Archive | August, 2017

Apparently there was something that wasn’t right in the last CMC vote for a Volume Regulation

31 Aug

So the CMC voted again and split into two separate votes, one for 2017 and another for 2018. The Handler Set aside of 15% for 2017 is unchanged. The Producer allotment of 75% for 2018 was approved with a 2500 barrel exemption for each grower. All districts are included in this regulation, note that previously District 4 was exempted. This re vote split the independents with two voting no. The proposed action was still approved and will be sent to the Secretary of Agriculture for his approval.

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CMC charts

6 Aug

Here is the visual on the over supply.  The industry’s last VR was 2000 and 2001.  There were some charts on historical grower prices that I will try to find and post.  Supply in the 40-60% range is the sweet spot.  

A couple of more thoughts on the CMC vote

6 Aug

I've heard from some folks since the vote in Washington and here are a couple more thoughts.

What did the Independents get?  Why did we do something to support Ocean Spray? Why didn't we just let Spray choke on their fruit? Why didn't we make Spray stop planting?  All good, valid questions.  But the question for ME was what will the independents pricing do if we don't do anything?  The answer?  There is nothing, absolutely nothing to suggest that our prices will go up in the next 5-10 years if we do nothing.  This huge inventory is dragging the whole industry down.  We have history to guide us….a VR in 2000 and 2001 worked.  In fact, the independents prices came up fast than Ocean Spray's.  True, the industry had a hot product in that time frame which was SDCs.  This time I feel that we have the export market.  China is primed and ready to go.  India has a longer path but has huge potential.  The US consumption of cranberries is 2lbs/person/year.  China's is .01lbs/person/year.  

Do I think that Spray epically screwed up the supply?  Yes I do.  Clearly in 2005-2006 when the supply was in balance, they went on a SDC plant building spree and encouraged plantings to fill those dryers.  Did anyone at Spray lose their job over this miscalculation?  Not to my knowledge. Most Spray growers probably think that this planting was a good idea, since they've had a good run of great returns, certainly way higher than the independents. They showed us.  But now the effect of this oversupply is knocking on Spray's door.  They've made some critical errors. They are going to have to make some hard, hard choices in the near future.  Independent growers have already made these choices and on the farm we've cut to the bone, taken second jobs, sold off stuff.  We would LOVE to see $25/bbl returns.  Spray growers fear them but I'm sure they have big bank accounts from the past 6 years to soften the blow.  

John Decas was famously right when he stood up at at CMC meeting and asked "what gives Spray the right to unilaterally increase the supply by 6000 acres?" And "The industry is in balance". So John was right.  But don't forget , that independents planted as well.  Independent handlers increased their SDC capacity.  Spray isn't the only one that increased supply.  

The CMC has the overall data.  The industry reports the sales figures into the CMC so we know if we are in balance as an industry.    The CMC members have known for a while that this train wreck was coming.  The question in my mind is, does the CMC committee have the guts to manage the fruit supply in the future, or are we going to blindly listen to our handlers and ignore the facts?  Did we learn our lesson?  

News from the CMC Long Beach Washington

4 Aug

This morning the U.S. Cranberry Marketing Committee members have voted unanimously for a Volume Regulation on the 2017 and 2018 crops.  This is due to the CMC’s August 2017 estimate of 10,910,000 barrels of inventory carryin.  Inventory as a % of sales is projected to be 115%.  So folks, we have a lot of cranberries in all forms in inventory with another large crop forecasted.  

FINALLY, the CMC is following their mandate to stabilize the supply of cranberries which will allow the industry to clear the decks of excess inventory.  
Both sides, the independents and Ocean Spray came together.  It was a joy to see and no I’m not being sarcastic.  This meeting may be a watershed moment for the industry.  No more “last man standing”.  No more “I win, you lose”.  Compromises were made.  No one got exactly what they wanted.  Apologies were made for previous mistakes made.  Promises were made to listen to each other in the future.  We communicated.  

The real clincher for me was Dr Richard Sexton’s presentation about the effectiveness of our marketing programs contained an supply and demand review.  His estimates that for every 1% reduction in supply that the price to grower should increase 2% regardless of which type of cranberries, whole frozen, finished goods or concentrate are disposed of got my attention!  Dr Sexton, UC Davis is a pretty big deal in the world of agricultural  economics.  That being said…will it work?  Time will tell.  There is a lot of work to be done with the staff at the CMC and USDA.  The market has to work.  There is a discussion that we may increase assessments to do more international, generic promotions.  Our work to date has been successful, but any increases need a very good plan and implementation.  

Key items:  2017 will be a handler withholding of 15% and 2018 will be a producer allotment of 75%, meaning that growers can deliver 75% of their CMC average deliveries.  There are some exemptions and the Ag Secretary has to sign off. 

 If I get a chance I may post some additional info. If you want details, go to the CMC website as I am sure they will put up the details.