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UK Retail Environment Helps Suppliers Break Commodity Mold

Tim O’Connor, President & CEO of the United States Potato Board, always seems to have the experience the industry needs. In the aftermath of the spinach crisis, he wrote us a letter, which we published under the title Pundit’s Mailbag — Buying Safe Food in A Changing World, that drew on his long experience with the US beef industry to help us analyze what the Buyer-led Food Safety Initiative could mean to the produce trade.

It is a lesson we still could pay more attention to:

If the buyer-led initiative stimulates processes above the minimum standard, such as Darden’s, and alters buyers’ purchasing criteria to value attributes from their suppliers beyond price, it will have great meaning to the produce industry.

Now Tim draws on years of cooperation with the British Potato Council to assess the meaning and significance of our piece, Asda and Tesco Buyers Accused Of Arm Twisting. He has some nice words for the Pundit too:

You continue to deliver important topics and interesting dialog to the produce industry; your coverage of the UK retail market is extremely valuable to the US produce industry.

I have been a student of UK produce retail innovation for the past seven years as I have tried to assist the US potato industry to move beyond its commodity mentality. In the course of that study, through our partnership with the British Potato Council, I have come to know numerous UK suppliers and retailers fairly well; this battle, and those like it in the US marketplace, is classic industry competition in commoditized markets.

Suppliers to Tesco and Asda, who produce unique, innovative offerings and provide category management services for those chains in a dedicated supply chain partnership, work outside these price wars. Suppliers who grow and ship commodities that are easily replaced by another supplier willing to sell interchangeable products at lower prices find themselves in the center of the storm because the retail chain has no incentive to remain aligned with a commodity supplier, and its switching costs to a new commodity supplier are virtually zero.

The most successful UK supplier organizations have made themselves as close to irreplaceable to their retail partners as possible because they provide the retailer with exclusive varieties, new unique value-added offerings and category management services that bring consumers into that retailer’s stores for products they can’t find in its competitors’ stores. These suppliers have also taken their unique offerings out of the daily “auction market” because no one else produces these items, so the retailer can’t seek lower prices from other suppliers on the open market.

These suppliers are smart and have made investments to acquire capabilities such as new product development and category management because the return on those investments is far superior to the return on commodity production. In turn, they have also enhanced their opportunity to provide commodity offerings to their retail partners as part of a total supply package, and, as I stated in an earlier comment to the Pundit, these aligned supply chain relationships are also the best system for implementing comprehensive food safety initiatives.

I won’t speculate on the outcome of the current investigations — clearly business must be conducted within the law and those who break the law must be punished — but, I will continue to challenge the US produce industry, the potato industry in particular, to follow the example of innovation in UK produce retailing because it is working for consumers, retailers and their suppliers who have moved above commodity production.

Commodity markets will always behave exactly as commodity markets; if produce growers and shippers want a different outcome, they have to learn to play a different game.

Tim O’Connor
President & CEO
United States Potato Board
Denver, Colorado

We appreciate Tim’s kind words and agree that many things that are not obviously actionable contain within them concepts and ideas that, assessed properly, can help each of us in our own businesses and indeed, in living our lives more fully.

As Tim notes, for all the lamentations, there are plenty of successful produce operators in the U.K.

David Langmead of Langmead Farms, Natures Way Foods and Sun Salads is a big supplier to Tesco in the U.K. He has already developed a reputation in the U.S. as a pretty sharp guy, so we don’t think the company is following Tesco to America and has opened Wild Rocket Foods because he loses too much money dealing with Tesco.

Indeed, the fact that Tesco wanted the company to open in the U.S. seems to imply that Tesco really values what David and his team deliver — so much so that they didn’t want to open in America without their “A Team” behind them.

This is really Tim’s message. To those who just want to farm and grow a commodity and sell it at market price — the future is a bleak one of being a price-taker in an age of consolidation, where the choice of markets is dwindling.

At the same time Tim is pointing out that it doesn’t have to be that way. These paragraphs of Tim’s letter are worth another read:

The most successful UK supplier organizations have made themselves as close to irreplaceable to their retail partners as possible because they provide the retailer with exclusive varieties, new unique value-added offerings and category management services that bring consumers into that retailer’s stores for products they can’t find in its competitor’s stores. These suppliers have also taken their unique offerings out of the daily “auction market” because no one else produces these items so the retailer can’t seek lower prices from other suppliers on the open market.

