If local grape farmers thought this winter would deal a harsh blow to their bottom lines, it turns out that last year's abundant crop may do the same. Add in the decision of ConAgra to close its Dunkirk and Fredonia Carriage House facilities, and some grape farmers may be in a bit of a jam when it comes to their finances.
While ConAgra is pulling out of the local grape market entirely, Cott Corp. is still working with local growers.
According to Daniel Hare, senior director of communication and external relations for ConAgra, ConAgra's growers were notified in January their contracts were ending.
OBSERVER file photo
Not only has ConAgra ended its contract with many area grape farmers, some will be unable to sell grapes this year to Cott, because of the surplus that was generated in 2013.
"We informed approximately 100 grape growers of our plans as soon as we could so they had as much time as possible to make adjustments to their plans for the year," Hare explained.
Robert Meyer, the senior director of investor relations and tax for Cott, said there was a 9.6 percent drop in total grape juice volumes nationally in 2013.
"Cott is matching its grape purchases with the current demand for grape products. Cott is continuing to work with local growers," Meyer added. "Overall, Cott's juice business is healthy, with other products growth offsetting the decline in grape. The Dunkirk facility remains an important and successful plant in Cott's operations."
That is good news to the employees of Cott in Dunkirk, who number more than 480, according to figures from the Chamber of Commerce.
Cott sent out letters in early February to its growers, notifying them of the issue with too much grape juice being available. A copy of the letter, signed by Randy Bell, senior director of food processing and grower relations, was provided to the OBSERVER by a recipient.
"As communicated over the summer, grape juice consumption has declined as more beverage choices continue to be made available to consumers. Cott has tried to offset this decline through new grape offerings and promotions, but unfortunately the reality is that we have a surplus of grape juice. The large crop in 2013 has left us no choice but to reduce our 2014 grape contracted volume," Bell wrote. "Cott values the diversity of having growers in the different regions of the Lake Erie grape growing region. As we selected contracts to renew for 2014, maintaining this diversity was the driving force in reducing our expected intake to match our forecasted demand. We understand that many outstanding grape farmers will have to find a different market for their crop in 2014. This business decision was very difficult to make for the Cott Grower Relations Team.
"Pursuant to Section 7 of the agreement, this letter serves as our written notice that we are terminating the agreement in its entirety. As such, we will not be taking delivery of your Concord grapes for the 2014 crop year, or any future crop years unless and until a new agreement by mutual consent is reached. We would like to thank you for your partnership over all these years and we wish you the best of luck in your future harvests."
Kevin Martin is a business management educator with the Lake Erie Regional Grape Program at the Cornell Lake Erie Research and Extension Laboratory.
According to his figures, Carriage House used more than 10,000 tons of grapes.
"As of right now those people that relied on those contracts don't have contracts and because of their recent surplus that Cott was referring to, a lot of them will not have contracts for this upcoming harvest, whether or not they continue to make jams or jellies," Martin added. "Local processors really do want to sell some of their surplus to them and hope that market keeps going, but even if they do, they won't need product directly from growers until the 2015 harvest, some of them."
Martin said it is a normal market cycle in Concord juice.
"Although the growers haven't been receiving a particularly high price over the last five or six years it has been extraordinarily high on the bulk juice market. Most of the processors were anticipating a decline at some point because they did see commodity prices like bulk Concord juice, did seem unsustainably high and we're starting to see those affects," he explained. "The record crop that we saw last year was timed perfectly with declining prices in other indirect commodities. We compete indirectly with corn syrup, apple juice, orange juice. With the exception of orange juice, all those prices have fallen considerably."
Where the market for grape juice is headed in the next few years is another question. Martin said some farms may be in danger due to a lack of a market.
"I think right now what you're looking at is the haves and have-nots, so either you have a market and you're in a fairly good position, at least right now, or you don't. ... It's down significantly in the last 12 months. I would say it's down by 40 percent in terms of price, but that being said there's some growers who still have a very stable market. Growers who still have contracts with Cott or still have contracts with other processors," Martin stated. "But the growers who don't have a contract are certainly in a fairly perilous state. Some of them have had the opportunity to build up some equity in their farms, but all of that is certainly at a substantial risk when there is at least temporary surplus of acreage, there are not a lot of good options for them. ... By and large they have affected a lot of growers that went from say, 100 percent contract for four or five acres with Cott or Carriage House, and that's all they had. And now they have nothing."
Some grape farmers will still be set, as they are members of National Grape, a cooperative that owns Welch's processing. Martin said the coop was looking for additional acres.
"They fulfilled all of those needs basically overnight when the Carriage House cancellation letter went out. In the short term they were looking to grow and that did help with some of this market, but over the long term their acreage and tonnage has been fairly flat."
Martin added overall acreage in Chautauqua County of the Lake Erie regions has remained basically flat since the early 1980s.