1/11/01 - Between 250 and 300 Massachusetts cranberry growers
met at the Plymouth Sheraton last week to hear what handlers and
industry experts had to say about the prospects for the coming
year. A similar meeting was held in December in New Jersey and
another will take place later this month in Wisconsin. What the
growers are hearing is what they have been hearing for the past
two years: too many berries and not enough demand, resulting in
continued low prices.
There are currently 4.3
million barrels of frozen berries in
inventory, said David Farrimond, executive director of the
Cranberry Marketing Committee in a telephone interview Monday.
The federal government has agreed to buy at least one million
barrels for use in schools and eligibility programs. The berries
will be sold through a bid process. The industry is predicting
that the procurement will bring in roughly $30 million in revenue
for the handler to whom the bid is awarded.
The purchase will reduce the
amount of berries in inventory to
about 3.3 million barrels. Since approximately 1.2 to 2 million
berries are normally kept in inventory to make beverages and
other processed products, there will still be a surplus of 1.3
to 2.1 million barrels after the sale. (Only about four to six
percent of the crop in any given year is marketed as fresh fruit.
The remainder is frozen. Frozen berries produce more juice than
fresh.)
The U.S. Department of
Agriculture will also offer $20 million in
direct assistance to growers through the Farm Service Agency.
Growers will be paid a subsidy of $5 for each barrel produced
last year up to a maximum of 16,000 barrels. However, since
production costs run about $35 per barrel and the amount growers
will receive for last year's crop is being predicted at somewhere
around $10 per barrel, even with federal assistance their income
for 2000 will be less than half of their expenses, a situation
that will likely force some growers to stop production either
temporarily or permanently.
Linda Rinta, who cares for
90 acres of leased and family-owned
bogs in Middleboro, Carver, Wareham and Rochester, is one such
grower. (Stressline ed. note: Linda Rinta has
added the following correction.
"I would like to correct a misperception created in the
Middleborough Gazette
article dated Jan 11, on a cranberry Growers' meeting. The article
implied
that Linda Rinta managed 90 acres of cranberries. Linda Rinta does not,
Paul
Rinta manages the cranberry acreage. We are a farm family with thirty
years
of a convenient division of labor. Paul manages the bogs and I attend
the
required meetings and fill out a mountain of paper work. If by that the
reporter got the idea that I was the manager of the property, she was
mistaken.")
"Our family will not
produce at all this year if we don't get at
least cost," Mrs. Rinta said. "It doesn't make any sense to
throw
good money after bad. I don't think anybody thought the price
would be as bad as it was last year. The volume reduction didn't
bring us any relief."
To get the supply and demand
back into balance, the supply must
be controlled and the demand increased, agreed the six handlers
on the panel at last week's meeting - representatives from Ocean
Spray, Clement Pappas & Co., Inc., Cliffstar Corp., Northland
Cranberries, Inc., Decas Cranberry Co., Inc.and Hiller Cranberry
Sales, Inc. What they could not agree on was a method for doing
so. "There are six handlers and six different
opinions," Mr.
Farrimond said. "The only consensus is that something has to be
done."
Whatever happens will happen
soon. The marketing committee will
meet Feb. 5 to discuss what recourse to take and will make a
recommendation to the USDA by the first of March, Mr. Farrimond
said. Any restrictions must be approved by the secretary of
agriculture.
Basically, there are three
approaches that could be taken, Mr.
Farrimond noted: a withholding regulation, a product allotment
(marketing order) similar to the one instituted last year, or
doing nothing at all. Ocean Spray favors another allotment, while
Northland is advocating a withholding program and Cliffstar and
Clement Pappas have suggested that no regulation would be the
preferred tack to take.
In a withholding program, a
percentage of the year's crop would
be established as "free fruit" that could be sold. The
remainder
would be considered "restricted" and could not be sold unless
the
handler found a new market, in which case a buy back provision
could go into effect. The grower would produce and deliver to
the handler his entire crop and it would be up to the handler to
get rid of the restricted fruit, either by donating it to
charities or research or destroying it. Percentages of 65
percent free fruit and 35 percent restricted have been suggested,
although it would be up to the marketing committee to make a
final recommendation.
