12/22/00 -- We will soon begin debate on a Marketing Order for 2001. Currently, two proposals are being advanced to the growers. Ocean Spray is recommending a 35% set-aside and a group of handlers is advancing another option.

As growers we have a tremendous power available to us through the CMC to limit supply and thus increase price. We must not waste the power because of handler driven differences. Together as growers, we must stay focused on the purpose of the CMC and take actions that are in the best interest of growers, not handlers.

Once again, I wish to point out that whether we like it or not, the supply vs. demand equation is an industry issue and we will never solve the issue by pointing fingers at each other. The purpose of the Marketing Order is to shift control of the supply side to the farmer grower. It is an extremely powerful tool with an end goal of increasing the grower price per barrel if properly used by the grower.

Implementation of the order is intended to cause buyers of cranberries (handlers) to be forced to bid more per barrel because there is less total fruit available. Since Ocean Spray controls near 70% of the fruit supply and four votes on the CMC, any plan that proposes that only their growers (and perhaps Northland growers) would be required to dump fruit will never pass at the CMC. Therefore, advocating this proposal is simply a hidden way of advocating no Marketing Order.

While Northland is obviously a handler, we are a grower first. Unlike every other handler or management at Ocean Spray, Northland’s success is ultimately based on the value of the cranberries we grow. Northland’s success is not based on low cost of goods or market share. We incur the bills to grow our crop the same as you. We then attempt to market our cranberries in competition with all other handlers in order to pay the bills for growing our crop and earn a profit over our growing cost. Other handlers, or their management, have the "luxury" of paying growers less in order to protect their "profits" or obtain their market share objectives. Northland does not have that option because, just like all of you, we have to pay for the cost of growing our fruit.

I’m tired of hearing, "Why should MY growers be required to dump fruit when I do not have an oversupply?" Growers need to ask the all-important question: Oversupply at what price? Does it really matter whether Northland, Cliffstar, Decas, Ocean Spray, etc. proclaims that they do not have enough fruit if the grower is getting $15 or less per barrel?

It is time for us to stand united as growers, not as pawns of our handlers. We need to take actions that will increase the grower price regardless of the results to our individual handlers. The only power that we ultimately have as growers is our ability to invoke a CMC action that will force the handlers to pay a reasonable price for our fruit.

As growers, we need to work on a CMC plan that is as equitable as possible to all growers on their individual farms. We will never develop a plan that is absolutely fair to every grower. The CMC is a valuable tool that can work to increase the value of all of our fruit as an industry. We will never satisfy every grower. We should strive to develop a plan that is as fair as possible to all growers and that accomplishes the goal of increasing the value of the fruit we grow.

In order to avoid grower differences based on handlers. I am proposing that as growers we join together and adopt the following proposal.

1. Determine the target crop for 2001 based on current inventory levels.
2. Grow and deliver our entire crop in 2001.
3. Set-aside the excess fruit in a CMC set-aside "pool".
4. Allow handlers to purchase fruit from "set-aside" pool or from other handlers to fill in "gaps" in supply.
5. Every handler will "set-aside" the exact same percentage of the crop that was delivered to them.
6. Every grower will be paid for the exact same percentage of the crop that he grew regardless of handler.

By way of example:

Target Crop set by CMC: 5,000,000 barrels

Actual Harvest: 6,500,000 barrels

Excess above Target: 1,500,000 barrels

Set-aside percent: 1,500,000/6,500,000 = 23%

Results:

1. Every handler would pay the grower for 77% of the fruit that was delivered by each grower.
2. Handlers would turn over control of 1,500,000 barrels to the CMC for either resale at established prices or to be destroyed.
3. Cost to store and destroy fruit could be paid from proceeds of any sale of fruit or equally charged to all growers through CMC assessment or each handler could spread his cost over all his growers equally per barrel delivered.

This proposal will not be readily accepted by some handlers that will proclaim that they will be forced to pay more for fruit that they need to run their business. They will contend that the system rewards Ocean Spray and perhaps Northland for contracting for more fruit than they needed. They will argue that it is unfair to their growers.

My responses to those objections are as follows:

1. The purpose of invoking an order is to reduce supply and increase price. If handlers have to pay more, GREAT, as growers we are headed in the right direction.
2. If Northland or Ocean Spray did not contract for the fruit, someone else would have. The fruit will not just disappear. As long as a grower will take less money for his crop than the guy next door, we all know that some handler would have signed the grower to a contract.
3. THEIR growers are not THEIR growers. They are growers that have agreed to be THEIR growers for the term of the contract.

