California Raisins raw material field pricing may be decided via arbitration!!
The California RBA has proposed a growers price of $2,000 per ton for this year, this represents an increase of $225 per ton more than last year suggesting a 10 to 12 cents per Lb increase for packed product resulting in a nominal price in the region of $1.20 to $1.25 per Lb FOB. The packers counter proposal was to stick with last years prices. This was rejected by the RBA on behalf of the growers.
Having failed to reach a compromise we expect the matter will be sent to arbitration, with a Federal Judge deciding the growers price for the 2015 harvest. The last time this occurred the price was not set until well over half way through the season, with packers unaware of their raw material input price for more than half of their years sales until months after they had been shipped. This caused packers to take a cautious approach to pricing, and in the medium term prices may increase as a result.
The California raisin industry is at a critical crossroads, it is trying to balance paying higher prices to growers to stop them from switching to more profitable tree nuts with keeping California competitive in world markets, with the backdrop of the ever worsening drought.
The shorter crop expected from Turkey this year, and increasing domestic consumption in China of their own material may give them some breathing space. Turkish prices already increased close to Californian prices, with more price increases likely as packers stocks diminish and they are forced to face Turkish growers higher price expectations based on the small crop.
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