Ag Commodity Checkoffs, what are they?
Agricultural research and promotion programs, or “checkoff programs”, are industry-funded initiatives which improve the market position of the covered commodity by expanding markets, increasing demand, and developing new uses and markets. They began operating at the state and regional level nearly a century ago. The term “checkoff” originated in connection with some of the earliest voluntary research and promotion programs in which producers marked a checkoff box if they wished to contribute to the program. Today, federal checkoff programs are mandatory, but the “checkoff” name has remained. In 1966, Congress began authorizing the establishment of checkoff programs at the federal level. In 1996, Congress passed the Commodity Promotion, Research and Information Act, which authorizes the U.S. Department of Agriculture to establish checkoff programs through the federal rulemaking process, without Congress needing to pass a law. Between checkoff programs authorized by Congress, and checkoff programs established by USDA under the authority of the Commodity Promotion, Research and Information Act, there are currently 21 agricultural checkoff programs at the federal level, many of which are below.
Checkoff programs (also known as Research and Promotion programs) establish a legal and organizational framework so competitors can pool resources and promote an industry as a whole. Checkoff programs help to develop new markets, strengthen existing markets, conduct important market and scientific research, and promote industry initiatives and activities. One of the most valuable characteristics of checkoff programs is that they promote and drive demand for a covered commodity without reference to specific producers or brands, thereby benefitting all producers and the entire industry.
How do they work?
Checkoff programs are financially funded by industry. They are also governed and managed by the industry and not the government. Programs are authorized by Congress and are overseen by the U.S. Department of Agriculture (USDA) to ensure fiscal responsibility, program efficiency, effectiveness, and fair treatment of stakeholders. However, all funds raised go directly to the checkoff program and are governed and controlled by the checkoff program. These funds are raised through assessments paid on a per unit basis of the marketed commodity.
Each checkoff program is governed by a board of directors, consisting of, as the industry determines, large and small producers, handlers, importers, and other commodity stakeholders. Board members and their staff help carry out the checkoff programs and direct the day-to-day management responsibilities. Boards may also contract out the administration of the program, and typically contract out the execution of the checkoff program’s research and promotional activities. Board members are nominated by the industry and appointed by the Secretary of Agriculture. USDA’s Agricultural Marketing Service provides oversight of the checkoff programs to ensure compliance with the regulations governing each program. This oversight includes approving budgets, contracts and communications, and is generally required in order for checkoff programs to legally operate.
Return on Investment
Each checkoff program is required to conduct an independent, third-party evaluation to determine its return on investment, to ensure that the program is benefitting the producers who fund it. In general, the return on investment can range from three dollars to as much as 18 dollars for each dollar spent. Below is a chart summarizing the results of the most recent of these evaluations for several of the larger checkoff programs.
| Program | Budget | Budget as % of Total Sales | $ Return on Investment (ROI) | Incremental $ |
|---|---|---|---|---|
| Almonds | $62M | 1.1% | 6.2 | $381M/$6B |
| Beef | $72M | 0.2% | 11.2 | $806M/$42B |
| Cotton | $80M | 0.4% | 5.7 | $456M/$21B |
| Eggs | $20M | 0.2% | 3.5 | $68M/$12B |
| Hass Avocados | $56M | 1.0% | 3.25 | $183M/$6B |
| Pork | $88M | 0.4% | 17.4 | $1,536/$23B |
| Soybeans | $118M | 0.3% | 6.5 | $768M/$47B |
| Potatoes | $18M | 0.4% | 5.2 | $70M/$4B |
| Dairy | $280M | 0.5% | 4.5-7 | $1,260-1,960M/$60B |
| Fluid Milk | $100M | 0.6% | 4.5-7 | $450-700M/$16B |
Establishing a Sod Industry Checkoff
Members of the U.S sod production industry have asked Turfgrass Producers International (TPI) to investigate the potential interest among sod producers in a sod checkoff program as well as its impacts. Over the next 12-18 months, TPI will host online webinars to seek input from producers and to share information on what a potential checkoff could look like for the sod industry. Any sod industry checkoff would be designed, implemented and governed by sod producers, for sod producers. All U.S. sod producers will have a chance to provide input on establishing an industry-wide checkoff and ultimately be asked to vote on it in a nationwide referendum in order for it to become law.
Please check out the Frequently Asked Questions (FAQs) below for more information about checkoff programs. You can also submit additional questions below and a response will be provided in a timely manner. Stay up-to-date on upcoming seminars and important dates in the Announcements section of this website that can be found in the green tab on the right of the home page, and you can also sign up for email notifications below.
