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October 24, 2005
Dear Tomato Grower:
2005 Crop:
PTAB estimates that 9.48 million tons
will be processed by the end of this week. The year will end somewhere
between 9.5 and 9.6 million tons.
2005 has been a disappointment with the
average paid yield at 36.5 vs. 41.5 in 2004 – an 11.2% reduction
2005 gave most growers a clear reminder
of the inherent risks involved with growing tomatoes.
2006 Terms of Trade:
While the problems associated with the
2005 crop are a clear memory it’s important to review contract terms and
conditions. Growers’ comments across the state are as follows:
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Terms and conditions have eroded over
the years and they are too weighted in the processors’ favor
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Contracts differ considerably from one
processor to another which make it difficult to assess the value of one
contract vs. another
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All terms and conditions are not
available when the decision is made to work with a specific processor
which leads to costly surprises
-
Late season premiums consistently are
too low and do not offset yield exposure and higher harvest expense
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Yields per acre are set too low
especially for new drip growers – this sets growers up for surplus
tonnage sold at a sharp discount
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To make money, growers need to grow for
yield, but this typically results in solids discounts
-
Processor harvested fields result in
higher MOT than a grower harvest. 3 X MOT is not fair when the processor
controls the harvest. A 2002 PTAB study shows that 3 X MOT is punitive
and the fair discount should be 1.2 X MOT + 0.8%
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Some canners pit neighbors against one
another so even excellent quality can lead to a discount
-
Paste processors use green, but don’t
pay for it
-
Payment terms need to consistently be
net 10 days
To address these issues neighbors and
growers for the same cannery need to work together. There also has to be a
realistic chance of making a change. The issues detailed below have broad
grower support. Other issues will be addressed as we gain support.
Early & Late Season Premiums:
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Processors need early and late season
tomatoes to fill their pack plans, so they have greater value.
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2005 showed growers across the state
the risks of growing both early and late tomatoes.
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Growers in the south received no early
season premium which they now regret after experiencing lower yields and
higher costs
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All late season growers complained that
$3 and $5 does not come close to cover increased costs and reduced
yields.
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Those that accepted September & October
deliveries without late season premiums are now suffering a severe
hangover that aspirin won’t help.
What to do?
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Last year Colusa and Yolo growers
received $3.00 to $5.00 premium for transplants and direct seed
respectively
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This was achieved by growers
understanding their costs & risk; a willingness to work together; and
recognizing that their canneries needed the tomatoes.
-
Early growers in the South need to make
the same assessment of their costs and risk potential. On a cost basis
alone early tomatoes cost $1.50 - $2.00 more. Do early growers want to
work for a premium?
-
Late growers across the state need to
determine when their yields drop off; how many additional sprays they
need to make; cost of additional insurance; and the likelihood that
their harvest will be affected by weather or a slow down at their
processor. They also need to be sure that premiums are paid based on
delivery date, not schedule.
-
Growers in the South are talking about
late season premiums starting in early September and almost all growers
feel that late seasons need to be a minimum of $5.00 - $7.50.
-
Before making up your mind look at your
situation and consider the situation of the area. Then let’s talk.
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Lastly, don’t agree to grow unless it’s
defined in advance.
Solids Programs:
Widespread solids programs have been in
place for the past 2 years. There is little consensus among growers
regarding the programs other than the following which the CTGA will work
on:
·
A strong preference to have
a program and the programs should be more forgiving, i.e. offer a wider
neutral zone where no premium or discount is paid.
·
Solids programs should be
based on county as opposed to cannery averages
·
Potential discounts should
not exceed potential premiums
Other key points the growers need to
consider before agreeing to supply a cannery are:
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Understand the program and compare it
to your history with the specific tomato variety
-
If your variety history doesn’t track
well or you don’t know how you will perform don’t agree to grow under
the program
-
If you need help assessing how the
program is likely to work for you call the CTGA and your cooperative
extension specialist
2006 Pricing Update:
There is increasing consensus in the
North that the price needs to be at least $60 and the South has moved to
$57 - $60 range. Firm cannery offers at $57 are available in both the
North and South with standard payment terms. We’re making progress.
Questions or
comments – please call (209) 478-1761 or e-mail
rdsiragusa@ctga.org.
Ross Siragusa
President/CEO |
