Assessments on your Crop

It is not a tax. It’s an assessment. So say the two groups who take assessments from California grower returns. These two groups, the Hass Avocado Board (HAB) and the California Avocado Commission (CAC), are different in structure, in charter and in their taxes assessment rates.

The Hass Avocado Board is chartered by the USDA to promote the consumption of Hass Avocados in the United States. It gets assessment fees from all Hass, Lamb Hass and GEM avocados sold in the US by both domestic and foreign producers. 85% of that assessment is returned to the country or state commission of origin. They must spend the assessments on US advertising and marketing. California growers pay 2.5 cents per pound to HAB and 2.125 cents of that money is given to the CAC. .375 cents remain with the HAB. HAB uses their 15% to meet their strategic priories including building demand, nutrition, supply and demand data, quality, industry engagement and sustainability. In their 2016 annual report, HAB received $54.7M in income and rebated $46.4M to the associations/commissions of origin. Their total marketing/research/communications expenses were $7.6M. Not too bad considering that their work seems to have changed perspectives on the healthy qualities of avocados – healthy fat, heart healthy, weight friendly and good for babies.

The California Avocado Commission was constituted by the State of California Department of Food and Agriculture. The CAC goal is to provide those engaged in the production of avocados the opportunity to avail themselves of the benefits of collective action in the broad fields of 1) advertising; 2) promotion; 3) production, nutrition, and marketing research; 4) quality and maturity standards; 5) the collection and dissemination of crop volume and related statistics; and 6) public education. The law says, “The production and marketing of avocados produced in this state is hereby declared to be affected with public interest. The provisions of this chapter are enacted in the exercise of the police power of this state for the purpose of protecting the health, peace, safety, and general welfare of the people of this state.” Weird -- Police Power – am I right? The CAC assessment for the 2016-2017 crop year was 2.3% of grower sales income for every type of avocado sold to a handler or sold directly. For every $1 paid, a grower paid CAC 2.3 cents. If you received $1.50 per pound, you paid 3.45 cents to CAC. In their 2016 annual report, the total revenues were $15.3M with marketing expenses taking up 64% of the budget at $9.8M. Within the marketing category, consumer advertising comprised a $6.2M expenditure and merchandising promotions comprised another $1.8M. Production research was $0.9M or 6% of the budget. Industry affairs was $1.17M or about 8% of the budget and administration was $3M or about 20% of the budget.

You likely recently received a letter from the California Avocado Commission (mine was dated 9/14) telling you your status for the next growing year: exempt or have to pay the CAC assessment for the 2017-2018 crop year. Growers who produced under 10K pounds average over a three-year period ending with the 2015-2016 crop year don’t have to pay the CAC assessment. This is good news if you don’t feel like CAC provides any benefit to you, but bad news if you want to have a say in CAC’s focus. CAC’s exemption doesn’t exempt you from the HAB assessment.

The 80/20 rule holds true for California avocado growers with a small number of growers producing the vast majority of fruit for sale. If you want to opt out of paying Commission fees or you want to opt in, you should talk to your local CAC representative and state your preference.