harvest is 85%-90% complete. The debate that is happening is over the size of
the WI crop. There are some that predict it will close to normal at 5 million
bbl. and there are others believe it will be closer to 4.2. All other growing
regions are close to normal. It is most likely that a 4.2 crop might bring the
sdc's prices up. The total crop number should be known soon.
The industry still has a significant inventory. The inventory and large crops have caused the downward spiral in sdc's prices over the past few years. Most of the inventory is now held in concentrate form. This is significant because manufactures of sdc's are now competing for fruit to run their plants. This competition is raising grower returns which will in turn raise prices.
Please note, I do not want to overstate the possibility of price increases. They will be modest at best, but it will move pricing off the historical lows. There are producers who are running at close to full capacity that are trying to raise prices. Decas is in this group. There are others trying to fill capacity by pricing fruit aggressively to fill their excess.
As far as the Organic Crop. Organic will be very short this year. The crop was down. A major supplier is getting a plant on line. Delays in that processes are inevitable.
There is also a lot of competition for the fruit which drives up grower price. There is also increasing demand for organic dried cranberries. We expect prices to be up 10%-20% in 2016.
The long term the picture is better. There are a lot of high yielding acres coming on line in the next three years. This will help balance supply and demand.
SO MUCH COMING AT US ALL AT ONCE!!!
Grower association, Cranberry Institute and Cranberry Marketing Committee meetings; a potential record crop; expanding surplus; continued bog expansion; lawsuits; counter lawsuits; Scamberry; volume regulation discussions; new Independent grower organizations (United); Cott purchases Cliffstar; auctions, B-pool in decline, etc. etc.
Included in this market update are links that reference many of the subjects above. In the near future, we will be adding a new tab on our website entitled “Industry News,” which will include these and other links to relevant industry topics.
If any subscriber to this letter wishes to hear from Decas what our thoughts are on these matters, please feel free to call us and ask for:
Chuck Dillon CEO
John Decas Chairman
Parker Mauck Grower Relations
The three of us will be available at the following events:
August 10 Wisconsin Field Day
August 17 Massachusetts Field Day
August 17-18 CI Meeting - Plymouth, MA
August 30-31 CMC Meeting-Minocqua, WI
We would be pleased to have an honest discussion of the facts and share our opinions on industry-related matters. Above all, we are willing to discuss in full the many distortions that are being circulated about our company in the form of frivolous lawsuits. The truth is not always an easy thing to come by in our industry.
In our first Market Update letter sent in August of 2009 we reported that, according to the USDA analysis of inventory and sales data submitted by all US handlers to the Cranberry Marketing Committee, projections were that as of September 1, 2009 about 53% of the 2008 crop would still be unsold. As of this point in time, the USDA projects that for September 1, 2010 that figure will rise to 70%.
At this rate, we could well have a full year’s
crop in storage by the harvest of 2011. We have more acres and berries than
ever, with a continuing decline in domestic and export sales. On top of this
predicament, there are nearly 6,000 planted acres (new, rehabbed and mowed) that
did not produce berries in 2009. There are another 2,000-3,000 new acres to be
planted in 2010 in the
In 2008 and prior to the February 2009 CMC meeting, I was issuing grower advisory letters warning that the Ocean Spray new acre policy, along with aggressive Independent expansion, was growing supply faster than demand could keep up. The huge 2008 crop and the economic downturn only added to the problem. Now there are more acres going into the ground this Spring most of which are in the OS co-op. OS will also acquire as much as a million barrels this year between the B pool and non-patronage fruit.
It is very evident that the entire industry is in an oversupply situation that could last a very long time. There is little on the demand side to overcome the vast amount of new acres being planted and acres that will produce at higher levels. This oversupply includes Ocean Spray (despite what they are saying) as there would be no other reason for them to dump cranberry products into the ingredients markets at prices below what it costs to allow a reasonable return to growers (including theirs). As the supply continues to grow you will see that no one will be able to withstand the downward pressures on prices to growers. Brands do not protect growers from vast oversupply market forces.
