What is in this article?:
- Demand for juice concentrate continues strong and may send 2012 Thompson green prices up to $300 per ton.
- Whether the world’s largest winery, Gallo, and other California wineries will pay that remains to be seen. However, a price like that being floated this early in the season is indicative of how tight available supplies are in the Thompson market for 2012.
- A $300 green price equates to $1,800 to $2,000 per ton for what likely will be 100 percent free tonnage raisins.
Demand for juice concentrate continues strong with and may send 2012 Thompson green prices up to $300 per ton.
Pullouts and increasing raisin sales
Glen Goto, RBA chief executive officer, explained the continued pullouts without new plantings to replace the removals by pointing out that it is far more expensive to establish a new vineyard than a new orchard crop like almonds. Many of the alternative crops like tree nuts also offer greater income potential and stability. Historically unstable grape prices along with growing labor shortages have also driven Central Valley farmers to non-raisin permanent crops.
Pullouts and increasing raisin sales are creating interesting dilemmas. One is that raisin packers are being put into a financial bind with 100 percent free tonnage and record grower prices.
The Raisin Administrative Committee, a federal marketing order, determines the potential market each year about harvest time. For example, if the RAC decides that packers can likely sell 250,000 tons of raisins domestically and the crop size is 500,000 tons then the free tonnage would be 50 percent, meaning growers would receive the RBA negotiated field price for half their raisins at delivery. The other 50 percent would be held in a reserve pool and marketed at a discount, often into world markets with the help of federal market development funds. The return to the growers for these raisins would be below the free tonnage price.
However, with less acreage and gradually increasing sales, there has been no need for a reserve pool. This means growers are guaranteed 100 percent of the field price at delivery. This brings tremendous early season debt to packers, especially when raisin prices reached $1,500 per ton to $1,700 per ton for the past two seasons. To alleviate this financial pressure, RBA negotiated a payment scheduled with packers, not unlike a cooperative.
Growers receive 65 percent of their proceeds within 15 days of final delivery, with 20 percent payable on or before Feb. 28 and the final 15 percent payable on or before April 30.
This, according to Goto, “maintains the (field) price level" set in RBA negotiations with packers and enables packers “to turn down low prices” from customers to generate cash flow.
The irony of these unparalleled current high prices for raisins and green Thompsons are posing a threat to the RAC and RBA. Some are challenging the need for both with high prices.
“The RBA fully supports the RAC,” said Goto because of the services other than setting free tonnage each year. He cited the federal grades and standards now in place through the RAC as one example for the need to maintain a strong federal marketing order. RAC also continues to promote raisin sales overseas.
The RBA was created in 1967 in an era when growers were paid through “open price” contracts, meaning growers did not know what their returns would be for several months after their crops were delivered.