"Consumers desiring the very best egg obtainable should demand a 'Rhode Island Special. This is the highest grade of egg sold in Rhode Island. 'Rhode Island Specials' must be produced in Rhode Island, of the highest quality, and of a greater average weight per dozen, packed in cartons by Rhode Island producers and producers' cooperative associations, sealed by the New England Quality label and under direct supervision of the State Bureau of Markets. [Italics ours.]

"The second grade of eggs in Rhode Island is commonly known as a 'fresh' egg. This egg may or may not be produced in Rhode Island, but must meet rigid requirements as to quality. Terms such as selected, fancy, nearby, newlaid and guaranteed used in connection with a sale of eggs must meet the requirements of the grade of 'fresh.'

"Eggs which fail to meet requirements of the grade of 'fresh' must be sold simply as 'eggs.' When a consumer observes no descriptive term in connection with a sale of eggs he can be assured such eggs in all probability are not fresh."

In setting up and strictly enforcing quality grades for eggs, the Rhode Island authorities are unquestionably doing the consumers in Rhode Island a service, by enabling them to be sure of getting the very highest quality egg if they ask for it. There is nevertheless the inference in the quotation just given that the grading system has been drawn up in such a way as to give Rhode Island producers an advantage over those producers in other States who can also produce eggs of the highest quality. The Bureau of Markets has repeatedly laid stress on its work in maintaining high prices for Rhode Island products. In his 1935 report, speaking of the egg quality improvement program, the Chief of the Bureau wrote, "The work has been rigidly carried on this year and we believe that it has resulted in sustained markets for Rhode Island products..." The annual report of the Rhode Island Department of Agriculture for 1936 points out that "The improved methods of production on western farms and modern transportation facilities have made it necessary that we set our standard higher in order to hold our

own market for our own eggs." In February 1938 that department reported"Rhode Island 'Special' eggs, produced in Rhode Island, packed in cartons by Rhode Island producers and producer cooperative associtions, and sealed with the New England Quality label have consistently topped the Rhode Island markets and proved that consumers will pay for high quality products."

There is certainly no objection to producers in any State improving their methods of production to hold as much of the premium market as possible. If local farmers have better eggs to sell than disant farmers it is only right that they should get higher prices. But the grades should be based strictly on the actual quality of the goods and if the distant producer can market eggs of the top quality it is only just to the consumers in the State and to the out-of-State farmer that the latter be allowed to use the same grade specifications and designations as the local farmer.

The fresh-egg laws of the Northeastern States, which are based upon the Federal egg grade specifications, have aroused considerable controversy because they require that to be considered fresh, eggs must have a nontremulous aircell. The objection has been made that the jarring incident to transportation makes the air cell tremulous but does not affect the quality of the egg. Therefore, it has been contended that the requirement of a nontremulous air cell works unfairly, to the disadvantage of the producers farther away from the market.

Here is an example of an extremely difficult technical question. It is clear that the requirement of nontremulous air cells may keep distant eggs out of the top grades. This appears to be right and proper if tremulousness of air cells is a real index of the quality of eggs as judged by the rank and file of consumers. We offer no opinion here on this technical question, but wish simply to point out the principle upon which we believe all grades ought to rest.

A question of a similar kind is raised by a professor in a midwestern university:

"For poultry products I wish to point out two laws that are affecting the movement of (our)

eggs. First is the Federal law setting up the requirements for Federal grades for eggs. It has been found through experience that eggs having considerable yolk color cannot be graded into the top grade, other factors meeting the standards. In brief, it is impossible to produce eggs with lemon colored yolks in the Corn Belt where large amounts of corn are fed to the laying birds. Apparently it requires a lemon colored yolk to meet the top grade of the Federal standards. It is obvious that wherever Federal inspections are made on eggs, that the color in these yolks severely penalize (our) eggs.

"Further, eggs with considerable yellow color in the yolks can be fresh by every known test for egg quality, including the measurements of the relation of height to width when broken out, as well as the acidity test."

