I’m glad to see your (and others) comments regarding Wal-Mart’s spurious claims of reducing FOB’s.
One issue that I didn’t see talked about is the fact that the biggest loser in the equation is the grower. While Wal-Mart’s costs are reduced (whether planned or merely a result of a larger crop), everyone else in the chain charges the same packing, storage, trucking and sales fees as before.
The resulting $1-2 drop in FOB is almost completely absorbed by the grower and would be the difference in a profitable (sustainable) crop. Wal-Mart’s claims to be cutting out the middle man to benefit the customer are misleading at best and will have serious negative impacts on the growing community.
— Rod Farrow
Lamont Fruit Farm, Inc
Waterport, New York
We appreciate Rod’s input and think he has an important point but think that the point needs to be more tightly focused.
The mere fact that Wal-Mart — or any other buyer — may pay less is not automatically money coming out of the grower’s hide. For example, if the cause is a larger crop, the grower will probably have lower costs of production per box of fruit and so a lower price may not be damaging.
In addition, although it is true that many costs are fixed — although sales agencies often work on a commission basis and trucking fluctuates, often in ways unrelated to the price of the fruit — this is the nature of the beast.
A grower can lose a lot of money or make a lot of money depending on markets; a packer charging a fixed fee per box minimizes his risk of losses but also caps his potential for gains.
Rod Farrow’s point, though, is to note the contradiction between Wal-Mart’s self-professed desire to emphasize sustainability and its willingness to put farmers into competition with one another on an auction basis.
This challenges sustainability on at least three levels:
First, one can never make enough specifications to know what short-cuts people will take if they have to do so. Desperate men do desperate things, and it is almost impossible to inspect them enough to make sure the land is treated well, food safety is robust, traceability ensured, workers not abused, etc. The specifications and contractual requirements are fine, but the key to making these things happen is dealing with prosperous organizations that generate sufficient cash flow to pay for these things.
If you are the biggest buyer and you beat an organization down on price, you better ask where the organization will pick up the margin. Of course, a de-facto auction system is specifically designed to avoid asking those questions, or at least to avoid having the close transparent relationship in which those questions would be honestly answered.
This inevitably leads to less sustainable behavior by vendors.
Second, sustainability relies heavily on a willingness to invest for the long term. Replacing all the light bulbs may pay for itself in three years, but if the facility is only needed for the Wal-Mart business and there is no assurance that one will have that business in three months, much less three years, then one will probably not make the investment.
Almost by definition, sustainability requires a long term view. A long term view is incompatible with a rolling auction system.
Third, if you want to be sustainable, you better decide what you want to sustain. One would think that sustaining an agricultural base and family farms would rank high up there. But, in fact, it doesn’t even seem to be a consideration.
That is really Rod Farrow’s point and, on that point, he is clearly correct.
Many thanks to Mr. Farrow for helping us jump start this important discussion.
First, let us start by saying that we here at the Coalition of Immokalee Workers are avid readers of your blog. You are consistently one of the most open-minded, thoughtful voices in the produce industry, and the industry as a whole is better for your work.
We are writing today in response to your recent post, “Big Ramifications For Industry as Florida Tomato Growers Exchange Agrees to Penny-a-Pound Program” (3/5/2010). It covers a lot of important ground for the future of the industry, and it’s safe to say that we agree with a good portion of what you had to say.
Your fundamental argument — that the produce industry is vulnerable on the issue of farm labor poverty and that, given the rising demand for sustainability, growers and their representatives ignore calls for real change at their own peril — is a very good one, and one Florida tomato industry leaders need to hear.
However, you do make one significant assertion at the conclusion of the post with which we strongly disagree, and we’d like the opportunity to share with you and your readers our thinking on that pivotal issue.