Sod Checkoff Webinar #1 - May 19, 2020
Sod Checkoff FAQs
The initial step is to gauge industry-wide interest for a checkoff program. With industry support, an industry- crafted proposal is submitted to USDA for consideration. Following review and public comments, USDA will publish a final proposal and oversee a referendum of producers and others who would be subject to assessment under the program.
That is up to the industry to decide.
A checkoff program can work to develop new domestic and export markets, strengthen existing markets, conduct important market and scientific research, and promote select industry initiatives and activities. The industry can accomplish more together than any individual company can accomplish alone. A checkoff program allows an industry to unify and pool resources, as well as identify and address issues that impact its sales, while having a substantially-greater investment to drive demand.
A checkoff program is overseen by a board composed of industry members. It is managed by a staff that the board hires. The board is appointed by the U.S. Secretary of Agriculture. Board representation will include representatives from all assessed segments of the industry. It will have control over strategic plan development, allocating funds, and approving business plans and programs. While directed and managed by the industry, the program is overseen by USDA to ensure fiscal responsibility, program effectiveness, and fair treatment of stakeholders.
As an industry checkoff, we can invest in driving demand for our product and addressing shared problems and barriers on a scale that exceeds individual company solutions. A checkoff program allows the industry to highlight and promote the personal, emotional, and environmental value of the commodity in people’s lives. Keeping campaigns free of specific brand names allows the industry to unite, pool resources, and collectively work toward driving sales and addressing barriers. And it leaves producers and other companies, as always, to compete on their own unique attributes and benefits.
Yes. A number of non-food industries use checkoff programs to promote their products. These industries include softwood lumber, paper and paper-based packaging, propane and oilheat, cotton, and Christmas trees.
In addition to those mentioned above, there are a number of industries with checkoff programs. Some of the most well-known and successful USDA programs include dairy products (National Dairy Board), beef (Cattlemen’s Beef Board), fluid milk (MilkPEP), pork (National Pork Board), soybeans (United Soybean Board), and eggs (American Egg Board).
The fundamental goal of every checkoff program is to increase demand for a commodity, thereby increasing the potential long-term economic growth of the commodity for all stakeholders of all sizes.
Checkoffs across industries, from food to fiber to energy, span a variety of operation sizes, production methods, distribution options and marketing strategies — all contributing to the common goal of promoting the commodity.
To launch a successful and sustainable checkoff program, equitability is key. The active participation of companies of all sizes is essential to the success of an overarching industry program. As such, a system to provide for equitable funding, governance and benefit is put into place. In general, across all industries and operational sizes, for every dollar spent in a checkoff program, the return on investment can range from three dollars to as high as 18 dollars.
- Governance: USDA ensures leadership rotates fairly and does not allow for any market leader power positions, or for disproportionate focus on a single marketing channel.
- Benefit: Programs are equally distributed and accessible, so program benefits accrue to all funders.
- Funding: Contribution rates are based on an equitable and proportional formula established by industry.
TPI has been asked by several members of the U.S. sod production industry to investigate a potential sod checkoff program. They have retained legal counsel with experience in establishing checkoff programs, and in February of 2020 the TPI Board of Trustees approved to fund the investigation, creation, and referendum needed for U.S. sod producers to vote on approving a potential checkoff program. Any and all decisions on a sod checkoff program will be made by U.S. sod producers regardless of whether or not they are members of TPI. Furthermore, all funds raised by a checkoff will be governed by sod producers and not TPI.
The cost to each producer is up to the industry to decide. Board members made up of U.S. sod producers that are nominated by the sod industry and approved by the U.S. Secretary of Agriculture will work with the industry to set the assessment rates. Once the checkoff is approved, the assessments are mandatory to ensure that everyone is participating and that no farm has a competitive advantage over another farm.
The approval of a checkoff program through a nationwide referendum of sod producers requires that all sod producers are subject to the checkoff order. Information at the USDA and within the industry among fellow producers is used to develop a compliance program to ensure the checkoff program is aware of all producers who are paying, or not paying, the assessment. All USDA checkoff programs include auditing and punitive measures for non-reporting or under-reporting. The Cattle industry has 750,000 people that own cattle. Their compliance program covers industrial farms to 4-H kids to hobby farmers and is very effective.
The sod industry decides all of the guidelines of a checkoff program, including any assessments or exemptions for small farms. If the sod industry decides that small farms should be exempt then those exemptions will be part of the program’s guidelines. If not, then small farms will pay assessments as determined by the sod industry and administered by the Research & Promotion board, comprised of sod industry members.
