June 23, 2006

Dear Tomato Grower: 

Final CLFP 2003 - 2005 Supply and Demand: 

 The CLFP June 1 Inventory & Movement Report was surprisingly bullish with overall demand off only 3.5% as compared to 2004 record movement. A few takeaways: 

• 2005 ending inventory is the lowest level since 1998 when it fell to 2.2 million
• Paste for Sale inventory of 575,000 leaves the paste market with less than 2 months supply. On paper, the industry will be out of paste about the time harvest begins due to the late harvest.
• 2006 marketing season will continue strong.

Projected 2006 Supply & Demand: 

 Comment:

• Pack is based on estimates that take into consideration improved crop conditions tempered by lateness of harvest. Even to reach 10.3 million exceptional harvest conditions and processing efficiencies will be required to process 1.9 million tons during October. In 1999 the industry ran 1.1 million tons in October which was the best ever…
• Demand reflects a 3.5% reduction from 2005 and a 7% reduction from 2004. This assumes lower exports due to tighter inventories and higher paste pricing

 Crop Update: 

• Tomatoes were still being planted as of the end of last week and reports that a few growers continued into this week.
• Other than a few scattered reports of spotted wilt in Fresno County and curly top in Kern, most growers are optimistic about the conditions of the crop.
• The crop to date has faced little stress, but this will change over the next few days as growing regions across the state will have temperatures in excess 100°F. Flowering plants will lose blooms and recently planted transplants will be at risk.

North – South Grower Meeting: 

The CTGA organized a North – South growers meeting last week at Harris Ranch with 45 growers from Colusa, Fresno, Kings, Merced, San Joaquin and Solano Counties to review 2006 and discuss

2007. The acreage represented just under 50% of the state’s production with a high percentage of early and late growers.  The main points covered: 

• Demand: Processors won’t meet their pack plan
• Supply: Worldwide supply will be below demand reducing likelihood of import pressure
• Costs: Unlikely to be lower due to increasing labor, rent and interest rates. Energy continues to be volatile with diesel $0.50/gal higher than last year at this time. Growers need to budget at least a 5% increase in overall costs
• Paste Market: Margins are widening with current spot market at $0.38. This equates to $67.47 tomato price using the 53% share of the paste price that growers averaged the past 5 years.
• 2007 will be a seller’s market

Regional vs. Statewide Pricing:

Following the 2006 negotiations many growers expressed interest in seeing one price and equal terms of trade across the state. Several processors have expressed the same interest. In a perfect world this makes sense, but there are several obstacles:

• Growers lose negotiating leverage
• Growers in different regions have different yields, alternate crops, expectations
• 2006 regional negotiations yielded the following prices:

                  - Northern Growers averaged $59.20 base and $62.56 including premiums

                  - Southern Growers averaged $57.60 base and $59.30 including premiums

• Regional pricing paid clear dividends when growers were willing to work together

 In order to work towards more uniform pricing, but not entirely move away from regional pricing the growers assembled agreed to work in regional negotiating groups, but communicate more closely across the regions. This should reduce the differences between regions while giving growers the flexibility to focus on regional priorities. Regional meetings will start within the next few weeks in the South.

 Vapam Regulation: 

Although we’ve presented data several times on how and when vapam is applied DPR still is lumping processed tomatoes in with carrots – spray blade or drip in fall and winter vs. broadcast applications in summer. We are working with CDFA and DPR to get the situation rectified, but it may require an industry funded study.

Promotion:

The recent World Processing Tomato Congress, which will be highlighted in the next Tomato Grower Magazine, focused heavily on current worldwide efforts to promote processed tomato products. The highlight is a $6.5 million 5 year European study called Lycocard which will focus on lycopene’s effect on cardiovascular disease. Tomatoes have so many good nutritional stories that it will only take a unified push to get a program off the ground. The CTGA intends to lead. The next Tomato Bulletin will contain more details.

 Stay cool.

 Questions or comments? Please call. 

Ross Siragusa

President/CEO

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