Agricultural Marketing Institutions: A Response to Quality Disputes

Grades and inspections govern the marketing of agricultural commodities. Federal legislation created the marketing institutions, in the late 19th and early 20th centuries, when national markets were emerging. Three commodities – fresh produce (fruit and vegetables), grains, and meat – all rely on similar institutions, suggesting they serve a similar role in each market. Tracing the events prior to the legislation of inspection for the three product groups reveals that disputes over quality in transactions between buyers and sellers were present in the fruit and vegetable and grain markets, while transactions along the meat marketing chain were not subject to such disputes. Evidence suggests that the institutions performed the same functions in the fruit and vegetable and grain sectors (solve quality problems), while meat inspections served different purposes that varied over time. As contracts and vertically coordinated market channels become more common in the fresh produce and grain industries, reputation effects will likely be able to enforce contracts, reducing the need for inspection. Meat inspection most likely will continue to be required to ensure sanitation and safety of the meat supply.