There are disadvantages to
both the handler and the grower in a
withholding program, Mr. Farrimond pointed out. The handler must
bear the added cost of disposing of the unmarketable portion,
while the grower ends up paying the cost of producing an entire
crop yet only getting paid for a percentage of it.
In an allotment program, on
the other hand, the growers
themselves are responsible for controlling the amount of
marketable berries. Each grower is allowed to bring to market a
predetermined number of barrels based on past production.
Growers have the option of limiting production by flooding bogs
when the vines are flowering or minimally maintaining their
acreage or producing a full crop and destroying the portion that
may not be sold. Last year growers were allowed to sell 85
percent of the average high yield produced during the previous
five years. (In many cases, due to new farming techniques,
yields have more than doubled in recent years from about 150
barrels per acre to 350 barrels, which added to the surplus,
according to Mr. Farrimond.) Growers who sold their crop to the
fresh fruit market were exempt from the order.
There is an advantage in the
allotment method to growers in that
reducing bog maintenance to the bare minimum lowers costs.
However, dealing with 1,282 growers throughout the nation on an
individual basis makes it a more complex system to manage, Mr.
Farrimond said.
John Decas of Decas
Cranberry Co. has also proposed that the
handlers deplete the surplus prior to the next harvest by selling
it at distressed prices, but Mr. Farrimond said that would likely
drive prices down further and would also eliminate the market for
the next crop.
Discouraged by the limited choices that have been presented, some
growers blame squabbling among handlers for distracting them from
developing new ideas for resolving the problem.
"It seemed pretty clear (after last week's meeting) that the
handlers are busy in their own market share battles. We aren't
going to find price relief in anything they're going to come up
with," Mrs. Rinta commented.
Hal Brown of Middleboro, who
offers information about the
industry and opportunities to share ideas in his website "The
Cranberry Stressline," said another marketing order would be
simply a "temporary fix until the demand meets the supply,"
which, he added, "isn't going to happen in the United States
because there's too much competition from other drink companies."
He also criticized Ocean Spray for "clobbering the competition,
not Minute Maid and Gatorade, but Northland...Talking about
driving another company to bankruptcy.that's going over the line.
It's a position that makes me feel very uncomfortable," he said.
Three of Ocean Spray's
shareholders, including Lawrence Harju,
principal of Harju Brothers Cranberries in Middleboro, upset
with Ocean Spray for not disclosing information in reports
prepared by Merrill Lynch and Professor Ray Goldberg of Harvard
University that purportedly recommended a merger or sale of the
bottled juice portion of the cooperative with a larger beverage
company, filed a lawsuit against Ocean Spray last month asking
that the information be released to shareholders. A discussion
about the reports is on the agenda at the company's annual
meeting in San Diego on Jan. 20.
Mr. Brown believes that the
company dug itself deeper into a
hole with growers when CEO Robert Hawthorne did not make an
appearance at last week's meeting.
"All the other CEOs
were there," Mr. Brown said. "A lot of
people felt insulted. It was a big audience. It would have given
them a chance to make a case for a marketing order. So much
depends on what Ocean Spray does."
Mrs. Rinta also noted that
the decision about what action to take
will be made by the marketing committee, which is composed of
handlers with Ocean Spray, the largest distributor, having the
most representation.
"Ocean Spray is the
900-pound gorilla in the room," she said.
"They have controlling seats (on the committee) so whatever Ocean
Spray wants, we'll get."
Another concern among
growers is the upcoming change in the
administration. Not only are the new decision-makers in
Washington an unknown factor, but it will also take some time to
make changes in personnel, which could have a major impact on a
seasonal business whose "employees" are trying to make
informed
decisions on a rigid timeline.
"I hope the new
secretary of agriculture doesn't agree with any
kind of volume regulation that doesn't provide us with any kind
of relief," Mrs. Rinta said.
Hal Brown said his wife,
Betty, like Linda Rinta, is
contemplating flooding her ponds this spring but is getting her
sprinkler heads ready just in case. "The final decision comes
when you put out the sprinkler heads,"
he said. "If you don't put them out and we have a frost, you
lose the crop. But if you put them out, because it's so much
work, you may as well go through the whole process."
