CTGA Tomato Bulletin Nov 12 04

November 12, 2004

Dear Tomato Grower:

District Meetings:

We had a combined 115 in attendance at Harris Ranch, Westley and Davis. The main issues discussed were:

2004 crop was 11,671,000 tons, but canner output was cut by an equivalent of 585,000 due to low solids and high limited use.
2004 average price was $47.43 once quality discounts and discounted over contract tons are taken into consideration. This compares to a fully loaded cost (direct, overhead, harvest & depreciation) of $1950/acre break even at 41.1 net paid tons per acre.
Growers will cut acreage by a minimum of 10% in 2005 due to poor economics
Poor field preparation weather will impact yields
2005 isn’t likely to exceed 9,700,000 tons – (255,000 acres at 38 tons/acre)
Demand is ahead of expectations and should remain strong

Bottom line – effects of the big crop will be short lived and limited

Regarding 2005 negotiations:

Most canners are not seriously interested in discussing 2005 with price indications in the $46 - $50 range with most.
CTGA will not pursue the traditional strategy of slowly trying to create a price consensus since most growers don’t support this approach and it penalizes CTGA members
The CTGA will establish a reference price which is based on economic analysis plus bring growers together on a regional basis in order to discuss issues that pertain to their specific canners:

Early and late season premiums
Quality premiums & discounts
Terms of trade

2005 Pricing:

Following the district meetings we have been approached by a couple of canneries about establishing a $50 price for 2005. Their logic is as follows:

They have growers that will grow at this level and acknowledge that the market expects the price to come down after a large crop.
Growers and growers’ bankers insist that the price have “a 5 in front of it”.
Lock in tonnage to support a sales program.
Be the cannery of choice for growers in their region

The CTGA Board has mixed feelings about the proposals. The Directors recognize that economics are getting tougher each year and they are extremely skeptical regarding the June 1 inventory figures. They also know:

· A number of growers will accept a $50 price which will undermine holding out for a higher level

· There is real value in establishing a price in November so growers can make informed decisions

· An econometric model assessing supply & demand, grower efficiency, grower costs and recent increased energy expenses support a $50 price.

· If growers can’t live with a $50 price they can wait and see if the poor field preparations will cause canners to be short which would drive the price up.

The CTGA Board supports a $50.00 reference price for 2005.

Next Steps:

1) Growers need to contact their canners and see if they are willing to support $50. Let them hear from you.

2) The CTGA will organize meetings in early December with growers from each region to discuss terms and conditions that affect their specific canner

3) CTGA will be in contact with each cannery throughout the process

Value of the CTGA:

Allows growers to legally work together to counter balance processor leverage
Provide an honest assessment of market conditions
Help growers maximize their returns through the exchange of information
Assist growers in the event of a contract dispute or new government regulation
Support the entire industry through promotion

Don’t Forget!

Please attend the CTGA Technology Seminar being held Wednesday, December 8^th at the Doubletree in Modesto. For more information or to RSVP please call (209)478-1761.

All the best for the Thanksgiving Holiday,

Ross Siragusa