USDA marketing orders are a common tool in agriculture. They help determine a minimum price for farmers for their products such as dairy and produce. But certain stipulations of marketing orders pertaining to tart cherries have set off a firestorm in social media.
You may have seen a picture posted online by Traverse City, Mich., tart cherry grower, Marc Santucci, after dumping a percentage of his crop on the ground to rot, blaming the industry’s marketing order and imports coming into the United States.
Growers say the tart cherry industry is complicated. The crop is not like sweet cherries where you can eat them by the handful. They’re even regulated differently. Tart cherries are commonly used for pies or juice. Time is important. It’s a very perishable crop.
What began as a massive pile of 1,000 lbs. is now just a thin layer of red, but the impact of Santucci’s online post is still shaking the industry.
“If you really think through what’s going on, I believe everyone will come to the same conclusion,” he says.
Not every producer is pleased with the attention.
“It’s created mistrust to consumers about the tart cherry industry,” says Cedar, Mich., grower Ben LaCross. “I’m a grower myself. I want to be able to harvest everything I grow, but I also look at the long-term health of the industry and viability of the industry.”
This taps into an underlying disagreement around the industry’s rules for this crop. Tart cherry growers have their own federal marketing order made up of their own producers. The purpose is to stabilize returns and make sure supplies don’t flood the marketplace.
“It’s so we don’t pack an extreme amount of inventory one year and depress market prices the next year,” LaCross says. “We know what the supply and demand has been for the past 20 years.”
That’s why the processor can’t accept all supplies under the order during years when yield or production increases. This year is one of those times. USDA says production jumped nearly 40% this year.
Processors are keeping just 29% of what it’s getting from the North American growers based on a surplus of production. That’s this year’s percentage of supply against demand.
“I understand we cannot pack an excess hundred million pounds of fruit in 2016 when we know in 2017, we can only sell 250 million pounds,” LaCross says. “What would that do to prices next year? That would tank them.”
Tart Cherry Debate
Growers don’t have to dispose the crop every year. Santucci says this is the first year he’s dumped his crop since 2009. The order accepted all of his cherries the last six years.
LaCross says, “If you didn’t like the marketing order this year, did you like it last year when you were allowed to harvest all of your crop?”
“I think people were sold on this marketing order being the panacea and I don’t think it is,” says Santucci.
Santucci says it’s not just U.S. Production rules that bother him. The United States is importing over 200 Million pounds of tart cherries into the U.S. Market from countries in Eastern Europe and Turkey.
“When I learned that forty percent of our consumption was imported cherries and we were dumping cherries on the ground to try to prop of the price of cherries, I felt like the little boy from Holland putting our finger in the dike because if you don’t control the whole market, you don’t control any of the market,” says Santucci.
Santucci says the Industry should focus on the domestic market first.
“The first thing we have to do is sell our cherries at a price that’s going to keep the imports out. Initially, it may be a few years at a lower price but now we’re selling more cherries,” says Santucci.
He’s no stranger to global trade. He was once an Economist for the Office of the United States Trade Representative. He also worked as the Director of the Office of International Development for the state of Michigan.
“If Turkey is able to provide a percentage of our demand at a competitive price, I believe I have to live with that and I’m willing to live with that,” says Santucci.
“It’s a challenge for our industry, but we need to look at the factors behind the imports. Those are extremely low-cost, Government supported imports that are coming into the industrial market. If we were to go and try to compete against those imports on price, there would be nothing left for the farmer. There would be no margin left over for the farmer,” says LaCross.
LaCross says that would be the worse for farmers than having to dump once in a while. But someone who spent his entire life in the Industry and is involved at every level, he recognizes the import situation needs to be addressed.
“Our industry has just started to get its head around the import problem over the last twelve months. I’m very confident we can make an impact on the import situation,” says LaCross.
In an industry that includes life-long farmers...
“Some of my first memories were helping my parents shake and harvest fruit,” says LaCross.
And ‘new’ producers finding their way in...
“I can’t call myself a farmer in a sense of spending my life in the dirt, but I do consider myself a farmer now,” says Santucci.
Both agree more discussion is needed. It’s a process already underway thanks to the spoils of a bumper year.
The Federal Marketing Order makes sure growers receive an income. LaCross says times were tough without it. He remembers when prices were below the cost of production. LaCross says the order is creating stability in the market. Santucci says he wasn’t in the cherry industry before the order.
Processors and growers do have options besides dumping the cherries. That’s why some growers are upset at the post. They can take the excess and sell it to the export market, use for new product development, research or donate it. The processor could store the crop for the future but the grower may not get paid for it.
Santucci says he’s just dumped his crop in the past but will look for other options another year.
The marketing order isn’t all or nothing. The industry has an opportunity to renew or discontinue the Federal Marketing Order every six years by holding a grower and handler referendum. To renew, more than fifty percent of the voters, a vote by a number or tonnage, must vote yes.