Op-Ed

Comments on the proposed marketing order re. the treatment of excess fruit in relation to foreign markets

by Lory Krueger, Pres.
Mid America Trade Group

6/22/00 -- I have read parts of the transcript of the CMC meeting with great interest. I have always maintained that in order to give the proper slant on any issue; it is much better to let the parties to the issue speak for themselves. It is in this light that I would like to present these comments. The issue that we are specifically interested in is the treatment of excess fruit in relationship to foreign markets.

We have developed our marketing plan to take into account that there is a surplus of fruit on hand due to several factors. There are many opinions concerning the causes for this surplus. Frankly, we are not interested in the causes, only the fact that the problem exists. We have focused our efforts exclusively on the foreign market. We have NO interest in the domestic market. We concluded, based on our research, that the surplus was a result of a lack of demand, not overproduction. Everyone we talked to over the last 12 months indicated that the best solution to the problem was expansion into foreign markets. Our research indicated that the solution was viable and that a vast foreign market was ready for cranberries.

So now we fast-forward to June 6, 2000 - Alexandria, Virginia. Cranberry Marketing Committee (This transcript is available on the Cranberry Stressline - Open page two and print this section. We are referencing pages 6-20 of this section.)

Of particular interest are statements made regarding the foreign markets and how to address them. To add perspective, I am framing the entire discussion on the statistic that was reported later in the text, after a motion was made and seconded "�to exclude foreign countries as an eligible non-competitive outlet."

The interesting statistic that was reported by Mr. Farrimond was the total foreign sales in 1998 was $51,619 for fresh fruit and $516,000 for processed fruit. This had to have been a typo. However, it was not challenged or asked to be repeated. I was under the assumption that this was the official transcript of the proceedings so I presume those present used that statistic as a basis for their decision. But, realistically, it must have been referring to barrels.

At any rate, it is a very small number when compared to the potential market.

The discussion, as reported in the transcript, is what I find to be very interesting. The rationale and logic that was applied to come to this decision is confusing at best and suspicious at worst. Maybe I am misinformed, but I was under the impression that the CMC worked for the cranberry grower to help him/her sell their product in a free and open market. I was under the impression that the industry was made up of principally growers and that in order to preserve the viability of the independent family farm, grower dollars and tax dollars were being used to see that the product was promoted and new markets developed to keep the industry healthy.

I admit, I am new to your industry and I don't have the historical perspective to understand how this all got turned around. Every grower we have talked to seems to understand the problem and certainly understands the solution. So what is getting in the way? All I can do is read the transcript of the proceedings in the context of the simple precept that the CMC exists to represent the welfare of the grower. It is that very precept that I have a difficult time finding in the discussion.

I will let the words of the CMC speak for themselves. You decide. Am I missing something here?

Just a few excerpts: Note: I have included my comments in (italics)

After a lengthy discussion regarding the definition of non-competitive outlets, non-competitive exports, one handler or two selling in the same country, brokers selling to a foreign customer and having that customer reselling to another country and so on, the following line of discussion took place:

Mr. Lukas (Northland Cranberries): I guess some discussions along those lines. Who makes the decision on whether a country is competitive or not? We've talked about this before, but let's, for the audience and for the record.

Mr. Farrimond (Manager): That's a good question. I put down there, "countries where markets have been established and competition exists."

Now, if you have one handler in one country, and another handler decides to take excess fruit into that country, is that a competitive market? Or do they have to be two or more that are existing already?

Mr. Lukas: We're looking at this rule for one year, right now.

Mr. Hiller (Mass. Independents): Yes.

Mr. Lukas: One year. I mean as long this order. Why don't we specifically name the other countries that would fall into a competitive nature?

Mr. Hiller: I agree, but I disagree, in that if you sell to a broker, you have absolutely -- in the U.K., and he distributes it throughout the world, you have no idea where your product is. (Comment: Does it really matter where the fruit ends up after it is sold?)