CMC February Meeting
Marketing Policy – At the February CMC meeting, the agenda included the usual routine of developing a CMC marketing policy based on inventories, estimated 2010 crop production, and projected domestic and foreign sales. The policy concludes with a recommendation as to the need for a volume (dumping) regulation. My conclusions on unsold fruit as cited in the first paragraph of this letter were based on the CMC data and USDA analysis as presented at the meeting.
After CMC consideration, it was determined that there is a surplus and that it would continue to swell in the foreseeable future. Despite this, the CMC voted against a proposed volume regulation by an 11 to 1 margin.
All Ocean Spray members voted against the proposed volume regulation. Some of their reasons included:
I agree with #1, #2 can be argued and #3 is not supported by their actions in the marketplace.
It should be noted that a very modest volume
regulation allowing growers to deliver 100% of their allowable allotment was
proposed by Kelly Rudd of
I voted with the majority. I have always opposed volume regulations on philosophical grounds, and the growers that I represent did not support a regulation. It seems clear to me that given all of the reasons against a volume regulation as stated by all the CMC members, volume regulation will never again be an option that future CMC’s will ever consider.
For the entire USDA analysis of our present and projected inventories, click here. The CMC Marketing Policy can be found here.
Reformulation – As we are all aware, another major factor contributing to our huge surplus is reformulation by major juice and food companies, reducing the content of cranberry in their food products. Reformulation not only contributes to oversupply but also makes the health message more difficult to promote.
Up until the CMC meeting most others and I thought that reformulation was a direct result of the high cost of cranberry ingredients in 2007-2008. At this meeting we learned that there is a lot more to this than previously thought.
Brooke Peterson of Clement Pappas & Co. was on the agenda to present market information relating to food claims and reformulation. Brooke’s presentation revolved around the sales trend of cranberry juice products. His source of information was A.C. Nielson Market Reports based on available supermarket data.
One alarming trend that the Nielson report shows is that cranberry juice cocktail (27%) sales are down 16% since around 2007. Regarding reformulation, I was very surprised to see from this report how reformulation began before the price of cranberry ingredients surged to record levels.
The presentation included the following facts:
Reformulation has been so severe in some cases that artificial color had to be added to the product to maintain its original shade of red. Reformulation outside of increased prices does not make much sense. It either points to a lack of having enough fruit or a consumer need that is being met (highly unlikely). I can guess you can read through the lines as to what happened back in 2005.
We at Decas believe that our industry must create incentives that will result in more cranberry content being added back into our juices. The challenge will be how to create those incentives, especially since $20 concentrate alone doesn’t seem to be increasing utilization, at least thus far.
We calculate that if all cranberry juice blends added 10% more cranberry juice content, it would:
We believe that the demand side of the economic
equation must be attacked vigorously. The CMC consumer studies over the last few
years have clearly pointed to the fact that the main reason that people buy
cranberry juice products is for their potential health benefits. If that is
true, then why don’t we give consumers what they ask for? Decas will
aggressively pursue a
At this CMC meeting Chuck Dillon, the CEO of Decas,
announced the Decas plan for a
Now the export market has played a very important role in the growth of demand over the past ten years but even these new markets have shown flat or declining demand and a rapid drop in prices. Why? Well certainly high priced fruit and the recession had tempered sales but our overseas representatives report that there is another disturbing factor at work; reformulation. In recent years we have seen significant reductions in juice content of both branded and private label products. We also see this same trend affecting the SDC market as well.
It is simply impossible to discuss the negative affects of reformulation without bringing up once again the reformulation of SDC’s by Ocean Spray in the product that they call Choice. This product is now under review by the FDA as requested by a leading Consumer group who have tested this product and claim the product has no cranberry content other than cranberry skin and should not be sold as a dried cranberry. They further say that the product has more sugar content than the label claims. We are told that a large volume of the Choice product is exported by OS to the EU and is sold both as an ingredient in food products and to companies who re-bag this product into retail packages.