You write, “By raising the cost of Florida product, CIW actually is encouraging buyers to buy from other areas. This seems unlikely to help the workers in Florida.” As we see it, there are several problems with this argument:
First, there is the assumption that the increase of a penny per pound for Florida tomatoes would in fact drive buyers away from the state. Here, the good news is we don’t have to debate the outcome of a penny increase, because we’ve seen the results and there has been no impact on demand. Three times in recent years, the FTGE has imposed a penny-per-pound surcharge on all Florida tomatoes (for increased costs involving methyl bromide, pallets, and diesel fuel), and on all three occasions the market for Florida tomatoes has remained steady. As Elmer Mott, president of Arcadia-based Collier Tomato and Vegetable Distributors Inc, said about the 2002 methyl bromide surcharge in the pages of the Packer, “Buyers knew when the Florida tomato shippers decided to do something and it was unanimous, they didn’t have much choice anyway.”
But even if we assume that Mr. Mott was wrong, and past experience is of no use in predicting the impact of this particular penny-per-pound increase, we still disagree with the underlying assumption of your argument, i.e., that cost is the only basis on which Florida can successfully compete with the Mexican tomato industry. Cost is Mexico’s primary competitive advantage, not Florida’s (beyond the transportation cost advantage afforded by its natural proximity to the East Coast markets). A market strategy based solely on cost is a recipe for failure in the long-run, and a guarantee of continued labor controversy in the short-run. Instead, if Florida tomato growers — and therefore tomato harvesters — are to prosper, they must look to Florida’s own competitive advantage, and that is the promise of a socially responsible tomato, one produced under significantly higher environmental and labor standards. Right now those higher standards are undercut by the very issues you have pointed to repeatedly on your blog: farmworkers’ poverty-level incomes and the most outrageous incidents of abuse, like slavery, that highlight the need for improvement across the board in farm labor working conditions. But, today, Florida tomato growers can still seize the opportunity to improve farmworker wages and working conditions, to be the first on the market with a socially responsible product consumers can believe in. If they do, it will take Mexican producers decades to catch up. “Fresh and Fair Tomatoes from Florida” stand a far better chance to survive the challenges of today’s marketplace than do tomatoes competing with Mexico on price alone.
Which brings us to the third problem with your argument: Contrary to your assertion, our agreements in fact commit major retail food companies to purchase from Florida growers who meet those higher standards. Our members pick tomatoes. We have no interest in driving business away from Florida. That’s why our agreements are structured in a way to keep buyers here in Florida, and they’re the only purchasing agreements out there that do that. Current contracts based on price certainly don’t.
Finally, there’s the elephant in the room: Wal-Mart. As you and others have argued before, Wal-Mart represents the “unfunded mandate” school of sustainability: Buyers make new and costly demands for higher standards, and suppliers go bankrupt trying to meet them or lose business. Mike Stuart of the FFVA put it succinctly in the pages of your blog when, in May of last year, he wrote, “At the end of the day, how are these firms going to make significant investments in food safety, traceability, sustainability and other important industry initiatives if the profitability of the business is squeezed to the breaking point? How are they going to survive at all?”
You have rightly pointed out the limitations to this approach, and warned of its potentially destructive consequences. Yet you also criticize the Campaign for Fair Food precisely because it calls on buyers to share the costs of sustainability, because you fear doing that might scare buyers away from Florida all together. You can’t have it both ways. It seems to us disingenuous (to borrow your term…) to criticize buyers who demand unfunded higher standards and simultaneously knock workers who demand that those buyers help pay for the improved standards. We agree with you and Mike Stuart that the Wal-Mart model is not the way forward, and think that our campaign is a better approach for everyone, growers, workers, and retail companies alike.
While we may have our differences with other aspects of your post (we clearly don’t consider ourselves “extreme and disingenuous” and can only hope that one day you get to know us a bit better), all that can wait for another time. But we cannot leave unchallenged your suggestion that this campaign will lead to a loss of business for Florida tomato growers. It hasn’t and it won’t.
What is true is that the industry will, inevitably, continue to lose market share if it insists on fighting a losing battle with Mexico on price. In contrast, our campaign is designed to keep demand here in Florida, and for that demand to seek the highest standards of social responsibility and sustainability by rewarding growers who are willing to do the right thing. We’d like nothing more than to work with an industry committed to those higher standards, at which point our campaign would function as an ideal marketing tool for not only driving buyers to Florida, but keeping them
We appreciate the kind words regarding the Perishable Pundit; we try very hard to look at the facts of the matter and not just assume anyone’s position is without merit.
