Op-Ed

On a cranberry marketing order for 2001

by John Decas

The campaign for a marketing program for the 2001 crop has officially begun. Mr. Sherwood Johnson, Chairman of the Board of Ocean Spray, along with Mr. Robert Hawthorne, CEO, in a letter to the Ocean Spray growers stated that the Board of Directors "… is convinced that another volume regulation through the USDA Cranberry Marketing Order will be necessary in 2001…" Mr. Hawthorne, at a grower meeting in Massachusetts, indicated that a 35% allotment is the specific regulation he will seek.

In the same Johnson-Hawthorne letter, they stated that those (Independents) who oppose volume regulations do so "… for their own selfish advantage…"

I can’t quite figure out how insulting a segment of the industry whose support they will need makes any sense.

If they expect to be taken seriously, they had better start mending fences quickly. They should first take a critical look at the allotment approach which we have just experienced and determine (A) Did it achieve the stated goal? (B) Do the growers support another year of the same? (C) Was it worth the money it took to manage the program? and (D) Was it applied equitably to all handlers and growers?

I suggest that the answer to all four questions is an emphatic NO. If Ocean Spray truly wants to engage our industry in discussions that might lead to some agreement on this matter, they might begin by supporting the proposed amendment to the Marketing Order as submitted by Pappas, Cliffstar, Decas and Hiller. This amendment gives the Cranberry Marketing Committee an additional option to consider. While I can’t predict whether this option would be utilized by the Marketing Committee if available, I do predict that this industry is not prepared to repeat the grotesque exercise of the allotment program that we were subjected to this year. Rob and Buddy stand alone on this one.

As much as I oppose a federally imposed dumping program of any kind, I would be willing to meet and listen to any proposition recommended by Mr. Hawthorne or anyone else.

I recommend that Mr. Hawthorne show good faith in this regard and agree to the following:

1. Agree to support the proposed amendment referred to above. (ed note: reprinted below) It gives the Marketing Committee, which is dominated by Ocean Spray members, an option they can use as an alternative to withholding (set aside) or allotment.
2. Ask the Marketing Committee to hold an informal grower survey to see what support for volume regulation there is.
3. Join with other handlers in an open forum to discuss the pros and cons of the Marketing Order and allow growers to comment and ask questions. This meeting would be appropriate at any time prior to the next Marketing Committee meeting. The sooner the better.
4. Agree to stop the name-calling. Calling any of us selfish for not agreeing with Ocean Spray only results in reducing the chance of ever engaging in dialogue designed to help our industry. The idea that any Independent handler cares less for their growers than Mr. Hawthorne is ludicrous at best.

In conclusion, I wish to remind Mr. Hawthorne that there can never be a volume regulation without at least one Independent vote. If Mr. Hawthorne thinks he has that one vote, then he does not need to respond to my recommendations.

If he needs to cultivate one vote amongst the Independent members, then he might find my recommendations useful as the way to proceed.

I would welcome any constructive comments from him in this regard.

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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