ADMINISTRATOR'S REPORT -- Jeff Haarer
Administrator's Final Status Report on the 2006 Processing Apple Bargaining Unit: Jeff Haarer reported that MACMA represents 61 percent of the bargaining unit membership, and 60 percent of the bargaining unit volume. Reports were received from all but two apple handlers. Appletree Marketing did not respond to repeated attempts to contact them. Peterson Farms sent total purchase amount before the deadline, but sent their 2006 asparagus purchases with grower detail as a follow-up instead of their 2006 apple purchases. Neither report would have affected percentages on the Administrator's Report.

MOTION: RICK RAY MOVED TO APPROVE THE ADMINISTRATOR'S FINAL STATUS REPORT ON THE 2006 PROCESSING APPLE BARGAINING UNIT. SECONDED BY FRED TUBBS. MOTION CARRIED UNANIMOUSLY.

Negotiation Schedules: Distributed to Board members. Last date to opt out of MACMA negotiations for 2006 processing apples is August 21, 2006. Indian Summer Cooperative has opted out. Rick Ray asked whether MACMA submitted their list of apple handlers with whom they will be negotiating. Karel Bush answered that they have not. Dawn Drake stated that the list will be provided to Karel early next week. Karel will forward to Board members.

Update on Board status: Board terms for Rick Ray and Art Lister expire September 1, 2006. Information regarding seeking reappointment was provided to both Board members.

NEW BUSINESS:
Michigan Processing Apple Growers Report: Dawn Drake reported that the MACMA Marketing Committee met last week to formulate asking prices for the 2006 apple crop. It was a very impassioned meeting because the growers are broke and they see their livelihood wilting away. They need to get more money for their crops this year. MACMA has had the same asking prices for the last three years, and they have been working closely with processors to try to lay the groundwork to have an increase this year. The Committee decided that on premium apples they will ask for an increase of 3 cents per pound; the middle range of hard and soft varieties will be about 2 cents per pound. Some of the factors taken into consideration in asking prices were the crops out East and in Washington. In New York, they will have about a 25-million-bushel crop. It's uncertain what National Fruit will be doing, if anything at all. Washington will have a large crop of apples. They're expecting only about 85 to 90 million bushels to go fresh, so that will cause more fruit to go into the processing market. Freight is an advantage for our growers. To get apples in from Washington it's about 9 or 10 cents per pound. In New York, there was a light increase in apples. It's about 3 cents per pound for freight from New York to Michigan.

Chemical costs have gone up 25 percent over the last three years; fertilizer costs have gone up 35 percent. With the increased minimum wage starting October 1, there will be even more of a burden for the growers, plus there's a question about whether the growers will have to pay overtime. If the apple industry is to continue in Michigan, something has to be done to support the growers. There are a lot of positive things going on in the marketplace. The juice market seems to be very positive this year. There has been an increase in per-capita consumption of apple juice. Processors have told MACMA that they want all the juice apples that they can get. Last year, China ran out of their supply of apple juice concentrate. They had booked a lot of business with U.S. buyers and they reneged on that business and ended up selling at a much higher price than what they had written contracts for. Not only did they clean out their 2005 supply, but they also had 2004 and 2003 supply that has now been cleaned out, so they're starting fresh this year. An apple juice concentrate broker in New Jersey has said that China is probably going to start around $5.50 to $5.90 per gallon. That's very different from the $3.75 and lower price they had been getting. Apple juice consumption is up, but of all the apple juice consumed in the United States last year, 77 percent of it was made from foreign concentrate, which was probably from China.

Rick Ray asked if MACMA has any information on Canadian processors' inventory levels. Dawn responded that she is not aware of any processed inventory that's on hand in Canada. Their crop is down a little from last year. As of last week, there were about 1,000 boxes of spies that were still on hand from the 2005 crop. Those have been moving into Michigan from $14.25 to $17.00. The interesting thing about spies in Ontario is that the Georgian Bay has always been a big spy-growing area. Nova Scotia planted a lot of spies several years ago - those are all coming into production now, and that's where the Georgian Bay has always taken their spies. So now the Georgian Bay spies are going to be looking for a home. Dawn also commented that the freight rate from Canada is about 2.5 cents and that Canada is the biggest importer of applesauce into the United States.

Jody Meagher asked whether Dawn had an update on the insecticide Guthion. Dawn responded that the EPA recently had another comment period where people could write in and tell EPA why they should re-register Guthion. MACMA and other industry members submitted comments. As it relates to apples, EPA is looking at a three-year phase-out period, so by 2010, growers will not be able to use Guthion anymore. The frustration comes in the fact that Guthion does so many different things that growers will have to use two or three different chemicals to replace one, plus they're less effective and more expensive. Arthur Lister asked whether the residues from the newer chemicals are just as bad as Guthion. Dawn responded that she has not heard that but that they are just not as effective. She added that on U-pick farms, with the new chemicals, people will not be able to go into the field for a certain number of days, so that can hurt that segment of the business. Arthur commented that some studies at Michigan State University have shown that some of the new chemical residues are actually worse than those currently in use. He said that growers have three years to try to come up with a replacement regimen. Dawn commented that there are currently no replacements available and that the chemical companies aren't going to invest a lot of money into developing a replacement for such a small-use market. Art commented that some growers will be out of business in three years, because the costs will be prohibitive.

