CTGA Tomato Bulletin - Sept 8 2006

September 8, 2006

Dear Tomato Grower:

In the current Tomato Bulletin:

CASS/USDA revises crop downward 12.3% to 10,000,000 tons.
2006 Harvest peaked week ending 8/19; weekly volume is expected to drop below 900,000 this week.
Garlic prices will increase to $190 - $200/ plus $25 - $40/acre increased sprinkling allowance.
Processors confident that they can purchase ample acreage for 2007 at well below $65/ton and in no hurry to seriously discuss next year.
Growers won’t get a minimum of $65 unless they’re willing to work for it.

2006 Harvest Update (through PTAB’s Sep 9 Estimate):

Crop still trails 7 yr average by almost 1,400,000, but has improved to 83% from 76% two weeks ago.

Crop Conditions:

Crop conditions are deteriorating as impact of July heat wave is being felt.

Processors are bumping green, and mold is sharply up across all growing regions. High mold loads are being rejected which has been a rare occurrence the past few years.
Growers and processors are beginning to see truck loads fall below standard weights due to hollow tomatoes.
Evaporation capacity is being cut due to a lack of ripe fruit.
Field yields peaked with neither grower or processor optimistic going forward
Several southern processors are likely to shut down the last week of September and reopen in October when/if late fields ripen.

The CTGA and CASS 10,000,000 ton estimate is beginning to look like a stretch.

Revised CASS extimate for 2006 crop:

CASS surveyed the industry August 15 and revised their crop estimate from 11.4 million to 10.0 million tons – a 12.3% reduction. The reduction was largely expected since no one believed the 11.4 million figure in the first place. In addition, acreage was dropped from 288,000 to 279,000; which calculates to 35.8 tons/acre. Based on grower and processor feedback on yields to date, I wonder whether 279,000 acres were actually planted.

Revised World Processing Tomato Council Estimate (‘000 MT):

Sep Est. June Est. Change

Worldwide 29,050 31,971 (9.2%)

Italy 4,000 4,800 (16.7%)

China 4,000 3,500 (12.5%)

Iran 2,100 1,950 (7.2%)

Spain 1,750 1,580 (9.8%)

Worldwide consumption estimated at 32,500,000 vs. 29,050,000 production will result in 3,450,000 drawdown in inventories. Tomato prices will increase worldwide in 2007.

Garlic Prices to Increase Sharply in 2007:

Growers on the Westside were able to negotiate a sharp increase for 2007 garlic. A major processor initially offered $160 which is a 12.6% increase over the $142 paid in 2006, but growers said they needed a minimum of $200. The processor then offered $170, but they still had no takers. Finally after processors reviewed available acreage and projections for alternative crops they reluctantly agreed to pay $190 plus $75/acre for sprinkling; a 37% increase. Another processor increased their sliding scale contract from $164 to $200 and matched the $75 /acre for sprinkling; a 24% increase.

Why is this relevant?

The garlic price is equivalent to $65/ton for tomatoes when adjusted for risk
Processors cannot easily replace existing growers
There is not an unlimited amount of suitable row crop land
When growers stick to their guns they can be successful

Processors confident that they don’t need to pay anything near $65 for ‘07:

Processor feedback from our August 28 Tomato Bulletin when we stated that growers wanted a minimum of $65 varied. A brief summary is below with editorial comments in parenthesis:

· It’s too early to talk about ‘07 since only 50% of ‘06 has been harvested (Every day that passes growers lose leverage)

· If ’06 is below 9,500,000, $65 could be in the cards otherwise it’s too much (Carryout inventories will be at historic lows whether the crop is 9.5 or 10 million)

· Growers will happily sell as many acres as they can at $60, so why pay more? (This argument is reminiscent to last year’s “Tomatoes will be planted in sidewalk cracks if the price is above $55”…)

· A $65 price is irresponsible, will force widespread imports and ruin a good thing. (Forget the import risk for ’07 and ruin what good thing? Who’s happy with financial returns in this business?)

· Higher late season premiums are a joke. Processors have just as much late season risk as growers. (Processor risk is spread across the entire season whereas the majority of late season growers have a high percentage or all their tonnage late. Yield risk and higher costs are well documented)

· Growers are out of their freakin’ minds. (Just like almond growers…)

All kidding aside, if growers want a price above current levels they need to follow these simple steps:

Do not commit acreage for 2007 without a firm price. This includes not committing to an undefined “CTGA price”.
Talk to your neighbors and attend CTGA regional meetings so you know what’s going on. Some knuckleheads contracted at $54 on annual contract last year when CTGA growers were averaging $58.
Work together as a group. Become a member of the CTGA. Individuals get picked off.
Being willing to say no if you don’t like the price. Based on market conditions, tomato contracts will be very easy to get for ‘07.

Next CTGA Grower Meeting:

Sep 12 Westside Field Station - Five Points 10:00AM
Sep 12 Service Club Firebaugh – Time to be advised

Questions or comments, please call (209) 478-1761.

Ross Siragusa

President/CEO