CTGA Tomato Bulletin

March 24, 2005

Dear Tomato Grower:

CLFP March 1 Inventory Report:

CLFP March Inventory Report	2002-03	2003-04	2004-05	Difference

Beg Inv	3,518,082	4,395,968	3,551,256	-19%
Pack	11,656,820	9,812,110	12,266,410	25%
Total Supply	15,174,902	14,208,078	15,817,666	11%
March 1 Inventory	7,015,535	5,875,979	6,501,209	11%
9 month Disappearance	8,159,367	8,332,099	9,316,457	12%
Monthly Disappearance	906,596	925,789	1,035,162	12%

Paste for Sale Pack	5,254,854	4,725,376	6,812,834	44%

Inventory March 1	2,276,469	1,627,251	2,473,408	52%
9 Month Disappearance	2,978,385	3,098,125	4,339,426	40%
Monthly Disappearance	330,932	344,236	482,158	40%
Total Paste Stocks
Total Paste Stocks Dec 1	6,846,911	5,886,146	7,009,700	19%
Total Paste Stocks Mar 1	5,049,958	4,027,205	4,626,795	15%
Disappearance	1,796,953	1,858,941	2,382,905	28%

Overall demand continued and is up 12%. Assuming the numbers are accurate, demand is driven by paste sales whereas canned product demand is declining.

If we take the average disappearance for March � May for the last 5 years, we project total 2004-05 disappearance at 11.75 million tons which will make it the highest ever. This will also put ending inventory at under 4.1 million which is below the past 5 year average.

Recap 2005 Pricing all equating to $50:

Firm contracts have been signed:

� Campbell�s, Del Monte, Hunt, Ingomar, SK & Unilever

Growers reviewing solids schedule and clarification on terms:

� Morningstar

CTGA reviewing Premium and Discounts (VIP) Program

� Stanislaus

CTGA awaiting solids schedule:

� Los Gatos

CTGA awaiting final proposal:

� Escalon, San Benito

Some canners are still looking for tonnage whereas some growers are on the fence about whether they will grow tomatoes at all. Grower concerns include:

� Wet planting conditions which will likely lead to lower yields

� Solids discounts schedules which put create too much risk in a tough economic environment

� Beds still not prepared

� Energy situation has deteriorated over 2004 which makes $50 very tough to make work

� Several long term growers in the Sacramento area decided to pull the plug on their tomato operations

Bottom Line: 10.3MM contract intentions unlikely to be met and outlook for 2006 tomato pricing is favorable.

Energy:

Below are two charts which show the near relentless increase in natural gas and diesel. If the trend doesn�t change the industry will be severely impacted. Attached are a couple futures charts which are very concerning:

Natural Gas � August Delivery:

Natural gas for August delivery has risen to $7.50 from $6.00 in 2004 and $4.50 in 2003. The increased cost to the industry from 2004 to 2005 is $24,000,000 or $2.40/ton on the expected 10,000,000 ton crop.

Natural gas usually is a good indicator for fertilizer values. If we assume an additional 25% over last year we would see an increase of roughly $27.00 per acre or just over $7,000,000 out of growers� pockets.

Diesel: Below is a chart for heating oil futures for April delivery. Heating oil futures are the best hedge for diesel and a good indicator of price trends.

The price increase in the past year has been $0.75 per gallon or roughly $63.24 per acre which equates to $17,000,000 more for tomato growers.

Bottom line: Without even considering the additional diesel cost to transport fruit to the cannery or increased can costs, growers and processors will be out close to $50,000,000 ($5/ton of tomatoes) if energy markets stay at current levels.

Paste and Product Market:

Based on higher energy costs and weather related concerns for the 2005 crop one would expect that paste and tomato product markets would be poised for an increase. Regrettably this is not the case with some reports that 2006 has been sold at $0.275/lb.

On the retail side branded marketers complain about their inability to raise prices due to retailer concentration. Overall demand is flat so they are loath to increase prices for fear of losing market share.

The following charts from the Food Institute sum up the canned tomato and sauce the retail market. You should note that canned tomatoes demand is shrinking just under 1% per year whereas paste/sauce/purees have dropped 3% per year. Some of this can be attributed to the effects of the low carb diet, but clearly the industry (growers and processors) need to address the demand side of the equation.

Promotional Activities:

Public Service Announcements:

Our public service announcements have run on 31 stations for a total 4490 broadcasts with an estimated audience of 14,585,000. The California School Food Service Association presented the CTGA with a plaque at the annual meeting in appreciation of our funding of the PSAs. We look at this as the tip of the iceberg in terms of what we need to do.

Canner Support:

Conagra, Ingomar, Los Gatos, Morningstar, Pacific Coast Producers have indicated there interest in supporting an industry wide promotional effort. The CTGA is in contact with the remaining canners to convince them to join the effort.

Our goal is to facilitate the creation of an industry wide organization in which growers and processors would contribute jointly towards promoting the nutritional message for processed tomato products. Some may argue that economics are so tough that no one can afford to contribute towards promotion. This is the same argument that some almond growers used in early 90�s. The almond industry reversed their negative slide through promotion and we have even more going for us. Inaction in our case will lead to more of the same negative dynamic � grower and processor fight over an ever shrinking margin.

Questions or comments � please call (209) 478-1761 or e-mail rdsiragusa@ctga.org

Ross Siragusa