OpEd

On volume regulations

by John Decas

4/25/02 -- I tend to be against volume regulations because they cannot be administered fairly.  Volume regulations, particularly when they exceed 15%, dramatically effect the ability of a small handler to be a reliable source of supply to his customers and allows large handlers who created the surplus to conduct predatory practices against companies like mine. 

It is also hard to ignore the fairness of regulations being applied against US growers because of a surplus being created in part by imported berries.  Chile is a perfect example that we should not ignore.  They have pumped well over 100,000 bbl. into the US this year, and that figure will increase to 400,000 within a couple of years. 

Having said all of that let me emphasize the following.  As a member of the Cranberry Marketing Committee for many years, I voted for every volume regulation that was ever imposed.  I did so after vigorous debate and reasonable compromise took place. 

In 2001, I joined with Ocean Spray and other handlers in support of a 25% regulation, which later became a 35% regulation, with the understanding that Ocean Spray would make some of their surplus berries available to all handlers in a reserve pool at a fair price. 

I withdrew my support when it became apparent that berries could only be purchased from the Ocean Spray reserve pool under conditions that Ocean Spray imposed that were impossible to meet without losing a lot of money. 

This year when the CMC met, I attended that meeting and was quite prepared to voice support for a modest allotment regulation in the event that the committee agreed that a volume regulation was needed. 

It all became moot when Ocean Spray management instructed the four Ocean Spray members to vote against any regulation.  On the other side of the issue, Gary Jensen offered a motion for a 30% volume regulation with a $30/bbl. buy-back price.  This proposal was strongly supported by John Swendrowski. 

The debate that followed was quite interesting.  Jack Crooks made the case for no regulation based on reduced inventories coupled with projected increased sales.  John Swendrowski argued vigorously that a huge crop could not be marketed in full and the value of berries would decline.  Therefore, John argued, the protection of a 30% volume regulation was necessary. 

Both sides made their case well, but I thought on the question of determining the likelihood of a surplus that John made his case better than Jack did.  It was a perfect scenario for a compromise, but neither party seemed inclined, especially Ocean Spray. 

Other handlers and I were quite prepared to participate in a compromise discussion, but the opportunity didn’t present itself. 

Now let me list some additional specifics in response to the question of my position on a proposed regulation: 

1.   I am scared to death about a scenario of a 0% regulation in 2002 and 30-40% regulation in 2003.  I would much prefer 10-12% for two to three years or even longer as opposed to a huge 30% plus regulation in any given year.  I must be able to have some ability to predict available supplies in order to plan my sales and growth and protect my customers. 

2.   The allotment regulation is deeply flawed without a mandated reserve pool.  Every grower and handler should be outraged at the CMC and the USDA for failing to offer an amendment to fix that problem, which is acknowledged by everyone as necessary.  Fix this, and much of the acrimony dissolves. 

Having said that, the allotment option is far superior to the withholding option, and it’s the option I could support. 

3.   A withholding regulation is tremendously harmful and prejudicial to: 

• Most small growers with limited resources, who have two jobs, and who have average or below average yields.  A 30% withholding causes a 140 bbl./acre grower to get paid for 98 bbl./acre. Mega-growers who contributed the most to the creation of the surplus suffer considerably less.
• Growers and handlers from states where conditions and laws result in a $5/bbl. cost to destroy withheld berries and who cannot cope with these costs. 
• Any grower or any region where a bad growing season results in a bad crop.  A withholding regulation would, in effect, further reduce the size of the small crop with no recourse.  At least with an allotment regulation, the handler has some flexibility to give his growers some value for a grower’s unused allotment and can respread extra allotment to balance his needs and the growers’ needs.  The grower has the flexibility to limit his crop and his costs.  If the 2001 regulation were a withholding rather than an allotment regulation, the cranberry industry in Massachusetts would have been decimated. 

I could go on in this regard, but I feel I have made my point. 

In conclusion, let me emphasize that small Independents find themselves caught in the middle of the CMO debate between the two giants of Ocean Spray and Northland.  For other small handlers and myself it is difficult to be anything but an obstructionist in this scenario to protect yourself and your growers. 

Last year at grower meetings in Massachusetts and Wisconsin I presented the idea of a Cranberry Marketing Agreement where all handlers would meet in open session with the USDA present to create an environment where compromise could be achieved.  Last year, four Independent handlers and their lawyers met with Ocean Spray and their lawyers and struck a compromise on the proposed 2001 regulation.  This compromise would not have fallen apart if the USDA was present and the meeting was public.

I can, under reasonable conditions, support a regulation that keeps us all on a level playing field.  The present environment does not allow for the fair application of a volume regulation.  The polarization of those who say there is no surplus when there is one, and those who would kill off some of us with a huge regulation are the real enemies of a sensible regulation. 

The framework for a pragmatic and reasonable regulation must begin with a gathering of handlers and the USDA in the open presence of growers to design such a framework. 

I prefer working with others as opposed to being forced to be an obstructionist because that happens to be my only choice.  I have worked with the CMC for the common good in the past and I am prepared to do it again.

If I could wave a magic wand, I would immediately impose a three-year 10-12% allotment regulation.

I could live with this for three reasons:

1. I can plan my marketing program for three years knowing the maximum impact on my source of fruit. 

2. This would reduce any surplus crop by 650,000 to 750,000 bbl. in each of those years.  That does not include any Canadian berries that may also be regulated on a voluntary basis.  I believe this would achieve the protection that some Wisconsin growers are seeking. 

3. This sort of commitment should better position the industry to make its case for the purchase of cranberries by the USDA.

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