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Fraudulent Farmer’s Markets ‘Detrimental To Legitimate Farms, Retailers And To Consumers’

Jim Prevor’s Perishable Pundit, February 9, 2011

Our piece, Fraud At Farmer’s Markets, focused on the issue of fraud committed by vendors at these markets who sell produce that the vendors claim is grown on their own farm, grown locally, grown without the use of any “sprays” etc., etc., but in reality is conventional produce bought at the local wholesale market. In fact, it is the exact same produce sold by supermarkets except worse because it sits out in a hot parking lot, on a street or in a public park all day.

We received a number of letters. We thought this one particularly thoughtful:

I personally enjoy visiting and shopping at the local farmers market. Lots of beautiful produce can be found there, as well as a few legitimate farmers.

However, as a farmer myself, I have an unfair advantage compared to the average consumer; I can easily see produce that has been purchased by the seller from outside the area, even from Mexico. I know what grows in my area, in what season, and what quality is available here, and what is being brought in from outside the area.

Farmers market consumers are easily misled because they are being told exactly what they want to hear; local, organic, pesticide-free and even sustainable. This may be music to their ears, but for a farmer like me who can see what goes on, local, organic, pesticide-free, and sustainable are words that should send up red flags among consumers. Unfortunately, much of the time these words are very simply not true.

The market managers are focused on making their market a success, and that means a busy market, not necessarily an honest one. The local agricultural commissioner does not have the resources to police these operations and there is much money to be made from eager consumers. Many of these farmers markets are pulling in far more people than the local supermarkets they compete with.

There is another kind of fraud that takes place at the farmers market as well. In most cases, the markets operate under an honor system when it comes to the space rent that is collected. The space rent is often based upon a percentage of sales. This is where the fraud comes in. The market operators simply take the vendor’s word for how much they sold. There is nothing done to verify the actual sales, and many of the vendors I have seen are getting away with paying almost nothing for the space.

The public subsidy of these vendors goes further. The massive appeal of these markets is draining significant business from established supermarkets that make major contributions to the community. These supermarkets have to pay legitimate rent, utilities, worker and liability insurance, health insurance, payroll tax, property tax, income tax, and food safety costs among a myriad of other costs. Many of these businesses donate generously to the local community as well. They are losing business to unfair competitors who do not have to pay these legitimate costs and who oftentimes are selling the same exact produce.

At the farmers market, people don’t seem to notice that the produce is usually transported from the farm (or wherever) in a non-refrigerated vehicle, and that it is displayed all day with no refrigeration to keep it fresh. Most of these farms would fail any kind of food safety audit, and it could be a blessing that the produce they are sneaking in from other growers may have actually come from a third-party-audited farm.

These farmers markets seem to be serving a segment of the population who are happy to subsidize a group of people that provide them with what fits into their ideology of local, organic and sustainable. This fantasy is the perfect setup to make them feel like they are doing their part to save the planet and their families from the evil industrial farmer. This is a serious matter that is detrimental to legitimate farms, retailers and to consumers.

— David Sasuga
Owner
Fresh Origins
San Marcos, California

Part of David’s point is that there is a public-policy concern here. In an age of tight municipal budgets – or for that matter in any age – it is obviously not acceptable to have people cheating on the fees due to the municipality.

This is especially true when these fees are in lieu of rent and taxes, which competitive vendors have to pay to sell fresh produce in stores.

Of course, we would make the point stronger by asking what business any municipality has in giving any particular group of vendors control of municipal property. If a city feels it doesn’t need to keep its parks open on a Saturday or thinks it OK to block off a street, the right thing to do is auction off the use of the property for lawful purposes.

Maybe a farmer’s market operator will win out, or maybe someone who wants to sell used books or an art fair or even a supermarket that wants to bid on the property to open a temporary store. Not to do so is just to leave money on the table or, more specifically, to provide a subsidy to a politically favored industry.

We actually see no public-policy purpose being served by the rule that only farmers selling their own product can rent booths in these markets. Why shouldn’t Wegmans be able to gather in product from all its many local vendors and offer them for sale in this venue?

The whole setup is arbitrary. A farmer with a willing spouse, healthy parents and lots of children to provide free labor will find the opportunity to sell at a farmer’s market to be lucrative. A childless widow running the farm may well think it wiser to sell her product through a distributor or direct to someone like Wegmans. For what conceivable reason should the public provide a subsidy to one of these farmers but not the other?

As to the core issue of our first piece in this series, consumers being defrauded, David’s letter follows logically on one of David’s areas of concern. David kicked off our coverage of a most controversial area when he sent along an article that we included in a piece titled, ‘Spiked’ Organic Fertilizer Raises Consumer Doubs About Organic Definition.

He also followed up with a letter during the same conversation that we included in our piece, Pundit’s Mailbag — As ‘Spiked’ Organic Fertilizer Investigation Widens, Potential Grows For Weaker Consumer Confidence In All Fresh Produce.

In that letter, David pointed out why the whole industry needed to be concerned about a possible deception being perpetrated against organic consumers:

This is more than just a quirky organic produce issue. While it remains a tiny percentage of overall production and sales, organic produce gets top billing with the media these days.

Consumer trust in any kind of fresh produce concerns all of us, and when the organic leadership and organic certifiers are not willing to do the right thing, it hurts everyone in the produce business as we continue to face major challenges in maintaining consumer confidence in the integrity and safety of fresh produce.

The same logic, of course, applies to consumers being defrauded at farmer’s markets.

One of the most valuable assets the industry has is the public trust for farmers. That is why Ocean Spray and Blue Diamond have farmers in their ads, and it is why every time some television program wants to interview an industry rep, we find a farmer in jeans, not a Gucci-shoed, Brioni-suited lobbyist to make the trade’s case.

If we have a group of farmers, or even faux farmers, that start getting busted — as NBCLA did by catching the miscreants in the Los Angeles area — it will gradually make farmers, fruit and vegetable farmers especially, look like cheats.

As this is a local issue with national implications, perhaps our national associations should consider establishing a position and task force on this matter. They could insist on one of two things: Either the farmer’s markets be open to everyone — so Schnucks or Kroger could buy a booth and sell produce if desired. Further that procedures be established to make sure everyone is paying rent and taxes. They could charge a flat fee for rent or they could sell tickets as they do at carnivals and make that the only legal tender at the Farmer’s Market.

Alternatively, if the farmer’s markets are to be reserved for farmers selling their own product, those rules need to be strictly enforced. Perhaps some arrangement could be made whereby the vendors pay a user fee to have everyone properly vetted, which would include random site inspections on the farms and review of any promotional claims — such as “organic” or “sustainable” or “no spray” that might be used. The key is that authorization to display should not be in the hands of the management of the farmer’s market as they have a conflict of interest and might be tempted to bend the rules to fill up the market or keep a popular vendor. It also seems that these markets ought to do something on food safety — even if it is just requiring those growers who are exempt from the recent food safety law to declare that on a sign.

When we ran the article indicating the fraud going on at farmer’s markets, several supermarket chains inquired about doing reprints. They know they are in competition with these farmer’s markets and that the playing field isn’t level. If the supermarket association, FMI, takes the lead here, it will come out as big business against the farmers. Maybe United and/or PMA could start a coalition, though, to make these points more forcefully. It certainly seems as if the status quo — more and more farmer’s markets with many phony farmers defrauding consumers — is not an acceptable situation.

Many thanks to David Sasuga and Fresh Origins for helping to advance the thinking of the trade on this important issue.

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