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A proposal from Cliffstar, Decas,
Hiller and Pappas
9/18/00 -- Since the
Cranberry Stressline has reported the proposed amendment which was
discussed at the Cranberry Marketing Order Committee regarding volume
control, we are writing to provide greater detail for the benefit of
Stressline readers and all growers in general. By doing so, we hope to
generate support for this proposal.
The proposal, in simple
terms, would give the Cranberry Marketing Committee an additional option
on how to impose future volume regulations, It would work as follows:
1. At their annual
August meeting, the Cranberry Marketing Committee could declare a
volume regulation that would be determined as a percent of industry
inventories. This percentage figure would be applied to each
handler's inventory on a date determined by the Committee, but prior
to the harvest. It could be the first of August or perhaps the first
of September, depending on available inventory data as provided by
the handlers to the Cranberry Marketing Committee.
2. If the Committee chose
to eliminate the entire surplus, they could regulate the appropriate
percentage figure of
the total inventory. For example, the Committee could take the
following steps:
A. Let's say that
the Cranberry Marketing Committee receives handler reports which
show 4,000,000 bbl. of industry inventory as of September 1,
while the pipeline needs of the industry are 2,000,000 bbl.
(already determined by the Cranberry Marketing Committee).
Pipeline berries would then be subtracted by the Marketing
Committee from the 4,000,000 bbl. of total inventory.
B. The remaining
2,000,000 bbl. represent 100% of the actual surplus and 50% of
the full inventory, The Cranberry Marketing Committee could then
vote to regulate all handlers by an amount equal to 50 percent
of their individual inventory and the surplus would go away.
C. Each handler
could dispose of their obligation from existing inventories if
allowed by law and/or from the harvest, which would begin within
a few weeks. Otherwise, the reduction would come from the new
harvest only.
3. The Committee could
impose a lesser disposal percent if they choose.
4. If the new crop is
so great that it creates a new but smaller surplus, then going into
the following harvest the Committee could once again impose a
regulation against each handler’s surplus, but this would likely
be at a much lower percentage than in the first year.
If the USDA rules that
this amendment is acceptable, it should be adopted by the Cranberry
Marketing Committee and the industry as a reasonable option that would
result in the benefits as described below. If the USDA declares that
this precise amendment is not allowable, we should find an alternative
way to achieve the same result.
If this proposed
amendment were to be adopted, the Marketing Committee could consider it
as an alternative to the allotment approach that has been approved by
the Secretary of Agriculture for this year's crop, or the withholding
(set-aside) option that was used in the 60's and early 70's.
Some of the benefits of
the proposed amendment would be as follows:
1. The Cranberry
Marketing Committee’s decision would be made in late August rather
than in February or March. A more informed decision can be made just
prior to the harvest rather than six months earlier. In August, the
Committee has better information regarding the actual inventories
preceding harvest. They can accurately predict the size of the new
crop as projected by USDA, and can estimate sales more accurately in
August than in February. Furthermore, an allotment program
determined in February could result in growers reducing the crop by
flooding out acreage in the spring only to find out in August that a
crop shortfall has occurred and that those berries were needed after
all.
2. Since handler
inventories also include berries imported from Chile, Canada and
Europe (oxycoccus), a portion of the regulation could apply
to imported fruit. Therefore the Marketing Committee could, to this
extent, apply the regulation to imported berries, not just U.S.
grown berries. Handlers will understand that importing cranberries
will have consequences if those berries contribute to a surplus and
would have to take appropriate steps to discourage overproduction in
Canada and other countries.
3. This option will
be easy to administer. The Committee need only regulate less than a
dozen handlers rather than all growers and handlers individually.
This will eliminate the enormous bureaucracy now being established
and save the hundreds of thousands of dollars which will be required
to oversee the burdensome grower allotment program. These saved
dollars could be put to better use for research and generic
promotion of cranberries. Handlers will also save money by not
having to manage individual grower allotment accounts. For growers,
there will be no need to go through the lengthy appeal process that
in many cases destroys their dignity by subjecting them to a process
that is so complicated that it cannot be conducted fairly.
Furthermore, the appeals process forces growers to plead for the
opportunity to sell the berries they spent their own time and money
to grow. We find this abhorrent.
4. This option has no
grower complications or inequities. There will be no temptation for
growers to violate any laws trying to avoid complying with the
regulation. It regulates the handlers, not the growers. This year we
are witnessing the obscenity of a program that allows some growers
to market 100% of their crop while forcing others to dispose of over
50% of their crop. How can we tolerate a program that will cause
some growers to go bankrupt who would otherwise have survived? This
program forces handlers to legally violate contracts with growers
that they are committed to sell 100% of the grower's crop. If you
are a grower whose handler has a market for all of your berries, you
are screwed without reason. If you are a grower whose handler cannot
sell all of your berries, then your handler is taken off the hook at
your expense and at the expense of their competition.
5. Handlers with the
greatest inventories would have to dispose of the most berries. It
is these unsold inventories hanging over the market which are the
primary force depressing prices for the new crop. What could be more
fair? While all handlers dispose of an equal percentage of their
inventories, the handlers who have the most inventory will bear a
proportionately larger burden for inventory reduction. No handler's
disposal records would become public. All anyone will know is that
ALL handlers will dispose of the same percent of their inventory,
and this will be audited and verified by USDA. No handler would have
to admit holding more berries than they could sell.
6. Finally, and most
importantly, under this proposal, the value of the new crop would
increase immediately in accordance with supply and demand. The price
of berries would be reasonable to the trade, predictable for the
future, and profitable for the growers.
Under the present
allotment program, we are disposing of some of the crop without
experiencing any stability. Many growers are being ruined, and surpluses
continue to exist while prices and returns continue to plummet. So much
for the wisdom of the economists who assured the Cranberry Marketing
Committee and the USDA that the 2000 allotment would achieve stability
and higher returns, We are getting the opposite while paying through the
nose for the privilege.
In conclusion, we wish to
emphasize that while this proposal is a better option than those
presently available, we believe that the free market will correct our
problems quicker and more fairly than any government-mandated artificial
scheme.
The Cranberry Marketing
Order is, however, the law of the land, and this proposal recognizes
that the new crop is not the problem; the carryover of surplus is the
problem. This proposal deals directly with the carryover of surplus in a
manner that is as consistent as possible with free market
considerations.
We will have additional
comments regarding this initiative as the process moves ahead.
Sincerely,
Cliffstar Corp.
Decas Cranberry Sales,
Inc.
Hiller Cranberry Sales,
Inc.
Clement Pappas & Co.,
Inc.
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