Mr. Farrimond: That's a good point.

Mr. Hiller: So, you know, how can we sit there and name every single country that our product is in? I'm not sure that we can do it equitably.

Mr. Beeby (Ocean Spray - Mass.): Well, you can, though, name those in which U.S. handlers are competing directly.

Mr. Hiller: Yes.

Mr. Beeby: In other words, the U.K.

Mr. Hiller: Right.

Mr. Beeby: You can't -- resales, you're right. You can't cover wherever they might be. But I think you could at least be sure you're covering the countries where there's competition between other -- between handlers of cranberries.

Mr. Farrimond: Well, the question I have though -- let's take the U.K. -- and we know there's more than one competitor there. Let's take Iceland. And there's one handler in Iceland selling cranberry products. By another handler coming in there? I mean is that a competitive market if you only have one there to begin with? (Comment: Is Iceland a significant market? Is that worth worrying about?))

Or is it an open market until you have the second one? And whoever the other handler is, once they come in -- and then it becomes a competitive market for the other handlers.

Mr. Hiller: Right, and along those lines that if a handler with excess fruit can go in there and dump product --

Mr. Farrimond: Right.

Mr. Hiller: And undermine the labor and intensity that some other handler has worked to develop that market. I mean it's --

Mr. Decas: Well, I think you should look at this issue as an important issue. I think if you handle it the wrong way, is going to be very explosive and very disruptive. (Good Point) It has potential for that. And I think you should consider it in that context. You're dealing with the language that you read earlier that was written for the 60's that was included in the original marketing order.

�It would be ludicrous to suggest that any handler could take his berries that he's responsible for from market, and could sell it into any other country, and not have the responsibility of paying his growers for those berries. This is a grower's program and we've got to protect the growers. (Comment: This would have been a good point if it had ended here.)

�I don't know how to resolve this problem. This is the kind of issue that takes time to consider and to take appropriate action. And now you're under the gun, given the date, of trying to make very, very difficult decision, and a decision that's complicated. My suggestion is, if you can do it, you should throw out the foreign exemption altogether for a year. Just take a pass on it for a year. (Comment: Just to refresh the memory�. This is a grower's program and we've got to protect the growers�.How much time do the growers have? Are the handlers shutting down for a year to see what happens? How do you connect this action to a benefit for the growers?)

Mr. Decas: I think it would only be a matter of time before you had somebody from Europe or Japan or some place over here soliciting growers for their extra fruit. (Comment: That sounds too much like Free Enterprise)

Mr. Lukas: Absolutely. See, I didn't understand that.

Mr. Decas: And then suddenly taking them back and cutting deals and you're going to turn this program into a special interest licensing thing. (Comment: Again, I must be missing something. If berries are being bought by someone, regardless of who the buyer is, how is that bad for the grower?)

Unidentified speaker: Well, this is a large issue.

Mr. Hiller: It is a large issue.

Mr. Farrimond: Well, that's already happened, John. We've already got a case of that in Wisconsin, where an individual's going around talking to growers about those who retain the 15 percent of their -- that he'll buy directly. And basically, they can't do that because they're not a handler. (Comment: The last time I checked, we have still retained the part of the Constitution regarding free speech. Moreover, for the Cranberry Marketing Committee's benefit, that is exactly how you research a product to determine if it is a viable product to introduce into a new marketplace. I am not sure who they were talking about, but I have a strong sense it may have been Mid America Trade Group. Whether we sell ginseng, blueberries or any other commodity, we do talk to the producers. We also talked to Canadian growers as well as some of the handlers. It is called sourcing.)

Mr. Hiller: But they can become a handler very easily, correct?

Mr. Farrimond: But when they become a handler -- you have to have an allotment certificate. The grower has to be able to give an allotment certificate to that guy that's now a handler, and he's already given it to his original handler. So you run into compliance problems. The individual who wants to buy excess cranberries --(Comment:. The individual who wants to buy excess cranberries�can't.)

