OTHERS PRESENT: (all or part of the meeting)
Ken Nye, Michigan Farm Bureau,
representing MACMA Asparagus Division
CALL TO ORDER AND ROLL CALL
Chair Meagher called the meeting of the Agricultural Marketing and Bargaining Board to order at 10:05 a.m. on Thursday, August 18, 2005. The roll was called.
APPROVAL OF FEBRUARY 3, 2005 MEETING MINUTES
MOTION: RICK RAY MOVED TO APPROVE THE FEBRUARY 3, 2005 MEETING MINUTES AS PRESENTED. SECONDED BY FRED TUBBS. MOTION CARRIED UNANIMOUSLY.
ADMINISTRATOR'S REPORT - Jeff Haarer
Administrator's Final Status Report on the 2005 Processing Apple Bargaining Unit: Jeff Haarer reported that MACMA represents 60 percent of the bargaining unit membership, and 57 percent of the bargaining unit volume. Reports were received from all apple handlers.
MOTION: FRED TUBBS MOVED TO APPROVE THE ADMINISTRATOR'S FINAL STATUS REPORT ON THE 2005 PROCESSING APPLE BARGAINING UNIT. SECONDED BY RICK RAY. MOTION CARRIED UNANIMOUSLY.
Negotiation Schedules for 2006: Distributed to Board members. Last date to opt out of MACMA negotiations for 2005 processing apples is August 21, 2005. Three handlers have opted out at this time: Cherry Growers Inc., Mason County Fruit Packers, and Burnette Foods.
Update on Board status: Jody Meagher's term expires September 1, 2005. She will seek reappointment. Arthur Lister passed away. Jeff will notify the Governor's Appointment office that there is a vacant seat on the Board. He requested that Board members submit suggestions for candidates for the Board seat. A suggestion was made that Arthur's son, Arthur Lister Jr., might be interested in serving on the Board. Fred Tubbs asked Jeff to contact Mr. Lister to determine whether he would consider the appointment. After brief discussion, it was determined that Jeff will research options for recognition of Arthur Lister by the Agriculture Department.
Jeff also commented that Mitch Irwin is the new director of the Michigan Department of Agriculture.
NEW BUSINESS:
Michigan Processing Apple Growers Report: In Dawn Drake's absence, Ken Nye provided a report for the Michigan Processing Apple Growers. A lot of work has gone into getting to where we are today in terms of apple negotiations. Mason County Fruit Packers, Burnette Foods and Cherry Growers Inc. opted out; Burnette has since signed an agreement with the association, as have most of the other apple handlers. There are negotiations continuing with Gerber and Heinz, and Dawn is reasonably confident that an agreement will be reached with those two handlers.
There are positive things going on in the apple industry, particularly in Michigan. There is a good crop this year, in terms of size and quality. While it's been dry throughout a lot of the producing area, the size of the crop appears to be good. The Eastern apple crop is up a little; that's more or less a processing crop, so Michigan has some competition. The Washington crop will be down from last year; they have a fairly sizable inventory of fresh apples, but processing inventories seem to be in good shape. There is a lot of new business in the state, in terms of fresh slices. That's been a positive influence. There has been continuing work on that area, and that should increase in the future. There are still some challenges from imported apple juice concentrate. That problem is not going away; it's very competitive in the marketplace and presents a challenge to the handlers in Michigan.
It's good to get negotiations out of the way as early as possible so people can make plans and get going with their crop this year. Although it is relatively early to get most of the agreements in place, it's good for the processors, because they can make firm plans for the year.
Chair Meagher asked what the size of the crop is. Rick Ray answered that it's about 20 million bushels. Tim Brian added that the Michigan Agricultural Statistics Service reported a crop of 19.5 million bushels. Ken commented that it's a manageable size. There are a lot of fresh apples in storage leftover from last year, including a large crop in Washington. The prices that MACMA has been able to negotiate are reasonable, in terms of the crop size and market conditions. The price is the same as last year.
Michigan Asparagus Growers Report: There have been a number of challenges this year in the asparagus industry. MACMA was unable to execute a normal contract with handlers and offered a "grade-only" contract to handlers. Honee Bear Canning opted out of negotiations for this year's crop almost a year ago. As a result, a number of members left the association so they could continue to sell to Honee Bear. MACMA continued to work with Honee Bear, but failed to come to an agreement. Prices started out at the mid-40 cent level for cut and tip asparagus, which compares to about 62 cents last year. Poor weather, including early frost, dry weather and excessively warm conditions caused the crop to be significantly short. The fresh market, however, did reasonably well. There was more tonnage that went that direction, which is good overall for the industry. But we ended up with 17.5 million pounds of processed asparagus, compared to 25 million pounds last year. Prices did improve a little throughout the season. Handlers didn't get all the asparagus they wanted in some cases. Part of that was due to fields that never got harvested or a lack of incentive for growers to maximize production because of low prices.
MACMA is collecting no marketing fees this year, but has contracts with most of the handlers. It's going to be difficult to bring Honee Bear back into the bargaining fold. For handlers that are interested in continuing to work with the association, there will have to be a meaningful contract that will provide a reasonable supply back to the handlers at a reasonable price to growers - one that both handlers and growers can live with.
