Feb 5, 2008

Tart Cherry Industry Will Decide the Fate of Its Marketing Order

In March, tart cherry growers and handlers will decide whether to extend the life of their industry’s federal marketing order, known as the Cherry Industry Administrative Board (CIAB).

The voters will receive ballots in the mail from USDA, and the ballots should be returned to USDA. It could take time for the votes to be tallied, but the end result should be known before the next harvest begins, according to Perry Hedin, CIAB’s executive director.

If approved, CIAB will continue to fund tart cherry promotional efforts, balance supply with demand and be a clearinghouse for information not available anywhere else. If not approved, the industry will lose half its promotional funding, along with one of the entities that help bring growers higher returns, Hedin said.

CIAB was created in 1996, after the industry petitioned USDA for a new federal marketing order. The order is based in Michigan, which annually produces almost three-quarters of the U.S. tart cherry crop. The order also encompasses growers and handlers in Utah, Washington, Oregon, Wisconsin, New York and Pennsylvania. Handlers pay the assessment fees: half a cent per pound for promotional activities and 0.16 cents per pound for administration, according to Hedin.

This will be CIAB’s second referendum. The last was held in 2002. This year, about 40 handlers and more than 600 growers are eligible to participate. More than 50 percent of those voting must approve of the order for it to continue, he said.

Growers who take a good look at the circumstances should see that the value of the marketing order is substantial, and should renew it, Hedin said.

Measurable benefits

In an attempt to quantify the benefits CIAB brings to the industry, economists Gerald White of Cornell University and Kevin Kesecker of USDA were hired to study the matter. White shared the results of the study in December, at the Great Lakes Fruit, Vegetable and Farm Market EXPO in Grand Rapids, Mich.

The study, available for download at www.cherryboard.org, concludes that the tart cherry industry is better off with a marketing order than without one – as measured by the farm-gate value of tart cherries at the grower level.

The economists analyzed data from 1972 to 2006, breaking it into three time periods:

• 1972-86 – years the first federal marketing order, the Cherry Administration Board, was in operation;

• 1987-96 – years no federal marketing order was in operation;

• 1997-2006 – years the current federal marketing order, CIAB, was in operation.

According to the study, the average real (adjusted) price of U.S. tart cherries was 40.5 cents per pound from 1972-86; 16.7 cents per pound from 1987-96; and 21.4 cents per pound from 1997-2006.

Several factors affect the value of production, but these and other statistics indicate growers got better returns in the years a federal marketing order was in place, White said.

Growers need to get more for their crop. As far as volume, no other commodity White works with fluctuates as much as tart cherries. They’re extremely vulnerable to freezes and other vagaries of the weather. There’s also the overall reduction in demand to deal with. Demand for canned tart cherries has declined by 47 million pounds in the last decade, he said.

Other challenges for tart cherries include the industry’s small size, a lack of major processors (such as Ocean Spray for cranberries or Welch’s for grapes), demographic changes (more women outside the home, less time for food preparation), competition from other well-established commodities and a lack of broad availability of easily identifiable products, he said.

Generic promotion could be the best way to bring demand for tart cherries back up, White said.

Anticipating that need, CIAB and the Michigan-based Cherry Marketing Institute (CMI) started a major promotional push two years ago, and they are starting to see results.

If CIAB shuts down, its contribution to the promotional budget – roughly $1.25 million annually – would be eliminated, effectively cutting the budget in half. CMI would probably continue funding the program, but it would be a big loss for the industry, Hedin said.

CIAB performs another important function: balancing supply and demand. If supply is predicted to be higher than demand in a particular year, the marketing order restricts the surplus – not allowing it to be sold in domestic (free) markets. Processors are allowed to sell restricted product in new markets and other designated outlets, however – if they can find them, Hedin said.

“Restriction allows us to make sure supply and demand in the domestic marketplace are generally equal, but doesn’t preclude additional sales in alternative outlets,” he said.

The restriction system also creates a reserve pool of tart cherry products, which can come in handy in emergencies. In the devastating year of 2002, when production was extremely short, reserves were available to help meet demand. It still wasn’t enough, but there was a lot more than there would have been had no reserve existed, he said.

There was no reserve system in place from 1987 to 1996, when the industry lacked a marketing order. The marketplace was fairly chaotic in that period. Handlers fought each other for business, and buyers would play them against each other until prices were “abysmally” low. CIAB was put in place to prevent those battles and stabilize supply, Hedin said.