These suppliers are smart and have made investments to acquire capabilities such as new product development and category management because the return on those investments is far superior to the return on commodity production. In turn, they have also enhanced their opportunity to provide commodity offerings to their retail partners as part of a total supply package, and, as I stated in an earlier comment to the Pundit, these aligned supply chain relationships are also the best system for implementing comprehensive food safety initiatives.

The problem with the Competition Commission inquiry in the U.K. is that it holds out hope to aggrieved farmers that someone, somewhere — particularly the government — will come and save them.

Alas, one of the definitions of salvation is a “liberation from ignorance or illusion” and success depends crucially on understanding that the only hope for success lies within each man and each organization.

What do you think David Langmead was thinking when he decided the right name for his bold new venture in the largest market on the planet was “wild rocket”?

An inspiration to us all.

Many thanks to Tim for his thought provoking letter.

Sun-World Launches Peru Earthquake Relief Program

Our pieces both yesterday and today have focused on a need for aid to Peru. Now Sun World send a release about its program to provide continuing resources to assist in Peru:

Sun-World Responds to Peru Earthquake Victims

With agriculture ties to Peru’s ICA region, Sun-World is responding to international requests to help Peru’s ravaged victims of last week’s devastating earthquake. The Company has established a sales-based recovery initiative. A portion of the proceeds from sales of Peruvian Minneolas will go directly to those in Peru that need it most.

“We are deeply saddened by the devastation of this earthquake which has affected many of our friends and trading partners, as well as, countless numbers of lives. Sun-World is assisting in a campaign that will help the victims of this disaster rebuild their lives and businesses.” states Mike Aiton, Senior Vice President of Sales and Marketing.

The earthquake affected the areas of Ica, Pisco and Chincha (roughly 160 miles south of Lima), which are known as rich agricultural regions, producing grapes, asparagus, citrus and a variety of other items. In helping with the reconstruction of this area, Sun-World has taken the unique step of donating $25, on behalf of the purchaser, for every pallet of Peruvian Minneolas sold.

“This is an emerging agriculture area representing a significant economic loss to the livelihood of many people. We feel a responsibility in assisting in the reconstruction efforts,” quotes Bruce Burton, President of Sun-World.

Dating from the occurrence of the earthquake; August 15, 2007, through the end of the season, retailers and other buyers will automatically participate with the earthquake recovery efforts with each purchase of Peruvian Minneolas. Sun-World will contribute $25 per pallet of Minneolas, and acknowledge those buyers, in upcoming trade publications.

Additionally, point-of-sale cards are available to stimulate consumer sales of this high quality citrus. At the conclusion of the Ica Earthquake Recovery initiative, a representative from Sun-World will present the check to the Peruvian Minister of Agriculture, to be used in those areas of highest need.

Consumers can also play a role with their purchases of Peruvian Minneolas and follow the progress of this campaign by clicking on the Sun-World website, www.sun-world.com, where they will find more information.

Sun-World, a leader in proprietary breeding programs, has partnerships with several Peruvian growers. A year into the relationship, the company currently imports minneolas, grapes and has plans for other items in the near future.

Sun-World is devoting this page of its web site to its Peru aid project and including links where consumers can donate funds.

Sun World also sent along this video from CNN detailing the suffering in Peru.

What is nice about this initiative is that it will provide some funds after the immediate crisis is passed and when the world’s attention is on to other problems. In addition, because the funds are going to go through the agriculture ministry, they should help our US trading partners and their employees.

Kudos to Sun-World for putting a thoughtful program together so quickly.

Hass Avocado Board Promotes Jose Luis Obregon To Managing Director


The Board of Directors of the Hass Avocado Board (HAB) approved the promotion of Jose Luis Obregon to the newly created role of managing director at its board meeting on August 15. Obregon most recently served as the first managing director of information technology for the HAB, overseeing the creation its state-of-the-art Network Marketing Center (NMC) and the organization’s intranet site, avoHQ.com.

In his new post, Obregon will take a more central role in the strategic direction, operation and management of the HAB, while continuing to oversee the ongoing development and implementation of the HAB’s information technology and marketing programs. Obregon also will continue to serve as the liaison between the HAB and the avocado industry worldwide.

“We have full confidence in Jose Luis’ ability to balance the duality of managing the current HAB programs, while providing the strategic vision for the organization,” said Charley Wolk, chairman of the HAB. “His leadership capabilities have been key to this industry’s incredible growth; the success of avoHQ.com is a primary example.”

