It would be easy to interpret the August 12 California Raisin Grape Objective Measurement Report as signaling a likely downturn in the price growers receive for their raisin crop this year. While easy to make, such an interpretation could also be wrong.
Prepared by the USDA’s National Agricultural Statistics Service, that report pertains to California’s two major sources of raisins, Thompson Seedless and Fiesta grapes, as well as other varieties, like Selma Pete, Dovine and Sultana, which are also used to make raisins.
The report projects the 2013 crop of raisin-type grapes to be 25.5 percent larger than last year. Together with this year’s expected record yields, that could produce the largest crop since 2008. Right now the supply of raisins and the demand for them are pretty much in balance. So, based on simple economic principles, a bigger supply without an increase in demand should lead to a lower price.
But, several other factors could mitigate the impact of more raisin-type grapes on the price of raisins, notes Jeff Bitter, vice-president of operations for Allied Grape Growers. The cooperative is the largest single supplier of Thompson Seedless grapes to California crush facilities.
In the raisin industry a larger crop usually means more variability in the maturity and quality of the grapes. “You may have a lot higher green tonnage,” Bitter says. “But, by the time those grapes are dried down, run over the shakers and processed, you tend to lose relatively more tonnage than in a year with a lighter crop when the grapes typically are more uniform in ripeness and quality.”
Also, this year, weather problems are expected to curtail raisin production significantly in Turkey, a major raisin producer. “That could create a hole in the market which California growers could fill with their extra raisins,” Bitter says.
The official estimate, released August 1, projects the 2013 Turkish dried grape crop as coming in 25 percent smaller than last year. If so, production would be only slightly higher than total dried grape exports during in the previous 12 months. Some think this year’s crop may even be smaller than the official figure.
This year’s bunch count in California’s raisin grape vineyards is another factor to consider when weighing the effect of this year’s projected crop size on raisin prices. The objective measurement survey revealed a record total of 47.7 bunches per vine. That compares to 29.1 in 2012.
In its survey, Allied counted 38 bunches per vines. Bunch counts by several other industry groups were in the low 40s, Bitter notes.
“Normally, when we have more bunches per vine, the berries and the bunches are smaller,” he says. “You have to adjust the number of bunches for difference in size and weight. The objective report has done that by estimating crop production will increase by a smaller percentage than the bunch count.”
Then, there’s the weather – in particular 19 straight days in July of 100-degree-plus temperatures in the central San Joaquin Valley, the home of California’s raisin industry.
“That took its toll on bunch development and berry sizing,” Bitter says. “It will mean more substandard raisins that are tiny, immature and less meaty.”
The Raisin Bargaining Association Board of Directors has voted unanimously to support
another season without any regulation of supply managed by the Raisin Administrative Committee. That would be the fourth straight season of 100 percent free tonnage for the industry.
The free tonnage percentage dictates how much money growers receive upon delivery to their packer. Last year, growers were paid the full amount of the record $1,900 per ton field price for their Natural Seedless raisins. The field price is determined by an agreement between the Raisin Bargaining Association and its signatory packers.
No price has yet been announced for the 2013 raisin crop.
This price, in turn, drives the price of the two options growers have for selling their grapes – wineries and the juice concentrate market. These outlets normally account for about 15 percent of the Thompson Seedless crop, Bitter says.
No green price has been announced for this season. However, in some limited activity up to now, Thompson Seedless has sold at a minimum green price of $285, Bitter reports.
Last year the green price rose to $325 a ton, which is the highest price ever paid for raisin varieties for crushing. Bitter is among many who doubt it will reach that level this time.
“It got there last year due to a kind of perfect storm of factors,” he explains. “We had a short raisin grape crop which the market wanted. Plus, inventories of raisins, bulk wine and concentrate were low. That drove up the both raisin and green prices. Those factors don’t exist to the extent they did last year.”
After taking into account the loss of tonnage as grapes dry down for raisins and the cost in time, labor and weather risks to make raisins, a 2013 raisin price similar to last year would equate to a green price in the range of $285 to $300 per ton, Bitter notes.
“If wineries come out with a $300 price for Thompson Seedless, raisin growers would have a very strong incentive to go green this year,” he says.
Bitter doesn’t expect any more raisin growers to sell grapes to wineries than usual this year. “Wineries may crush more Thompson Seedless than normal simply because more will be available,” he says. “Most raisin growers did well in the raisin market last year. They’re optimistic that they’ll do well again this year. However, if wineries were to come out with a $250 a ton price, a fence-sitting grower would almost certainly decide to make raisins.”
Because Allied supplies wineries that buy Thompson Seedless for their sparkling program, they’re usually one of the first to start harvesting each year – typically around August 7. This year they began July 25.
“I’m guessing the raisin harvest may start one to two weeks earlier than normal as well,” Bitter says. “That will give us that much more time to get the bigger crop harvested, dried and in the barn.”
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