NFAPP's Newsletter February 1996

Featured Articles :

"Hot Potato Issues", by Albert Kagan
Topic: Canadian Potato Trade with U.S.

"Legislative Update.....Farm Bill", by Pamela Mischen
Topic: Farm Bill 1996

"Market Watch.....Orange Market Update", by Timothy Richards
Topic: The U.S. Orange Market

Fresh potato shipments from Prince Edward Island (PEI) and New Brunswick (NB) continue to alarm the US potato industry. The fact that potato shipments from PEI and NB have increased to northern Maine shipping points (Houlton and Calais) is of concern to Maine growers, who persist in asking for US governmental intervention. This pattern of potato imports into the US from PEI and NB has its origin in the early 1980s.

Viewing Maine, New Brunswick, and Prince Edward Island as a potato growing region will help explain current import/export patterns. This potato growing region which has similar soil, (PEI has a sandy soil that has no rocks), climatic and yield characteristics typically plants about 220,000 acres per year. The number of acres planted in this region has been fairly constant since 1980.
Within the region Maine was the dominant producer with 50% of the total acres planted in 1980. Since 1980 Maine's share of the planted acres has dropped to less than 37%. PEI's acreage change has been dramatic going from about 26% of the total planted in 1980 to almost 45% in 1995. Current speculation is that PEI acreage will continue to increase in the near term.

This pattern of stable regional production with intra-regional shifts appears to be continuing beyond 1995 as expanded processing facilities come on line. PEI is the recipient of plant capacity upgrades by Cavendish Farms and commensurate plant modifications by McCains.

Correspondingly, the issue of import expansion of fresh potatoes into the US from NB and PEI appears to impact the fresh market which is approximately 45% of Maine's production. The import season ranges from October to May.

At certain times in the marketing year Maine potatoes are imported into Canada to fill uncommitted production runs at the processing plants. The bringing of potatoes from Maine to NB or PEI is a cumbersome process that involves Provincial Marketing Board approvals and the granting of specific easements that are both tonnage and time particular. In essence the Provincial Marketing Boards must first be contacted in an effort to use all available Canadian potato stocks before an easement will be granted for Maine (US) potatoes.

Maine Potato growers further contend that Canadian trade practices violate GATT rules, in particular the prohibition of bulk shipments of fresh potatoes to Canada (without an easement). Container size limitations on processed potato products and the prohibition on consignment sales all tend to position Maine growers at a competitive disadvantage. These and other trade practices will need to be resolved so that an orderly marketing environment can be facilitated across this region that does not continue to adversely impact upon Maine potato growers.

The Senate passed its version of the Farm Bill on February 8, 1996. Consistent with Freedom to Farm proposals in the House, the Senate bill will allow growers to be more flexible in the crops planted. The bill guarantees seven of years of declining payments that are not tied to the crop under production. Unlike earlier Senate versions however, fruit and vegetable plantings will not be allowed on contract acres. This includes those acres which are currently double-cropped with a 'program' crop and a vegetable crop.

The House is expected to take up its version of the Farm Bill in late February or early March. Like the Senate version it also protects fruit and vegetable growers by prohibiting planting of fruits and vegetables on contract acres with the exception of any region that has a history of double-cropping.

Funding for the Market Promotion Program in the Senate bill was limited by an amendment proposed by Sen. Bryan, Sen. Kerrey, Sen. Bumpers, and Sen. Reid to $70 million per year. This amendment also limits cost-share assistance to non-foreign small businesses and cooperatives. The House bill limits funding to $100 million per year and does not exclude foreign or non-small business from cost-share assistance.

Also added by an amendment offered by Sen. Leahy is a check-off program for kiwi fruit. The funds will be used for research and promotion activities. Both bills also contain a provision which allows the Secretary to use fees over $100 million collected by Ag Quarantine Inspection to be used for increased inspections.

Despite expectations to the contrary, the recent cold weather in Florida does not seem to be causing a sustained increase in prices. While preliminary estimates of a 10% reduction in the current year's crop led to an immediate run up in the FCOJ futures price, continuing reports of greater than expected production in Brazil (952,000 metric tonnes) place an effective ceiling on any near term price movements. Although a January 24 Florida Dept. of Citrus report shows Brazilian FCOJ exports running 21% below last year's pace, inventories of some 532,000 metric tonnes represent a significant overhang in the market. If the price moves above $1.45/lb, Florida officials believe the Brazilians will move this inventory into the U.S. market.

A broader look at the 1995-96 U.S. crop provides little more optimism for higher orange prices. The mid-January USDA crop production report places U.S. production of all oranges at some 11.9 million tons - a 2% upward revision from the last forecast. Total orange production is forecast at 3% greater than last year, which would represent a record crop.
This average masks differing projections for each producing region. Only 1% of this increase, and probably less once the full extent of the frost damage becomes known, represents Florida production. California, on the other hand, is expected to bring in record amounts of both Navels and Valencias. Production of California Navels is expected to be 14% higher than last year, and Valencias 8% higher. Fortunately, export volumes (reported in mid-January) of fresh oranges were running almost 20% greater than last year, so the expected reduction in fresh prices has been limited to 12%. Currently, FOBs for California 72s are in the $6.50 to $8.00 range.

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