It is essential that we recognize the growing concern regarding reformulation and selling products with small amounts of cranberry relative to the standard product as it affects “fruit integrity.” A significant contributor to the growth and development of the cranberry business over the years has been a direct result of the associated health benefits. Reformulation and selling products with small amounts of cranberry relative to the standard product may put in question some of the health benefits and even potentially question the integrity of the fruit business. As an industry we should be doing all we can to continue driving the health benefits of cranberries while developing products which deliver those benefits.
We have much more to report, but we will do that in
the next letter. In a few weeks we will provide more information regarding the
market, grower returns, new acre initiatives, the upcoming Cranberry Institute
meeting, and details regarding a new grower organization that is presently being
considered by growers from various growing areas. I will also provide you with a
report on the Atlantic Cranberry Management Course held March 10-12 in
Please note that this letter includes several links to documents that are very informative and of interest to all in our industry.
The Road Back – It Won’t Be Easy
The first market update letter was quite lengthy and designed to catch growers and others up on news regarding the market conditions of our industry. Growers are usually lagging in receiving negative and/or positive trends and are prone to making ill-timed decisions in managing their business, particularly on the issue of expansion because of this delay.
This letter will be shorter and, for the most part, will update many of the important points included in the first letter. Since that letter was written, growers now realize that we must all lower our expectations regarding the value of cranberries as we begin the 2009 harvest. They have heard this message from multiple sources and are certainly aware of what their handlers are presently experiencing.
2009 Crop - This year’s crop is winding down and it seems that the Massachusetts crop will be down by about 600,000 barrels from last year. The Wisconsin crop, according to some experts, will be down between 500,000 and 700,000 barrels. All other growing areas seem to be coming in strong, especially all of Canada.
New Acres – I have given this matter a lot of consideration.
I believe that I can conservatively report that there are about 1,800 acres of newly planted, non-bearing bogs in Wisconsin. About 1,000 of those were planted this year. About 1,200 acres planned for next year.
Quebec - The Quebec Growers’ Association (APCQ) has reported that this year there are 1,295 acres of planted bogs that are non-bearing. At least another 500 acres are being prepared for planting next spring (my estimate).
We also know that Ocean Spray will be planting 150 acres in New Brunswick next spring. In all other growing areas (US and Canada), it is safe to say that there are more than 1,000 acres of new and rebuilt acres in the ground, with at least that much planned for next year.
It is clear that cranberry production will continue to climb. When all of these acres come into full production, the North American berry crop will increase by at least 1,400,000 barrels. Can demand keep up?
The Cranberry Marketing Committee will receive the flyover data that is now being processed, and that data should be as accurate as we can expect. We will pass that info on once it becomes available.
The purpose of this meeting was to petition the USDA to purchase up to 400,000 barrels of cranberries in either concentrate or sweetened dried cranberries (SDC) form during the 2009/10 fiscal period. The reason this request was being made was due to the record crop harvested during the 2008 crop year, and a global economic downturn. This has resulted in inventory levels continuing to remain higher than what the industry felt was needed.
Because the possibility that this situation would continue during the 2009 harvest season thus causing disorderly markets the CMC decided at its February 2009 CMC meeting that it would be pro-active to try and alleviate the situation by petitioning the USDA prior to the 2009 harvest. During the meeting in July 2009, USDA personnel stated that funding for procurements would not be available until October 1, 2009. The industry group indicated that it would prefer to have purchases made starting after January 1, 2010 and have it continue periodically during 2009/10 fiscal period.
The CMC will continue to monitor the situation going forward. CMC has already been told that there are a number of other commodity groups, such as pork and beef, who will be looking for large government purchases due to the current economic situation they find themselves in. Therefore, there no assurance that the USDA will make a large purchase of cranberries during the period indicated.
Meanwhile Mr. LaFleur and Mr. Lochner will continue to assist the USDA, AMS, Commodity Procurement Section in developing product specifications for sweetened dried cranberries.
