Canners are struggling, too
Pear processors are facing higher costs and competition from imports.
|Canners say they recognize that growers aren't getting rich on the prices they pay for processing pears, but they're struggling to stay in business also because of a shrinking market and rising costs. |
Sue Root, head of operations for Truitt Brothers of Salem, Oregon, said Pacific Northwest canners used to process around 160,000 to 170,000 tons of pears annually. Since China began exporting large volumes of pears to the United States about six years ago, the volume has dropped to 140,000 tons, leaving canners with excess capacity but the same overheads.
Canned pear imports to the United States totaled more than 33,000 tons in 2007, according to the U.S. International Trade Commission. Most of those came from China. However, Root does not think Chinese pears will totally displace Northwest pears because the people who buy Chinese pears are buying on price. Chinese canned pears are snow pears, which are a different variety from Bartlett. People who buy Northwest pears prefer the shape, flavor, and color of Bartlett pears, she said.
"I think there's a very large need for what we're doing, but maybe it's not in balance with the supply."
Canners would love to be operating at capacity, but with static demand for canned pears, all they could do is compete for a bigger slice of the pie by taking each other's customers, she said. Ultimately, all that does is lead to price undercutting and a less profitable situation for the industry. What's needed is consolidation, she suggested.
The canneries have been responding to lower demand for canned pears by diversifying into other types of products. Truitt Brothers, for example, processes cherries, Italian plums, and green beans, and produces full meals in plastic trays. Root said that, surprisingly, the cost of metal has increased much faster than the price of plastic. One of its new products is a one-gallon plastic container of processed pears designed for institutional users.
"It's just like the Red Delicious story," she said. "If we were still just a canner and didn't have something else to help spread the overhead and pay the bills, we would not be in business. We're trying to keep our equipment and our people, and trying to survive."
Though the company could not survive on the pear business alone, pear processing is still important to the company and is where its roots are, she said. Canners recognize that they need growers to supply pears just as they need customers for the final product. The price structure is designed to encourage growers to supply what the canneries need.
"We do know our growers are hurting and we do know nobody's going to get rich on these prices, nor are we getting rich on the Bartlett business either."
Root said that the costs of inputs, such as corn syrup and metal for cans, have increased steeply in the last couple of years. "Is that different from the growers? Absolutely not. To compare pain to pain, they can match us or beat us, with their fertilizer costs. We're both in a world of hurt.
"I don't have a positive message that could go out to anyone, except to say that as an industry something needs to change," she added.
She does not think a return to a free-market system for buying pears is the answer. Before the Washington-Oregon Canning Pear Association was formed to negotiate prices, canners would send out buyers, who might pay a certain price to one grower and a different price to their neighbor.
"There was no consistency," she said. "What we like is being able to look all our growers in the eyes and say, 'We didn't give a better deal to the guy across the street.'"
Pear prices set
Pacific Northwest pear canners have agreed to pay a base price of $240 per ton for 2008 crop No. 1 grade processor pears, following negotiations with the Washington-Oregon Canning Pear Association. The 2008 price will be adjusted by $1 for each thousand tons of Northwest pears actually processed above or below the 140,000-ton level, with a maximum adjustment of $10 per ton either up or down.
The price for No. 1A grade pears (2 5⁄8 inches and larger) will be 5 percent above the No. 1 price, and the price for No. 2 grade will be 62 percent of the No. 1 price. For culls, the price is $1 per ton.
The two-year agreement sets the base price for the 2009 season at $247 per ton, with the base tonnage being the three-year average processed volume.
The association negotiates with three Northwest canners: Truitt Bros., Inc. of Salem, Oregon; Del Monte in Yakima, Washington; and Northwest Packing Company of Vancouver, Washington. The other two Washington processors, Snokist and Independent Food Processors, pool their growers' fruit and do not participate in the negotiations.
Growers pay an assessment of $6.25 a ton to the Pacific Northwest Canned Pear Service and $1 a ton to the Canning Pear Association. —G. Warner