity check-offs performed? Can we get the results of similar check-off commodity groups and see if they have all benefited, or at least at what level?

A - Checkoffs are required to make periodic reports to USDA. We'll see if we can compile a list of "results" or at least add links to some of those reports.

Q - Have any commodities abandoned the check-off and why?

A - Not that we're aware of, but we will ask USDA and post a more definitive answer here.

Q - How do you reverse out of a check-off and at what cost?

A - The Marketing Order that establishes the Checkoff program will include the "rules" for a recall. It can set up a periodic referendum (vote) and/or allow for producers to call for a vote by means of a petition. In either case, the checkoff is responsible for covering the costs of the voting process. We'll try to get an estimate from USDA, but they will want to know how many producers we are talking about (which depends of whether or not those who produce fewer trees are exempt).

Q - Is there a check-off consultant that could help evaluate?

A - There is help available from USDA and a lawyer who has been involved with a lot of checkoff programs. Others like Hugh Whaley are also available.

Q - Some growers would be concerned about "Big Brother" looking over their shoulder and getting into their books.

A - There are laws protecting privacy. IRS is not allowed to look at Checkoff reports. However, in most programs, the Checkoff auditor randomly selects some of the growers and has a compliance team verify the numbers submitted.

Many farmers have had this concern since checkoffs began. If there were problems along these lines, it's likely that they would be widely known throughout the farming community.

Q - I assume we have a task force from the NW working on these ideas. Who are they?

A - Betty Malone and Jim Heater are on the National Checkoff Task Force.

Q - Do we have a general consensus of opinion, How do the big growers sit?

A - The big growers requested that a national task force be formed and charged with working through the details. They are asking for a report in August that tells them whether, and if so, how, the task force thinks a checkoff could work for the Christmas Tree industry. They have asked to see what the task force thinks a workable checkoff program would look like, so that necessitates making some recommendations on the details.

While the task force is trying to put together key elements that they think would work for the industry, this is a working document. The task force wants to stress that NO DECISIONS have been made yet. Your input is helpful and encouraged.

Recent Questions

Thanks to Jim Puffer for writing in with the following questions and comments. We have replied as appropriate.

Q-How are the check off funds collected? It is of my opinion that the best place to collect a check off is at the nursery level. At this point funds are being allocated to a marketing program. If there are concerns about mortality the check off should be at a lower rate due to this certainty.

A-The task force has discussed several options for collecting, including at the seedling level. Mortality is one issue... others say that it may not be clear whether the seedling will end up being a Christmas tree or timber, and others say that some grow their own seedlings. There will likely be issues with any manner of collecting, which is why it is so important for the task force to get all of the ideas and input that they can.

Q-I believe it is reasonable to expect growers to be contribute to sustainable marketing program at the beginning of their business plan. If this was implemented would the grower be able to capitalize this expense?

A-Great question. It's the first time we've heard it. If funds were collected at the seedling level, presumably, the money would still be spent before the seedlings reached maturity. While marketing does have a residual effect, we're not sure anyone has ever been successful in arguing that that investment could be capitalized. We will see what I can learn on that.

Q-As far as representation, I feel it would be most fairly represented at a one tree one vote combined with a one grower one vote representation.

A-The task force is sensitive to the idea that those who grow more trees ought to have more say in whether or not to have a program, and if so, what types of marketing/research projects should be funded. The idea of regional representation and making sure the nominees for directors are proportionately representative of those paying into a program helps some with the latter. There are some issues with having some votes count for more than others in a referendum while keeping the balloting anonymous. The task force members are trying to learn how other industries handle that.

Q-Other questions I would have is measuring cost to benefit, administrative costs-total dollars and percentage of generated dollars.

A-USDA limits the amount that can be spent on administrative funds in the first 3 years. Further limitations can be written into the marketing order. The task force was leaning toward limiting administrative costs when they last met. They will now take everything they heard at the three facilitated meetings, plus feedback for some other recent meetings (the California meeting and the Pennsylvania CTA board of directors) and start putting together their recommendations to present at the NCTA Convention in Des Moines in August.

