Op-Ed

John Swendrowski addresses Decas' issues

3/10/01 -- Now that almost a week has passed since the Cranberry Marketing Committee (CMC) vote for 5,000,000 bbls, I have had time to step back, study the numbers, analyze the data that surrounds the vote, hold discussions with advisors and choose a course of action.

I have decided to pursue the following course:

    1. Oppose the Order as recommended by the CMC at the USDA
    2. Request that the proper governmental agencies review the procedures that lead to the CMC vote
    3. Grow our entire crop at Northland
    4. Advocate a realistic Producer Allotment or Advocate a Handler Withholding at a level that will be justifiable to the USDA in August and increase the grower price
    5. Request assistance from Congressional Delegations
    6. We will leave all of our options open

I fully expect to be criticized by those that have an agenda that is different from mine. My agenda has been consistent from the beginning of this process, but I will state it again.

Invoke a Marketing Order that will provide the growers with the best opportunity to return to break even at the farm level NOW, not over 3 - 4 years.

Let’s review my course of action:

    1. I will oppose the CMC recommendation because I do not believe it serves any purpose to the grower. It simply guarantees that the average grower will not earn enough from his crop to pay the bills on the farm. Obviously, some growers with high yields, low cost, and no debt will earn "enough". I believe that the Marketing Order is designed to address the average grower not the wishes of a few.

      2. The only justification for even invoking an Order is to limit supply in order to support prices at the farm level. A plan that is supported by economic models that indicate a strong potential to increase farm level pricing to break even is justifiable. An order that will guarantee below break even prices to the grower but protect handler profits or business plans cannot be justified. We will make our case at the USDA and throughout the comment period.

    2. We will formally request that Justice and the FTC review the circumstances that surround the CMC vote. We do not know if anything wrong took place because we are not an expert in the law. Within our government we have agencies that are in fact experts within the law. We will simply provide any information we have and allow them to review the data and make a determination.
    3. We will grow our entire crop. We believe that based on the current situation that there is a good chance that the Order will not be approved by the USDA. Given the timing of the process, we believe it will be too late to utilize the Producer Allotment to implement an effective order at a later date.

      4. While I’m sure that others will criticize me for using numbers, I think it is important to analyze the decision to grow the entire crop at this time.

      Percent

      Sales History 7,500,000 100%
      OSC Crop Projection 6,000,000  80%
      CMC Crop Projection 5,700,000  76%
      CMC Recommendation 5,000,000  67%

      Based on current crop projections for the 2001 crop, the industry will only grow 9% to 13% more crop by growing it all vs. Sales History. At Northland, we believe the fresh fruit exemption will also flood the fresh fruit market and the final crop will approach 5,100,000. We believe that the additional cost to grow the extra 600,000 to 900,000 bbls is negligible.

      We believe that the economic risk of growing less fruit and the possibility of No Order or a Handler Withholding dictate that we must grow the entire crop in order to keep our options open.

      Given the early freeze in Wisconsin, the significant snowfall and the apparent late spring, we also believe that conditions are right for a potential bad crop in 2001. Maybe Mother Nature will complete the task that the CMC failed to accomplish.

    4. We will advocate a realistic Producer Allotment or we will advocate a Handler Withholding order that can be passed as late as August when we have a better idea as to the size of the crop, the actual government purchase, and the size of the carry over.

We understand that Handler Withholding is not as well supported as a Producer Allotment. Given the current recommendation of the CMC, we believe that a Handler Withholding at the proper level is far better economically to the grower than the current Producer Allotment proposal.

We believe that the additional cost of growing and disposing of the additional fruit can be far outweighed by the additional income on the bbls we deliver as unrestricted.

Handler Withholding will allow all handlers the ability to access fruit at grower break even prices from the reserve pool. Access to fruit will no longer be an issue. Everyone can access all the fruit they need without having to "cut" interhandler deals to secure fruit. The only restriction to access by any handler will be price. Thus, Handler Withholding will provide the grower with the price protection we seek from an Order. I believe that the small costs of growing the entire crop and destroying a small part of the crop is far less than the economic benefit on the part of our crop that is utilized.

I believe that it is now obvious that the only way the grower can gain control is to eliminate all the handler access to fruit issues and raise the grower price, is to invoke a Handler Withholding program.

5. We will contact and lobby the various members of Congress to assist in helping us fix the grower problem.

6. We will continue to evaluate all of our options as this process unfolds and be prepared to adjust as necessary.

Finally, I encourage you to stay involved and continue to contact various agencies and make your views known. Your voice is extremely important to this process.

From an economic standpoint, I do not believe that you have any reason to fear no marketing order. I do not believe that the current CMC recommendation will significantly change the price per bbl from the price under no order.

You cannot "throw in the towel" without a fight. You cannot allow a group of handlers to force you to accept 3 years of cash payments that will not pay the bills. You must fight for your family and force the CMC to vote for a plan that will fix your economic problem now.

One final point, undoubtedly one of my critics will raise the claim that I am only motivated for a larger reduction because Northland has "cheap" inventory or "no value" inventory on our books.

That line of attack is purely emotional and has no economic basis. SEC accounting rules require Northland to hold its cranberry inventory at "net realizable value". As a result of those rules we were required to write down our inventory value (what we paid for purchased fruit and what it cost us to grow it) to the market price for cranberries. We took a charge last year of over $57,000,000 against our cranberry inventory to comply with the accounting regulations. That was real money that was either paid to growers or spent growing the crop in the past. Does anyone really believe that our inventory will go up by more than $57,000,000 when Ocean Spray expects to pay less than $60,000,000 for its entire 3,000,000 plus bbl inventory. I do not care what happens. Northland, like every other grower will have lost money on the 1999 and 2000 crop. That line of attack is the typical "emotional spin" that continues to avoid the numbers because the attackers in fact know that the numbers do not support the CMC recommendation.

 

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