Following hearings in October, the Washington Apple Commission’s board was to decide whether to send out ballots asking Washington apple growers if they’re prepared to pay an –additional one-cent-per-box assessment.
The hearings were held in Yakima and Wenatchee on October 23 and 24, after this issue of the Good Fruit Grower went to press. If the board decides to go ahead, ballots will be mailed out at the end of November and will be due back on about December 17, according to commission President Dave Carlson.
The commission’s assessment rate has been 3.5 cents per 40-pound packed box since it downsized in 2003 following a class-action lawsuit. The proposal would allow the commission to collect up to one cent per box more, which would generate an additional $1 million on a 100-million-box fresh apple crop. However, any increase would be effective only for one year. The base assessment rate of 3.5 cents would not change.
One of the main functions of the Apple Commission is to conduct promotions in export markets, using federal Market Access Program dollars in addition to assessment revenue collected from growers. It also provides about 43 percent of the Northwest Horticultural Council’s total funding and 60 percent of the U.S. Apple Association’s assessment and membership income.
George Allan, former commission chair, said both those organizations are active in the political arena, and political issues are likely to impact the apple industry even more in the future. Concerning the export program, Allan said it makes sense for the industry to have a way to access the federal matching funds.
"We’re getting so much assistance from the U.S. Department of Agriculture on the export program, it appears to be a really good utilization of grower funds to enhance the program."
Allan noted that the domestic market for apples has been fairly flat. In large crop years, the ability to sell fruit on the export market is important for the successful marketing of the crop.
However, because the commission’s income is based on a rate per box, the commission’s budget will not keep pace with inflation, unless the crop size increases faster than inflation, Allan said. The declining value of the dollar and increasing travel costs have already impacted the commission’s overseas programs. Allan said the commission’s aim is just to maintain its programs, not do more.
The 3.5-cent assessment rate was established in the settlement of the lawsuit that stopped the commission from promoting apples on the domestic market.
Rick Plath, president of Washington Fruit and Produce Company, Yakima, a company that intervened in the lawsuit, said he thinks the Apple Commission is sufficiently funded to do the work that’s ahead of it. Individual shippers have successfully taken over many of the duties done by the Apple Commission on the domestic market. "It’s worked out great," he added.
Plath said the profitability of apple growers seems inversely related to the assessment rate. The rate was 25 cents per box from 1990 to 1997; 40 cents from 1998 to 2000; 25 cents in 2001 to 2002; and 3.5 from 2003 until the present.
"I’m wondering if the orchardists made more money when the assessment was 40 cents, 25 cents, or 3.5 cents," Plath said.
West Mathison, president of Stemilt Growers, Inc., Wenatchee, said what the commission is doing now seems well aligned with the industry’s needs. It provides a mechanism for obtaining federal export funds, and he felt it important to support political efforts, with all the immigration challenges that the industry is facing. "I think one penny like that is probably a penny well spent," he said.
Bruce Grim, vice president of the U.S. Apple Association, said all the efforts of the Apple Commission are vitally important, from its export program to its financial support of industry organizations. USApple’s three main functions are government affairs, education and nutrition, and crisis communication. Although USApple’s annual budget of $1.8 million is not likely to change greatly, it will be subject to inflationary pressures. The Apple Commission’s payments to USApple for the current year are budgeted at $920,000, a 2 percent increase over last year, and its dues to the Northwest Horticultural Council are $438,306, about 6 percent more than last season.
Grim suspects that when the Apple Commission’s assessment was set at 3.5 cents per box, thought was not given to how costs would increase over time. "I think the commission is doing the responsible thing, saying we want growers to keep their money as long as possible and if we don’t need the one cent, we will not take it."
For the referendum to pass, two-thirds of the growers voting must be in favor, and those in favor must represent two-thirds of the acreage of voting growers.
Carlson said if the referendum passes, the change would officially go into effect 60 days after the vote is certified, but the commission would not change the assessment partway through the season.
The board would need to consider the following factors before deciding whether to adjust the assessment rate for 2008-2009 or subsequent years:
- The projected crop size;
- The commission’s fixed costs;
- Increases in dues of organizations that the commission helps fund;
- The amount of matching funds required to qualify for MAP funds;
- The commission’s budgetary needs;
- A review of the commission’s –programs for the previous year; and
- Other changes in the industry that are outside the commission’s control.
The commission’s 2007-2008 budget is $7.6 million, based on a conservative estimate of 92 million packed boxes that would generate $3.2 million, plus $4.3 million in federal MAP funds. MAP funding has increased each year from $2.3 million in 2003-2004. The current budget also shows increases in interest income and income from the lease of office spaces at its Wenatchee headquarters.
On the expense side of the budget, $1.7 million is allocated to export activities. Export travel expenses are up 31 percent from the previous year, and contract fees for representatives in export markets are up 6 percent. Total staff salaries in the export department rose by 15 percent to $554,000, which Carlson said was partly due to Todd Fryhover, projects manager, switching from a part-time contract position to a full-time staff position this year. Administrative salaries increased by 23 percent, which he said was partly because of plans to hire an additional person for six months to train as a successor to Executive Assistant Laverne Bergstrom, who will retire in August 2008.