Over the past year, discussions centering on our forecasted increase in production have culminated in the industry’s strategic plan to develop new opportunities to increase demand and stabilize future market returns. The planning discussions focused on exploring any/all tools to support our future growth including a possible change to the marketing order to add credit-back authority. The authority would encourage handlers to build upon the California Walnut Board’s (CWB) activities, providing additional visibility, awareness and sales for walnuts, through crediting a portion of the handler promotional expenses against handler assessments due under the program.
The California Walnut Federal Marketing Order, established in 1946, provides authority for a set of activities including: research, promotion and regulating quality and volume control. However it does not currently include authority for handler credit for market promotion (credit-back). This authority, if approved, would allow handlers to receive a credit (rebate) for eligible market promotion activities of 70¢ per $1 of spend, up to a cap of available dollars based on prior year crop acquisitions. The purpose of the program is to encourage handler marketing activities to promote the sale, use and consumption of walnuts, in addition to the ongoing work of the CWB. Similar programs have been successfully used in the almond and prune industries.
At the 2019 spring Board meeting, CWB staff presented a framework for the potential program, and at the direction of the Board, the Marketing Order Revision Committee (MORC) convened on several occasions to develop, review and discuss the program structure. The MORC presented its proposal to the Board at its annual fall meeting. An overview of the program is included below.
The full board voted unanimously to move forward with a formal request to USDA. The request is currently under USDA review. The process will include a formal hearing which is expected to take place February 11, 2020. Following the hearing, USDA will make a recommended decision which recaps the testimony, followed by a 30-day comment period. Once the comment period closes, USDA considers the testimony, comments and other available public information, and may then issue a secretary’s decision and referendum order. The referendum order requires USDA to put the proposal to a vote of the growers, where you will be asked to vote on changing the language in the order to add credit-back authority. If the growers favor the amendment, the marketing order would be amended to include both the authority to offer credit-back and the terms of the program – whether or not the industry chooses to implement them. The expected timeline for voting is late spring/early summer.
What is Credit-Back Authority?
- Credit-back is an authority that several agricultural commodities (almonds, prunes, etc.) use to allow handlers to conduct eligible marketing activities in return for a partial credit/rebate on assessments.
- The CWB does not currently have this authority in the marketing order, therefore, formal rule making has been undertaken to add the authority to the order.
Objective/Purpose of the Program
- Objective of the program: Effectively promote the sale, use and consumption of California walnuts
- Purpose: To encourage handler market promotion in addition to the CWB’s generic marketing efforts
Structure/Mechanics
- The credit-back authority, once approved, will be in the Order, whether industry chooses to use or not.
- Program authorization to spend will be determined on annualized basis in conjunction with fiscal budgeting.
- Determining available dollars for the crop year will be based on percent of budgeted assessment revenue.
- Each handler’s share of available dollars to be based on prior year crop acquisitions.
- Credit-back will be 70¢ per $1 of spend on eligible marketing & promotional activities.
What are the Rules & Requirements?
- Credit-back requires California Walnuts wording and/or handler name with the word walnut(s) to be eligible.
- Credit-back is not intended for use with private label/3rd party products.
- Activities containing other nuts and/or fruits, etc. would receive credit-back based on the proportionate share of walnuts included.
- Walnuts used as an ingredient in manufactured food products would receive credit-back based on the proportionate share of walnuts included.
- Complete rules, regulations and eligible/ineligible activities are defined in the Credit-back Guide.
What are the Impacts to the Board?
- To be funded from prevailing assessments, likely reduction in domestic program, given this is the largest area of CWB spend.
- Available dollars for the crop year to be based on percent of budgeted assessment revenue; CWB Executive Committee to make a recommendation to the Board annually.
- Similar programs have credit-back in the range of 10%-15% of assessments.
- Staffing implications to be determined based on the breadth & depth of the program.
Next Steps and Timeline
- The CWB, at the Board’s direction, submitted our request to USDA in September 2019.
- USDA is reviewing this request.
- USDA to hold a public hearing (Winter 2020).
- USDA Recommended decision followed by 30-day comment period.
- Grower Referendum (Spring 2020) following USDA’s recommended decision.