This being said, we don’t find CIW’s argument persuasive as to why raising the price of Florida tomatoes will not disadvantage Florida vis-a-vis other production areas and alternative eating options.
1) The examples of prior surcharges due to things such as diesel fuel strike us as different, not merely in degree but in kind from the imposition of a penny-a-pound fee on Florida-grown tomatoes. Costs related to pallets, methyl bromide and diesel fuel are not imposed on one production area and not another. Whether billed as a separate surcharge or negotiated in as part of the price, higher diesel prices, to take one example, affect all production areas and all products.
The distinctive nature of the CIW penny-a-pound scheme is that it applies to Florida tomatoes and ONLY Florida tomatoes.
Elmer Mott’s bravado aside, both trade buyers and consumers have choices, and increasing the price of one product over another surely influences those choices.
Indeed we would submit that the CIW’s own actions prove that CIW knows increasing the costs of Florida tomatoes makes them less competitive. After all, surely the CIW does not think that this penny a pound will be sufficient to elevate the lifestyles of workers to a level CIW thinks is satisfactory. So we only have to ask, why does CIW not propose a dime a pound or a dollar a pound or ten dollars a pound? The only possible answer is that CIW knows that price does matter and that this level of price increase would quickly and obviously cause a decline in demand for Florida tomatoes.
A penny a pound is sufficiently small that the impact on demand will be imperceptible — but that speaks only to the limitations of our perceptive abilities, not to a lack of impact. Economics 101 says if you tax something you get less of it, and if you subsidize something you get more of it. Economically, if we assume that the penny-a-pound scheme actually helps the workers — that is to say that it doesn’t depress wages from where they would have been by a penny-a-pound — then this scheme functions identically to a government-imposed penny-a-pound tax on Florida tomato production.
2) It is said that a definition of chutzpah” is when a child kills his parents and then pleads to the court for mercy on the grounds that he is an orphan… so it takes more than a little chutzpah for CIW to argue that the penny-a-pound scheme is desirable on the grounds that the alternative is “a guarantee of continue labor controversy” — a controversy mostly caused by CIW!
Although CIW’s assessment of market opportunities for Florida tomato growers is interesting, the market is pretty efficient in these matters and we have absolutely no reason to think CIW has special competency in this area. There do, of course, exist “fair trade” type programs and there is absolutely nothing stopping anyone from seizing the market opportunity that CIW describes and marketing a brand of tomatoes whose laborers are paid very well and promoting those tomatoes as “Fresh and Fair” as CIW suggests. Our experience with fair trade products, though, indicates that this is a niche product appealing to a certain sub-section of the population and that a much larger segment of the population looks to price, quality and service, perhaps preferring to directly control their charitable giving rather than giving through paying higher prices for groceries.
Once again, one is left with the distinct impression that this is more a talking point than an argument because if CIW’s executives really believed that there was this great market opportunity to pay higher wages and then market the product as more socially acceptable, they wouldn’t have to run penny-a-pound campaigns. They could start a tomato company and both provide the high quality jobs they yearn to see and make a fortune — to do with as they please. That they don’t do so and instead urge other people to risk the losses if their ideas are incorrect speaks volumes.
3) The agreements CIW has signed are not made public. Therefore we can’t judge to what degree they are effective or not in keeping people buying Florida tomatoes. In any case, the demand-suppressing effect of higher prices plays out in other ways. Right now because of the crop losses due to the freeze, if you go into Wendy’s there are big signs saying you won’t get tomatoes unless you specifically ask for them. Even if a company was obligated to buy all its tomatoes from Florida, higher prices lead to menu changes and the next new burger may have a slice of avocado on it rather than tomato.
