What’s Ahead for the Central California Grower December 9, 2004 Fresno, California Presented By By...
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Transcript of What’s Ahead for the Central California Grower December 9, 2004 Fresno, California Presented By By...
What’s Ahead for the Central California Grower
December 9, 2004Fresno, California
Presented By
By
Mechel S. Paggi & Fumiko YamazakiDirector, Center for Agricultural Business
CSU, Fresno
Grape Juice Concentrate Study Update*
* In collaboration with the Agricultural Issues Center, UC-Davis. Funding for the preparation of this presentation has been made available in part by the Governor’s Buy California Initiative, the California Department of Food and Agriculture (CDFA) and the U.S. Department of Agriculture (USDA). The content of this presentation does not necessarily reflect the views or policies of CDFA or USDA, nor does any mention of trade names, commercial products and organizations imply endorsement of them by CDFA or USDA.
Grape Juice Concentrate Industry ProfileToday’s Discussion
U.S. Grape Juice Concentrate Supply & Demand Industry Views Price Analysis
Cost of Production Studies Summary & Implications
Trends in U.S. Trade in Grape Juice ConcentrateTrends in U.S. Trade in Grape Juice ConcentrateCompetition in Domestic & Global MarketsCompetition in Domestic & Global Markets
Factors Effecting Global Competition: Exchange Rates and TariffsFactors Effecting Global Competition: Exchange Rates and TariffsIndustry Trends and Consumption PatternsIndustry Trends and Consumption Patterns
Red vs. White GJC marketsRed vs. White GJC marketsDemand Enhancement StrategiesDemand Enhancement Strategies
Ongoing Research Areas
(-)
* Prices are calendar year averageBasis and may be greater than crop yearaverages.
*
California Grape Juice Concentrate Market Supply and Demand
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
1999 2000 2001 2002 2003
Gallons
CA GJC Production (x40 gal per ton)
US GJC Imports (non-frozen, 68 Brix)
US GJC Exports (non-frozen, 68 Brix)
US Net Trade in GJC (non-frozen, 68 Brix)
Apparent US Consumption of GJC
Data on Carryover StocksNot available
*
Industry Views
• The Market for California Grape Juice Concentrate is Mature
•While overall demand for grape juice and other fruit juice concentrates
for use in production of beverages and foods may continue to increase
unless things change most of that increase will be captured by lower priced imports (grape, apple, pear, etc)
Thompson Seedless: Crush and Prices
125
7695
200
412
605
255
490
86
3.13
1.90
2.38
5
2.15
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004
Tons/$ per Ton
-
1.00
2.00
3.00
4.00
5.00
6.00
Dollars per Gallon (@40/gal)
Thompson Crush
Thompson Price per Ton
Thompson Price GJC Equv
(380)
(432)
(215)
(260)
Estiamted White GJC Prices
0
1
2
3
4
5
6
7
8
9
2000 2001 2002 2003 2004
Dollars per Gallon
CA White GJC Price fob
Thompson Price GJC Eq
Imported White GJC
Margin GJC to Grape Price
$5.50
As of June 04
Implied Price Based on Average Margin
$7.67
Avg. of $2.67
Apparent
Selected Juice Sweetner Market (AJC and GJC)
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
1999 2000 2001 2002 2003
Gallons
GJC and AJC
AJC Imports
GJC Apparent Consumption
0
50
100
150
200
250
300
350
Million Gallons
1996 1997 1998 1999 2000 2001 2002 2003
Year
Quantity Imports of U.S. Apple Juice Concentrate: 1996-2003
Argentina Chile China ROW
US White GJC 68 Bix vs. China AJC 70 Brix
0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004
dollars per gallon
Chinese Apple Juice
White CA GJC
Potential Returns from Grapes GrownFor Concentrate
NET RETURNS PER ACRE ABOVE OPERATING COSTThompson Seedless for Concentrate
PRICE YIELD (ton/acre)
$/ton 9 10 11 12 13 14 15
140 27 157 287 417 547 676 806
160 207 357 507 657 807 956 1,106
180 387 557 727 897 1,067 1,236 1,406
200 567 757 947 1,137 1,327 1,516 1,706
220 747 957 1,167 1,377 1,587 1,796 2,006
240 927 1,157 1,387 1,617 1,847 2,076 2,306
260 1,107 1,357 1,607 1,857 2,107 2,356 2,606
NET RETURNS PER ACRE ABOVE OPERATING + OTHER CASH COSTThompson Seedless for Concentrate
PRICE YIELD (ton/acre)
$/ton 9 10 11 12 13 14 15
140 -381 -251 -121 9 139 268 398
160 -201 -51 99 249 399 548 698
180 -21 149 319 489 659 828 998
200 159 349 539 729 919 1,108 1,298
220 339 549 759 969 1,179 1,388 1,598
240 519 749 979 1,209 1,439 1,668 1,898
260 699 949 1,199 1,449 1,699 1,948 2,198
NET RETURNS PER ACRE ABOVE TOTAL COSTThompson Seedless for Concentrate
PRICE YIELD (ton/acre)
$/ton 9 10 11 12 13 14 15
140 -1,541 -1,411 -1,281 -1,151 -1,021 -892 -762
160 -1,361 -1,211 -1,061 -911 -761 -612 -462
180 -1,181 -1,011 -841 -671 -501 -332 -162
200 -1,001 -811 -621 -431 -241 -52 138
220 -821 -611 -401 -191 19 228 438
240 -641 -411 -181 49 279 508 738
260 -461 -211 39 289 539 788 1,038
FOR CONCENTRATE NET RETURNS PER ACRE ABOVE OPERATING COSTS *
PRICE YIELD (ton/acre)
$/ton 9 10 11 12 13 14 15
140 -7 123 253 383 513 643 773
160 173 323 473 623 773 923 1,073
180 353 523 693 863 1,033 1,203 1,373
200 533 723 913 1,103 1,293 1,483 1,673
220 713 923 1,133 1,343 1,553 1,763 1,973
240 893 1,123 1,353 1,583 1,813 2,043 2,273
260 1,073 1,323 1,573 1,823 2,073 2,323 2,573
* UC-Davis cost and returns study based on no specific variety, data refers to spur pruned varieties, such as white varieties - French Colombard, Chenin Blanc - and the red varieties – Rubired, Royalty, Salvador.
