Pear prices too low, say growers
Both growers and canners are being squeezed by rising costs.
Don Weippert says processing pears are not profitable for growers unless they have very high yields.
The negotiated base price of $240 a ton for Pacific Northwest processor pears for this season was met with dismay by growers, who say the current system for negotiating prices isn't working.
The Washington-Oregon Canning Pear Association has been negotiating the price on behalf of growers since the 1950s, according to Manager Jay Grandy.
While prices for Bartletts processed by Northwest canners have barely changed in the last 20 years, pear production costs have risen dramatically, growers say.
"I just bought spray this morning for $700 a gallon," said Ray Wolverton, a pear grower at Buena, Washington.
He recalled that in the late 1980s and early 1990s, growing processing pears was a relatively easy and profitable proposition. Pear prices were similar to today's, but diesel cost $1 a gallon, sprays were $300 for the season, and a new tractor could be had for $10,000.
Wolverton figures that the average pear orchard in Washington probably yields about 20 tons per acre of pears for processing. Assuming that about 88 percent of the crop is number-one grade, the return would be about $4,500 per acre, which for most growers would not be profitable. And that's not taking into account the years when the crop might be harmed by frost or hail.
Until a few years ago, the price was negotiated annually. Now, price agreements are for multiple years. This year's $240 base price is a 4.3 percent increase from last year, which does not even cover inflation, Wolverton said. The 2009 base price has been set at $247, an increase of less than 3 percent from this year.
With costs rising out of control, Wolverton said he doesn't like the idea of locking in on the processing price for two years. "I might be paying $10 a gallon for diesel next year. Picking costs alone will take away that $7 a ton increase.
"If they can't pay a price where pear growers can make money, then it's time for this game to go away," he said. "Right now, the canners can come up with a negotiated price and it sits on the table for the whole industry, and I think the people that are negotiating it aren't farmers, and the few that are growers are intimidated by the processors. How we're doing this is purely a rubber stamp of what the processors are willing to do."
Grandy said the price is arrived at through a series of offers and counter offers made by canners and the association. Growers would like the price to be higher, and processors want it lower. Canners are facing increasing costs for inputs, labor, and transportation, as well as competition in the market from cheaper imports.
"If the processors don't stay in business, there's a lot of Bartletts that won't have a home," he said.
Wolverton said labor is the farmer's single biggest input cost. The minimum wage in Washington is adjusted annually based on the federal consumer price index for urban wage earners, and he'd like to see the processing pear price tied to the same economic indicator.
Don Weippert, a grower at Sunnyside, Washington, said it's doubtful that growers can produce pears purely for canning at the current prices unless they have exceptionally high yields. "At 20 tons per acre, you're not making money on pears any more," he said.
He believes that if the price were set on a free-market system, it would increase competition so that producers of good pears would get higher prices, and producers of low-quality pears would get lower prices. "It would force out the blocks that should come out and make the ones that are profitable more profitable," he said.
John Douglas of Pasco, who joined the association board last year, said he'd like to see the association dissolved and allow supply and demand to set the prices.
"If each canner had to go out and negotiate with growers and warehouses, it would create some price competition between canners," he said. "Right now, there isn't any because they know the end results."
Brent Milne, who represents packer McDougall and Sons of Wenatchee, Washington, on the association's board, said that before the negotiations, his company supplied information to the association showing that growers needed at least $275 a ton just to keep up with inflation. However, he thinks it might be difficult to obtain better prices, even with a free-market system, because consumer demand for canned pears is dropping.
Still, growers shouldn't be giving their pears away, he said. "There's product still being produced that needs to go someplace, and we need to get the most value we possibly can out of it."
Grandy said the same three canners buy cherries on the open market, and typically, one processor announces a price it intends to pay, and the other canners follow suit so that all growers get the same price. He guesses that the same would happen with pears.
Steve Sundquist, a board member, thinks the way it is done currently is the most effective way to negotiate the price because both the growers and the canners are facing higher costs. "I think the Canning Pear Association did hit a pretty happy medium between the needs of the canners and the needs of the growers," he said. "Our costs have gone up; the canners' costs have gone up likewise."
Sundquist thinks a free-market system would result in less stability. Knowing what the price will be for the following season allows growers to plan ahead and use cultural practices to grow fresh pears if they want to target that market instead.
Ron Wilcox, a pear grower and former chair of the Washington-Oregon Canning Pear Association, now works as field representative for Truitt Brothers and said he can see both sides of the issue. Now that he knows the cannery side of the business, he doubts that a free-market system could be successful.
One reason is that all five canneries are putting up virtually the same product of the same quality, so it's difficult to see how one cannery could pay a higher price than another. Another is that canned pears can be stored from year to year.
Wilcox grows pears specifically for processing and said he makes it pay by growing high tonnage. "It's not a get-rich situation, but it does put the bread and butter on the table," he said.
Wilcox said he's spending a lot nowadays on fuel and sprays, but knowing what the price will be for two years means he can tell if he's putting too much money into growing the crop.