We hope to see you in Des Moines in August (The facilities did not flood and the early registration date has been extended to Tuesday for the Pacific Northwest because of your meeting last week.) Registration info is available at: http://www.christmastree.org/convention08.cfm

Notes from Oregon Meeting

From the Corvallis Meeting to Discuss the
Possible National Marketing Checkoff
June 19, 2008

Forty to forty five people met Thursday at the Corvallis meeting. The meeting was opened by Betty Malone, Marketing Order Task Force Chair and Oregon grower who presented the beginning of the power point presentation. She introduced Hugh Whaley of Osborn and Barr, who did the rest of the presentation and answered questions. This first session lasted over 2 hours
Several people left at the break between the power point and the breakouts. The group divided into two sections to discuss Board Membership, Exemptions, Assessments and Referenda. The second session lasted over 2 hours.
At the end of the meeting Betty passed around sign up sheets for people who wanted the results of the meeting and one for people who would be willing to help with small research projects.
Friday at the general session Betty gave a summary of the chart below. The 15 minute time slot was extended to 35, because one of the earlier speakers didn’t get any questions. She was able to tie in the checkoff possibility of state monies being collected with the reports earlier that morning that only 20 people contributed to the Northwest marketing program in 2007 and the report that donations to the Research Committee were down 50%. There were only a few questions asked. The one that generated the most interested concerned whether national checkoff monies could be spent on expanding the market into Mexico.
At lunch time the local Extension agent asked Betty why she had not done the power point presentation. So when an afternoon speaker finished early, Betty presented the power point program to ten people who had not seen it Thursday while the rest took an early break.
This meeting in the northwest was one of the smallest in 15 years.
The conclusions from the breakouts were as follows.

Board Membership

1. What size should the board be?
Recommended a Nine member board. Smaller board meant lower
administration costs: 25% less for a 9 member board (in 4 areas) than a 12.
2. Should alternate directors be allowed?
No. But web conferencing and poly conferencing should be allowed. No proxy
votes should be allowed.
3. Should each state be represented or should there be regional representation?
regional
4. If the representation is regional, which map does the group prefer?
4 areas with 9 members to the board.
5. Should there be a limit on the amount spent on administration?
Yes. 10% after the USDA fees are paid. The group wanted more information
about the percentage spent by comparable industries.
Should the checkoff board have the discretion to hire their own staff or should they be mandated to contract with existing trade associations?
Checkoff Board should have discretion to hire their own staff.
Exemptions:
1. Should any trees be exempt from the assessment?
Yes. Are participants public record? How would it work to be sure people paid
in, but still have what people paid be private? How can that be enforced?
2. If so, what would the limit look like?
To talk about the limit the group discussed different ways to make the
assessment:5 acres or less, 1500 to 1000 trees, but assessment should be on
the gross sales because it is fairer. Acreage can fluctuate. Recommend
$10,000.00 be where the assessment begins. First Handler is the person who
cuts the tree. (Trees sold on the stump)
3. Should greens and wreaths be included in the assessment?
No, neither should potted trees.
Should the marketing order have a provision for spending money on research?
Split decision. More people felt that this is primarily a marketing order. But
maybe we should review the decision after 5 years.
Should the checkoff board have the authority to set aside funds for a multi-year project?
Yes
Assessments:
1. Should imports be included in the assessment?
Yes, as well as exports. Could monies be used for export issues or markets?
Not to be used for research.
2. How should the assessment be made? Mixed results
A. By the tree? 6 people
B. By seedlings planted? 3 people
C. By gross sales? 3 people addresses fairness issue: LG trees versus table tops
D. By truck load
E. Acre 2 people
F. Stumpage value 1 person
3. What form would be used to calculate the assessment?
4. Should the state associations be allowed to collect funds for state programs with this national checkoff?
Keep the national program separate. Don’t include the states.
5. Should the checkoff board be allowed to raise the amount levied from the initial rate within specified guidelines?
Give flexibility to the Board to adjust the rates, but put limits on how much a
Board can raise it.
Referenda:
1. Should there be an up front referenda or a delayed referenda?
Up front referenda
2. How often and under what conditions should subsequent referenda take place?
4 years.
3. How should the marketing order be approved? Voted for option “C”
A. Majority of those eligible to vote
B. Majority of those eligible to vote who represent a majority of the volume of production
C. Majority of those eligible to vote and that represent a majority of production
4. Should the vote be in person or by mail or either? Vote by mail

North Carolina Meeting Notes

Checkoff – Marketing Order Study
North Carolina Meeting
June 17, 2008
Boone United Methodist Church

Attendance: 90

Presiding: Cline Church, NC National Board of Directors Member

The recommended outline for the meeting from the National Task Force was followed.

