There is a new president and CEO, Ross Siragusa. CTGA also has a consultant’s recent evaluation of the association and the industry that suggests it to be a kinder, gentler grower bargaining association in representing the interest of growers who produce 60 percent of California’s tomato crop.
Unfortunately, the newness look stops about there for its members and other California processing tomato producers when it comes to the industry’s economic outlook short term and long range. It the same old story of too much production, not enough consumption and low prices for growers.
No price has been established in negotiations between processors and CTGA, but interim CEO Ron Schuler told CTGA members at its 57th annual meeting in Modesto recently that prices will not be much better than last year, despite a 2003 crop 13 percent smaller than 2002 and seemingly tight world supplies.
"We are that close to an agreement," Schuler said, his thumb and forefinger almost touching. He had hoped to announce an agreement at the annual meeting. He didn’t, but he told growers not to expect more than $51.50 per ton with a $3 to $5 late season premium as Southern San Joaquin Valley producers in Kern County began dropping seed in late January.
About the only difference between this year’s price and last season’s is that the 2004 price will most certainly be established earlier.
Not this year
A long-term contract, spelled-out industry wide delivery standards and several other contract criteria CTGA hoped to get into a new processor contract for growers, will not happen this year, said Schuler. It will be a one-year deal, and growers are on their own in negotiating delivery standards with processors, Schuler said.
And, those, according to Schuler, are far more important than price.
Schuler, former long time president of the California Canning Peach Association, went back into retirement after the meeting.
CTGA hired Schuler as interim CEO in September after the previous president resigned. Since then the association has undertaken an association evaluation while searching for a permanent CEO.
The agribusiness strategic consulting firm, The Hale Group, recommended CTGA be a kinder, gentler negotiator with processors; recognize regional differences in its price negotiations; adopt a CTGA grower board code of conduct; work closer with processor and negotiate a price more consistent with industry supplies/demands.
Ken McCorkle, Wells Fargo senior vice president, agribusiness industries and luncheon speaker, went even further.
"The days of union mentality...of banding together to bargain for higher than marketing price are over," he said. "All this does is encourage excess production and does not serve the industry."
Growers, he said, are not in competition with processors but in business with them. An adversarial relationship is counter productive, he added.
"CTGA protects the high cost tomato producer," said McCorkle.
Nevertheless, according to CTGA chairman, Don Cameron of Helm, Calif., said CTGA’s membership wants it to negotiate prices, and that is what it will continue to do.
"The tomato growers in our state need a strong association to bargain," said Cameron, calling for all growers to join CTGA. Currently 40 percent of the state’s production is out of the association.
Cameron said when non-association producers agree to a price less than CTGA, "you undercut your neighbor. You (also) left money on the table that might mean the difference between your financial success and failure," he said.
While Schuler was not optimistic prices will improve significantly this season, despite a short 2003 crop and shortages of tomato products worldwide, Cameron and Schuyler said processors may be surprised at the state’s tomato production this year.
Schuler said it may be difficult for it to reach the 11 million tons that are being projected early.
One reason it may come up short is because of profitable alternatives like cotton and rice.
"All commodities are moving toward a long-term bull market," said Cameron. "We have been accepting low prices only with the help of the Farm Program to keep us in business these last three to four years. I now see prices improving for all commodities, including specialty crops in California," he said.
Cameron believes growers will move to crops like cotton, rice and wheat because they cost less to produce, lowers risks and are profitable. "These crops will take away from higher risk, higher capital and lower priced crops" like tomatoes.
Crops are changing
Plus, crops like almonds are taking good ground permanently away from tomatoes. Wineries are once again offering long term contracts. And, urbanization continues to take farmland out of production.
This all should translate to better prices to processing tomato growers.
Cameron called for growers to unite behind CTGA.
"What we ask is for a fair and reasonable price for our crop. A price that both the grower and the processor can profit from," said Cameron, adding that unity is also necessary to support product promotion.
"We need to find new and improved markets for our tomatoes and...avoid the Wal-Mart Syndrome. For every time you hear prices falling in Wal-Mart, you should also hear another grower or processor falling as well."
Cameron followed McCorkle and it was a tough act to follow. The banker had nothing but a gloomy assessment of the processing tomato industry. He said despite a weather-shortened 2003 crop not only in California, but China and Italy as well, a "protracted four-year slump will only continue.
"While prices for both tomato paste and raw tomatoes could rise in 2004, the basic structural issues plaguing the domestic processing industry since 1999 have not changed," he said.
-- Excess total bulk paste production capacity that exceeds its ability to market products.
-- The transition from fresh pack canning to two-stage bulk paste re-manufacturing has reached it practical maximum.
-- Paste re-manufacturers are getting more product from a pound of raw product, so much more that that alone drives modest increases in consumption.
-- Two key processing tomato markets, the pizza and pasta industries, are not growing, primarily because of America’s infatuation with the low carb Atkins diet.
-- Export markets are small, and competition from China will not allow that to change.
McCorkle does not expect the current class of well-capitalized processors to disappear. They will work harder to increase capacity and lower paste costs. This downward pressure on bulk paste prices could drive branded processors out of the processing business and into the bulk market to meet their demands.
With little hope for better prices, McCorkle said growers who want to continue growing processing tomatoes must cut costs by adopting more efficient precision farming methods; convert to drip tape if they have not already done so; get rid of unnecessary assets and be more "customer oriented" with their processors to give them a better market niche.
"And, you have to look at diversifying to avoid concentrated processing tomato acreage," he said.