4) We are not sure we see the connection between Wal-Mart and the penny-a-pound schemes. If they ever sign up and start paying the extra penny, you can be sure Wal-Mart will likely negotiate to make up that cost by paying less for the tomatoes. Indeed there is a real question as to whether the penny-a-pound scheme will actually increase worker take-home wages over the long term. If workers are willing to do a set amount of work for $100 dollars and an agreement is signed requiring employers to pay a bonus, over and above wages, of $10 for that type of work, over time the wage for that type of work is likely to gravitate to $90 because people are willing to do that job for $100, and $90 plus the mandatory $10 is the same thing.
There are distinctions that make a difference. CIW explains its position: Yet you also criticize the Campaign for Fair Food precisely because it calls on buyers to share the costs of sustainability, because you fear doing that might scare buyers away from Florida all together. You can’t have it both ways. It seems to us disingenuous (to borrow your term…) to criticize buyers who demand unfunded higher standards and simultaneously knock workers who demand that those buyers help pay for the improved standards.
We think we can have it both ways because the CIW is guilty of selective indignation. It has nothing to say about the treatment of workers in Mexico, the Dominican Republic, Cuba, California, or about workers who grow other crops or work in other industries, etc. It simply says that buyers should pay extra to help workers if, and only if, the buyers happen to buy Florida tomatoes. This may be politically astute to focus on one commodity and one place so as to maximize the pressure and minimize the costs to buyers — but it is not obvious that it actually helps any workers.
We bow to no one in our pursuit of social justice, but the laws of economics cannot be repealed, and actions, including raising prices, have consequences. We are not sure the penny-a-pound scheme will raise worker incomes because, as we said, labor markets adjust. If, however, they are effective and you raise the cost of labor you will encourage mechanization, alternative growing areas, consumption of alternative products and many other effects adverse to the interests of those looking for a job.
It would be nice if merely raising the wages of one’s workers was sufficient to entice consumer demand for high priced product, but as the Pundit Momma taught him as a very young boy:
If wishes were horses Beggars would ride: If turnips were watches I would wear one by my side.
Florida’s tomato growers are in a pickle; if they don’t create working conditions whereby they would be thrilled if NBC did a piece on Dateline, the industry is vulnerable, but if they do spend money to do this, the industry will not be competitive. However, CIW’s suggestion to market the crop as socially sustainable will appeal to only a small percentage of customers.
The only solution may be to do what the rest of society has done — mechanize and thus harvest tomatoes with fewer people who, because they are more productive, can get paid more. That may be the best possible solution, but the cost — shutting off needed jobs for people — is real. CIW’s ignoring the results of the policies it advocates is more than problematic.
Many thanks to the Coalition of Immokalee Workers for weighing in on this important issue.
Jim, while you are correct in having questions about Ellen’s commitment to this new diet, I have no question about this industry’s commitment to each other. I am so impressed with how Dan’l’s idea came to be a reality because so many of us have a strong desire to work together in spreading our positive messaging about our products.
I love the passion in this industry and how that passion comes together to do great things. We have already succeeded — a big thanks to everyone joining in this campaign and having fun with it.
Ellen’s commitment to the “sugar free” diet is indeed questionable.. She started off with much enthusiasm, posting a “video diary” of her “sugar free journey,” which she updated twice a day initially. By February 16th, just two weeks after she announced the program to big fanfare, she made what was, at the time of this writing, her last video diary post. So she hasn’t bothered to do an update in over a month.
Maybe she fell off the wagon and doesn’t want to deal with it… maybe she is busy with American Idol… or maybe she started getting real nutritional input from experts who pointed out that her message was incoherent and hostile to real science and so she decided to skip the whole matter. We certainly suspect it was the latter because Ellen had started backtracking on the show almost immediately.
After declaring that she was going to give up “everything” — including wine and vodka — as part of her decision to give up sugar, Ellen declared that she was really giving up “cake” and endorsed supposedly more natural sugar substitutes such as agave nectar.
We share with Cindy a joy at the effusive enthusiasm of this industry. What Dan’l actually did was both inspire industry members (and a few consumers) to give away produce to the needy and help chronicle the giving that was already going on.