AvoHQ.com is the first of its kind global intranet linking multiple producing countries that market Hass avocados in the U.S., connecting packers, importers, domestic and foreign producers from California, Chile, Dominican Republic, Mexico and New Zealand. Obregon’s leadership has resulted in an increase of nearly triple the number of users on avoHQ.com.

“I am both honored and excited to be named to this position,” said Jose Luis Obregon, managing director of the HAB. “Throughout my tenure with the organization, I have become increasingly familiar with the issues and challenges of the worldwide Hass community. I welcome the opportunity to continue building demand for Hass avocados, while increasing category growth in the U.S.”

A bilingual citizen of Mexico, Obregon also is fluent in the business practices and culture of Chile. This background serves him well, as Mexico and Chile represent the largest importers of Hass avocados into the United States.

He joined the HAB in 2005 after two years as Deputy Director of the Fresh Produce Association of the Americas in Nogales, Arizona, a trade association representing Mexican fresh fruit and vegetable imports into the U.S.

Obregon holds an MBA from the University of Arizona and a Bachelor of Science degree in Accounting from the Instituto Tecnologico de Estudios Superiores de Monterrey. He was recognized by Produce Business Magazine in 2005 as one of the “Top Forty Under 40” Produce Executives in the U.S.

The Hass Avocado Board has always been progressive, and we’ve admired what is surely one of the best web sites in the industry, writing a case study in Pundit sister publication, PRODUCE BUSINESS.

And in selecting an up-and-coming executive such as Jose Luis Obregon for its newly created managing director post, it continues in that progressive tradition. It seems like just yesterday that PRODUCE BUSINESS named Jose Luis to our 40-under-Forty for 2005.

Of course, Jose Luis has quite a heritage. In the business his father Francisco “Pancho” Obregón is well known, now consulting under the Novelle Consulting umbrella, Francisco Obregon has worked in government, in industry and been active in association work. You can be sure Pancho is smiling today.

Despite the esteem in which his father is held, Jose Luis actually has more famous relatives. Perhaps the HAB can count on Jose Luis having a few of his great-grandfather’s qualities:

The Mexican Revolution was equally turbulent. Francisco Madero overthrew the old tyrant Porfirio Díaz — only to have his naiveté and trusting nature set him up for a putsch by another tyrant: Victoriano Huerta. Pancho Villa, Venustiano Carranza, Emiliano Zapata and Alvaro Obregón combined to overthrow Huerta — only to be followed by civil strife between Villa-Zapata and Carranza-Obregón.

With the triumph of the latter faction, the field was reduced to two. Carranza was overthrown in 1920 — ten years after the Revolution began — and only Obregón remained. Considering his personal qualities, and those of the other leaders, it seems almost inevitable that Obregón should have triumphed. He was astute where Madero was naive, prudent where Villa was reckless, flexible where Carranza was rigid and, unlike the insular Zapata, he had a vision that embraced all Mexico.

Astute, flexible and with a vision. A great description of Jose Luis Obregon and his great-grandfather, the President of Mexico.

Best of luck to Jose Luis, congratulations to his proud father and kudos to the Hass Avocado Board for making such a fine choice.

Point/Counterpoint: Raw Foods Advocates Get Steamed About Pasteurized Almonds

Our piece, pundit Pulse Of the Industry: California Almond Board, was run as part of our series on how food safety is playing out beyond leafy greens. It is an interesting case study in how an industry can use a marketing order to impose mandatory food safety requirements — in this case the imposition of a “kill step” in the form of mandatory pasteurization of almonds.

In the past few months, the program has had some challenges. The industry, itself, asked USDA for an extension, fearing that the industry couldn’t achieve 100% compliance. The USDA declined to grant that extension and so the program will start as scheduled on September 1, 2007.

At the same time consumer awareness of the plan has grown as the implementation date has approached, and that has led many “raw food” advocates to object to the plan. An advocacy group known as the Cornucopia Institute has been particularly outspoken. It has launched “The Authentic Almond Project” to address concerns it identifies this way:

California-grown raw almonds may soon no longer be available. A new USDA mandate requires raw almonds to be sanitized through treatment processes that the industry generously describes as “pasteurization.”

The rule requires “pasteurization” of almonds with a toxic fumigant or treatment with high-temperature heat. The scheme imposes significant financial burdens on small-scale and organic growers, lacks scientific justification, damages domestic almond markets, and does not address the unsustainable methods used on the industrial-scale almond orchards where the only traced-back Salmonella outbreak occurred. And the treated almonds can still be deceptively labeled as “raw!”