As growers, we all made choices, some expanded because of handler encouragement, some made decisions based on high contract prices, some made a decision to acquire or build and became a "new grower". All of those decisions resulted in the industry supply outpacing demand. As growers, we now know that if supply outpaces demand, the handlers (including Northland) will simply destroy the price.

It is obvious that the respective management teams of the handlers cannot develop a plan to handle the oversupply in a manner that will generate a per barrel price that allows the grower to pay the bills. We thus have no choice as growers except to unite and have the Department of Agriculture take action to reduce the supply and force the handlers to raise their price and compete once again for our fruit.

Let me remind you that when supply and demand were in line and handlers competed for fruit we earned an average of $60 per barrel. One can only assume that if supply and demand is in line, that the handlers can develop business plans that generate $60 per barrel again. I don’t think it’s too much to ask them to simply run their business the way they did when we earned $60. Even if we had to set-aside 50% of our crop to achieve $60 per barrel for the 50% that we could sell, we would be averaging $30 per barrel on our entire crop including the set-aside portion. $30 per barrel is significantly better than the $10 we could get without a marketing order.

Under my proposal, every grower, new and old, Ocean Spray or independent would set-aside the exact same percent of his crop. I would hope that as growers, despite our differences, we could join together and take actions that will protect our business.

I would add the following suggestions to my proposal:

1. Voluntary agreement to not plant new acres through the Department of Agriculture.
2. Handlers could purchase CMC "set-aside" fruit for $40 per barrel for domestic use or $20 per barrel for foreign market development.
3. Proceeds of any fruit sale by CMC would be used to fund generic advertising for cranberries.
4. Any handler purchasing foreign fruit beyond their three-year average would forfeit an equal amount of US fruit to CMC but not be allowed to reduce percentage payments to US growers under Agriculture Department rules.
5. Any handler that is paying growers $40 per barrel would be exempt from a set-aside as an Agriculture Department rule.

I’m sure that given all the great minds in our industry, my proposal will have some flaws and I acknowledge that up front. I am willing to sit down with any group of growers to try and work through those flaws and develop a CMC proposal that growers believe is the best course of action.

Northland purposely did not nominate a candidate to the CMC in order to allow a grower only individual to sit on the CMC. Northland did not vote for an independent representative on the CMC so that grower only votes would decide the representative.

Northland made the choice to not pursue direct representation on the CMC to prove that we were willing to advocate a CMC program as a grower, not a handler. We were willing to take the chance that, as growers, we can work together to solve our problems.

If any handler wishes to simply retain all "his" growers and be exempt from the CMC, he can raise his grower price to $40 and not purchase cheap fruit from other handlers or foreign growers. Under current market conditions, I would have no objection to a handler that meets the above criteria saying, "MY growers should not dump fruit because I do not have an oversupply and I pay them at least $40 per barrel." In fact, I would applaud his efforts as a businessman and someone that cares about "his growers."

We must come to the realization that, as growers, we can join together and utilize the power of the Marketing Order to achieve our goal. If we continue to act as "Northland growers, Cliffstar growers, Ocean Spray growers, etc.," we will solve nothing and many of us will cease to be a part of this industry.

We can hope that we are more creative than our fellow growers and wait for the others to go out of business or we can forget handler affiliations and stand together as growers to fix our short and long-term problems. Those of you that think you can be the "last man standing" may be surprised to find out the power of the American spirit to survive by your fellow growers.

Northland will continue to analyze proposals for a Marketing Order in 2001. In the end, we will support the plan that has the best chance of improving the grower price and can get the votes to be implemented. Failure to implement a plan that leaves us open to the risk of a huge crop in 2001 is the best way to guarantee that many growers will, in fact, be out of business.

Being able to deliver your entire crop to your handler for $10 or less per barrel will not solve your problems on the farm. As a grower, you must use the CMC as one of the only ways that you can obtain more for your fruit. You cannot allow handlers to use you as a grower to support a program that either reduces their cost of cranberries to increase profit or to grow market share.

Long-term, Northland is committed to use more fruit with our 27% Solution. Northland voluntarily chose to reduce its own crop by 30%, not 15% in 2000. We have put our money and our actions where our mouth is to do our part to address the grower problem. Now, unless you forget handler interests and join us as growers in support of a Marketing Order and individual actions that will raise the grower price for everyone, we will waste the power of the CMC.

Failure to put our differences aside as growers will simply prove that we are nothing but "pawns" of the management of our handlers and that we can be cast aside so management can achieve their individual agenda. As growers and businesspeople, we are better than that and now we need to prove it!

I encourage each of you to urge your representative to the CMC to vote in the best interest of the growers. You must urge them to act as growers, not as the mouth of some handler.

Thank you for your time and I will gladly discuss any of the issues with you.

Sincerely,

John Swendrowski

Chairman & CEO

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