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October 15, 2007 Dear Tomato Grower: In the current Tomato Bulletin:
PTAB Projects 28,000 for the final week
· Late rains eliminated any chance of 2007 topping 1999’s 12,239,000 · Based on 293,000 acres the average yield for ’07 is 41.1. This is likely to change when the final harvested acres are calculated Should the industry be worried about a 12 million ton crop? Despite the big crop, fundamentals remain strong: · Major paste buyer’s are rebuilding inventories · Export demand is stronger than ever due to a 10% reduction in China and 5 – 10% reduction in key Mediterranean exporters – Italy is actually buying from California and not at low prices · Paste market remained stable despite crop size · 12 million tons matches original intentions – processors received what they wanted CTGA’s 2007/2008 Supply and Demand Estimate: Carry-In 3,130,000 CA Production 12,050,000 Other US 550,000
Total Supply 15,730,000
Projected Demand 11,500,000
Ending Inventory 4,230,000 · The projected carry out would be similar to 2004, but most major producers had large crops which won’t be the case this year · The EU will begin decoupling tomato subsidies which will begin the process of a sharp reduction in overall production thusly creating new demand for Californian paste · Most CA paste producers project that they will have no available inventory by next crop which means the 11,500,000 demand figure may be understated · Arguably, we are entering a period where the market needs 12 million tons from California on an annual basis 2008 Grower’s Intention Survey Projects 22% Acreage Reduction · Based on feedback from growers representing 49% of 2007’s planted acreage, 2008 will show a 22% reduction
So what would a 20% acreage reduction look like? Assuming there ends up being an overall reduction of 20%, we’re likely to see the following:
293,000 (’07 acreage) X 80% = 234,400 ’03-’07 Yield 37.7 Projected 2008 Production = 8,836,880 While acreage will be reduced, we can’t lose sight of growing production capacity due to the new Rio Bravo plant. Projected ’08 Capacity = 12,400,000 Potential shortfall = 3,563,120 CTGA projects fully loaded cost per acre Based on grower feedback and UCCE 2007 cost analysis: Land Prep $100 Cultivation 90 Seed 85 Transplanting 140 Greenhouse 195 Growing 95 Irrigation 350 Fertilizer 230 Chemical 200 Harvest 370
Total Direct 1855
Overhead Rent 200 Other 200 Interest 75
Total Cost $2330 2008 costs are almost assuredly to be higher due to labor, energy and water. Taking a conservative $2400, per ton will be $63.66 based on a 37.7 ton yield (planning on a repeat of ’07 yields is wishful thinking) Processors confident that they’ll secure more than enough acres with no price change: Most processors are confident that they’ll easily secure 2008 acreage without changing the price. Presumably, their logic is based in part of the following: · Securing enough acres has never been a problem · When conditions were dry in the past canners got their tons · Following a 12 million ton crop several canners may cut back (don’t count on it being much) · There are a lot of acres of row crop land with wells and cotton acres will get cut first (pima outlook is getting better) Bottom line; a price with “a 7 in front of it” is not on their radar screens. If you want a higher price and an early contract, please consider the following: · Tell your processors how many acres you will be cutting. If you are reducing the number of processors, make sure that this is on the table from day 1 · Don’t commit to a processor without a price. Agreeing to the “CTGA Price” at an undefined later date only undermines your leverage · The fear of losing a tomato contract is overrated especially in the current environment · Don’t say one thing and do another in the field · Please attend grower meetings, talk to your neighbors, work with the CTGA As long as growers follow these steps, attractive pricing and an early contract is achievable. Anheuser-Busch Brewing and Food Science Laboratory UC Davis approached CTRI and CTGA to contribute $125,000 each to be spread over 5 years for a processing tomato specific food laboratory. Dean Van Alfen addressed this project at the 2007 CTGA Annual Meeting. At this stage, just over $1,000,000 of the $2,000,000 requirement was pledged by ConAgra, Heinz, Los Gatos and an anonymous processor. Growers should support this endeavor, but more processors need to show their support first. Tomato Health and Benefits: Check out this MSN article on what men should eat – see image 4 http://health.msn.com/dietfitness/slideshow.aspx?cp-documentid=100171565&imageindex=4 ___________________________________________________________________________________________________________ 2008 Grower Intentions As part of CTGA’s 2008 bargaining strategy, it is critical that we have a good estimate of growers 2008 planting intentions. Between projected tight water and very attractive alternative crops, 2008 will not be “business as usual”. Please base your response on your best estimate of how much water you’ll receive in ’08 and respond to this request as soon as possible. Your individual replies will be kept confidential. Thank you for your support. Please fax replies to (916) 925-0213 or e-mail to ctga@sbcglobal.net County: _____________________ 2007 Conventional Tomato Acres _____________________ 2008 Conventional Tomato Acres _____________________
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