Almonds are an unusual item. Although to most people, almonds are just a snack or a minor ingredient in some cooked dish or baked good, to vegans, almonds — with their ability to be turned into almond butter and to produce almond milk — are truly one of the staffs of life. This has led to a small but passionate group trying to stop the program.

We asked Pundit Investigator and Special Projects Editor Mira Slott to speak both with the Cornucopia Institute and the Almond Board of California to help us better understand the controversy.

Mark Kastel
Senior Farm Policy Analyst
Cornucopia Institute
Will Fantle
Research Director

Q: What are your concerns with almond pasteurization?

MARK: One is the process PPO Propylene Oxide [CA Almond Board document is here]. It’s considered a possible carcinogen and is banned in the European Union. (Editor’s note: The Almond Board of California has explained that the process is “banned” in Europe and Canada only in the sense that it has not yet been approved for use in Europe and Canada and that unapproved uses are “banned.” However, approval has now been applied for in both Europe and Canada. The Almond Board of California further explains that PPO is acceptable in Mexico.)

WILL: We are doing additional research. PPO is banned for use in Canada and Mexico as well. This truly raises the issue that if it’s not OK for use in these countries, why are we doing it here? It’s a toxic substance. It is classified by the World Health Organization’s International Agency for Research on Cancer as possibly carcinogenic. The qualifier is only on there because there are no scientific studies done on humans of the health affects.

When it’s banned elsewhere, we want to know more. Part of the troubling issue is that the California Almond Board’s scientific research that looked at PPO and high-temperature scheme treatments hasn’t been released to the public. We want to see this research and be able to say this is OK.

Maybe the science is there. But the consumers and growers need to be reassured. We need a chance to review this. We believe this ruling needs to be reopened for comment to address this issue. (Editor’s Note: The Almond Board of California publishes a Food Quality and Safety Program Published Paper Summary that provides citations to scientific journal articles, typically peer-reviewed, that relate to this program. You can read this Published Paper Summary here.)

MARK: Second: Consumers obviously choose product based on perception of safety. And this is a questionable practice that also has the result of impacting exports.

Q: In what ways?

WILL: We have done initial contacts with several manufactures of food products in this country. They use raw almonds in their products and are taking steps to abandon the California raw almond market even though many believe the alternatives from Spain, India and other countries in the Middle East are not as good quality. There is general acceptance that the California almond is the best in the world. So those manufacturers of raw almonds prefer to use them. At the same time they are in favor of untreated almonds.

The other problem is that the ruling will diminish market opportunities for American growers and set up unfair competition from other countries. Loss of market share for producers in California is a big issue despite the fact there will be some consumers that will see pasteurizing as making almonds safer.

MARK: It would allow untreated almonds to come into the U.S. If the argument is that pasteurization is needed for the protection of U.S. citizens, why would we allow this? It is illogical.

WILL: I believe the reason behind this ruling is not so much for safety, as for liability protection for large growers, particularly because the last outbreak was traced back to a large orchard in California.

WILL: Some people who have food allergies want raw almonds. They have turned to almonds as safe, but might steer away from pasteurized almonds because of the potentially toxic gas. There are religious groups where as much as 30 percent of their diet comes from almonds. They grind them up and use them as an ingredient in many foods. Many Seventh-Day Adventists believe in raw foods. [Check out the website: What Would Jesus Pasteurize?].

Raw food advocates are a small but significant group. I hesitate to put a number on it.

They have issues with both PPO and the high-temperature steam process. They sprout and germinate raw almonds, soaking and sprouting them before processing. The high temperature destroys the ability to do this. If the almonds are pasteurized, these raw food advocates will be unable to use the products the way they are accustomed to.

These individuals will find raw almonds, most likely switching to imported varieties. I know a grower in California who is planning on switching to direct sales of raw almonds. He’s a total advocate of raw foods. I think he’s going to push the envelope. He’ll deal with the legal issues. There’s a little bit of a grey area.

MARK: Both the fumigant treatment and steam heating treatment are of concern for people who want to eat raw foods. It could impact nutritional value. Limited testing was only conducted by almond industry people, who are proponents of this.

WILL: The steam process is difficult to find in California, a much tougher nut to crack in guaranteeing access whether you want it or not. The steam treatment is much more expensive, so clearly producers will be looking at the PPO treatment. It’s a half to a third as much for PPO than steam, which is substantial when talking hundreds of thousands of dollars. Steam treatments are running $2 million to $2.5 million. PPO starts at $500,000.

