Rural Cooperatives Review - June 2007

Beating the Odds: Reducing Market Risk for Specialty Crops
Click linked text for pdf of presentations, or click here for all presentations.

The University of California's Rural Cooperatives Center, working with a group of California specialty crop Bargaining Associations and USDA’s Risk Management Agency, offered an opportunity for growers to learn more about improved risk management strategies for production and marketing of their crops to increase profitability. The May, 2007, event in Yuba City focused primarily on crops relevant to the region.

The day began with a presentation by Barry Kriebel, President of Sun-Maid Growers of California.  He reported on the current "International Outlook for Nuts and Dried Fruit", having just returned from the International Nut Conference in Madrid, Spain. The I.N.C. represents almonds, Brazil nuts, cashews, hazelnuts, macadamias, pecans, pine nuts, pistachios, walnuts, apricots, dates, figs, prunes, raisins and peanuts.

International competition is strong. Turkey, for example, is #1 world exporter of raisins, dried apricots, hazelnuts, and figs. However, quality remains a high priority for consumers and there California has the edge. Health concerns about food in general, and the benefits of nuts and fruit in specific are an important reality of marketing these products. Consumers will recognize more value in raisins, dried fruits and nuts in the future as health practitioners advise to eat more fruits and vegetables.
                                     
Shermain Hardesty, Rural Cooperatives Center, UC Davis, followed with a presentation on "The Power of Producer Collaboration". Conditions facing specialty crop producers include:

• Many sellers, few buyers
• Perishable product
• Demand for most produce commodities is inelastic
• Competitive sellers may bid against one another and drive price down
• Capper-Volstead Act enables producers to legally act as a cartel, but not to unduly enhance prices

Collaboration through marketing cooperatives or bargaining associations can address many of these conditions. Also discussed was the role of information sharing cooperatives and marketing agencies, such as the CA Citrus Growers Association. In addition, mutually beneficial collaboration between producers and processors exist, such as the Tomato Products Wellness Council, a collaboration of growers, processors and brand representatives. Voluntary contributions from members contribute toward approved research and generic public relations.

A session on negotiating skills followed entitled "Winning Strategies for Crop Market Negotiations". This included role playing exercises with participants playing both producer and processor roles.

Daniel Sumner, University of California Agricultural Issues Center, spoke on “2007 Farm Bill: Opportunities for Specialty Crops.”  This large and complex bill, started in the 1930’s, operates in conjunction with a host of other policies. Understanding the entire bill is difficult if not impossible, although many people understand individual parts.

The prime component of the Farm Bill is food, nutrition and consumer services, accounting for over 40 percent of expenditures in 2005. Crop subsidies will receive smaller budget allocations, mainly due to projected high commodity prices for the next 5 years (in large part because of bio-fuel expectations).  This will have less direct effect in California than elsewhere, since California ranks in the bottom 25 percent of national commodity payments (as a % of gross cash receipts in 2004) and likewise for conservation payments. However, re-distribution of those funds within the Farm Bill is unlikely.

Karen Klonsky, UC Davis Department of Agricultural and Resource Economics, addressed the topic of "Assessing Long-Term Planting Decisions", specifically with regard to orchard crop choices. The main factors discussed were:

• Expected Revenue
• Costs of Production
• Consumption
• Domestic & international competition
• World trade position
• Treaties, Tariffs, and subsidies

No one factor alone can be used, for example, while peaches have the highest expected revenue per acre, they also have the highest production cost.

Finally, a panel of experts discussed several alternative crop possibilities in a session entitled “Risk and Returns: Emerging Specialty Crops in the Sacramento Valley.”            
             
Benny Fouche, UC Cooperative Extension-San Joaquin County discussed blueberries. While this crop has traditionally been grown in Oregon, successful trials in California may warrant inclusion in crop consideration.  Variety trials indicating the most suitable varieties were discussed.

Garry Vance, California Pecan Growers Association, addressed pecans. Pecans are the only major tree nut native to North America and are grown commercially in 15 states. While traditionally alternate bearing, overall supply has not changed in many years. Although this has resulted in demand exceeding supply nationally, limited numbers of buyers in California can pose a problem. However, over the past 5 years, growers have enjoyed high prices.

Alan Greene, California Olive Ranch talked about olives for oil.  Although many small producers exist in Northern California, most olive oil is imported, so potential growers face pre-existing competitors. Superior quality may be the answer to that competition.

-top-