MACMA has started work with some congressional offices regarding disaster assistance. Phil Korson from Cherry Marketing Institute and Dawn had good meeting with legislators last week. They are willing to help out any way they can. Before USDA will declare a county as a disaster area, the harvest has to be finished, so there won't be any progress until November for any kind of apple assistance. With apples, there has been considerable hail damage - in the Northwest, they've had a loss of about 75 percent of the total apple crop.

Rick Ray asked whether MACMA has made efforts to ensure there are no cooperative members serving on their Marketing and Bargaining Committee. Dawn responded that when elections are held in December, those growers who are not co-op members are "asterisked" to show that they are eligible to be on the Committee. When they're appointed, there is also a double-check to ensure they are not co-op members. Dawn listed the current members. Rick asked whether these are the only members that participate in pricing discussions. Dawn briefly described the process they use. They start with a Bargaining Committee conference call. Dawn takes information from processors to that call. There is discussion and once they come to a conclusion about what the Committee will buy, then Dawn goes to the full Committee with recommendations from the Bargaining Committee. Rick clarified that there are two separate committees - a board and a negotiating board. Dawn confirmed that is correct.

Michigan Asparagus Growers Report: Ken Nye commented that the marketing situation has improved significantly since last year. Honee Bear Canning, who had opted out in the prior year, have come back and they've had good discussions. There were also challenges with another processor last year - Profac Cooperative - but within a few days of negotiation, Profac agreed with what had been negotiated with other handlers, so MACMA ended up with a reasonable price for processors this year - 57 cents cash, 59 cents with terms. There was a little bigger crop than expected - 22.5 million pounds. There were weather concerns with frost. Fresh market was very good. Overall it was a positive year for the asparagus industry, because everybody decided to stay in and work together.

A study committee was formed to look at the industry - made up of growers, handlers and other industry experts. There was good discussion about what the industry needed to do to survive. The committee also looked at how MACMA operates internally, and there will be some changes made to bylaws and operating procedures. "Grower-owned and controlled processing cooperative" has been difficult to define. The conclusion has been made that there are no "grower-owned and controlled processing cooperatives" for asparagus. MACMA is committed to ensuring that there are no cooperative members making decisions about bargaining and pricing, etc. Profac was previously viewed as a "grower-owned and controlled processing cooperative" at one time; it is not anymore, based on MACMA's interpretation. There may be some changes to the Marketing Committee and terms of service.

MACMA is working with handlers on pursuing an additional USDA purchase. A purchase was announced earlier this year that was a little smaller than expected, but it will be helpful to the industry.

Jody Meagher asked for a perspective on the international market. Ken responded that it hasn't changed much. There is a lot of international competition. The Mexican, Peruvian and other Southern Hemisphere industries like to sell fresh asparagus to the United States. There is also a place for processed asparagus, and there will be continued competition from the south. China is always a big unknown; they had a poor crop last year and price is relatively high. They will probably come back with more production this next year. We import far more fresh asparagus than we produce in the United States, and it won't be long before we're importing more processed asparagus than we produce. It's a product people want and we don't produce that much of it in the United States anymore. The imports have some advantages, particularly in labor costs and other costs of production. If we stick together, our industry can battle that competition. As long as growers maintain the quality and reputation they have, the industry can survive.

Fred Tubbs commented that there are some quality concerns locally. Ken responded that if growers maintain quality, the industry will be more likely to survive. Fred suggested that MACMA, through newsletters and other communication, emphasize quality to the growers. Rick encouraged Ken to continue to pursue the USDA buy. Ken responded that they plan to continue the pursuit; they have had good support from congressional delegation and they will use them as necessary. Rick also commented to the Board that it's important to treat all processors equally. He also commented that the processor who abandoned MACMA seems to be receiving credit for "saving" the industry by coming back on board. In reality, he said, it's the processors who have maintained their support for MACMA and the entire industry that deserve the credit for keeping the industry alive. Fred Tubbs supported Rick's insistence that no processor should receive preferential treatment.

Ken commented that some members have come back into the association, including some who have been difficult to get over the years.

Jody Meagher asked whether overseas asparagus industries are being monitored to the same degree as U.S. growers and processors, including pesticides, fertilizers, and processing practices. Ken responded that there is monitoring by the Food and Drug Administration. Samples are taken of a small percentage of the product. Those products also have to meet USDA quality standards. He commented that when you're handling a valuable product like asparagus, in most cases it makes no sense for the handler to do all the things necessary to get that product into a package that the consumer wants and bring it here to the United States then have something wrong with it that gets it rejected. The handlers involved in Peru and other countries are producing a quality product; it would do them no good to bring a product here that's going to get turned away - it's too expensive. There's always a perception that they're doing something wrong or something is unsafe, but overall, normal trade practices are going to dictate whether they continue - that's just how the process works. Rick commented that the canned asparagus coming from those countries is a very good product. Ken noted that with a cheaper product like apple juice concentrate, where the volume is huge, it might be more likely that there are those who will try to cheat the system.

On the subject of Guthion, Ken commented that if the EPA allows only four more years of use for apples, cherries and blueberries - the three largest fruit crops in Michigan - it is guaranteed that if we import apples, cherries or blueberries from anywhere else in the world, Guthion will be there, and we will continue to import those things regardless.

MEETING DATES
Meetings for 2007: February 8, at Constitution Hall in Lansing; August 14, at the Oceana Intermediate School District in Hart.

PUBLIC COMMENT
No public comment.

ADJOURN

MOTION: RICK RAY MOVED TO ADJOURN. SECONDED BY ARTHUR LISTER. MOTION CARRIED UNANIMOUSLY.

The meeting adjourned at 11:00 a.m.