It is five months until the 2008 California raisin harvest begins, 18 months before the 2009 crop is finished, and roughly 30 months until the 2010 raisin crop should be in sweatboxes.

Plenty can happen before those crops are delivered to processors. Frost, rain during harvest, floods, and earthquakes — to name a few. However, one thing that grape growers who make raisins can take to the bank now is that they will receive at least $1,310 per ton for each of those three crops.

No other California commodity group can say they know what the minimum price will be for their crop three years down the road.

The Raisin Bargaining Association (RBA), Fresno, Calif., which represents a third of the state's 3,500 raisin producers, has negotiated a guaranteed floor price with 14 major raisin packers for its raisin producers for the next three years who want economic assurance they will have raisins to market.

The price will never be less than $1,310 per dried ton for the 2008, 2009 and 2010 crops. This floor is $100 more than last year. It could go up from $1,310 based on a supply/demand sliding scale.

With the first ever three-year RBA contract with packers for a guaranteed minimum, raisin producers would be expected to dance in the streets of Fresno, Calif., the center of U.S. raisin production. All U.S. raisins and 45 percent of one of the world's best natural dried fruit snacks are produced within a 60-mile radius of Fresno.

However, it is a bittersweet victory for RBA and its independent packer members. It has been a bloody road to stability. For example:

  • An estimated 1,500 raisins growers are gone, either switching to other crops or out of business. Twenty years ago there were 5,000 growers. Today there are 3,500.

  • An estimated 60,000 acres of raisin-type grapes have been removed since 1996. That land will never again be planted to grapes, raisin-type or otherwise, according to industry experts.

  • Raisin production has plummeted from 432,000 dried tons eight years ago to just 300,000 tons in 2007. This represents the disappearance of almost 600,000 green tons of grapes.

Fortunately, the bleeding has stopped, and the future is bright for those who survived, according to the new RBA president, third generation Dinuba, Calif. raisin producer Michael Mikaelian, and Glen Goto, RBA chief executive officer.

Even though the RBA represents only a third of the industry, its annual price, negotiated with 14 independent packers, is the benchmark for grower prices across the entire industry.

The majority of the state's so-called raisin-type vines are Thompson seedless. Of the roughly 270,000 acres of what the state calls raisin-type grapes planted in the Central Valley, about 250,000 are Thompson seedless.

Once a triple threat variety because it can be utilized for wine, raisins and table grapes, the Thompson has fallen on hard times. It is no longer widely sought in the wine industry with movement away from so-called jug wines. The wine industry is shifting more to varietals produced in coastal areas, leaving the Thompson and other lower value varieties in the Central San Joaquin Valley in less demand. The table grape industry has a large array of new varieties, many red, that have relegated the Thompson to a second tier in that industry.

Thompsons crushed each season have represented as much as 20 percent of the total crush in the past two decades. It has also been as low as 10 percent. Prices have been all over the board from a low of $76 per ton to as much as $200 per ton. It has been the instability of the past 20 years that has driven growers to alternative, more economically attractive permanent crops.

In years past, the opening winery price for Thompsons, usually from Gallo Winery, has been the benchmark for wine grape prices statewide. However, Goto says due to the declining use of Thompsons in wine, that is not the case any more. “Thompsons for crushing are a concentrate market today.”

California wine grape growers may wish Thompson yardstick days would return based on what the RBA has done, setting the price floor for Thompsons 45 percent higher than the average price paid last year.

Typically, RBA prices were settled after winery prices were announced in the fall.

“Things have changed,” said Mikaelian. Before, the RBA and raisin packers would wait until winery prices were announced before agreeing to a price. The raisin price was then set based on a ratio of roughly four pounds of green grapes to produce one pound of sun-dried raisins. “The tail is no longer wagging the dog. Instead of the raisin industry reacting to the wineries, wineries are going to have to react to us,” said the 49-year-old RBA president.

“Raisin growers stand to make money whether the wineries buy grapes or they make raisins.”

Goto added that with falling raisin grape acreage, raisin packers recognize that without strong prices, they could lose their supply of raisins for an established marketplace.

Wineries are going to have to dig deeper than ever if they want Thompsons this season. The RBA negotiated price translates into about $225 to maybe $250 per ton for Thompsons compared to the average price of $155 per ton paid last year for 364,000 tons. This price range is more than any average price wineries have paid since 1998.

It will be interesting to see how wine grape prices are impacted by the Thompson price, since reports are circulating that wineries may be in the market for 2008 to purchase additional wine grapes.

“I really do not think that our raisin prices will really impact wine prices. The Thompson crush market is primarily a concentrate product now, not wine market,” said Goto. This concentrate is used for such things as sweetener in soft drinks.

