January 18, 2008

Dear Tomato Growers:

 ·        $70 price agreement reached with all processors except Escalon.

·        CLFP and USDA issued puzzling reports - December inventory report shows record high inventories, but the Contract Intentions shows processors want the 2nd most ever

·        Late season contracting is very tough sledding whereas other positions have very high tons per acre averages, which creates potential for a short ’08.

·        Please be sure to register for the Jan 31 CTGA Annual Meeting in Modesto. Program should be worth your time and there will be some winners of Silver Oak!  

Campbell and Unilever Agreements: 

During this past week, Campbell and Unilever agreed to terms: 

Campbell Agreement: 

Base Price:                                       $70 

Early Season Premium (ESP)        $5.00 for direct seeded acreage delivered first 21 days harvest

                                                            $3.00 for transplanted acreage delivered first 21 days harvest

 Late Season Premium (LSP)        $5.00 scheduled Sep 15 – 21

                                                            $7.50 scheduled Sep  22 - 28

                                                         $10.00 scheduled Sep 29 – Oct 5

                                                         $15.00 scheduled Oct 6 until harvest completion  

Late Season premiums to be paid by June 1 

Comment: The ESP is driven by additional cost and risk especially for Northern areas. Campbell’s extends this premium to other regions in order to be fair and to assure that they will get their processing plants started as early as possible.  

Unilever Agreement:  

Base Price:                                      $70

 Late Season Premium (LSP)        $5.00 delivered        Sep 15 – 21

                                                            $7.50 delivered        Sep  22 - 28

                                                         $10.00 delivered        Sep 29 – Oct 5

                                                         $15.00 delivered        Oct 6 until harvest completion       

The CTGA and Escalon will get together the week of Jan 28. 

2008 Full Year Price equates to $72.60: 

·        Taking current agreements and the past 5 year weekly average for deliveries and apply LSP’s and estimated ESP’s the average price is $72.60 as opposed to the $70 base price.

·        Over the past 5 yrs LSP tonnage represents 26.5% of total tonnage so it rightfully should be included.

·         Arguably, we should see less than average October deliveries, but Mother Nature will have a major say in that.  

Contrary Reports: 

·        Dec 1 inventory levels are at the highest ever. This is not surprising given that total supply is also at the highest level.

·        Movement, if annualized, at 11,500,000 is respectable, but not off the charts.

·        Processors report that domestic demand is sluggish, but export volume and pricing is excellent

·        If movement continues at this rate, ending inventories will be 4,226,000 – high but below 1999 and 2000 levels.

·        The key going forward will be maintaining export sales and cutting production in ’08 otherwise the industry will have a large inventory burden. 

During contract discussions, many processors expressed concern regarding the overall crop size and anticipated inventory levels. This is why the 2008 Contract Intentions Report, shown on the next page, is concerning. Boswell’s new plant will increase demand by 400,000, but the numbers are difficult to square. The only two conclusions that make sense are: 

1.      Demand is much better than stated

2.      Processors are unwilling to cut production for fear to losing market share and operational efficiencies, so “damn the torpedoes”

Fortunately, the Contract Intentions is a bit of a pipe dream and not likely to play out. 

2008 Contract Intentions Report: 

                                    Estimate                    Acres            Yield            Production   

                                    2008                        288,000          41                11,800,000         

                                       Actual

2007                        293,000*        41.3*            12,081,000

2006                        282,000        35.8                10,104,000

2005                        264,000        36.4                  9,600,000

2004                        281,000        41.5                11,672,000

2003                        274,000        33.8                  9,252,000 

Average                    279,000        37.8                10,542,000

* estimated 

Comment: At risk of making the same mistake as last year when the crop exceeded the estimate and the CTGA forecast was otherwise, it will be extremely difficult to achieve 11,800,000 tons. 

·        The only years with > 40 ton averages were ’04 & ’07; when there were near perfect growing conditions. We can expect high yields due to a greater percentage of acres grown with drip irrigation, but the higher use of well water and uncertain weather make 41 tons a stretch

·         The 288,000 acres is a figure backed into by the USDA and its likely to be a lot lower in reality due to tight water, alternative crops and growers contacting a very high tons per acre. 

·        Some processors report that its very difficult to find tonnage later than Sept 15 whereas others want to wrap the harvest up by Sep 28 in order to avoid high LSP’s. 

So what’s a more realistic estimate?  265,000 acres @ 40/tons per acre = 10,600,000

 UCCE Southern Sacramento Valley Tomato Day: 

Check out some of the excellent presentations made last week in Woodland. 

http://ceyolo.ucdavis.edu/Vegetable%5FCrops/Meeting_Powerpoints.htm 

CTGA Annual Meeting – January 31 in Modesto  at the Double Tree Hotel 

Just a reminder please join the CTGA Board, growers, processors, extension specialists and allied industry at the 61^st Annual Meeting. We have an excellent line up of speakers and exhibitors at a central location, which will hopefully allow many growers to attend.  

Exhibitors include:

                                    Ag-Seeds                              Actagro       

                                    Ag World Systems               American Ag Credit

                                    Bayer Crop Science            Hortau

                                    Netafim                                  Nunhems USA

                                    Odenberg                              San Joaquin Equipment

                                    Seminis                                 Ultra Grow Plant Food

                                    Yara North America             Yosemite Farm Credit 

I hope to see you there and thank you for your support!

Questions or comments please contact Ross Siragusa at 916-925-0225 or rdsiragusa@sbcglobal.net

 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  JANUARY 31, 2008 ANNUAL MEETING REGISTRATION 

Name(s)*:  _______________________________________________________________________________

                     _______________________________________________________________________________

Company: ________________________________________________________________________________

Address: _________________________________________________________________________________

Tel: _________________________Fax: ______________________ Email: _____________________________     

R.S.V.P. by January 24, 2008                                       * Non-Members / Allied Industry

California Tomato Growers Association, Inc.                       please enclose $35 payable to:

2300 River Plaza Drive, Suite 100                                       California Tomato Growers Association, Inc.

Sacramento, CA 95833

Tel. (916) 925-0225 / Fax (916) 925-0213

ctga@sbcglobal.net  / www.ctga.org

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