This is the Lord’s work and Dan’l deserves much credit for undertaking the task.
There are still, however, three obvious areas that, if addressed, could help the industry even more:
The first is that tying it all into Ellen and her ‘journey” may have helped with initial publicity, but what the produce industry has is the endorsement of the most prestigious health and science organizations in the country for the idea that consumers should eat more produce — we don’t want to mess that up by aligning ourselves with the kind of junk science that Ellen espoused.
One suspects that Dan’l and company are also seeking a way to distance themselves a bit from Ellen, whether because of doubts about the accuracy of her nutritional advice or doubts about her commitment to the sugar-free diet. In their current headline video, the organization declares that Fresh for Ellen, which started out as a “fan club,” is now a “movement” with a “mission” to “share fresh produce.” You can see how the message is evolving here:
The second issue is whether identifying produce as “Nature’s Candy” is the best idea. Without a doubt, many fresh fruits have a lot of sugar, which is why they taste like candy. But a lot of the health benefits of increasing produce consumption come from eating vegetables. Indeed we once had a spirited exchange with Bryan Silbermann, President of the Produce Marketing Association, on this very topic. The Pundit referenced an important report:
In the National Cancer Institute’s 5-A-Day for Better Health Program Evaluation Report, the following dilemma was identified: “… the potentially undesirable sensory qualities of some vegetables and fruit (e.g., bitterness, sourness, pungency, astringency) may act as significant barriers to the adoption of a diet that is high in vegetables and fruit, especially among children. The dilemma here is that the strong-tasting compounds as a group overlap extensively with the compounds that are potentially protective against cancer; therefore, removing strong-tasting compounds may reduce the protective effect.”
Put another way, all produce is not created equal when it comes to health effects, and the produce items that may be easiest to get people to increase consumption of, namely sweet-tasting fruits, are probably the least valuable health-wise. That is why the USDA’s latest food pyramid for kids urges the consumption of 1 1⁄2 cups of fruit each day and 2 1⁄2 cups of vegetables — 67 percent more vegetables than fruit.
In other words, many fruits piggyback on the good nutritional value of vegetables. This is especially true today when the focus is on obesity and thus avoiding calories. A cup of spinach has 7 calories, a cup of orange sections 85 calories — or more than 12 times as much!
Now oranges are rich in Vitamin C, have quite a bit of fiber and their calorie count certainly compares favorably to, say, a rich ice cream (312 calories in a cup), which is rich in not only calories but saturated fats and cholesterol. So it is a very good idea to eat an orange rather than ice cream or chocolate cake for dessert or instead of many snack foods.
And we need sweet fruits because human beings yearn for sweetness and this gives a great way to satisfy that yearning. So most people could significantly improve their diets by eating more fruit and less of other things.
Still, the identification of fruit as “Nature’s Candy” may lead the public health community to emphasize the consumption of low sugar produce items rather than just more fruits and vegetables — that probably would not be a win for fruit producers.
Finally, giving away produce — or other valuable things — to poor people is a kindness and should be praised. It can also generate good publicity for the donors and show the passion and sincerity with which those who produce a product wish to share it with the world.
The goal of the industry, though, is to sell more produce, not give it away. So the best donations should be strategic. You want to give away produce items that people are not familiar with so the donation serves as a kind of sampling program. You also want to give it to the young, whose tastes and buying patterns are not as well established and thus are susceptible to being influenced.
Over the years, we have seen many people in this industry so anxious to do the right thing. We think it important that there be a strategic approach to giving, so that the industry can do well while doing good.
Many thanks to Cindy Jewell and California Giant Berry Farms for helping us think through such an important issue.
Now that the Health Care bill has passed the House, the President will soon sign it and it will become the law of the land. The good thing about this is that we will actually come to know what is in the law.
