Peach growers work to maintain supply/demand balance

Cling peach growers Hartley Spycher, center, with his sons Kurt, left, and Eric, are hoping that California's canning peach acres remain in balance so that growers will be able to make a profit vs. being faced with oversupply, low prices and high input costs.

After experiencing years of ups and downs with oversupply, low prices and high production costs, California cling peach growers finally have their acreage in balance and want to keep it that way, by planting only what canners and processors will purchase.

"Don't plant without a contract," is the mantra repeated by the California Canning Peach Association, a cooperative established in 1922 for the bargaining and marketing of processing peaches, and whose leaders remember the lean years all too well.

"In 2005, the association had nearly 100 growers with unsold fruit and we were struggling to find our way out of an ongoing industry oversupply problem. We are entering 2009 in a vastly improved position," said California Canning Peach Association President and CEO Rich Hudgins. "We have a balanced supply/demand situation for the 2008-2009 marketing year and processor selling prices have advanced enough to offset cost increases and maintain profitability."

Hudgins said he is working closely with his grower-members and the association's processor customers to negotiate raw product pricing for the 2009 season. He estimates there will be 24,500 bearing acres in production this year, 400 fewer acres than the previous year.

Escalon peach grower Gary Darpinian, who chairs the association board, said reducing cling peach acreage has been a great benefit to the growers who have stayed in the peach business.

"Those of us who remain are survivors. Growers and processors must do our best to preserve the gains we have worked so hard to achieve," Darpinian said.

He added that in three years, cling peach growers have moved prices from what he called "an unsustainable level" in the $230 per ton range to a price of $321 per ton in 2008, a level that gives growers an opportunity to recover soaring input costs and encourages them to continue growing peaches.

But Hudgins noted that the increase in the price for peaches, along with decreasing prices for almonds and walnuts, means the cling peach sector is subject to losing this balance in supply and demand, should growers decide to plant more peach acres.

"We find ourselves dealing with renewed grower interest in planting peaches. However, there is no excess processing capacity left in our industry and processors have become much more disciplined in their contracting decisions," Hudgins said. "We have worked hard and assessed our members more than once for tree-pull programs in order to achieve our current balanced supply/demand position. While the world changes every day, we must do everything possible to moderate the pendulum swings so we can maintain profitability for both growers and processors."

The tree-pull programs reimbursed farmers who removed peach orchards.

Third-generation cling peach grower Eric Spycher, who farms with his father and brother in Ballico, said they have never planted anything without a contract and believe that growing peaches requires a 20-year investment during the life span of the tree.

"Many growers look at what has the best return for the moment. If the neighbor is making a dollar more, then they want to make the neighbor's extra dollar and that is pretty typical for agriculture," Spycher said. "It is really important that we remain in balance. There is talk that possibly 60,000 acres of almonds could be coming out of the ground this year because of the lack of water. A couple of decisions could change the whole peach industry and we don't want to screw it up."

Marty Adrian, who grows peaches, almonds and walnuts in Escalon, agreed.

"The peach price is much more attractive now than in past years, but it doesn't take a whole lot of people to plant too many acres out of contract to throw the supply and demand out of whack again," Adrian said. "Even though the cling industry is in really good shape right now, I have doubts as to what the long-term future will bring."

For that reason, Adrian said he's unsure if he will invest in replacing older, unproductive peach trees with new ones. He said the risks include finding enough experienced employees to work in the peaches—which are more intensive and require more management—and foreign competition.

"China can grow peaches and put them in a can so much cheaper than we can here. It seems like the Chinese market production is really increasing. It is just a feeling I have that I think we may be better off going to something that is a little less labor intensive," Adrian said.

For now, though, the prospects for peaches appear improved, and processing companies like Del Monte Foods, Seneca Foods and Pacific Coast Producers, which together purchase 95 percent of California's cling peaches, are promoting a wide variety of peach products to the consumer and food service markets.

Nils Lommerin, chief operating officer for Del Monte Foods, points out that today's changing consumer, retail and economic dynamics may offer new opportunities for the cling peach sector.

"Consumers are looking for a better value and they are looking for greater value per ounce," Lommerin said. "The other thing that is happening is people are eating more meals at home. For the first time in decades, the restaurant sales are declining. As a company, Del Monte needs to adapt to these changes and that is what we're doing."

Recognizing that nutrition and convenience are important to consumers, Del Monte Foods continues to offer California cling peaches in 4-ounce cups. Del Monte recently reported that sales of 4-ounce fruit cups have grown at a rate of 10 percent a year over the last three or four years.

He added that processed peaches could become a larger component of food purchases for value-oriented consumers, because peach products represent a good value and allow consumers to stretch their food dollars. Del Monte's latest value-added fruit products, and the marketing effort under way to support them, emphasize convenience and good health.

Steve Ott, vice president of food service at Seneca Foods, confirms that all consumers are trying to get the most for their money today, specifically school food service directors.

"Rising food costs—across nearly every product category—have significantly impacted school meal programs over the past year," Ott said. "School districts nationwide are challenged with continuing to provide nutritious meals without blowing their budgets, but nutrition should always outweigh cost. Fruit items, noted for their nutritional properties, are required in most of the meals served in the school lunch program and peaches are a very viable option."

To maintain and increase the demand for California cling peaches, Hudgins said, it is important that consumers be made aware of the health benefits of processed cling peaches, including vitamin A and vitamin E.

"We, as the processed fruit industry, are perceived as being less than nutritious because the fruit is seen as not coming straight from the farm. But the science says from a nutritional basis, canned and frozen fruit is nutritionally equivalent with the fresh items," Hudgins said. "We've all read the reports which point out that most people eat only one-third of the recommended daily servings of fruits and vegetables. Our challenge is to move the needle on consumption in as many ways and forms as makes sense for American consumers."

(Christine Souza is an assistant editor of Ag Alert. She may be contacted at csouza@cfbf.com.)

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