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Op-Ed

Northland's view on reaching a compromise on a 2001 marketing order
Let’s look at the numbers to see where Ocean Spray and Northland differ.

by John Swendrowski,
President, Northland Cranberries

2/23/01 - Jack Crooks has posted an article regarding the need to reach a compromise on a 2001 Marketing Order. I agree with Jack that growers are facing the most important decision as to their future since I’ve been associated with this business.

As we search for the compromise, it becomes extremely important to analyze the data in order to reach a solution. I have attended several grower meetings and have heard one common theme from growers regardless of handler affiliation. That theme is: "We must act quickly to raise grower pricing to break even at the farm level." Break even is generally defined as $35 – 40 per barrel.

Let’s look at the numbers to see where Ocean Spray and Northland differ.

	Ocean Spray	Northland
1) Proposed 2001 Crop	4,800,000	4,000,000
2) Government Purchase	1,000,000	600,000

The USDA has just solicited the first bid. That bid will utilize 100,000 barrels. Because the bid includes bottles, caps, cartons, corn syrup and manufacturing costs, shipping the bid will exceed $5,000,000. The total purchase will be $30,000,000. Thus I do not believe the government purchase will exceed 600,000 barrels.

3) Shrink from 2001 crop

300,000

200,000

Ocean Spray is at 5.5% of their projected crop. 4,800,000 plus 600,000 foreign = 5,400,000. Northland is at 4.3% of their projected crop. 4,000,000 plus 600,000 foreign = 4,600,000.

4) Project Sales

6,200,000

5,800,000

I don’t believe we will increase sales at Ocean Spray’s levels and be able to increase grower returns to the $35 – 40 per barrel range. Do Ocean Spray’s numbers include projected sales to other handlers under a Marketing Order?

5) Carry Over Needs

2,000,000

1,800,000

Historical data from 1996, back when growers were profitable, indicates that the maximum carryover was under 1,500,000 barrels. Given the increase in sales since 1996, I believe that 1,800,000 is workable.

6) Excess In Plan

200,000

If you follow all of Ocean Spray’s numbers, they have an extra 200,000 barrels in their plan. They end up with 2,200,000 barrels instead of 2,000,000 at August 31, 2002.

ANALYSIS

If Ocean Spray 1) Acknowledges government purchase at 600,000	Change (400,000)
2) Eliminates excess at August 31^st	(200,000)
3) Splits carryover difference	(100,000)
4) Splits shrink difference	(50,000)
5) Concedes 12.5% of our sales difference	(50,000)
Total	(800,000)

Ocean Spray can lower the Marketable Quantity to 4,000,000.

Northland has always taken the position that we should follow the economic data that suggests that 7,500,000 barrels should be the available supply in order to return $40 per barrel. At 4,000,000 barrels, the Available Supply would be as follows.

Inventory at August 31, 2001	4,300,000
Government Purchase	(600,000)
Foreign Crop 2001	600,000
U.S. Crop	4,000,000
Shrink	(250,000)
Available Supply	8,050,000

Northland’s 4,000,000 proposal is a significant COMPROMISE that will make 550,000 more barrels available to meet handler "needs and dreams" than economic models indicate will return $40 to growers. I don’t believe that we can risk more than 550,000 to meet handler targets at the expense of growers.

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Northland's view on reaching a compromise on a 2001 marketing order Let’s look at the numbers to see where Ocean Spray and Northland differ.

Northland's view on reaching a compromise on a 2001 marketing order
Let’s look at the numbers to see where Ocean Spray and Northland differ.