What is in this article?:
- $1,500 raisin field price record announced.
- It has taken a decade of economic disarray for the raisin industry to finally reach a supply and demand balance — for at least one year.
- 75,000 acres of Thompsons have been replaced.
- RAC declares 100 percent free tonnage.
Free tonnage 100 percent
The Raisin Administrative Committee (RAC) is a federal marketing order made up of growers and packers that annually estimate sales for the coming year. That number is called “free tonnage.” That has ranged from a low of 53 percent to 100 percent of the crop over the past decade. Only eight times since 1967-1968 has the crop been declared 100 percent free tonnage after harvest and growers received the full field price. The RAC accounted for the eighth time when it announced recently that there would not be a reserve pool for 2010, and growers would receive 100 percent of the field price for their entire crop.
The free tonnage percentage dictates how much money growers receive upon delivery to their packer. If the RBA field price was set at $1,000 per ton and the free tonnage was established at 53 percent, that means growers would get only $530 per ton upon delivery. The remainder of that year’s raisins would go into reserve pools and sold at discount prices to foreign buyers, school lunch programs or turned into cattle feed or distilled for alcohol. Packers could also buy reserve raisins for domestic sales at discount prices. In the past, growers have even been paid in reserve pool raisins not to produce a crop the following year. This is somewhat simple to accomplish with Thompsons since they are cane pruned, not spur pruned. If you lop off all the canes in the winter, there is virtually no crop.
Regardless of where reserve pool raisins eventually went, they never returned as much as the field price.
Cash costs to grow, hand harvest and field dry an average crop of 2 tons of raisins per acre is about $2,300 per acre, not including overhead, according to the University of California. It costs about $1,850 to produce the same 2 tons with mechanically harvesting and continuous tray field drying. The green to dry ratio over the past few years has been about 4.5 tons green for 1 ton dry.
California produces 99 percent of the raisins produced in the U.S., mostly within a 50-mile radius of Fresno, Calif.
Wine sales skyrocketed in the 1990s and wineries scrambled for supplies, offering high prices for Thompsons which could be blended with wine grape juice. When the supply from new wine grape vineyard plantings caught up with demand, wineries quit paying decent prices for Thompsons and growers made raisins rather than harvest green. Thompsons also get caught up in the world concentrate market. When concentrate supplies are cheap and abundant in places like China or South America, wineries buy concentrate offshore and forgo California grapes. This would also divert green Thompsons to raisins. Cheap apple and pear juice from oversupplies of those crops can also be used for concentrate.
E&J Gallo, the largest winery in the U.S., is also the biggest buyer of Thompsons, annually setting the industry green price. Gallo sales total 68 million cases annually. Not only that, but the three largest wineries in the U.S. (Gallo, The Wine Group and Constellation Wines) account for 50 percent of U.S. case sales, and they all buy Thompsons. Gallo is always the first to announce prices, and it sets the bar where it wants.