Allied chief advises struggling grape concentrate growers

Talk the price up, not down, in the coffee shop. Talk to your lender and remember he needs your business in bad times as well as good. Don't be afraid to make raisins if the wine concentrate price is less than you expect. If you choose to lay raisins, tell your concentrate buyer.

That was marketing advice to Thompson Seedless growers deciding whether to make raisins or “go green” for concentrate from Nat DiBuduo, president of Allied Grape Growers, at a recent meeting in Selma sponsored by the California Association of Winegrape Growers.

Against the double threat of escalating costs and declining revenue, growers are struggling to achieve economic sustainability with something more than the $125 to $150 per ton on an eight-ton crop, or enough to cover their costs.

Using an estimated 2001 crush of 3.25 million tons, DiBuduo said an estimated 500,000 tons, of which Thompson Seedless was nearly half, went for concentrate. The 2001 price for raisin varieties was $75 to $80, down sharply from the $200 of 1999.

“You, your fathers, and your grandfathers didn't get into this business just to survive, and growers have a right, as well as processors and end users, to make a profit. All three segments need to work together for an equitable pricing system.”

Concentrate processors, he said, need to realize at least $5 to $6, which is more than they have been receiving, to stay in business. Competition for concentrate from California grapes is global against a backdrop of the strong dollar. The domestic apple and pear industries also compete with their concentrate products.

Joe Ciatti, whose international brokerage company in San Rafael annually deals in 110 million gallons of wine, juice, concentrate, and alcohol, chaired a panel on the world market and outlook for concentrate.

Ciatti said he realized growers cannot survive on $75 a ton for their grapes. He said grape concentrate prices went to about $4 a gallon in the late summer of 2001 but have since returned to the $4.50 to $4.75 range.

Hurt grape market

“So suppliers have sold their product and the market is picking up. It hurt the grape market because the concentrate price was at the bottom when the crush started. That was the driving force for keeping grape prices so low.”

Andy Bivona, a concentrate specialist with the Joseph W. Ciatti Co., said concentrate from California grapes is preferred but the price typically has been higher than imports.

Apple concentrate is a predominant substitute for grape concentrate and has the advantage of being easily reconstituted for a considerable savings. It has reached a price level that is stable.

Most contracts for concentrate are made in the fall during the California grape crush, Bivona said, so the present situation lends itself toward increasing prices due to a rather short supply.

“The overall concern of buyers today gives support to the argument that they want to buy product from the U.S. Imports will play a role, but California product is preferred as something they can depend on.”

Another Ciatti specialist, Brad Miller, said imports have a place in the concentrate market, which has an estimated demand for 28 million to 30 million gallons.

The typical production of grape concentrate in California is 25 million gallons. California wineries may use about 3 million gallons for their need for sweeteners, and the export market claims 2 million to 3 million gallons. Some 20 million to 22 million gallons is sold to companies like Welch's, Tropicana, Minute Maid, and others, Miller said.

Thus a shortage of 6 million to 9 million gallons has to be made up from imports.

Import advantage

Imports are attractive because of price, often 50 cents a gallon cheaper than the marketplace price for California product. Imports are available even with a 67-cent-per-gallon duty.

For sweetener users, most of whom are situated in the northeastern U.S., freight costs, at 50 cents to 75 cents per gallon from the west coast, work against the California product.

Another reason is special needs, such as the intense color of Rubired concentrate desired by certain processors, when supplies are not available from California.

Import sources want to “keep their foot in the door” with some product in U.S. markets, while U.S. processors maintain some import business as protection in pricing negotiations with domestic sources.

As a result of globalization, off-shore plants of American companies buy product from nearby sources instead of paying to ship it from the U.S.

Miller also said that for all the price attraction of imported concentrate, it still does not travel well. If not handled properly, it can readily crystallize, solidify or develop some other quality issue.

Another disadvantage to imported concentrate is it may not be made with the same attention to sulfur dioxide levels required of California product.

Panelist Barry Kriebel, president of Sun-Maid Growers of California, said California trade will benefit from China's entry into the World Trade Organization.

Essential for global trade, however, will be quality, price, reliability and service.

“If you don't have all four, your supply goes to the next source in the marketplace and there are plenty of people selling out there,” he said.

Turning to concentrate, Kriebel said, after 25 years in the business, he accepts Thompson Seedless growers shifting from concentrate to raisins and back again as a reality.

But, he said, “These markets are fundamentally different. At the end of the day, the juice price should not drive the raisin price and the raisin price should not drive the juice price. These markets really have nothing to do with each other, except for the overall demand in any one season.”

Fred Kilian, a Yakima, Wash. grower and chairman of the board of Welch Foods, Inc., said his company produces $700 million in fruit juice and spread products.

In red and white grape concentrate, he said Welch's looks for consistent quality, on-time deliveries, and accurate invoices.

“And we want concentrate to be captan-free and have low sulfur dioxide of less than 15 parts per million.”

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