California navel orange growers are sprinting to the finish line for the 2003-04 season heavier of pocket than they have been in six years.
A combination of factors lined up to make this current navel marketing year the best since 1998. By time the crop is finished in May — maybe earlier if it continues unseasonably hot — growers can expect to put money in the bank.
That is no idle accomplishment for an industry in crisis for five years from lost markets after a devastating 1998 freeze, lost market share to imports, lost consumer confidence because of poor quality fruit, and a predatory domestic marketing driving grower returns below the cost of production.
A major factor in the one-season turnaround is the newly formed California Citrus Growers Association (CCGA) which has brought a pro rate system — albeit voluntary — back to the citrus industry.
CCGA took center stage at the recent California Citrus Mutual Citrus Showcase in Visalia, Calif., to show growers in dollars and cents that returns were sharply higher through early March compared to 2002 and the past four seasons.
CCGA board member and secretary treasurer Mike George, grower and general manager at Suntreat Packing and Shipping, Lindsay, Calif., readily acknowledges that “it would not be fair to say” CCGA deserves all the credit, but he is convinced prices would not have been as good as they are without the new organization.
Joe Nelson, president of California Citrus Mutual, gives CCGA more than 50 percent of the credit for better grower returns on navels.
Also helping the cause was a strong export market, especially in Korea; a weaker dollar making American citrus more attractive overseas; an 8 percent to 9 percent smaller crop and a high quality crop.
It was a later start in harvesting and that was partly by CCGA design. The voluntary agricultural marketing cooperative removed some of the flexibility in the early harvest, which impacted positively the quality of the initial California navels. That got the year off on the right foot with consumers.
“It was a great foundation to build on and maintain for the season,” said Nelsen.
Upon that foundation growers had averaged more than $9.50 per carton (more than 80 percent fresh market utilization) through early March, $1.71 more per carton over 2003 and 77 cents above the average for the past seasons, said George.
So far that had returned to navel growers $277 million, $42 million more than a year ago.
The return per acre has been $1,060 more per acre than last year and $477 more per acre than the average for the previous four years.
“It was a solid first year start,” said George.
CCGA board vice chairman and former Sunkist chairman Tom Dungan of Exeter, Calif., called CCGA “the most successful collaborative effort” he has seen in his 44 years as a citrus businessman.
CCGA was formed under the Caper-Volstead Act as an agricultural marketing cooperative and a “voluntary” replacement for the old mandatory pro-rate under the now disbanded federal marketing order.
The goal of CCGA is simple: to increase the grower return per acre.
CCGA's board did that in 2003-04 for the navel crop by first coming up with an average cost of producing, packing and shipping of $1,785 per acre. That was translated to an $8.76 per carton cost of production. The CCGA board meets weekly during the season to evaluate crop sizes and prices and determine if it should call a pro-rate or a voluntary reduction of shipments.
George explained that if the average price came with $1 of that cost, a voluntary pro-rate was called. If prices hit that “trigger” price, the pro-rate would be “mandatory.” It had not reached that point by early March this season.
CCGA was not easy to form. There was reluctance on many fronts, but membership has reached almost 90 percent of the state's 4,000 citrus growers, according to George. Most of major marketers also signed on.
The 2003-04 navel crop made a perfect fit for the launch of the new CCGA, but a good start from the blocks is met by more challenges before getting to the finish line.
The challenges ahead are many, according to George.
These include the year when crop elimination is triggered by a big, high quality crop.
The tenet to CCGA is an increased FOB for growers. When that big crop comes, and it will, a 20 percent crop elimination can mean different things to different growers.
For some that could be a 30 percent to 50 percent smaller crop a low-producing heavy ground versus a higher yielding orchard dropping 20 percent of its crop. The challenge then will be to make all growers whole with a profitable FOB crop.
“What does voluntary mean?” challenged George. Even in good years, the definition in 2003-04 meant everything from a strict adherence to CCGA pro-rate voluntary recommendations to “it is voluntary so I can do what I want.”
It will continue building trust between growers, packers and marketers that was formed this year in an industry that has a recent history of sharp division of the federal marketing order.
And, perhaps the biggest challenge will be possibly investing in a generic promotion campaign financed by CCGA members. Sunkist is famous for its trademark promotions and the question is will a generic program financed by all growers perhaps bolster that to overall increased consumption.
Navel growers have tasted success in 2003-04 for the first season in a long time. One grower said a good quality crop was returning $100 per bin to growers from the packing house on yields of three to four bins per acre.
The more immediate challenge for CCGA from here on is the 2004 Valencia crop, which has been a train wreck for several years.
However, for now California citrus growers are humming “Happy Days Are Here Again.”