Jul 27, 2007

Tart Cherry Industry Managing around 45 Percent Restriction

Tart cherry growers were not very happy with the large set-aside ordered in June by the Cherry Industry Administrative Board (CIAB), which administers the federal marketing order governing red tart cherries. But they are managing to live with it. The CIAB recommended that the free percentage be set at 55 percent and the restricted percentage at 45 percent.

“We knew we had a pretty good crop and a pretty large inventory, so we expected to have a pretty big set-aside,” said Jim Bardenhagen, recently retired Extension director in Leelanau County, Michigan, and now “just a tart cherry grower.”

“Still, growers are disappointed that the set-aside had to be so big. What they want to see is more sales, more demand.”

A program to boost demand kicked off in February, but its impact on the tart-cherry market still is not known.

“I think growers accept the need for it (the set-aside),” said Jeff Send, who operates a receiving station for tart cherries in northwest Michigan.

Two things have made the set-aside more palatable this year, he said.

“This year, there has been quite a bit of wind damage, so the cherries that are going on the ground are substandard and shouldn’t be packed anyway,” he said.

Secondly, processors have not asked growers to set aside the full 45 percent.

“Each processor has a different program, but the most any processor has asked for is 15 percent. Others are asking growers to divert 10 percent, and a couple are asking for zero.”

“The crop in Europe is down this year because of spring freezes,” Bardenhagen said. “Processors are expecting a larger export market. Most are taking 85 percent or more of the cherries from their growers.”

The decision to restrict nearly half the tart cherry crop was made at CIAB’s annual marketing policy meeting June 21 in Grand Rapids, Mich., following USDA’s estimate of the crop size that day. Percentages are calculated using the USDA’s estimate of harvest. The USDA released its official crop estimate projecting a national crop of 294 million pounds of red tart cherries.

Final percentages are determined in September.

The board used the Optimum Supply Formula (OSF) as set forth in the order, according to CIAB administrator Perry Hedin.

The board considers such factors as crop size, the three-year average annual volume of sales of tart cherry products in the United States, the carry-in of product into the current year and the desirable carryout of product for the following season.

Last year, following a predicted crop of 256 million pounds, the board set the restricted percentage at 33 percent. It later adjusted the final percentage to 38 when final estimated crop size rose to 263 million pounds. This year’s crop is larger.

Free tonnage is production of the current year that can be marketed by handlers of tart cherries without any limitations. Restricted tonnage is that which must either be retained by handlers in inventory or diverted by handlers into other market opportunities, such as exports or fresh sales.

Three-year average sales in the domestic market averaged 173 million pounds, Hedin said. When a 10-percent “market growth factor” was added, the estimated size of domestic market demand for the 2007 crop was pegged at 193 million pounds.

Other adjustments were made based on an estimated 94 million pounds of cherries in processor inventories.

Last year, Hedin said, processors sold 68 million pounds of “restricted” cherries – 28 million pounds to the USDA’s domestic feeding programs, 10 million pounds into export and 30 million pounds into new and expanded markets.

The restriction number does not apply to growers directly. Processors and their ability to market products, and their willingness to put fruit into inventory, affect how many cherries they will buy from growers – and thus affects how many tart cherries will be shaken from the trees and destroyed. Growers may also sell cherries for fresh use.

Prices this year were in the high 20s (cents per pound) for 100-grade fruit, according to Send, who added that very little fruit make that grade.

Probably across the board, growers will get about 20 cents a pound for the tart cherries they grew this year – including those that processors asked them to leave in the orchard, he said.

Harvest in northwest Michigan, the latest in the tart cherry harvest season, was in full tilt the week of July 16.