Jul 30, 2015Marketing order approval could boost cranberry promotion
In light of considerable market turmoil in the U.S. cranberry industry in recent years, Michelle Hogan was a bit surprised when growers recently approved the continuance of the industry’s federal marketing order.
Hogan, newly appointed executive director of the Wareham, Massachusetts-based Cranberry Marketing Committee, was pleased to hear that cranberry producers in Massachusetts, Rhode Island, Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon, Washington and Long Island, New York, approved the continuance of their federal marketing order, also known as the Cranberry Marketing Committee, USA (CMC).
USDA informed CMC in July that 76 percent of all the producers voting – representing 84 percent of the volume of production by those voting – favored continuance. Approximately 470 eligible producers cast ballots in the referendum.
The marketing order requires that a continuance referendum be held every four years in May. USDA will not consider termination of the order if continuance is favored by more that 50 percent of the growers who vote in the referendum, provided they represent more than 50 percent of the volume of cranberries represented in the referendum.
“(Approval) means we have four more years of work on our surplus situation,” Hogan said.
“Actually, I was quite surprised, given the fact our volume regulation was (rejected) last year by USDA,” she said. “The approval allows us to keep in the toolbox the ability to address the market situation and market our way out of the current oversupply.
“We’re hoping we can get back to profitability for our growers,” Hogan said. “That would be the long-term goal. We can’t control the market. We’d like to have a hand in putting our growers on a level playing field and everyone making money again. The only way to do that is to increase our sales.”
Volume control rejected
Due to the widening gap between supply and demand over the past decade, CMC recommended in early 2014 using volume control to address the oversupply situation.
The proposal, which faced approval by U.S. Secretary of Agriculture Tom Vilsack, would have restricted a grower to selling only 85 percent of his or her recent average sales in an effort to drive up the price. Volume control has been used five times since CMC’s inception in 1962.
USDA rejected the recommendation. According to media reports, USDA cited concerns over Canadian growers’ apparent involvement in the process, which could lead to potential violation of antitrust laws, and stated the recommendation wasn’t in accordance with guidelines for marketing order committees and boards.
“We worked all these years to get the whole cranberry industry involved (in addressing the surplus), and once we did, it wasn’t allowed,” Hogan said of USDA’s ruling.
“Our emphasis will remain on sales,” Hogan said. “I can’t see us ever doing volume regulation, but it’s something that is available if the surplus situation ever gets bad enough. We then would have to proceed as a U.S. industry for volume regulation.”
Hogan said CMC recently received USDA confirmation that its marketing order would not be impacted by a recent Supreme Court decision that ruled against a raisin marketing order, claiming government agencies should not be allowed to claim a portion of a crop.
“The Supreme Court’s decision (in the raisin case) addresses a narrow situation where, under the raisin marketing order, the government, through an administrative committee, takes title to a crop held in reserve and may physically appropriate that crop,” according to USDA’s communication to CMC. “The decision does not address other types of volume controls or reserve programs. Because no other administrative committee physically appropriates and takes title to the agricultural product as part of a volume control program, the court’s analysis (in the case) will not affect the current operation of USDA’s other marketing orders, which help to stabilize market prices and are tailored to an individual industry’s marketing needs.”
“Ours is totally different,” Hogan said of how volume control would work for CMC. “There is no reserve pool. The government doesn’t take control. It would restrict the amount a grower could deliver to the handler.”
Change in leadership
Hogan succeeded Scott J. Soares as CMC’s executive director, who served for three years before resigning effective May 30.
In his resignation message on CMC’s website, Soares said “CMC’s ability to move a volume control regulation has become less as the global cranberry industry has grown and evolved. Changes in demand for particular forms and increased volumes of cranberries that are grown outside of the (marketing order) have clearly contributed to the CMC’s inability to reach consensus on a volume control measure. The volume control tool must shift if it is to be used and be effective.”
Soares said in light of the industry’s struggle to adjust supply, “the only other clear path to addressing a surplus is to increase demand.”
That task now will be led by Hogan, who has been assistant executive director for the majority of her 15 years with CMC. Hogan previously spent 11 years working for the Cranberry Institute and the Cape Cod Cranberry Growers Association. She also managed the Frost Advisory Service for cranberry growers in Massachusetts.
Hogan will be the primary contact for the organization and is responsible for working directly with USDA, the CMC board of directors and cranberry industry leaders. She will also provide management and oversight for all of CMC’s international, domestic and trade policy programs.
“We’re counting on sales to deal with the surplus we’re faced with,” said Hogan, who dealt primarily with growers and handlers in her previous role.
“The problem with our industry is half the industry is still making money at $35 or $40 a barrel. The other half is in single digits. It’s a complete division, and it matters who you sell to. A handler who only has cranberries is in a worse position than a handler that has other commodities. They’re working off the other products they handle. Some growers have been faced with single digits for three or four years and they’re struggling. They need some relief.”
She said smaller growers are “abandoning their farms and bigger guys who are more efficient are buying them. Some have had to choose to get a job and lose everything. For some of them, it’s a sad situation. Unfortunately, our growers are just going out of business. I’d love to see our growers looking profitable again.”
Large operations such as Ocean Spray and a “dozen others that do export sales is where we’re seeing the growth,” Hogan said. “(Ocean Spray is) a big player worldwide. That’s a good thing for the industry – opening markets for little guys who don’t have the money to do brand promotions.”
Global inroads pursued
Hogan pointed to an increase in export sales, with marketing promotions having been initiated in China, India, South Korea, Mexico, Germany and France.
“We were working on Russia, but we’re pulling back a little” based on market conditions, she said.
USDA gave U.S. cranberry growers a boost in 2014 when the agency agreed to spend $55 million on surplus cranberries. USDA announced in November it would buy approximately 680,000 barrels of cranberries in the form of juice, sauce and dried berries to distribute to food banks and schools.
CMC has worked to promote the use of cranberries in schools, and recently created a foodservice section – including a toolkit for schools – on its website to promote cranberry recipes for food preparers.
Hogan said it’s easier to market fresh, frozen and dried cranberry products than it is to deal with concentrate, due to its shipping content.
“We have to find ways to use up the concentrate in our product,” she said.
“The challenge is we have to continue to see sales increases on both the foreign side as well as the domestic side, and limit the amount of foreign fruit coming into the country,” she said. “We have enough, and it’s easy to have Canadian fruit come this way. We’re competing with the Canadian industry.”
Hogan said plantings have slowed following a surge from 2008-2010, in which growers were “planting hand over fist while the segment was still making $70 to $80 dollars a barrel. So then there was crop three years later coming into the market, and there was no market. Production has gone up too fast and has exceeded sales. It’s our goal to increase the sales side. We meet twice a year to decide which new markets to enter overseas. That’s really where we want to focus the majority of our effort.”
Cranberry surplus evident
According to USDA, total U.S. cranberry production in 2014, 8.72 million barrels, was down 3 percent from the 8.96 million barrels the previous year. Bearing acreage, at 40,500, decreased 1,500 acres from the 2013 season. In 2014, Massachusetts, Oregon and Wisconsin increased their acreage, while New Jersey and Washington remained unchanged from 2013. The average yield in 2014 was 211.6 barrels per acre nationwide, an increase of 0.2 barrels per acre from 2013.
When combined with Canadian cranberry production, the 2014 crop was expected to possibly match the previous year’s record harvest of 12 million barrels. The global cranberry supply stood at 16 million barrels (1.6 billion pounds) near the end of 2014. Demand this year is expected to be about 8.2 million barrels, according to CMC.