All the major processors have left Washington, with Seneca leaving after this year's crop. Seneca was a major handler out there; they did more business than the entire Michigan industry, so that leaves a large amount of production in Washington without a home. The Washington industry has been going downward in terms of acreage for several years, and that's probably going to continue. However, a number of those growers are going to try to move more product into the fresh market. This presents a continued challenge to the Michigan industry, because that displaced production has the possibility to come to Michigan, competing in our market, or being used by handlers here in the state at relatively low prices. There isn't much of a home for that asparagus and the growers may be willing to take whatever they can get for it. Next year, the association will try to work with handlers a little earlier to develop some kind of long- or short-range contract that will help benefit both handlers and growers. The association can continue to be pretty aggressive for a while on this project; however, reserves are not going to last forever, since there were no marketing fees collected this year. This next year, to some degree, is going to make or break the association in terms of what they will be able to do in the future. The association and handlers will have to work together to make something positive happen for the industry.
Chair Meagher asked if higher energy costs might benefit the asparagus industry, because of the high cost of transportation. Ken responded that there's no question that it costs significant amounts of money to bring asparagus from Washington to Michigan to be processed. That's some advantage that Michigan growers could have. But when you have no other home for asparagus that's in the ground, planted five years ago, and your alternative now is to plow it under, at what point might the grower say, "How much do I have to get to harvest this before I'll stop?" That's the challenge that we have, even though we have a cost advantage in terms of transportation cost. At 45 cents per pound, which is where the industry started this year, any asparagus grower can tell you that, if that's what they have to compete with, there won't be an industry for very long. And if handlers can buy 10 or 15 million pounds of asparagus from Washington at 40 cents a pound or less and bring it to Michigan, that's the scenario that growers won't be able to live with for long.
We have maintained an industry here in Michigan when everybody else in the United States has lost theirs. There have to be reasons for that: the mix of our crops, the things that the processors do, the niche that asparagus provides, the competitiveness we have in terms of the way we harvest, the relatively small number of handlers - there have to be some things that have worked right in Michigan to keep this industry here where others have lost it. We have to take advantage of those things. We also are now the only source of domestic production. Is that worth something to somebody? I would say yes. If your only source is going to be offshore, primarily Peru, what are you willing to pay to hedge your bet to make sure that there still is another source of asparagus? So, that transportation factor is important to us, but there are some market influences out there that are requiring some other changes in this industry.
Jeff Haarer asked how large the fresh market asparagus crop was. Ken responded that it was about 5 million pounds. Fresh market is where the growth is for the asparagus industry.
Rick Ray commented that there were "deals" published related to down payments by processors with future payments made to growers, and that some processors were paying cash near the end. Rick asked whether growers received the payments they were entitled to. Ken responded that these are some of the uncertainties that come out of a situation where there isn't a minimum price. There were several handlers that agreed to down payments, but since MACMA doesn't have price in their agreement, Ken has no way to check on prices paid. Rick asked whether MACMA growers delivered asparagus to Honee Bear, even though Honee Bear opted out. Ken responded that MACMA informed their growers that if they wanted to deliver to the handler of their choice, they would provide them a waiver from the marketing agreement that they had with MACMA for 2005. There were approximately 20 growers that received the waiver, and some of those probably delivered to Honee Bear. When the decision was made, the Marketing Committee knew it detracted from the association's bargaining power, but the committee felt that they had no choice but to offer that opportunity to the growers.
Tim Brian asked whether the association is recruiting new members. Ken responded that they are not recruiting at this time. He has spoken with growers that are interested in joining, but they want to have a plan. It's MACMA's job to come up with a plan that's going to work before approaching the growers.
Tim asked whether there's any research being done on new markets for processed asparagus. Ken responded that there have been some handlers that have worked on frozen spears, microwavable and quick-fix products, but they don't have the growth potential the industry needs. The market for canned cut-and-tip asparagus is not a growth industry; there is a certain market that will continue to buy it, but it's not one that's growing. Rick added that canned asparagus is a growing market for the Peruvians, and that creates another challenge. The Peruvians are driving the canned market right now, at very low price levels.
Jeff Haarer asked about USDA purchases of processed asparagus. Ken responded that about 5 million pounds were sold for domestic feeding programs this year. USDA said they would purchase a little more than they ended up purchasing this year. The association will continue to work with USDA on that project, but it's not going to last forever. The industry's success in 2003-2004 was partly due to the size of the USDA purchase, and there's probably a day when there won't be 5 or 7 million pounds to go to domestic feeding programs, and that will be a challenge for us.
Rick Ray commented that the apple group was wise this year in going back to last year's pricing. There were a lot of apples sold above the MACMA base price last year, but with a minimum price set for this year, handlers can enter the season with a floor price that gets them started and creates a greater sense of security. Perhaps with asparagus this year, a base price could be set, then let the market move up from that point.
Fred Tubbs commented that for the asparagus industry to survive, 2,000-3,000 acres need to be planted every year. This year there might be a couple hundred acres planted. Fred is not planting any asparagus this year and is considering planting Christmas trees, although he's never grown them before. The ground is too low for fruit and he's not interested in selling off acreage to vegetable growers.
MEETING DATES
Meetings for 2006: February 2, at Constitution Hall in Lansing; August 15, at the Oceana Intermediate School District in Hart. A suggestion was made that meeting notices be sent to the Fruit Growers News and Vegetable Growers News.
PUBLIC COMMENT
No public comment.
ADJOURN
MOTION: FRED TUBBS MOVED TO ADJOURN. SECONDED BY TIM BRIAN. MOTION CARRIED UNANIMOUSLY.
The meeting adjourned at 11:15 a.m.
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