Board Membership Breakout Group: The consensus was for an odd number of board members – most liked the 9 member with three regions. The staggering of terms was recommended so that continuity would be there and three year terms were suggested. Imports should be included and have a member on board. This group also liked having a public director to maybe provide insight when there is a tough decision or have some advisors to the board from the public sector (this was the preference). They also felt that alternates should be in place to make sure representation is there from all regions. There should be a cap on administrative costs – 5% and 10% talked about. They wanted the board to be able to have the authority to enter into contracts with no restrictions placed on them.

Referenda Breakout Group: The first referendum should be delayed up to 3 years to see what it generates before a vote and they had no recommendation for subsequent referenda except to say they would be expensive – maybe every 5-6 years. Approval for an order should be by majority of those growers voting who represent the majority of the production. The voting for an order is recommended to be done by both mail and in person. ***The big talking point here was about the number of people who have not attended in NC and Michigan. Will they be able to see this before it goes to USDA? Will there be another meeting to go over what the task force writes into the order before it gets USDA approval and goes into effect? How can we get more growers to realize the importance of this or is their absence a statement? If the ones here today feel positive about this order, is there another opportunity for input or is this the final to go ahead? The people expressing these comments were invited to come to Des Moines in August and give input.

Exemptions Breakout Group: At what level is cost of collection/assessed amount at the breakeven point? Set minimum based on break even point. Suggested: 2000 trees or $50,000 sales. (Later, it was mentioned to even lower that number of trees.) There was consensus that wreaths and greenery not be included but could be voluntary. Research must be funded (first discussed a minimum 10% up to __% and then changed to have a range from 5% to 30% so that an immediate problem might be addressed). Research monies should be included and “research” needs to be defined. Multi-year research projects should be allowed with an annual review and money set aside for those projects. A multi-year project should not exceed three years and a cap on how much money for a multi-year project. To approve a multi-year research, the board vote should be 2/3 majority for the project.

Assessments Breakout Group: The consensus was to include imports in the assessment. Discussion held about first handler of the trees paying the assessment (many large growers purchase from smaller growers – capital gains discussed). Some did not want to pay per tree but most in the group did. Assessing at the seedling sale was mentioned but grower has no income until the product is sold. Is this a Christmas tree checkoff or a seedling checkoff? A no was given to seedling assessment – still much discussion. Hugh said an assessment could be made every time a tree is sold from seedling to market. But is it realistic for box stores to pay? The quick vote went for first handler paying the assessment and paying the same amount for all trees no matter size or grade. The majority voted for paying per tree not by gross sales. It was decided that states should get funds from the assessment. The board should also be allowed to raise rate within guidelines.

Other Comments after Meeting form some attending meeting but has further thoughts after going home:
One call that came to the NCCTA office after the meeting was to ask that the Task Force reconsider having the assessment made at the seedling producer time of sale. This would get both large and small growers and fewer collection points. (Does this mean that only seedling producers would vote in the referendum?) The suggestion was made to increase the price of seedlings going to line-out beds by $5 per hundred and the price of field-ready seedlings by $10 per hundred and then pass that increase along to the buyer.
Another call asked the Task Force to consider an assessment per acre for those growers not yet selling trees but have them in the ground. They also have a vested interest in marketing and promotion.

What NC did to prepare for the meeting:
Some members of the NC Task Force team have been to 3 meetings in counties to talk about a possible checkoff and have distributed materials at these meetings. There are three more planned during July and one more the last week of June. The NC office mailed 2200+ invitations and a map to the June 17 meeting. These were sent to NCCTA members, drop-out members, names on county ag lists, Virginia Christmas Tree Growers Assn, Mount Rogers Christmas Tree Growers Assn, the Eastern NC Christmas Tree Growers Assn, and e-mails went to SC and TN. The www.checkoffstudy.com site has been on the NC website (www.NCchristmastrees.com) for over a month. In addition many calls have been voluntarily made to some growers. The quarterly magazine of NCCTA (Limbs & Needles) had articles and the meeting date highlighted on the front cover. Much effort has gone in to awareness of the meeting and education about a checkoff.