If I’m a small grower, I have to take product to someone else to process it, whereas before, I could produce it myself. Now suddenly the process is in place and growers face huge cost burdens.

Q: Your estimates differ from those of Almond Board of California. In particular, Richard Waycott says that PPO and steam pasteurization are similarly priced, and that pasteurization investments are available to the public.

MARK: We question the process that went into this. What we’re asking for is not a rejection of these techniques, but suspension of the rule to investigate alternatives and proper course of action. We don’t believe almonds are inherently dangerous and certainly not any more dangerous than many other fruits, vegetables and nuts.

Are we going down a road we shouldn’t because some risk exists in all foods. There are many cases of pathogenic contamination of pasteurized dairy products and meat. This is not a guarantee of safety even if we go down this path.

WILL: Best management practices should be used throughout the growing industry and that would help minimize potential for a salmonella outbreak; in the farm environment, on the ground in the orchards, when harvesting and collecting product. There is a whole variety of better food safety practices that influence the potential of salmonella. It’s a question of how applicable these food safety processes are to larger farms. The last outbreak took place on a huge operation. Is the solution to gas and steam heat every nut?

Q: Do your positions stem from support of small farmers?

WILL: It’s not necessarily wise to concentrate 80 percent of almond production in California when many parts of the country are suitable for production. This large industrial scale exposes us to more food safety problems. Our organization tries to preserve market opportunities for smaller farmers. We look at these issues like the impact of almond pasteurization from that perspective. We examine the root causes, pushing for changes and alternatives to protect family farmers and help them to stay in business. We all have these biases of what influences us in our causes.

We will work with members in Congress who share our interests and have influence with the USDA. We will campaign with public officials and help generate public pressure to get Congress to look at these concerns. We’re investigating the possibility of a lawsuit.

We find the process circumspect. Cornucopia has shined the light on this. We now have dozens of almond growers in our corner as well as many other people who have strong interest in continued debate. We are asking to open commentary and reevaluate.

MARK: Even if there was the possibility for wider participation, the process was done without wide participation. The analogy is like the proverbial tree that falls in the forest and nobody hears it.

WILL: Unfortunately, the almond industry may have had the best intentions, but the public didn’t know about it. When the rule went out in the Federal Register for public comment, only 18 comments from around the country came from it. We know with our discussions from USDA officials that after the rule was finalized, because of our efforts, the USDA received almost 1,200 comments from the public almost universally condemning it. If there could be a window of time to talk about it without the ruling in place, we believe there will be tens of thousands of people registering concerns about this.

A few weeks ago, we had a conference with stakeholders through a conference call. We had growers on line, small handlers, retailers from California, Washington State, Minnesota, Wisconsin, and Illinois. These retailers were very concerned about providing pasteurized almonds to their customers. Citizen groups and policy groups like ours were also on line as well a couple of lawyers.

A wide variety of organizations and interests will be working together on this over the next few months to get USDA to slow down, review this rule and examine all the issues.

Q: As of right now, the ruling is going forward. One issue you’ve been pressing relates to consumer product labeling. Could you explain what you’d like to see occur here?

WILL: Right now, the treated California almonds, whether by PPO gassing or steam heat at 150 degrees or dry roasting, can still be sold and labeled in stores as raw. We think they should carry some kind of disclaimer. It’s disingenuous, false advertising. Consumers have a right to know what they are buying is what it is. The Almond Board says they don’t have jurisdiction on consumer labeling. In the end, the consumers don’t care who makes the determination on this ruling. They just want the truth.

Richard Waycott
President, CEO
Almond Board of California

Q: Since our recent food safety interview, The Almond Board requested a delay on implementing the California almond pasteurization program, and the USDA just denied it. What does all this mean?

A: The deferral would have allowed almond facilities more time to complete the required validation and certification for pasteurization so that all industry members would be in full compliance with the program.

We as an industry had to develop technologies that were effective and have done that and continue to do research with more technologies underway. Getting them in place and ramped up is a difficult process. We conducted comprehensive studies reviewed by our expert panel to analyze these different technologies. With what we have 100 percent approved and available, September 1 wasn’t enough time for the industry to complete implementation and all the certification paperwork. We thought we should extend the time and petitioned the USDA to delay until March 1.

