May 3, 2004

The Hale Group summary indicated a need for early pricing, a single uniform price, and the build of relationships between processors and CTGA.  The dust is settling and this is where we are:

·         Base price settled in February and contracts completed by April compared to September ‘03

·         Standardized base price of $51.00 – eliminating equating prices

·         Late season premiums of $3.00 & $5.00

·         Generally standardized discounts with minor differences

·         Requested a fair solids premiums and discount schedule

·         Opening offer from the processors was $48.00; late season premiums of $5.00 & $7.50; some canners offering $2.00 early season; equating terms

·         No plans for conciliation as of this date

What was left to be negotiated between the grower and processor?

• Early Season Premiums
• Tomato Varieties
• Harvesting Costs & Scheduling

So will you be better off? Too early to know for sure, but a few observations can be made after taking changes in late season and assuming no early season premiums.

• Grower is $2.35/ton ahead compared to opening offer of $48
• Compared to last year’s $50 the grower is $0.45 ahead
• Some growers will benefit if they produce high solids fruit, but others have greater exposure if they produce low solids
• Many growers have contacted the CTGA to express their concern that $51 is not enough in the current cost environment; changes in the early and late seasons premiums really hurt them at the benefit of the mid season grower; solids schedules introduced too late which put too much risk on some of the growers.

As a newcomer I have a few comments about the negotiations and the overall pricing structure:

1.       California growers undervalue their tomatoes. There is no significant domestic or offshore competition.

2.       Growers set the stage for accepting lower prices by committing themselves financially 6 – 9 months before the crop comes to market. As a consequence bargaining is a façade with the processors holding most of the cards. Once the fruit is planted what are you going to do?

3.       As a former fruit processor I don’t blame tomato processors for not raising tomato prices. Why should they? Growers seem willing to accept the CTGA price and many growers have signed contracts for less.

4.       I think the CTGA negotiating team and Ron Schuler did a very good job negotiating the contracts this year, especially given the lack of grower support. I do think that growers deserve more, especially in light of sharply rising energy, fuel, fertilizer, labor and seed expenses.

5.       The grower needs to start working now on 2005 if he wants better pricing. This would also permit the processors to adjust the pricing of their products so their margins don’t suffer.

6.       Join the CTGA.  Have a voice in the future of processed tomatoes.

I will spend the next 30 days meeting with growers across the state to get your input. My only request is that growers get involved.
 

Other News
The California League of Food Processors reported in late March inventory movement of tomato products:

These numbers support the widely held view that inventories are tight and are supportive for higher tomato product pricing. If demand continues at its current pace, June 1 inventories will not be burdensome, so the market should have little problem absorbing the projected 11,000,000-ton crop.
 

Sustainable Agriculture
The CTGA set up a sustainable agricultural subcommittee chaired by Bruce Rominger from Winters, with Jim Beecher from Five Points and Gary Merwin form Clarksburg as members. The committee will make recommendations for putting together a processing tomato production guidelines book. This is in response to requests from several large customers; in addition to the recognition that tomato growers need to document conservation measures.
 

Product News

In response to the impact of low carb diets a number of new products have hit the market including Heinz’ One Carb Ketchup and Unilever’s low carb pasta sauces. Campbell’s also introduced a lemon flavored V8 juice. Also, there has been lots of positive press on the benefits of lycopene.

Any comments? Call Ross Siragusa (209) 478-1761.
 

Ross D. Siragusa
President/CEO

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