It should perhaps be pointed out that competent authorities are not in agreement over the technical question involved-whether eggs that would be considered fresh by the great majority of consumers are kept out of the top grade by the mere fact of having considerable yolk color. Until agreement is reached on this technical question, no judgment can be formed as to whether or not eggs laid by corn-fed birds are unfairly discriminated against on account of their yolk color.

CHOICE OF LABELING REQUIREMENTS.—North Carolina, South Carolina, and Florida all require eggs brought in the State to be labeled "Shipped" (unless they are cold-storage eggs, in which case they must be so labeled). Questions have been raised as to the fairness of this requirement. For instance, eggs produced in southern Georgia or southern Alabama and sold in the markets of western Florida may not have been shipped as far as competing eggs from the heavy-producing sections of Florida, which are around Jacksonville and Orlando.

It might also be questioned whether it is proper to require a product sold at retail to be labeled with the name of the State of origin as in Florida, Georgia, and Montana in regard to eggs; or with the name of the home State if produced within the State, as in North Carolina, South Carolina, and in Florida in connection with eggs.

Some years ago the Federal food and drug regulations, as well as the pure-foods laws of most States, required that when corn sugar or corn sirup was used in manufacturing such foods as jam and sweet pickles these foods be labeled with some word like "dextrose" or "glucose" to warn the consumer that the foods were not made wholly from cane or beet sugar. In 1930 the Federal regulations were changed, and since that time they have not required special labeling of foods made of corn sugar or corn sirup. Most State laws and regulations have been changed to agree substantially with the Federal regulations, but several States still require the labeling of foods and soft drinks that are made partly from corn sugar or corn sirup.

It is contended that these labeling laws interfere with the sale of products made of corn sugar and corn sirup. Probably this is true. When the consumer sees in the store a jar of strawberry jam with a label, "This jam contains dextrose,' she suspects something is wrong. She probably would be just as skeptical of a label, "This jam contains sucrose." She wants to buy pure strawberry jam with no ifs, ands, or buts.

Consumers, manufacturers, technical nutrition specialists and pure-food experts all have a hand in making the Federal definitions for foods under the Food, Drugs, and Cosmetic Act of 1938. Marking and labeling requirements should be more uniform; when there is agreement on requirements that give necessary protection to the consumer and to the trade, these requirements ought to be accepted everywhere in the country. Lack of uniformity in regulations of this kind may interfere seriously with interstate trade.

Whether it is proper to require a product to be labeled with the name of the State of origin, whether it is fair to require out-of-State products to be labeled "shipped," and whether such requirements as the nontremulous air cell for the higher egg grades are fair to distant producers all of these questions lead to the heart of the grading problem.

THE ULTIMATE BASIS OF EFFECTIVE GRADES. Grading has been promoted by producers and traders, and largely because they stood to gain

by it; but grades must rest solidly on consumers' preferences or on basic utility to consumers if they are to be effective. Consumers will not pay more for one grade than another if it makes no difference to them which grade they buy. Furthermore, the fundamental economic justification of grades likewise is that they afford a means for consumers to register their preferences more accurately and more effectively, so that, if the grading system is carried all the way back to the producer, consumers are better able to encourage the production of the grades they prefer and to discourage production of the less. desirable grades.

In other words, although it has been producer groups primarily that have promoted grading, it is the consumers who determine the effectiveness of the grades set up. The grades established have been effective in proportion as they have reflected real differences in consumers' preferences. For example, candling is used to determine egg grades because it is the most reliable method known for estimating in advance how the egg will taste when served on the table; and certainly a real difference exists in the strength of a consumer's desire for a good, fair, or bad egg. If egg grades were based on the shape of the egg and that alone, consumers probably would pay no more for one grade than another, and there would be no incentive to producers to grade, nor indeed any reason why they should. These principles, while clear enough, perhaps require some explanation to bring out their applicability to grading that does not reach all the way through to the ultimate consumer. To give a few of the many possible examples, the grades for canning peaches follow the product only as far as the canning factory. Wheat grades go only as far as the miller. Most grades for fresh fruits and vegetables are not used after the product reaches the wholesaler, for both the retailer and the consumer typically buy on personal inspection.

