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June 15, 2007
Dear Tomato
Grower:
In the current Tomato Bulletin:
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Coalition of Ag Groups, CDFA with
support of Valley legislators gains Ag exemption for new cargo
restrictions for this season – an excellent demonstration of teamwork
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Westland’s Water District indicates
that they should be able to meet 50% allocation but availability and
timing of supplemental water is up in the air
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Prospects for alternative crops in 2008
brighten significantly
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EU agrees to a phased out decoupling of
production subsidies for processing tomatoes
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Time to get bullish on 2008 prospects
and beyond
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Morning Star makes new proposal
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China Study Trip organized by WPTC
Load Securement Storm Cloud Averted:
This week started with a meeting with CHP
which provided the following alarming news:
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Traditional tomato tubs secured by
perimeter cabling will require 4 lateral tie-downs per tub (perimeter
cabling not included in regulations)
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Any loads with tomatoes above the tub’s
sidewall height will require tarping
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Since the regulations were already in
place the CHP could not grant an exception
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The only exemption could come from the
Federal Motor Carriers Safety Administration (FMCSA) which could take up
to 90 days.
Through a concerted effort involving Rep.
Costa’s office, Assemblyman Aghazarian’s office, Farm Bureau, Ag Council,
CLFP and the CDFA, a meeting was
arranged in San Diego with the CHP
and FMCSA which resulted in the
following tentative agreement:
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A temporary waiver for all ag
commodities
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Safety studies for current method of
securement must be presented to CHP by Dec 1
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Tomato industry must address the safety
of having tomatoes loaded above the tub’s sidewalls. This is not because
the CHP views spilling tomatoes as a significant risk, but the
regulations state that anything above the sides of a trailer must be
secured. This issue needs to be addressed in any safety study.
Delta Pumps Creep Back Into Action:
A June 13 meeting of the Westlands Water
District painted the following picture:
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Barring an unexpected curveball,
growers should receive their 50% allocation
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Growers, however, should be prepared
for additional disruptions
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The 56,000 AF supplemental allocations
purchased will be unpredictable in delivery timing and may not be
delivered.
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Pumps not expected to reach capacity
until July 1
Given the water concerns, few southern
growers are going to be willing to commit acreage for tomatoes until they
know what they’ll be paid.
Alternative Crops:
Just as water concerns cloud the picture
for 2008, the recent rally in feed and food grains gives many growers
cause to rethink their 2008 crop plans. At the risk of being accused of
trying to convince growers that they shouldn’t plant tomatoes, let’s take
a look at wheat economics:
Revenue/acre:
Yield 3 ½ tons/acre @
$200/ton $700
Straw $
30
Gross Revenue
$730
Costs/acre:
Land Prep &
Planting $ 72
Seed $ 26
Chemicals/Fertz
$ 76
Irrigation $ 32
Harvest $ 35
O/H Including
Land $155
Total Cost
$396
Profit
$334
Ø
A grower with $2300
fully loaded tomato costs and a paid yield of 38 tons/acre would need a
$69.32 price in order to make $334/acre; interesting but also consider
the risk, ability to lock in price before committing, rounds of golf that
could be played…
EU
Decoupling Processing Tomato Production Subsidies:
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For the 2008 crop year, the EU will
begin a 4 yr phased decoupling of production subsidies.
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The consequences will be an increase in
the price that EU processors pay for tomatoes; consolidation of European
processors; enhanced export opportunities for Californian canners.
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The international landscape will look
wholly different by 2011 and Californian growers should see bottom line
benefits.
Long term Outlook for Tomato Prices –
Bright
Over the past 18 months, the market
dynamics for processing tomatoes changed significantly.
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Sharp cost increase in inputs
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Majority of Growers willing to work
together
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Enhanced opportunities with alternative
crops
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Food safety concerns regarding offshore
supplies
Looking forward, growers’ ability to
secure better tomato prices should be even better
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Tight water will force growers to
insist on a price before committing while the reduction in suitable row
crop acres will be in high demand from several crops
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Reduced EU subsidies will create
increased export opportunities for California while reducing competition
from imports into the US
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Global brands will be challenged in
their ability to source reliable high quality tomato products
If growers want to stop being taken for
granted and make meaningful changes in how they sell tomatoes, now’s the
time. The CTGA will be working this summer on significant changes in the
way it does business to take advantage of the new environment.
Revised Morning Star Offer:
Morning Star made a revised offer for
2007 production last week at $63/ton, but conditions attached required
clarification. The clarification is not available in time for this
Bulletin. Against the backdrop of an almost assured drop in tomato
acreage for 2008 and greater competition for acreage, growers are
bewildered by the hard line they’ve taken this year.
WPTC China Study Trip:
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The World Processing Tomato Council and
the Chinese Processing Tomato industry is organizing a trip from August
6 – 11 which will visit northwestern China.
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The trip will include visits to farming
operations, processing facilities and meetings with government
officials.
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If growers are interested in joining
this trip, please contact the CTGA office. The estimated cost will be
$3500/person.
Questions or comments please call.
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