Nevertheless, you can bet the 45 percent increase in Thompson prices not only this year versus 2007, but for the next three seasons will not be lost in negotiations between wineries and growers for grapes.

Thompson producers have a bit more leverage now in the green versus dry scenario. One of the biggest factors in the past in deciding whether to sell to wineries or make raisins has been the availability of labor. Growers fearful they would not have enough laborers to cut and lay raisins before it rains would often hedge that risk by selling to wineries cheap.

At the peak of raisin production roughly a decade ago, it took 50,000 farm workers to harvest raisins in a four to six week period from about the end of August to the middle of October.

Goto said that need has been reduced to 20,000 to 30,000 workers, partly due to the lower acreage, but also to the advancement of dried on the vine (DOV)/mechanical harvesting technology. This advanced rapidly after a major labor shortage to hand-harvest the 2005 crop.

Goto and others in the industry estimate as much as 50 percent of the raisin crop is from dried-on-the-vine (DOV) and mechanically harvested vineyards.

Some of these are with elaborate and very expensive arbor-type trellising systems requiring special under-canopy harvesting equipment.

However, most DOV/mechanical harvesting systems have been adapted to conventionally-trellised systems where growers cut canes, partially dry the grapes on the vine, and then lay them down on continuous paper trays down the row middles to complete the drying process. They are also picked up with machines. These dry quicker on the ground than when grapes are picked green and laid on individual paper trays. The longer grapes are on the ground, the more chances there are for weather damage.

The continuous tray system uses the same mechanical grape harvester utilized to harvest wine grapes; therefore, producers with access to machines do not have to rely on hand labor for either raisins or crushing.

“I think the wineries made mistakes by offering prices too low for too long for Thompsons. Growers pulled grapes out and planted something else. There are far fewer Thompsons than there once were,” said Mikaelian. “Those vineyards are not going to be replaced with more vines.”

The pullouts continued even as the raisin picture improved, according to Goto. “There are vineyards that historically went to the green market that were taken out this year because of low winery prices.”

The other side of that $1,310 price is a solid market for raisins in the U.S. Raisin packers are aware that the declining acreage is a threat to their supply. That is one reason, according to Goto, packers agreed to a minimum and a three-year contract early for not only this year's crop, but the two years following as well.

“This higher price and three year contract will have an impact on growers going to their lenders for crop loans. Bankers will be more receptive to growers.” However, Goto added he does not expect significant new acreage to be planted for the next few years.

Goto also expects lenders to continue for the near term to shy away from loaning money to establish high producing, DOV vineyards. It costs $8,000 to $12,000 per acre to trellis for a DOV vineyard with overhead trellising. For a crop like almonds, establishment cost is about $4,000. “When bankers look at the profit potential for almonds and recent history for raisin grapes, the numbers make it pretty obvious as to what the bankers will loan money for,” said Goto.

“Hopefully, in the next few years with this three-year contract it may change people's mind about investing in raisin-type vineyards,” said Mikaelian.

“There is some new DOV development going on now,” admitted Goto. “But, it is guys with enough capital to do it on their own. They may be putting in another 40 acres with a system that has the potential for four to five tons per acre with the idea that the price potential looks pretty good down the road to pay for it,” said Goto.

It takes three years for a vineyard to become bearing and several years after that to reach full potential, depending on how it is farmed early.

When the only way to produce raisins was to lay them on trays, yields typically were about two tons per acre. DOV and continuous tray systems do much better than that.

“Cost of production is all about cost per ton. Harvesting costs vary depending on whether you use hand labor like we do or use a more mechanized method. However, cost of production remains about the same. Therefore, the more tons you can make, the less per ton you have in the crop,” said the new RBA president.

Overall, Goto says it costs about $800 per ton in out-of-pocket expenses to make raisins.

“If prices get up to say $1,400 or more, it will make it a lot easier for a guy like me with an older vineyard and relatively low yields to look at planting DOV varieties,” he noted. “I think a lot of people will have a better feeling about raisins over the next three years when this new agreement starts putting some good money into their pocket.”

While the new three-year contract is definitely a corner-turner for the California raisin industry, it must be tempered by the high cost of farming today, said Goto.

“Costs are making growers more cautious than perhaps otherwise with the three-tier pricing structure we now have in place,” Goto said. Prices for fuel and chemicals go up daily. Prices of nitrogen have doubled in two years. Sulfur, a major chemical for powdery mildew control, has doubled in one year, according to Goto, adding that although the labor needs are less than a few years ago, growers are still concerned about the cost availability of labor for hand-harvesting raisins.