Op-Ed

Pawns in a chess game

by John Swendrowski
CEO, Northland Cranberries

8/1/01 -- Over the course of the last 18 months I have written several Op-ed’s, attended grower meetings and attended several CMC meetings to highlight the long-term impact of the oversupply on our price per barrel. Until we deal with the on-going year-end inventory, we cannot expect to see significant changes in the price per barrel. Based on public reports of the latest Ocean Spray meetings, it appears that the current outlook by the industry leader is that it will take four to five years to reach the new defined break even price of $25 per barrel cash during a twelve month period.

It should now be obvious to all growers that no handler has a "magic fix" to the price per barrel problem that grower’s face. The economic results to the per barrel price of the laws of supply and demand cannot be overcome by the worlds leading marketing individuals.

Bottom line based on historical data; it appears that we can sell (demand) about 5.0 million barrels at about $50 per barrel to the grower, 5.5 million barrels at about $35 per barrel and 6.0 million barrels at $18 or we can try to sell all 7.5 million barrels at who knows what price. We can grow 7.5 million barrels, but we can only sell 5.5 million barrels at a price that will sustain the grower on the farm. As long as we continue to have an oversupply of fruit available, handlers will use that fruit to chase market share by lowering the selling prices of concentrate, sweet dried, juice, fresh etc. in an attempt to sell all they can. The only way as growers that we can fix the problem is to fix the supply side of the equation.

I find it quite interesting that over the last four years as the price per barrel nose-dived, almost all the growth in sales came from businesses that are not handlers. In other words, the increased volume of fruit that is being sold is primarily coming from businesses that do not buy fruit from growers. They are increasing their business by purchasing cheap fruit and concentrate from handlers trying to sell their inventory at any price, all at the expense of the growers. Sales of excess fruit at cheap prices to non-handlers has caused a deterioration in the price that handlers can receive from private label or branded cranberry products as they compete for end sales to the consumer. It is a vicious cycle with the grower price as the only variable. More fruit – less price, plain and simple.

Obviously each handler, Ocean Spray, Northland, Cliffstar, Pappas, Decas, all have opinions on how to fix the problem. To the best of my knowledge, every handler has told their growers that they care about them and want to help solve the problem. Given the various motivations of each handler, I do not believe that we can expect to find a solution to the GROWER problem through the handler. As a grower I have heard and read that we must unite in order to solve the problem. Given historical differences between handlers, it is impossible to unite. However, I propose the following:

1. Every grower authorizes their handler to contribute 10¢ per barrel to a fund to retain a group of economic experts to analyze the problem purely from a GROWER perspective.
2. Each handler will submit two names of economists for consideration.
3. A panel composed of three growers from each handler will review the names submitted and choose the final five economists on the panel from the names submitted.
4. The panel will review all available data and all available tools (CMC etc.) within the industry and develop its recommended plan of action.
5. All handlers will agree to support the recommendation of the panel.

We would have a war chest of $500,000 to $600,000 to support this project at 10¢ per barrel. I believe that with that type of funding available, we could get some of the best economic minds in the country to sit on the panel. The process would eliminate all the historical personality differences between handlers and only act in the best interest of growers. It seems to me that money spent to find a solution would be far better than the millions that may be spent in future litigation suing each other.

I would think that the various grower associations could raise significant contributions to the process from vendors and banks that are directly impacted by the price per barrel. The industry may be able to source funds from various governmental programs or other private "think tanks" to increase the available cash significantly.

I challenge my fellow handlers to prove their concern for their growers by calling me and signing on to the proposal. Just in case the handlers do not agree to support this study, I challenge all growers to force their handlers to participate. Remember that the panel of experts would be independent individuals with no loyalty to anyone but the growers. Their duty is to develop a plan to benefit the grower both on a short and long-term basis. It will be a grower-controlled panel without any hidden agenda. It would be well worth the investment to find out what a group of unbiased experts would suggest as a course of action.

We cannot continue to be the pawns in this chess game. We must take control of the game while we still can act. Unfortunately, every day that goes by under the current situation, someone may no longer be a part of our industry, thus will not be able to act.