How then do grades rest on consumer preferences? There are two answers, depending on the commodity in question. If the commodity is radically changed in form on the way to the consumer, as when wheat is changed to flour, the

ultimate consumer's influence on the choice of grade standards is indirect. Yet it is real. The miller prefers the qualities of wheat that will give a high yield of flour possessing the qualities consumers prefer. However, for commodities of this kind, which undergo a radical change in form, the arguments presented above are most realistic if "consumer" is understood to mean "user"; thus the miller is to be regarded as a consumer of wheat.

On the other hand, if the commodity is not greatly changed in form, the influence of the consumer is felt directly. Even if the consumer buys, say, lettuce on the basis of personal inspection and not on grade, yet the grades used by shippers and wholesalers are directly related to what the consumer wants. The qualities the dealer will prefer are usually and mainly the same ones that the consumer will prefer. Some modification of this statement is necessary, for the shipper and dealer will also prefer a type of produce that will ship and keep well. That is, to consumers' preferences, which they must keep in mind, they will add some preferences of their own growing out of the necessities of merchandising. This qualification is an addition to, and does not in any way weaken, the general principle that grades must be solidly based on consumers' preferences.

It is always possible that some irrelevant requirement may be included with relevant requirements in setting up grade standards. For example, it might be decided arbitrarily that only perfectly shaped eggs would be allowed in the top grade. Then eggs of nonstandard shapes would be thrown into the lower grades and the consumer would learn that in order to be sure of high quality, he must buy perfectly shaped eggs. In such a situation would lie opportunities for unfairness. Suppose, for instance, that farmer A's flock could produce eggs meeting all the standards that the eggs produced by farmer B's flock met, except that farmer A's eggs were not perfectly shaped. Then farmer A's eggs would be thrown into a lower grade, along with eggs inferior in quality, even though consumers would just as soon buy farmer A's product, and at the same price as farmer B's.

The problem of choosing "correct" grade standards involves several difficulties. The first difficulty is that there is no general agreement as to whether consumers' preferences as expressed through market prices, or home economists' or nutritionists' evaluation of basic usefulness, shall be taken as the basis of grade standards. The two may differ widely. The second difficulty is the small amount of research that has been done to determine consumers' preferences. We do not have very definite quantitative information about the details of consumer preferences. The third difficulty is to translate consumers' preferences into a description of the article in objective and measurable terms. It is desirable to formulate grade standards so far as possible in terms of definite measurements-in terms of inches, pounds, a certain number on a color scale, etc.

It is necessary to solve all these difficulties before the fairness or unfairness of a given requirement in a grade standard can be judged. For example, the question of whether the requirement of nontremulous air cells in the top grades of eggs is fair or unfair cannot be settled until there is general agreement as to whether a tremulous air cell is or is not a reliable index of quality-"quality" being defined either on the basis of consumers' preferences or according to some scale of "basic utility" requirements. If it is generally agreed that a tremulous air cell is a reliable index of quality, then the exclusion from the two top grades of any eggs that have been shipped in from a distance must be recognized as fair and just; but if a relationship between quality and tremulous air cells cannot be satisfactorily demonstrated, such exclusion must be judged as unfair to shippers who are at a distance from the market.

It is possible then that some arbitrary requirement may be added to the grade standards and that it will have the effect of discriminating against a certain group of producers. In order either to prove or to disprove that the requirement is arbitrary, it is necessary to discover what characteristics are considered by consumers (or, alternatively, by experts) as making up quality, and then to express those charac

teristics in definite, measurable terms. If the description so arrived at includes the disputed requirement, it may be concluded that the requirement is necessary; if not, that it is arbitrary.

The problem of judging the fairness of labeling requirements does not appear to be so complicated as that of determining correct grade standards. If the required labeling includes information that is not of interest to consumers, they will ignore it in making their purchases and it will have no effect. If, on the other hand, consumers are interested in the information given by a required label, it is hard to make out a case for denying it to them. But this does not mean that a strong and obvious case cannot be made against misleading labeling. In the past, some of the southern States have required eggs produced within the State to be labeled "Fresh", provided only that they were not "partly or wholly decomposed" and had not been in cold. storage and had not been shell-treated. Such labeling, which is in essence false, can only lead toward suspicion and disregard of all official labeling and official grades. Certainly it is a fair test of a labeling requirement to ask whether it gives the consumer accurate information and whether the prescribed terminology tends to misrepresent the produce or not.

