Tomato growers face challenges with water, price

Issue Date: February 3, 2010

By Christine Souza
Assistant Editor

After managing short water supplies carefully and producing a large crop in 2009, California processing tomato growers say they face definite challenges as they make plans for 2010. Those challenges include continued access to water, concerns about prices and the impact of a struggling economy on their businesses.

As farmers develop their planting intentions for the season, the per ton price farmers will earn for their tomatoes is a top concern. Growers say that the current price quoted by processors for tomatoes would not be high enough to pay for producing the crop.

"The offers have been in the $62 (per ton) range. That is a really discouraging offer from processors, especially when you consider the effects out there in the industry," said Aaron Barcellos, a diversified farmer who grows processing tomatoes in the Los Banos area. "Our acres will likely be going down because of the price. We won't be growing as much as we did in the past. We're looking at probably a 10-15 percent cut in our acreage."

Barcellos, a fourth-generation farmer, said 2009 turned out to be a good year for tomato growers, with a market price for tomatoes of about $80 a ton.

Now, growers and processors face high inventory levels going into this year as a result of last year's record crop.

California tomato processors indicated in a January California Processing Tomato Report that they intend to contract 12.6 million tons, 5 percent less than the 2009 contracted production, although that would still be the second-largest crop in at least 20 years. The report also indicates that processors estimate the contracted production for 2010 will come from 280,000 acres, producing an average of 45 tons per acre. The contracted acreage forecast is 28,000 less than was reported under contract in 2009.

The California Tomato Growers Association—a grower cooperative that bargains with processors on behalf of farmers—met with processors in October to establish a course of action for price negotiations and says it proposed a mutual exchange of offers with each processor.

"We started with an asking price for raw product that was lower than last year. The price offer was based on a premise that an average grower with average costs should be able to make a reasonable rate of return growing tomatoes," explained Mike Montna, president and CEO of the association, as he addressed members and processors at the organization's 63rd annual meeting in Modesto last week. "When talking to growers about the current offers in the low $60 range, their response to me has been very clear: How can they take the $800 per acre away from last year's bottom line and still make it work? Overall, their cost of production is down slightly, but not enough to make up for those levels."

Ed Yates, president and CEO of the California League of Food Processors, which represents tomato processors, said he was unable to comment on prices offered for tomatoes, but indicated that it is important for the industry to have some inventory carryover.

While negotiations for price continue, both growers and processors worry about the possibility of not having enough water to irrigate the processing tomato crop. Even with the recent precipitation, this possibility remains a significant concern.

In response to last year's dismal water situation, Yates noted, growing regions for tomatoes shifted to areas where water supplies were more plentiful.

"Tomatoes were competing for water in 2009 and one can observe that tomatoes economically chased water. There were some shifts to producing areas where water was either from the ground or more available than some of the more traditional producing regions," he said. "Plus, we have the regulatory and legal predicaments for the delta and shipments of water."

Barcellos farms on the west side of the San Joaquin Valley in five different water districts, three of which receive federal water supplies that were severely restricted in 2009. He said he had to fallow 800 acres of ground last year to ensure that he would have enough water for his tomato crop, and that he believes he will have to fallow ground again this year.

"Most of my property out there is in federal water districts, so we are faced with pretty severe water shortages. It is challenging. Fortunately, I do have some options of transferring water, which helps, but supplemental water is very expensive and our margins are pretty thin right now," Barcellos said. "We are concerned that if we don't get average-sized yields, with the current tomato prices they are offering it is just not profitable for us."

Although water shortages caused stress last year, Barcellos said, the growing conditions otherwise were perfect for tomatoes and resulted in an excellent quality crop.

"With processing tomatoes, there is a lot of risk involved with growing them. It can just be one little blip in the weather radar to really affect what your outcomes are," he said.

"Basically, in three months of the season, you are packing for 12 months. So how much disappears in a month drives in essence the annual consumption of tomatoes," Yates said. "Like any commodity, you want some in reserve or carryover in case of a disaster crop. This year could be close to the second-largest crop on record, depending upon how it unfolds."

Leaders of the tomato growers association said it intends to continue to work with growers and processors to ensure that a price agreement can be reached. The organization has also pledged to become more visible when dealing with legislative and regulatory issues on behalf of its members.

"There is no doubt that our industry faces some challenges for the upcoming year," Montna told farmers attending the group's annual meeting, "but I can tell you that the board and I are totally committed to ensuring that these challenges are met."

(Christine Souza is an assistant editor of Ag Alert. She may be contacted at csouza@cfbf.com.)

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