February 28, 2006

 Dear Tomato Grower:

 2006 Pricing:

There has been a lot of pressure from processors and growers to publish an average price for California. Unlike past years, there is significant difference between regions. There are also contracts which are “market priced”. So where are we at this stage?

Rough weighted average excluding late & early premiums: $58.00

Rough weighted average included expected late & early premiums: $59.00

 Several canners are still developing their prices so these figures will change slightly. Some notable changes this season vs. last:

• Northern growers in general will receive higher prices than the rest of the state

• Northern canners paying up to $5 Sep 15, $7.50 Sep 25 and $10 Oct 7

• Central and Southern canners paying up to $1 Sep 5, $4 Sep 15, $6 Sep 25 

Why the differences:

• Northern growers were willing to work together for higher base prices and late season premiums

• Southern growers were willing to insist on starting late season earlier and some processors recognized that $3 and $5 was not enough 

The higher price in the North did come at a cost with one cannery cutting their existing grower base’s tonnage by just under 30% in order to cut production and replace some Northern tonnage with fruit from the Stockton area. The lessons learned are as follows:

• Working together pays dividends, but there needs to be a statewide effort to maximize gains. The barriers of entry are too low for a regional only strategy.

• Canneries will strongly resist paying a higher price if it puts them at a competitive disadvantage with processors from another region.

Contract Intentions:

California Agricultural Statistics Services reported that 2006 canner contract intentions are 11.6 million tons based upon 293,000 acres and 39.6 ton per acre yield. The trade was genuinely stunned by the high figure with most estimating the crop at 11 – 11.2 million. If we take the estimate at face value will the industry build too much inventory?

 No. Let’s look at the numbers.

 Projected 2005 & 2006 Supply and Demand

An 11.6 million crop wouldn’t be ideal, but not the end of the world either. A wet spring would make this whole discussion moot in any case.

2005 Yields per Acre by County

Before we completely put 2005 to rest it’s useful to review yields by county which helps explain some of the differing price expectations for 2006:

County                 Yield           Harvested Acres          Production

Colusa                 34.78                             19,900                 692,200

Fresno                 38.85                             96,800              3,760,300

Kings                    40.61                             21,300                 865,000

Merced                29.02                             14,200                 412,100

San Joaquin        35.23                             32,400              1,141,400

Solano                 32.37                             10,300                 333,400

Stanislaus            35.17                             11,000                 372,800

Sutter                   35.54                               5,200                 184,800

Yolo                     34.19                             37,500              1,272,000

Average               36.36                                    

Paste Market:

Sales are limited but pricing is in the $0.35 - $0.37 range. This is quite a jump from the $0.27 - $0.29 reported last year.

 Promotion:

For those of you that attended our annual meeting you may recall that one of our objectives for 2006 is to set up the framework for a nutritionally based promotional program. To this end, we’ve contracted the services of Rodger Wasson. Rodger brings hands on experience building and launching successful programs for almonds, beef, pork and strawberries. With Rodger’s leadership we are confident that we can build a compelling case that both growers and processors can support. If not, we’ll drop promotion once and for all.

Questions or comments? Please call (209) 478-1761

Ross Siragusa

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