September 28, 2007

Dear Tomato Grower:

 In the current Tomato Bulletin: 

• Growers and processors on “pins and needles’ as consequence of last week’s rain
• Weekly volumes slipped; weeks of 900,000 tons plus are over
• Five Points – Huron grower meeting drew 25 growers and all but 1 will cut in ‘08
• CTGA to survey regionally ’07 actual acres vs. ’08 intentions
• Tomato price has only one direction to go; it isn’t down
• Hale Group seeks your input

Rain falls across region: 

• Rain fell with accumulations of 0.1” to >2.0”
• Areas worst hit were Los Banos and Sutter Basin – both with too many ripe acres
• Full impact of the rain has yet to be felt, but most observers expect mold to spike shortly
• The key going forward will be processors sticking as closely as possible to contracted delivery schedules and fruit quality staying within customer specs

PTAB Projected 850,000 tons this week. 

• Although it’s doubtful that volume will hit 850,000 this week, the harvest is likely to reach or come very close to 12,000,000 tons.

Five Points – Huron Grower Meeting: 

25 growers met last week to discuss 2008. The following are the take aways: 

• The dynamics are quite different from previous years due to the combination of permanent plantings and the environmental restrictions
• For 2007, most growers had a substantial water carry over which is not the case for 2008
• All but 1 grower present at the meeting will reduce tomato acreage
• The majority are budgeting for a 25% allocation – 0.65/acre feet
• Due to reduced allocations, district water will increase from $85 to $100 - $120/AF
• Allocations will be parceled initially at 10 – 15% with the final allocation not known until June or July – by the time the water arrives it will too late for most growers
• Several growers commented that there is a compelling case to sell water as opposed to taking the risk of growing tomatoes. The argument is as follows:

                              Projected Supplemental Value    $500

                              Tomato Water Requirement          2.6 AF

                              Gross                                               $1300

                              Water Cost    $120 X 2.6 AF        $312

                              Overhead                                         $350 

                              Net                                                    $638 

• Growers suggested that the CTGA should survey all growers to get a handle on grower intentions for ’08 since this will be a critical piece in determining the proper price

Why a Survey is Necessary? 

The confidential survey will highlight: 

• Available tomato acres by region and the effect of tight water and alternative crops
• Allow growers and the CTGA to better determine the proper bargaining strategy
• Processors will be able to use the results for determining their ’08 sales strategy

The survey is likely to show that ’08 will be supply vs. demand driven. 

Very Bright Pricing Prospects for 2008 

Despite tight water and the possibility of a 12 million ton crop, prospects for the 2008 tomato price has to be bullish. Why? 

• Export demand is very strong which will eliminate any paste carry over normally expected with a large crop
• All crops with the exception of tomatoes and cotton are actively bidding for 2008 acreage

-          $240 wheat

-          $435 Safflower

-          Tight water will increase the value of alfalfa in areas like Los Banos, Dos Palos, Woodland, Dixon, Sutter Basin, Williams. Alfalfa will take ground away from tomatoes for 4 to 5 years. 

-          Check out today’s page 1 article in the  Wall Street Journal on the bullish trend for grain  

      http://online.wsj.com/article/SB119093856250042023.html?mod=hps_us_whats_news 

• A lot of tomato ground is tired and out of rotation resulting in increased disease and gradually declining yields. Now that grains are profitable, expect to see growers to better adhere to proper rotation.

It’s too early to predict the 2008 price, but “smart money” says it will be well above current levels. 

Hale Group Interviews: 

Per previous Tomato Bulletin, the CTGA Board hired the Hale Group to assist in the development of a 5 year strategic plan and make recommendations on how to improve the bargaining/price discovery process. Each grower and processor will be contacted by either phone or email/fax with questions regarding CTGA’s performance, and what improvements should be made. Your input is valued so please respond.

 Questions or comments – please call Ross Siragusa, President/CEO at 916-925-0225.

| Tomato Bulletins | Press Releases | Editorials | Archives |