CTGA Tomato Bulleltin

January 26, 2005

Dear Tomato Grower:

2005 Pricing:

There has been some movement over the past week with Hunt joining Ingomar, SK, Los Gatos, Morningstar and Stanislaus at $50 per ton. Campbell’s and Del Monte are working on their final pricing strategy.

A few items worth considering:

Fields are very wet so for some growers who haven’t finished their field prep strong consideration is being given toward increasing cotton acreage
Growers are in the process of reviewing their 2004 costs and many are stunned by how much higher they were than budget and 2003
Its hard to paint a positive yield picture for 2005 so banking on repeating 2004’s yield in order to make money is a dubious strategy
Most canners are having difficulty in covering their full pack this year

If you don’t like a proposal from a canner let him know it.

CTGA Annual Meeting:

We had a very strong line up of speakers and exhibitors during our annual meeting last week in Modesto. The UCCE put on a very informative morning session while Secretary A.G. Kawamura, Rodger Wasson from the Strawberry Commission, and Dr. Clare Hasler from the Robert Mondavi Institute did an excellent job pointing out opportunities for our industry. A brief recap:

Secretary Kawamura’s speech focused on “four pillars” that support California Agriculture.

Nutrition – Given the spotlight on obesity and the importance of healthier eating habits programs that promote nutrition and good diets support California agriculture across the board. He specifically pointed out “You guys have a wonderful product to work with so the opportunities are huge.”

National Security – Supporting food close to home not only helps economically, but it’s easier to assure that it’s safe and wholesome.
Energy – Farming is increasingly being viewed as a source of renewable energy whether it’s for ethanol from corn or bio-diesel from garbanzos.
Environment – Farming is a resource for open space and preserving natural resources. Most people have a very favorable view of farmers, but do not think positively about agriculture. Agribusinesses need to a better job of getting their good story out to the public.

Rodger Wasson gave a very upbeat speech on how associations can do a lot with little money by supporting targeted nutritional research and being creative in getting their message out.

Rodger related a story about the state of the Almond Board when he joined in 1992. Growers were withholding dues and the industry was in a general malaise due to meager returns (not too dissimilar to the processed tomato industry today).

Rodger knew that almonds were healthy, but most dieticians cautioned people against eating them. Given the limited resources he challenged the Modesto Rotary to participate in the “Almond Challenge” which consisted of eating 2 oz. of almonds per day and taking cholesterol readings before and after the trial. Blood was drawn at the Almond Board office and almonds were dispersed. A month later all participants showed a reduction in cholesterol including one woman who showed a drop of 50 points. The rest is history.

Rodger readily admitted that almonds had nowhere near the health message of processed tomatoes, so we just need to wake up and get a broadly supported program started.

Dr. Clare Hasler discussed functional foods as a way to fight disease and how processed tomatoes fit nicely into this category. A couple worthwhile points:

68% of consumers are likely to treat themselves as opposed to seeing a physician. Incorporating healthy and good tasting foods is a natural.
Cardiovascular disease is the leading cause of death in the US, larger than the next 5 combined. Higher levels of Lycopene in the blood are associated with reduced levels of cardio vascular disease.
Italians which consume pizza more than 2 times a week have ½ the risk of suffering a heart attack. (Note Italian pizza has more tomato sauce, thinner crust and less cheese than the typical US version)
Lycopene has been shown to reduce osteoporosis and a 39% reduction in lung cancer risk.
Given the aging population there is a tremendous opportunity for products that consumers perceive as healthy and easy to consume.

In canvassing participants in the meeting, there was a general sense of optimism that these steps can be taken at a reasonable cost to improve the industry.

The only disappointment with the meeting was that there wasn’t greater attendance. If we are going to improve this industry it will take wide support from growers and processors across the state.

Will higher demand result in higher prices for processing tomatoes?

A Fresno County grower challenged me last week with the following question,

“What makes you think that increasing demand will result in a higher price of processing tomatoes? Barriers to entry for both growing and processing are low so who’s to say that we don’t increase demand to 13,000,000 tons and the price remains unchanged? Where’s the payback on the investment in promotion?”

Based on current economics the industry is losing growers and acreage. Increased production would accompany increased returns.
Higher demand creates greater opportunity for product differentiation based on quality attributes, for example, higher Lycopene tomatoes.
Demand driven by nutritional benefits will create greater export opportunities than currently exist. Export markets offer the greatest potential for growth. California as a low cost producer will benefit. Due to restrictions on water use, increased permanent crop plantings, competitive row crops and land retirement there is limit on how much land can be devoted to processing tomatoes.
A promotional program would offer the opportunity to differentiate California processed tomatoes from other origins. If there isn’t a program growers won’t reap the true benefit of their investment in good agricultural practices.

This issue can be debated at length, but if we don’t take steps there is no reason to anticipate an improvement from the current state of affairs.

Personnel Changes at CTGA:

We regret to inform you that Adam McCarthy will be leaving the CTGA. He will be working in Dixon, CA helping to manage a cattle ranch, and will also be performing some independent agricultural consulting. Adam and I decided it would be in the best interest of the Association to consolidate our duties. We would like to thank Adam for his contribution to the CTGA and we wish him success in his future endeavors.

Thank you for your on-going support and if you have any comments or concerns please call or e-mail.

Ross Siragusa

209-478-1761

rdsiragusa@ctga.org