"BUY-AT-HOME" appeals.-Good reasons can be advanced for requiring that consumers be informed of the State in which the product they are buying was produced. Often a fruit or vegetable grown in a particular part of the country has a flavor or some other characteristic peculiar to that locality, which the consumer is looking for. In such cases he may be greatly aided in his buying if the product is marked to show what part of the country it came from.

In some instances, however, marking with the State of origin has apparently been required because it aids in building up a sentiment against out-of-State products. If required with such a purpose in mind, marking with the State of origin must be classified as a hindrance to interstate trade.

One Southern State recently promoted an in

tensive Buy-at-Home campaign. As one feature of the campaign, consumers within the State were urged to buy eggs produced within the State in preference to those shipped in. In one of its annual reports, the State Department of Agriculture had the following to say about the purpose of the egg law:

"In the grocery stores of (this State), you will find signs reading 'Shipped Eggs', '(home State) Eggs', and in some instances, 'Cold Storage Eggs'. These signs are placed on cases containing eggs in compliance with (our) egg law. The law was designed for two purposes; first, to indicate to the purchaser the quality of the eggs on sale and second, to promote the use of eggs produced in the State. It has unquestionably been of great service in this direction. However, (our State) had a long way to go before she supplied eggs sufficient for her own consumption."

In the same report, the Department quotes with approval from a local paper as follows:

"The growing of poultry as a 'secondary farm income to replace some of the loss of cotton income' is strongly advocated. The shipping of live poultry has brought hundreds of thousands of dollars into the State in recent years but in spite of the growth in poultry production, the State is still annually sending hundreds of thousands of dollars to other States for eggs." [Italics ours.]

To sum up the argument of the last few pages, it must be admitted that the choice of grade specifications or the choice of labeling requirements, either one, may have a restrictive effect on interstate commerce. A grade standard may contain a requirement that prevents produce originating at a distance from the market from qualifying for the top grades. Information may be required on a label which will influence consumers to buy produce raised within the home State rather than outside its borders. A requirement is not to be condemned automatically, however, on the sole ground that it exerts a restrictive influence on interstate commerce. It must be tested by the criterion of whether it is firmly based on consumers' preferences (or,

alternatively, on experts' judgment of basic worth) and by the further criterion of whether it is thoroughly accurate and honest in its implications.

EMBARGOES ON SPECIFIED GRADES

A survey of the types of grading laws and regulations affecting interstate commerce would be incomplete if it did not include those which have the most direct and immediate effect of all-laws and regulations that prohibit the export or import of produce of low grade. The Michigan potato law does not permit cull potatoes to be sold for table use within the State or to be shipped out of the State. The Colorado egg law prohibits eggs grading as U. S. Trades from entering the State. A regulation of the State Department of Agriculture of Utah prohibits cull fruits and vegetables of every kind from entering the State, and directs inspectors of that Department to inspect any fruits or vegetables coming into the State to see whether they grade as culls. Furthermore, entering trucks are charged an inspection fee, varying from 50 cents to $4. In the summer of 1937, all of the incorporated towns of Bamberg County, S. C., adopted a uniform ordinance under which official inspection was required of all cucumbers to be shipped out of the county. By this means it was hoped to eliminate culls entirely from shipments. The marketing agreements of the Agricultural Adjustment Administration have also been used to keep produce of inferior grades off the market.

Many growers and dealers believe that prices of perishable agricultural commodities can be raised and stabilized by keeping inferior qualities off the market. The extent to which such a program may raise the total income of growers is not known and probably varies greatly from one commodity to another and from one season to another. The present study is not attempting to determine whether or not a general program to reduce the marketings of inferior grades is desirable. But it should be pointed out that any law which prohibits the shipment of produce of inferior grades into a given State, but which allows local producers within the State