February 23, 2007

Dear Tomato Grower:

 In the current Tomato Bulletin: 

• Statewide growers meeting draws 65 growers from across the growing region and they decided to suspend dropping any more seed in the greenhouse until a $63 contract is settled.
• Bureau of Reclamation indicated that the estimated water allocation based on current rainfall would be 35% vs 60% as originally indicated.
• Canadian growers settle with one processor at US$90.56 for paste tomatoes. Peel and juice tomatoes will be higher.

 Statewide Meeting: 

Last week at regional grower meetings there was a strong push to organize a statewide meeting in order to get a true sense of grower unity. Despite the good farming weather, 65 growers from Kings to Colusa Counties attended.  The salient points from the meeting are as follows: 

• We still do not have a Tomato Contract. There are indications that processors are willing to pay $61 - $62, but there is nothing firm.
• Water Districts held meetings yesterday and indicated that based on January precipitation, the February Estimate should have been 35%. This may improve to 40 – 45% in March, but 60% is unlikely. This will have an impact on the 2007 crop and most definitely 2008. Buying surplus water is not a real option at $200+, so growers will have to rely on wells which cost >$100 per acre to pump an acre foot of water. This is not a budgeted expense.
• Surveys done by seed companies indicate that planted acreage will be in 280,000 – 285,000 range not the 305,000 suggested in the Contract Intentions report. The projected crop size should then be 10,650,000 – 10,830,000 based on a paid yield of 38 tons per acre. This takes away much of the concern regarding a huge crop.
• Processors perceive that growers are “whipped” and will be happy to accept $60 - $62. As a consequence, the paste market is being discounted. The discounted paste market, in turn, is being used as justification for a lower tomato price…perverse logic.
• Another justification for a lower price is that the average grower should not expect to make a profit. The $63 price is based on the idea that the average grower with a 5 yr 37 tons per acre paid yield can budget a small profit; <6%. Given the tight beginning inventory, two consecutive poor (a.k.a. awful) years plus the risk associated with growing tomatoes, it’s only reasonable to expect that an average year would be profitable.
• Corn continues to climb to >$170/ton in Stockton. The price is so attractive that seed dealers are running out of seed. Growers with water can net $275/acre with less than $700 cost – do the math and figure out the return vs. tomatoes…

 Growers were offered the following options for their review: 

·         A revised sliding scale which was deemed interesting but too much downside potential; also there was concern on how to implement it across the industry.

·         Call it quits and negotiate the best deal possible. The base price will be up $4.00 vs. last year’s average.

·         Agree regionally to cut acreage if price targets are not met recognizing that 45% of the acreage is already committed.

·         Pull the $63.00 offer due to the water situation.

·         Send processors a letter signed by named growers stating that if $63 is not paid there will be consequences in ’08; dry weather &  increased demand. 

In discussing these options one grower mentioned that he suspended dropping seed due to the lack of a price and concern over the water situation. Another grower in the north suggested that he was considering the same but his rationale was alternative crops potential and frustration of having no firm tomato price. 

Growers concluded that they firmly need $63.00 and they would like to get this resolved quickly while some suggested that the price needs to be higher in light of the water concern. 

In order to show the industry that growers are serious about achieving a quick settlement, all present agreed to stop dropping seed until there is an agreement. The CTGA asked its growers to do the following: 

Please call your greenhouse and stop dropping seed. Once an agreement is reached with a processor, we’ll immediately contact you to commence dropping seed for that specific processor. Please contact your neighbors to be sure that they’re aware.

 Since the meeting, the CTGA has been in contact with 6 processors and expects fresh offers early next week. 

Canadians show us up once again…this is getting annoying: 

Last year our Canadian “friends” out yielded our record best by >1 ton/acre. Now they’ve gone and settled their 1^st tomato agreement at US$90.56/ton for paste tomatoes with Sun Ripe and avoided arbitration.  

You’ve got to be impressed with their style. 

Questions or comments please call (209) 478-1761. 

Ross Siragusa

President & CEO

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