FOR CONCENTRATE NET RETURN PER ACRE ABOVE OPERATING COST + CASH COST
PRICE YIELD (ton/acre)
$/ton 9 10 11 12 13 14 15
140 -419 -289 -159 -29 101 231 361
160 -239 -89 61 211 361 511 661
180 -59 111 281 451 621 791 961
200 121 311 501 691 881 1,071 1,261
220 301 511 721 931 1,141 1,351 1,561
240 481 711 941 1,171 1,401 1,631 1,861
260 661 911 1,161 1,411 1,661 1,911 2,161
FOR CONCENTRATE NET RETURNS PER ACRE ABOVE TOTAL COST
PRICE YIELD (ton/acre)
$/ton 9 10 11 12 13 14 15
140 -1,598 -1,468 -1,338 -1,208 -1,078 -948 -818
160 -1,418 -1,268 -1,118 -968 -818 -668 -518
180 -1,238 -1,068 -898 -728 -558 -388 -218
200 -1,058 -868 -678 -488 -298 -108 82
220 -878 -668 -458 -248 -38 172 382
240 -698 -468 -238 -8 222 452 682
260 -518 -268 -18 232 482 732 982
Implied price range Using Apparent Margin For White GJC
Observed Implied Grape Price Margin GJC Price 140/40 = $3.50 + $2.67* = $6.17 to 260/40 = $6.50 + $2.67 = $9.17
1999 2000 2001 2002 2003 2004
6.70 5.81 4.60 4.94 4.87 7.67 est.
•The California industry has an advantage in transportation arising from geographic proximity and increased constraints on imported products resulting from increased security measures applied to imports and ocean shipping conditions.
• The California industry should market more aggressively the positive attributes associated with the health and safety standards applied by the industry (traceability), relative to imports
•Grape juice concentrate will continue to be an industry that is needed by producers as an outlet for product and by wine companies and food & beverage companies as input into production, but GJC companies will have to adjust to increasing competitive pressures from other commodities and countries and increasing cost of doing business (regulatory compliance, energy cost, etc.)
•Opportunity exist, but a shift in attitude from marketing a commodity to marketing a product with specific and unique attributes may be important
•Examine ways to grow demand working with industry on development of Alternative uses and new products
Industry Views and Implications
Implications for Growers
• Grapes “for concentrate” success depends onbeing able to produce quality, high yields, at low cost
• Grapes for other uses that can find a home in theconcentrate market need the same
• Research and development on management practicesand varieties etc will be crucial to achieving and maintainingviable production systems
• Market fundamentals suggests GJC prices are not likely to increase significantly from current levels and are linked directly to what can be paid for grapes for concentrate
0
20
40
60
80
100
M
i
l
l
i
o
n
d
o
l
l
a
r
s
1996 1997 1998 1999 2000 2001 2002 2003
Year
U.S. Imports of Grape Juice Concentrates: 1996-2003
Argentina Chile Mexico Brazil Canada Italy France South Africa ROW
0
5
10
15M
i
l
l
i
o
n
G
a
l
l
o
n
s
,
6
8
B
r
i
x
1996 1997 1998 1999 2000 2001 2002 2003Year
U.S. Imports of Grape Concentrate: 1996-2003
Argentina Chile Brazil Mexico Canada Italy South Africa France ROW
0
0.5
1
1.5
2
2.5
M
il
li
on
G
al
lo
ns
,
68
Br
ix
1996 1997 1998 1999 2000 2001 2002 2003
Year
U.S. Exports of Grape Concentrate: 1996-2003
Canada Japan Korea South United Kingdom Hong Kong Taiwan Mexico Costa Rica Panama ROW
0
5
10
15
20
25
30
35
40
45
M
il
li
on
D
ol
la
rs
1996 1997 1998 1999 2000 2001 2002 2003
Year
Value of U.S. Exports of Grape Concentrate: 1996-2003
Canada Japan Korea South United Kingdom Mexico Taiwan Panama Hong Kong Costa Rica ROW