Concentrate – There is an acute oversupply of cranberries. Most of the oversupply is in the form of concentrate. In August, concentrate was selling for between $45-55/gallon. The Ocean Spray concentrate auction sold concentrate at $33/gallon and immediately lowered the value of all concentrate to below $30/gallon. Ocean Spray will have another auction in January. An auction by the industry leader does not seem to make sense in a period of weakness.
In a letter to their growers, Cliffstar referred to the Ocean Spray auction as a “fire sale” by the “industry leader.” Cliffstar went on to say, “We believe that the actions and activities of others were purposely intended to mislead and misdirect independent growers and handlers with less than responsible concentrate pricing.”
I have quoted the Cliffstar letter because I think they are correct! Furthermore, in a recent letter dated September 22, the Clement Pappas Co. stated:
“More challenging to our small, fragile cranberry industry are the actions of the dominant industry force. Whether their actions are carefully thought out or their consequences unintended, there is no question that they have had a tremendous impact on the industry, in many cases very damaging.” Once again, Decas agrees with Clement Pappas in this regard.
Reduced Utilization – This one really hurts. As I indicated in my previous letter, resistance to the high prices of cranberry ingredients in 2007, particularly concentrate, resulted in many food companies reducing the amount of cranberries in their products. Some discontinued some of their cranberry products altogether. Others substituted non-cranberry ingredients into products and still characterized the product as basically a cranberry product, which was a false claim.
Many companies do these things, but it is shocking that our industry leader would be one of them, especially in a time when we are suffering a major surplus. Reduced utilization has been a major contributor to the supply and demand issues we are facing today, and will continue to damage our industry over the next twelve months. It badly undermines the credibility of the cranberry health message and significantly lowers our ability to reduce the surplus, which, of course, keeps grower returns down.
Cranberry Health Message – It goes without saying that without a credible health message, the appeal of cranberry products would be greatly diminished. A recent market study funded by the CMC and conducted by Cogent Research of Cambridge, MA shows that 33% of consumers believe that cranberries are “healthy” and that 61% consider cranberries as “extremely healthy.”
A look at a few other conclusions made in this study would include:
According to the study, the two most important things that consumers want are:
(1) Healthier product options, and (2) More details on the benefits of cranberries.
For the past several years, our industry has addressed those two consumer concerns very nicely. The handlers, the grower associations, the CMC and the CI have all managed to coordinate their efforts and resources with health studies and generic promotion. As a result we worked out of the 2000-2001 surplus, and growers returned to profitability.
Now, because of reformulation, some of these products are “less healthy.” Because of mislabeling, consumers are not getting the percent of cranberry that they think they are getting.
Because of fraudulent labeling, consumers are getting substitute juices, which they believe are cranberry, and more sugar than they know. Reformulation is killing us. It is diluting and confusing the health message, and it’s putting more berries in the freezer than in the products. We cannot grow our way out of this dilemma until this issue is dealt with head-on by the leaders of our industry.
Do we have the will and the capacity to act as an industry in our collective best interest?
The Road Back – A Beginning
The scenario that I would propose would be for the CI and the CMC to call a crisis meeting of the leaders of our industry. The handlers, growers’ associations, major growers, etc. The purpose of this meeting would be to define the depth of our problem. How to promote cranberries in a way that will result in increased utilization. How to make the health message more credible and more powerful. A few ideas to consider:
1. The health message must be directly related to cranberry content in all products.
2. Consider the old Northland way of guaranteed 27% cranberry content in all cranberry juice drinks. Promote the number 27% until everyone understands what it means, so that when the label includes a boldly printed 27% the consumer knows that the product meets the necessary health requirements. Even the present owners of the Northland brand have eliminated any reference to 27% cranberry in order to compete.
3. Promote the health message of cranberries by better defining PACs (proanthocyanidins) and developing a standardized industry method of defining PACs. Do this, and we make it possible for the consumer to buy the required dosage of cranberry in their powders and other nutraceutical products that they are seeking, rather than having to rely on labeling misinformation.
