CTGA Tomato Bulletin - November 20, 2002

November 20, 2002

Dear Grower:

No Response To CTGA's $52 Offer
The California Tomato Growers Association has received no formal response to its $52.00 offer for the sale of processing tomatoes for the 2003 season.

In discussions with processors, comments, as expected, focused on the large crop and the half a million tons that were packed in excess of canners intentions. One canner described the situation as Economics 101, “As long as we have a surplus it will be difficult to pay more than last year, unless we can’t get them.”

The big question is why would California processors pack 500,000 tons more than they contracted for, especially when the 10.5 million ton canner intentions represent more than an adequate amount to meet demand? It seems that California processors are speculating on increased sales due to the shortfall in the European tomato crop. One would hope that the party that stands to gain from a transaction should also be the party that bears the risk, you know, “risk equals reward”. So perhaps our processor friends could explain why growers face the risk of lower returns on their 2003 tomato crop due to increased inventories while processors are speculating on greater returns from increased sales of the same inventory.

The fact is, that while North America packed 500,000 tons more than intentions, worldwide, the industry is almost 2 million tons short of its 2002 desired pack and this includes the so called excess inventories held by California processors. (Table 1.)

Inventories aside, the Association’s $52.00 price offer for 2003 is based on a modest but reasonable return so that growers can cover increased costs and make the necessary investments in their operations to drive efficiencies. The Association is continuing its discussions to weigh the interest of processors in reaching an early price settlement for 2003.

Australia Weathers Serious Drought
Australia’s most populous state, and the countries tomato growing region, New South Wales, has been hit by the country’s worst drought in a century. Foodnews reports that with planting now underway, the water shortage in the tomato-growing regions of Australia has become increasingly serious. The price of water increased 11% in one week and has doubled since August. Water storage in local reservoirs stands at 60% from a year ago, which in turn was low.

It is difficult to estimate the reduction in the tomato crop if rain does not arrive in the growing areas soon. Planting will continue into December and harvesting in Australia usually begins in the last week of January and continues to mid or late April. Contract intentions for the 2003 crop stand at 387,000 metric tons.

Cancer-fighting Tomato Named the Top Development in Food Biotechnology in 2002
The prospect of a cancer-fighting tomato has been named the top development in food biotechnology in 2002, according to a Roper survey of 1,000 randomly selected American adults.

When asked which publicly reported development in food biotechnology during 2002 was considered most valuable, two-thirds of respondents selected a research program that is enhancing tomatoes with a higher quantity of lycopene, an antioxidant believed to help fight cancer. The tomato is currently undergoing field tests.

“This year’s top advances in biotechnology represent a shift in focus of plant biotechnology beyond pest management,” Chin said. “More and more, biotechnology is moving toward products that will offer direct benefits to consumers, such as improved nutrient profiles and enhanced tastes.”

After ranking the top developments in food biotechnology, six of every 10 respondents said they support the use of biotechnology in agriculture, while two out of every 10 were neutral and two out of every 10 expressed opposition. The study is considered to have a margin of error of plus or minus three percentage points at the 95 percent level of confidence.

Worker's Compensation Takes Dramatic Increase
Workers’ Compensation Insurance rates have dramatically increased for processing tomato growers in California. The graph below shows for the years 1997 through January 2003 the advisory pure premium rates as approved by the Workers’ Compensation Insurance Rating Bureau (WCIRB) and reported by Dave Bellusci, Senior Vice President and Chief Actuary. Rates for the years 2003 – 2006 reflect benefit increases contained in Assembly Bill 749 and signed by the Governor in May 2002.

Open Rating, as a result of deregulation, tempted some carriers to price premiums below the advisory rates during the 1995-2001 time periods to gain market share. This activity eventually caused several carriers to exit the industry and a return to a sound rate setting process that reflects the advisory pure premium rate and a reasonable administrative cost. This restructuring combined with new workers’ benefits as provided in AB 749 is the cause for the big jump in compensation rates.

World Processing Tomato Pack

(Table 1)
Million Metric Tons

	2001	2002 Intentions	2002 Final
Northern Hemisphere
EU
Spain	1,463	1,500
France	298	275
Greece	939	1,050
Italy	4,800	4,700
Portugal	917	950
Sub Total	8,417	8,475	6,900
Non EU
Algeria	270	330	260
Israel	144	160	160
Jordan	50	60	60
Morocco	150	180	180
Tunisia	430	600	540
Turkey	950	1,300	1,500
Japan	60	59	57
China	1,000	2,500	2,000
Hungary	100	100	100
Bulgaria	30	130	30
Sub Total	3,184	5,419	4,887
North America
California	7,827	9,525	9,900
Other US States	499	557	557
Canada	482	544	563
Mexico	136	100	100
Sub Total	8,944	10,726	11,120
Southern Hemisphere
Brazil	1,000	1,200	1,000
Chile	725	550	545
Argentina	255	210	215
Venezuela	7	8	8
Peru	45	45	45
Australia	380	375	375
New Zealand	53	37	37
South Africa	204	215	215
Senegal	47	43	43
India	120	120	120
Taiwan	14	14	14
Thailand	140	160	160
Sub Total	2,990	2,977	2,777
Total	23,535	27,597	25,684

U.S. wheat futures gained as the market’s focus remained on tight world supplies.

Severe crop problems in three of the major world exporting nations continue to prompt large swings at price levels unseen in the past five years. The U.S. and Canadian harvests are near 30-year lows while the Australian crop is forecast to be less than half that of last year.

The Chicago Board of Trade’s December delivery future gained 11.25 cents a bushel to end at $4.1350. At one point, the contract surged to $4.17, which was within striking distance of recent range high.

John C. Welty
Executive Vice President

| Tomato Bulletins | Press Releases | Editorials

Northern Hemisphere