Mr. Farrimond: �Now then, my question is, you know, if the program is that if somebody has excess cranberries and they tell the committee they're going to send it to X-Y-Z and X-Y-Z has already got someone in there selling cranberries, is that a non-competitive country at that point? Are you locking out those excess cranberries? And also, let's say that some handler who has been working diligently to try to enter into a country but the regulation comes into effect before he actually starts putting product in there, does that then --

Mr. Jesse (Ed Jesse, alternate public member): You say there are 54 countries where commercial sales are currently being made?

Mr. Farrimond: Fifty-four countries were identified.

Mr. Jesse: Mr. Chairman, I move that foreign countries be excluded as an eligible non-competitive outlet.

Unidentified Speaker: I'll second it.

Mr. Hiller: Motion's been made and seconded. Any discussion?

Mr. Lawton: Robbie, could you repeat the question again?

Mr. Hiller: The motion was that foreign countries be --

Mr. Jesse: Excluded from --

Mr. Hiller: Go ahead, Ed.

Mr. Jesse: From the list of non-competitive outlets.

Mr. Hiller: All foreign countries.

Mr. Lawton: So no fruit --

Mr. Hiller: No excess fruit sold to foreign countries.

Mr. Beaton (Ocean Spray Growers - alternate-Mass.): Is that restricting -- you know, I understand the concerns here -- is it restricting our ability to generate new markets in the future. I mean is that what we --

Mr. Jesse: Sure it is, but with 54 countries currently being serviced by U. S. cranberries, I mean, it's kind of a lot --(Comment: Compared to what? How many countries are there in the world?)

Mr. Lukas: And with the surplus we supposedly have at our avail, I mean, my heavens, what do we need more for? I appreciate your question.

Mr. Beaton: I just don't want to limit our ability to get ourselves out of this dilemma.

To recap:

Mr. Decas: �This is a grower's program and we've got to protect the growers.

Mr. Jesse (Ed Jesse, alternate public member): You say there are 54 countries where commercial sales are currently being made?

Mr. Jesse: Mr. Chairman, I move that foreign countries be excluded as an eligible non-competitive outlet.

Mr. Hiller: Anything else? Okay. None. Do you want to do another roll call or just an aye? All those in favor?

(There was a chorus of "Ayes".)

Mr. Hiller: All those opposed?

(There was no response.)

We are looking at the potential to market over 500,000 barrels of cranberry products in the first year of operations. That is over half of the excess. Under this proposal, we will be prevented from moving the grower's product overseas and the grower will be paid nothing.

If this proposal stands and is enacted, we will probably become handlers and will likely sit out this year with the growers from the U.S. We will buy our fruit from Canada and review the CMC position next year. If it is the status quo, we would be hard pressed to look to the CMC for any assistance.

Not everyone markets your product on price. We have recognized the quality and have tried to take it out of the commodity class and put it into the premium class. We have represented a pricing schedule to our prospects that would provide a reasonable price to the growers. We have taken a different approach to marketing a premium cranberry product overseas and have enjoyed an enthusiastic reception from our potential trade partners. Time will tell if any U.S. growers will benefit from our efforts.

Just an idea:

What if USDA purchased all the excess fruit at a reasonable price to defray some of the cost to the grower; say $10/barrel. That would amount to under $10 million. What if the handler's contributed to solving this problem and would accept the fruit, segregate it and hold it exclusively for export until it is sold. All excess fruit destined for sale overseas would be priced the same regardless of which handler has it to prevent the price wars that the CMC seems to fear. It is easier for the USDA to monitor a few handlers versus several hundred growers.

The foreign playing field is now level and hard work and serious marketing effort is rewarded. The domestic market remains up for grabs and is business as usual. The grower has a chance to survive.

In the mean time, we will market ginseng, blueberries and Canadian cranberries until sanity returns to the U.S. market.

Related Link: Agricultural Export Assistance Update: Quarterly Report
June 2000

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