4. How about an aggressive effort to get a government health claim in the US?
The impact in France was substantial and has had a spill-over effect in other markets. It will require working with the FDA to define how cranberry health claims will be allowed, based on cranberry content.
5. How about a conference with the FTC to strengthen the labeling requirements for cranberry?
6. Adopt an industry recognized seal to police cranberry products in the market.
When diluted and mislabeled pomegranate products began to show up in stores, pomegranate growers and pomegranate processors formed a coalition to protect themselves and the integrity of their health message. I have attached a copy of their information guide that explains their mission and objectives. While our situation differs somewhat, why can’t we adopt this approach to ensure the cranberry standards that will protect our credibility, educate consumers, increase cranberry utilization and raise returns for all growers?
Just imagine how many worthwhile ideas we can all come up with together. By all, I include our Canadian counterparts who can coordinate with us on all of these issues and work with their government as I suggest we work with ours.
These are some of the directions we need to pursue rather than one which undermines usage and the health message.
This is how we can spur and sustain demand.
I do not pretend to have all the answers, but I for one do not believe in hand wringing and accepting what is happening to this great industry.
I refuse to believe that the collective leaders of this industry cannot find a way to consider these ideas, along with other ideas brought forward by any number of thoughtful people who are an integral part of our industry.
We need to fight our way back. In a second attachment to this letter, you can read how the CMC representative in Germany fought a good fight on our behalf to protect our cranberries from those who would try to ride our coattails and our health message under false pretenses.
If he can do that successfully for all of us in Germany, why can’t we do the same here in the US?
Chairman of the Board
A combination of poor weather conditions and rising
demand for cranberries health-conscious consumers are both indications of what
appears is going to be a short Cranberry Crop this year.
Cranberries prefer cold winters and plenty of rain and unfortunately last year's unusually warm winter and a summer drought in many parts of the U.S. and Canada hurt the crop that is currently being harvested.
Officials estimate this year's smaller yield is expected to bring growers $45 to $50 for a 100-pound barrel, up from $37 last year, and more than triple the $16 a barrel about seven years ago. Farmers generally need between $18 to $24 a barrel to break even.
Overall, officials are predicting growers will produce about seven million barrels in the U.S. and Canada -- about one million less than a year ago. As recently as August, the U.S. Dept. of Agriculture was forecasting a slight increase in cranberry production in the U.S. this year, but officials say they expect to revise the numbers in January. Some growers in the Massachusetts area are already reporting crop size to be down about 30% this year from a year ago because of the weather.
Prior to harvest, all was looking exceptionally good
in the designated growing areas for the North American cranberry crop. This has
not proven to be the result in the east, however, and it is looking like the
story will be a similar one in other locations. Weather being the largest issue.
In the East, Massachusetts had predicted a harvest 1.8-2 million barrels, but it
is now looking like 1.6 or perhaps 1.4 million barrels is more likely. In the
West, Wisconsin originally appeared as though they would produce a bumper crop
at 4 million barrels, but now has pared back to 3.6 million barrels.
The overall outcome for 2005’s North American cranberry crop appears that the harvest will be anywhere from regular to a little short. Quality may be another problem for the fresh market, as another result of the weather conditions are the production of smaller berries that tend to be lighter in color.
In August The USDA announced the 2003 US cranberry crop
forecast that the Massachusetts crop would be up 17 percent from 2002 for a
total production of 1.7 million barrels. Growers suffered from drought
conditions in 2002 which kept production levels down. Excellent pollination and
sufficient rain fall have resulted in good fruit set and produced an average
crop for many growers this year.
This year we saw a slight rebound in the barrel prices to growers. This is good news because Growers can now invest these higher returns back into their bogs to improve production practices. Five years of returns below the cost of production have taken their toll on the productivity of many cranberry bogs. This has been the first year in many, that growers are increasing their maintenance of the cranberry vines and general overall production practices such as sanding and water conservation practices.
Massachusetts remains a leader in cranberry production, producing over 25 percent of the US cranberry crop worth an estimated 48 million dollars.