Already the Center for Science in the Public Interest is crowing about their pet project:
HEALTH REFORM TO DELIVER CALORIE COUNTS TO CHAIN RESTAURANT MENUS NATIONWIDE CSPI Celebrates “Huge Victory for Consumers” After 7-Year Fight
WASHINGTON — Tucked neatly inside the health reform legislation headed to the Oval Office for a presidential signature is language that will require calorie labeling on chain restaurant menus, menu boards, and drive-through displays, as well as on vending machines. The legislation applies to chains with 20 or more outlets, and requires them to provide additional nutrition information on request.
Similar measures are already in effect or are awaiting implementation in California, Maine, Massachusetts, New Jersey, Oregon, New York City, Philadelphia, and a dozen other localities. The federal standard will supersede the varied state and local requirements.
”Coffee drinks can range from 20 calories to 800 calories, and burgers can range from 250 calories to well over 1,000 calories,” said CSPI nutrition policy director Margo G. Wootan. “With the health reform legislation passed today, Congress is giving Americans easy access to the most critical piece of nutrition information they need when eating out. While it’s a huge victory for consumers, it’s just one of dozens of things we will need to do to reduce rates of obesity and diet-related disease in this country.”
CSPI began pressing for nutrition labeling at chain restaurants in 2003. In past sessions of Congress, stand-alone menu labeling bills were introduced by Senator Tom Harkin (D-IA) and Representative Rosa DeLauro (D-CT). New York City became the first jurisdiction to enact menu labeling, via regulations issued by the city’s Board of Health, in 2006. Governor Arnold Schwarzenegger signed California’s menu labeling law in 2008, after vetoing a similar measure the year before. The National Restaurant Association dropped its longstanding objection to menu labeling last year, and actually supported the language passed by Congress today.
”The historic legislation that President Barack Obama will sign will do so much to give more Americans access to health care, but it also does much to help prevent disease in the first place,” Wootan said. “Menu labeling at restaurants will help make First Lady Michelle Obama’s mission to reduce childhood obesity just a little bit easier.”
The bill exempts small businesses, and does not apply to daily or temporary specials and customized orders. It requires the U.S. Food and Drug Administration to propose specific regulations not later than one year from now. Those regulations will be finalized through a formal rulemaking process, and the FDA must make quarterly reports on its progress to Congress.
The relevant section is titled “Nutrition Labeling of Standard Menu Items at Chain Restaurants,” and the gist is that restaurants and retailers that serve prepared foods will have to display on the menu a “nutrient content disclosure statement,” which will list the calories of each item and a “succinct statement concerning suggested daily caloric intake” designed “to enable the public to understand, in the context of a total daily diet, the significance of the caloric information that is provided on the menu.” The information must also be available in writing and there must be signage advising that it is available.
Restaurants’ daily specials are exempted, but drive-through windows are not. Nor are vending-machine operators. The regulation applies to any outlet with at least twenty stores — including not just centrally owned and operated companies, but also franchises.
It is not surprising that this regulation made it into the bills. Sen. Tom Harkin (D., Iowa) is a big supporter and, more broadly, the idea fits into the now-trendy notion among the Michael Pollan crowd that the focus on medicine and insurance is somewhat misplaced as the real focus should be on food and nutrition.
Besides, hardly anyone important in the food business is opposing the regulation. Similar legislation, known as the LEAN Act, was endorsed by a who’s who of the restaurant industry, including the National Restaurant Association (NRA). Partly this is because most big fast-food chains publish this info anyway, partly because the industry wants to preempt state and local standards with a federal one and, partly because the NRA is desperately trying to avoid having restaurants blamed for national obesity issues.
The specific problem is that there is not the slightest scintilla of evidence that making such information available changes behavior. California has health warnings so ubiquitous that everyone seems to ignore them. The government mandated that private companies make substantial expenditures to make sure that fresh foods have country-of-origin labeling on them. This was done at the behest of U.S. producers who thought such labeling would swing business to them. Yet there is no evidence that consumers have changed purchasing habits.
Because the cost of executing this new nutritional-labeling requirement is paid by the private sector, it doesn’t show up when the Congressional Budget Office scores the cost of the bill — but a cost it is. Since we have no reason to think there is any effect to this new labeling requirement, we can presume that lots of money will wind up being spent with little or no effect.