December 29, 2006

Dear Tomato Grower: 

In the current Tomato Bulletin: 

• Huron, Five Points and Cantua Creek growers turn down $61 and $62 offers but make an agreement to sign at $63.
• CLFP Dec 1 inventory report shows higher than expected inventory levels due to a combination of greater utilization of off-grade fruit, better than anticipated plant recoveries, and slow product movement.
• Tomato Products Wellness Council’s Board has inaugural meeting and agrees to fund cardio vascular focused research. All growers need to support this initiative.
• John Deere Extend Ag studying the launch of risk management tool that can assist growers to make better variety selections and benchmark management practices which should result in higher revenue/acre.

Early Westside CTGA Growers Sign at $63: 

• Ingomar offered $61 to early Westside growers citing a concern about slow product shipments.
• Their growers countered that they wanted $65, but would consider $63 for an acreage contract.
• Ingomar countered at $62 for a tonnage contract with no green discount up to 2%.
• Growers countered at $63 with their standard green discount which was accepted.
• Grower logic for accepting $63 is as follows:
  • Although they wanted $65, a $63 price represents a 10.5% increase over 2006
  • Mild fall weather allowed for a much more efficient bed preparation
  • 2006 crop at 10.1 million plus the increased acceptance of offgrade fruit created less of a shortage than originally contemplated
• Los Gatos indicated that they would follow Ingomar’s lead. Other canners will follow if they gain confidence that they won’t be undercut.

Significance of $63 Signing: 

• After all the talk since August, growers and a major processor were able to come to an agreement on a price and terms. The first real step in making the market for ’07.
• Westside growers, Cantua Creek south,  were able to put aside commercial rivalries and agree on areas of common interest. This gave them the confidence to reject lower offers and will help negotiations with other processors.
• Since the growers involved are all on the early side, work still needs to be done on late season premiums.
• Each region needs to decide whether $63 is a good price or not for their specific requirements. The CTGA will organize meetings starting in early January to push the process along.

CLFP Dec 1 Inventory Report: 

• Industry not surprised that movement was off for the 1st six months. Most industrial shippers reported that demand was sluggish. Although the report shows disappearance off 15%, this cannot be accurate because the pack figure does not include green or other off-grade tomatoes that were utilized in the pack. Nor does the pack figure accurately reflect the impact of above average plant recoveries. These factors do, however, add to the overall inventory.
• Fundamentally consumer demand for tomato products is stable so we expect to see improvement during the next six months.
• Processors may use this report as an excuse to seek a lower tomato price but inventories are still tight and there is little likelihood that processors will cut their 2007 production intentions. Just take a look at your 2006 costs, average yield and plug in a return – the $63 Westside Grower price agreement is easily justified.

Tomato Products Wellness Council Agrees to Fund Research:  

On December 13 the Tomato Products Wellness Council agreed to fund a $400,000 research study at Penn State and UC Davis. The study will look at the affect of tomato product consumption in three key areas:

1. Compare the effect of high vs. low intake of processed tomatoes for 6 weeks on biomarkers for hardening of arteries (endothelium function) and cell fragments (platelet function) that lead to the formation of blood clots. Both are markers for cardio-vascular disease.

2. Determine if the consumption of tomato products will offset the negative effects of consuming high fat meals

3. nvestigate the effects of high vs. low consumption of processed tomatoes on plasma lipid composition, oxidative stress, blood pressure and inflammatory status in humans.

Why is this worth $400K? 

• This study will create the opportunity to approach consumers with a new body of evidence reinforcing the message that increased consumption of tomato products will have a positive effect on cardiovascular health. This is in addition to the well known link between tomato products consumption and reduced prostrate cancer.
• Based on our review of more than 200 tomato studies there are strong reasons to believe that these trials will be successful.
• Product studies tied to health benefits increase demand

Examples: 

• The growth in red wine consumption doubled in the four week period immediately following the release of a study in November on the positive effects of resveratrol; a natural ingredient found in red wine. This is despite the fact that the study used mice and it would take 750 – 1500 bottles daily consumption to replicate the resveratrol levels used in the study.
• US per capita almond consumption doubled over the past 8 years as a direct result of focused research and public relations.

The Wellness Council Board also authorized $50,000 to be spent on communications which will allow us to get the ball rolling. We will increase public relations activities once we have relevant news and sufficient funds.  

What’s this have to do with growers? Everything…

• The only way to sustain higher prices and improve this business is through higher demand

• The CTGA will contribute $0.025/ton from its members’ tonnage in order to get this process started, but we will need additional contributions
• All processors, with the exception of San Benito/Tomatec, support the Wellness Council and are willing to match grower contributions. (San Benito/Tomatec growers should ask their processor what their excuse is…)
• Non-member growers obviously need to contribute. If growers can’t support improving tomato demand, they should seriously think about growing something else.
• We have a unique opportunity for the industry to work together and increase demand. This is the only way to sustain higher prices and expand our industry.

eTomato Data Study to create risk management tool: 

John Deere, which owns eTomato, is looking at offering an analytical tool to growers which would take the eTomato database and analyze it considering location, soil type, tomato variety, irrigation system and weather which will result in following benefits: 

1. Increase the producer’s revenue and profit potential by utilizing the right tomato variety given location, soil type and delivery period.
2.  Allow the producer’s to benchmark their production which can help identify best management practices, reduce costs and improve results.
3. Determine the best management practices by genetics and production environment which allows the producers and their advisors to fine tune operations for increased yield, quality and/or reduced costs.

Deere utilized a similar system in Illinois for soybean and corn growers which resulted in an 8% increase in gross revenues. 

 Annual Meeting Jan 24: 

The Wellness Council will be the focus of our upcoming 2007 CTGA Annual Meeting January 24 in Modesto. The discussion will include Campbell’s, Del Monte and Heinz’ perspectives on consumer trends and why research combined with public relations is so important. Please try to attend since this industry wide effort is a very important step for improving demand which will translate into better margins.   

Wishing You & Your Families a Prosperous 2007.

Ross Siragusa

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