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February 7, 2003 |
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| Dear Grower: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTGA Rejects
Del Monte's $49 Offer Del Monte Foods made a $49.00 offer to CTGA for the 2003 California tomato crop. Evidently, Del Monte growers were getting concerned about the price for this year and the company wanted to give the growers a minimum commitment and hoped that this would do the trick. The CTGA at its Board Meeting of February 4, 2003 resoundingly rejected the offer and in a letter to Del Monte stated that there is a major disconnect taking place in the processing tomato industry in California. Considering the recent Canners’ Intentions numbers (see below), it appears that all logic has left the contracting practices of California processors as they doggedly build inventories and drive down finished product prices. The inevitable financial mismatch, however, cannot be balanced on the backs of growers. CTGA proposes a fair and reasonable price that addresses growers’ welfare of $52.00 per net ton. With the cost of business going up, our $52.00 offer of today is not the same as the one we made in October of 2002. Petroleum prices are on the rise and with the state’s budget in disarray there are numerous proposals that will directly increase the cost to produce tomatoes in California for the 2003 crop. For example, the Mill Tax, the tax growers pay on the sale of fertilizers and pesticides, and Workers Compensation Insurance premiums will no longer be partially offset by General Fund monies. The $52.00 price was established using statewide average cost-of-production and yield-per-acre data plus a modest 5% or $100 per acre profit margin. We know that there are a large number of paste contracts, priced on a cost-plus basis, utilizing the CTGA negotiated price as the benchmark. If this type of contract is good business for processors then it is good business for growers, the #1 critical component supplier. After all California is selling and putting its name on the goodness and wholesomeness of our tomatoes! CTGA is impressing upon all canners that time is of the essence for this year’s negotiations. It is critically important that we have a meaningful dialogue now, as the future is uncertain. We are vitally concerned about the potential impact if the U.S. was to go to war or if the drought that is plaguing the west deepens. CTGA expects to have a number of discussions with canners in the next few weeks. |
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| Drought Watch In 2002, Arizona, Colorado, Utah, Nevada and Wyoming had the driest or near-driest summer since meteorologists began taking notes more than a century ago. The Colorado River ran at 14% of its normal flow, a 100-year low. And many think there is worse to come. Drought is no stranger to the west, but each visit is more punishing. Previously reliable water-sources, such as aquifers, are shrinking; populations are growing; American Indian water rights are more strictly enforced; endangered species are more fiercely protected. In previous droughts, cities and irrigators simply built more dams, dug deeper wells, sliced wider canals and diverted streams. Few such options are available today. Climatologists are worried by a recent northward shift in the Pacific Decadal Oscillation (PDO), a pattern of warmer or colder weather on a 25-year cycle. This new phase, which is causing the rain of the immediate future, will largely fall in the wrong places: on central Los Angeles, for example, rather than over the Sierra Nevadas. Two wet weeks at the end of 2002 bolstered hopes for an El Niño-driven end to three years of drought in the Sierra and northern Nevada. Instead, they were followed by a warm and dry start to 2003. As a result, the snow pack has dwindled below where it was a year ago, and experts are fearing a fourth-straight wintertime bust. In related news, the federal government is warning thousands of West Side farmers that they might receive only 50% of the water they contracted for their plants. Those farmers produce crops on more than one million acres between Tracy and Bakersfield. A complaint from growers and water district managers is that the low initial estimate makes financial planning – and dealing with bankers – difficult. |
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| California
Processing Tomato Report As reported by the California Agricultural Statistics Service, Jan. 31, 2003
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