Notes from Michigan Meeting

Checkoff – Market Order Meeting
Michigan
June 13, 2008

The following is a recap of the checkoff meeting held at Montcalm Community College in Sidney, Michigan as well as input from Christmas tree growers in attendance.

Steve VanderWeide welcomed attendees and recapped a little history of the past efforts for national marketing programs. He presented the first portion of the power point presentation then introduced Hugh Whaley. Hugh completed the power point adding pertinent comments.

After a brief lunch break, participants divided into two groups to address the issues of Board Membership and Exemptions. After 20-30 minutes of discussion and input, we broke and re-divided into two discussion groups to address the issues of Referenda and Assessments. Hugh Whaley “floated” between the groups to answer questions and offer input. Following a 25 minute discussion, we brought the groups together and each reported on their recommendations while others had the chance to ask questions or offer additional input.

The following were the recommendations that came from the Michigan session:

Board Membership: there was complete agreement that a smaller board was preferential to a larger board. Each state does not need to be represented on the board, but regional directors should represent production from that area. Of the three hand-outs, they preferred “Option 3” with 12 board members. There was consensus that there should be a limit on administration. Checkoff board should have expenses paid, but receive no other compensation. The checkoff board should have the discretion to hire their own staff.

Exemptions: there was consensus that there needs to be a production level to simplify the program and to insure possibility of success. The production level of 4,000 trees was acceptable, but no lower. Some recommended 5,000 trees. (It must be noted that we had a number of large choose & cut members that wanted to be included. We will need to emphasize the voluntary options for farms that don’t qualify, but want to participate in marketing.) The group felt that including greens and wreaths would be too complicated. Maybe that industry could also participate in a voluntary program for their industry. There was strong support for research funding and 10% was reasonable. (Some suggested an even higher percentage for research) Group felt that checkoff board should have authority to make decisions on multi-year projects or any other programs.

Assessments: Group agreed that imports must be included in assessment. There was a great deal of discussion on how the assessment should be made. A few agreed that gross sales would be fair, but consensus that growers would not like to report this way. One member advocated assessing at the seedling level, however the group as a whole agreed that this would create many difficulties (Often when the seedling is sold, we don’t know if it will be a Christmas tree or nursery stock or other. It brings in another industry that may not want to be involved. What about seedling sales by state or federal agencies or trade associations?) Consensus of the group was that assessment should be based on actual tree production as reported by the grower. Reporting growers would help to insure compliance by other neighboring growers. Growers didn’t recommend a per tree price, but said that task force should determine how much is needed and work backwards. No obvious concerns with 12 cents per tree. No consensus on if board should be allowed to make increases. If allowed, there would have to be limits.

Referenda: Group agreed that a delayed referenda would make the most sense and that vote should be by mail. Most participants seemed to think that a majority of those eligible to vote as well as a majority of production should be required. There was discussion on the importance of getting information out to as many growers as possible.

Notes for future meetings:
Telephone calls were key in getting good participation.
Try to leave as much time as possible for discussion (we had to rush a bit)
Hugh Whaley was a good resource – the growers were very interested in what he had to say.

Letter of Support

I am writing in support of the proposed checkoff program at the highest amount acceptable to the major producers, i.e. up to $0.15 / tree (or the equivalent in gross sales, which is probably a better way to report it).

Santa & Sons Christmas Trees would be a willing participant even if the amount were $0.25/tree or the equivalent. With the funds that are collected, I very strongly feel that they should be directed only at marketing, and not for farming research. The reason I feel that way is marketing has been the one place where our industry has historically failed to provide consistent support and we desperately need to manage our product's image, lest our image be managed for us by the artifical tree makers. It also makes the program easier to understand and support for growers. And it is the nationally based nature of the program that makes it it benefit all growers so it is an ideal fit for creating and sustaining a market image for real Christmas trees.

The size cutoff seems to make sense to me and also seems to be at about the right level. Creating a register on a .org url with website links for all participating contributors could provide an incentive for growers under the size cutoff to contribute.

Good luck and thank you for your work on this issue.
Mark Rohlfs
Santa & Sons Christmas Trees