SUPPLY & DEMAND
Critical News for Growers & Packers
Vol. 2 No. 1 January 12, 2002

Even You Should Sign Up

An industry member was visiting in Glenn County this past week and was surprised at the number of growers who said they did not plan to sign up for the tree pull. Now many people consider Glenn County an above average production area, yet a number of PBA members in that area are signing up for the program. These growers are above average growers. What do they know that these other ‘above average’ growers seem to be missing? And why should you, an above average grower, sign up a block in the tree pull? Consider the following example and the table below.

Big Risk, Small Return

By not participating, this grower is really gambling on the notion that other growers will pull out more than their share. Not likely - those growers to the south are hoping the same thing. The grower is betting the industry will reach its goal and there will be a quick return to profitability. So he intends to gamble that even though he doesn’t pull out his 20% someone else will pull out 40%.

To illustrate how this translates to a large risk for a small return, lets assume that everybody else does participate and the industry reaches its goal. How much extra money will it mean to his operation to keep his 40 acres? If a 20% reduction in acreage results in a 20% increase in price, the average return per ton would go from $750 to $900 per ton. If the grower kept all 200 acres in production, at this price he would have a return of $79,000 over cash costs. If instead, he was farming only 160 acres out of the 200 he would still have a return of $71,000 over cash costs.

There is a saying that pigs get fed, but hogs get slaughtered. In other words, for a potential gain of $8,000, the grower is willing to risk not ever getting the $71,000, because without the participation of everyone, the potential improvement to the price will never happen. Run the numbers on your own operation and take action - don’t delay.

Editorially Speaking
Neill Mitchell, PBA President

TREE PULL STUFF
Rich Peterson has already received hundreds of applications for the USDA-funded tree pull. He says there are still funds available and he encourages growers to sign up. He is hopeful that signups will continue to the point that a waiting list is established to ensure that all available funds are used.

If you have studied the application and feel that you may not qualify for the program, please submit it anyway, as there remains a possibility that we will have an additional Sunsweet/PBA program that could help you. We are seeing a lot of enthusiasm for the program so send in your application to help save the prune business and improve your own financial outlook.

The USDA comment period is now underway (ends Jan 16th) so it would be good if you feel like expressing yourself to fax or email to USDA and express your support (202-720-8938 fax, or email: moab.docketclerk@usda.gov). Too often, because we have overwhelming support for a program, we don’t feel it necessary to express our support but this enables the opposition comments to sometimes outnumber the positives. Contact the PBA office if you need help.

A FREE $260 PER TON EXTRA?
Ken Lindauer called me last week expressing frustration that several non-PBA growers in his area probably benefited quite significantly from the PBA price agreement without contributing a dime to the organization. It happens that these people were selling to a packer that terminated their contracts and left them with very few options.

One of these growers was ready to accept a low ball offer which would have resulted in a dry price of about $500.00 per ton. Those soliciting their prunes were telling them that a 2001 prune price would be impossible given the turmoil in the industry and the number of growers without contracts.

We have no way of knowing whether these fellows signed these low priced contracts, or whether the packer will enforce them, but we do know that at the time they were willing to sell their crop at $500.00 per ton. The PBA price will bring most growers in the north valley over $760.00 per ton, so I believe I can say that the hard work put in by the board and members of the PBA brought these growers an additional $260.00 a ton.

Ken points out that many non-member growers know better than to be negative about PBA, but they just can’t seem to get it into their heads that they could do better by joining PBA and working with the group that for the last 33 years has been setting their field price!

A VERY GOOD FRIEND IN WASHINGTON
Congressman Wally Herger has been a personal friend of mine since he was in the California Assembly. At that time our kids were in little league together so I had the privilege of getting to know Wally on a personal basis. He has always gone the extra mile for his farmers and has done it again with his support of the tree pull. As most of you know, Office of Management and Budget held up the tree pull pending review and many of us were increasingly pessimistic about the outcome.

Wally Herger sent a letter to Mitch Daniels at OMB (along with the letter from our own Greg Thompson that the congressman forwarded). I realize that the tree pull became a reality due to the efforts of a great many people but the fact that the program was released by OMB just a few days after Congressman Herger’s letter would lead one to believe that this effort carried the day.

I would encourage you to support Wally Herger in his reelection efforts and it certainly wouldn’t hurt to write and thank him for his work. Greg Thompson, of course, is always there for the prune business and continues to do more than expected to make things better for growers. Our thanks to Greg too!

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To contact Congressman Herger you may write or send a fax to his Chico office: 55 Declaration Circle, Ste. 104, Chico, CA 95973. Fax: 530-893-8619.