November 7, 2005

Dear Tomato Grower:

 2006 Prospects: 

In the last Bulletin we reported that growers in Woodland turned down $57.00 from two processors. Since then we’ve seen the following:

• $58 for mid season and $61 for early was turned down in Woodland
• $57 was offered Los Banos south by one canner with unchanged harvest costs and 2 years at $56. Growers appreciated the offer, but have not moved to confirm
• Another canner offered $58 in the south, but harvest rates may be slightly higher
• A Delta grower could not get a firm price for ’06 from his canner so he planted alfalfa instead
• Lastly, a peeling operation is offering a minimum of $56 with the guarantee to meet the market when it’s settled

At the same time, we’ve seen a few worrying signs:

• A large processor told growers that once the dust settles in January or February the price will be $54-55 and harvest rates will go up
• Another large processor is not interested in putting out a price until January when they have a better idea of the supply and demand (growers coincidentally have little leverage at that stage)
• Two branded processors floated $55
• Processors speculate that a price of $58 or above will result in every open piece of ground being planted with tomatoes from Tulare to Chico

Bottom Line:

• Few growers are signed for ‘06
• Several processors are intent on dragging the process out until after growers are committed to seed/greenhouse expense
• Growers’ leverage slips dramatically once the seed is committed
• If growers don’t work together pricing could drop from $57
• As for over-planting, tomato economics don’t support this argument at the levels currently being discussed

So what can we do about it? 

The CTGA will organize regional negotiating meetings to hammer out specific offers for each region’s processors. These meetings will serve to get everyone in each region on the same page. We will discuss the tools that growers can use to engage the processors. 

Non-CTGA members will be encouraged to join the association to participate in these pricing discussions. The benefits include: 

• Make a strong statement that growers are serious about receiving a fair price
• Reduce the possibility of being undercut
• Greater consistency for terms and conditions
• Reduce potential for surplus/discounted tonnage
• Regionally based proposals deal with local economics and yields
• A much better opportunity to make a decent return in ’06 and beyond. The alternative is another year where the loss potential significantly outweighs the profit potential

For growers that are worried about being bogged down by unreasonable proposals please remember that Membership doesn’t force you to adhere to CTGA pricing. It allows you to: 

• Openly work with other growers to maximize your leverage
• Gives you current pricing information so you can make the best decision for your business
• Protects you under CTGA Terms of Trade
• Provides support in assessing your canner’s performance relative to others

For those of you that have a bad taste in your mouth for something that occurred 5, 10 or 20 years ago, give the CTGA another try. It’s changed significantly. 

This week we will meet in the Delta and will begin organizing meetings throughout the state. 

’06 Seed Price: 

In recent Bulletins, we touched on proposed price increases for seed. Thanks to a recent meeting with a major seed distributor, we can now provide greater detail. The sharp increase was driven by the switch to transplanting which now captures 70% of all seed. 

If a grower is either early season or direct seed, costs will be stable or reduced as compared to ’05 which is due to the utilization of blended seed. For transplant growers, brace yourself for prices in the $850 - $985/unit range. The increased cost to growers is roughly $10,000,000 or $1.00/ton. Growers need to think long and hard when agreeing to a specific variety and be sure that it performs as well or better than other alternatives.

The Final Numbers for the 2005 Crop:

The harvest activity ended 2 weeks ago with the final tally just below 9.6 million tons which is 6.8% less than contract intentions and 18% below 2004.  

 ’04 Comparison 11,671,000     5.18       1.4        0.9       0.5       24.8         2.4        4.42        

 Although tonnage was lower than expectations plant yields were much better than last year due to higher solids and lower limited usage. Peeler plants report better than expected results with problems limited to hot stretch in summer which caused sunburn. 

Promotional Efforts: 

Press releases for food sections with recipes: 

• Sacramento chef Bibba Caggiano’s recipe for Macaroni with Vodka Sauce and accompanying article has been carried in 328 newspapers in 28 states with a readership of 27,115,000.
• Miami based chef Norman Van Aken’s recipe for New World Cusine with supporting article has been carried in 416 newspapers in 27 states with readership of 12,995,000.
• Our new public service announcement which highlights the health benefits of processed tomatoes and Lycopene has been broadcast 138 times in 34 states with an audience of 12,799,000.

 Once we get ’06 pricing behind us we need to ratchet up the promotional effort several notches.

 Annual Meeting:

Please join us for our annual meeting January 25 in Modesto. Our speakers will include Chris Rufer from Morning Star, Reuben Peterson from Heinz and Pat Coe from ConAgra discussing the outlook for the processed tomato industry.

 Questions or comments – please call (209) 478-1761 or e-mail rdsiragusa@ctga.org

 Ross Siragusa

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