After considering the impact of this being a food safety issue, the level of industry preparedness, the logistics and the ability to adapt the processes, the USDA decided not to accept the recommendation. The USDA believes there is more than enough capacity and will work with the industry to reach full compliance as quickly as possible.

Q: How prevalent is pasteurization in the industry already?

A: When you take into account all the blanching and oil roasting, and the fact that many third party processors already use pasteurization, a great amount of pasteurization is already underway, and this rule is just completing the process.

Q: Can the Almond Board of California impose standards on other states or imports?

A: We’re a federal marketing order, but limited to state borders. The California Almond Board doesn’t have regulatory authority over imported product. At this time, there are no requirements that imported almonds meet standards the California industry is imposing on itself. There is a laborious process for doing that. Our industry is not pursuing that right now.

We are being responsible as our product is going into the supply chain with an extra food safety step. There is a process the industry and government can pursue to require the same standards for imported product. We can’t start doing that until we get regulations in for our own industry.

We produce 80 percent of world production, so a small amount of almonds is imported. At Costco, for example, consumers can buy Spanish almonds and they are labeled as such. These Spanish almonds are blanched so they have gone through pasteurization. There won’t be any California almonds not pasteurized. If imported almonds are roasted or blanched, they’ve gone through pasteurization.

Q: In our earlier interview, you pointed out that almond food safety problems are rare, and incidents of salmonella contamination in almonds are extraordinarily low. You also emphasize that pasteurization is only one procedure in a comprehensive food safety program across the supply chain. This being the case, The Cornucopia Institute speculates the reason behind the pasteurization ruling is not so much for safety as for liability protection.

A: This is flat out not true. The statement that this is more about legal liability than food safety is just wrong. Our legal environment is what it is. People are concerned about viability of business if a food safety incident occurs, but this program was put in place based on science and advice from independent food safety experts, industry research and FDA and USDA recommendations for implementation.

We think it is not acceptable to sell product that could possibly harm someone unless we are doing everything we can to minimize risk. That is what all experts recommend throughout the supply chain. Once you treat a product with pasteurization, you also must establish good manufacturing practices, with adequate packaging and you must have a strict protocol is in place so contamination doesn’t reoccur.

Q: There seems to be a community of raw food advocates who claim that pasteurization will change taste, nutrition, content, etc. Tell us how you’ve approached these concerns.

A: Certain consumers would like to buy products raw regardless of food safety issues. As we discussed in our earlier interview, we stipulated as an industry that we had to have pasteurization that didn’t change intrinsic value of product. We went through an extensive process with chemical measurements for taste, and from a sensory, crunch, appearance standpoint. And we are really satisfied we are not changing the raw natural state of products.

Q: Cornucopia argues that the ruling could create new competitive barriers for California growers and result in a loss of market share. Does this point have merit?

A: At this time, the Almond Board doesn’t perceive pasteurization as resulting in loss of market share because our research shows that pasteurization does not alter the state of the product. There are consumers emphatic that pasteurization converts the product from its raw state and they may stop buying California almonds. However, we don’t see this as having any significant impact on California market share.

Q: What about from an increased cost standpoint? The Cornucopia Institute estimates steam treatments are running $2 million to $2.5 million and that PPO starts at $500,000. Are these numbers comparable to your own estimates?

A: It depends on the size throughput of equipment. Machinery starts at the $200,000 level. Then you have the peripheral equipment and space issues to consider. It depends on the technology the company already has in place and other variables as well.

A very large piece of equipment can handle 35,000 pounds an hour. On that kind of scale, obviously the size of the boiler and warehouse ramps up, but cost per pound is lower. You have to analyze costs on a company-to-company basis, and it is difficult to make generalizations. I would say $500,000 to $1.5 million is a range for the machine and accompanying facility and equipment.

I might add that the vast majority of capacity is available to small handlers and for that matter is steam-based, not PPO-based. Cost per pound being charged by third-party processors is 5 cents per pound for either PPO or steam. There is not a huge difference based on the technology they are using. This is all documented and we’d be happy to share the information.

Q: Could you comment on this recent Cornucopia Institute release and its accuracy?

A: The Cornucopia Institute started looking into the almond pasteurization program a few months ago. They describe it as an undercover scheme that for some reason they were not aware of, even though the industry has been working on this program for several years; we’ve had hundreds of meetings and articles written about this, and the information has been on our website for three years now. There is nothing secretive about this. Anyone can attend these meetings.

We try to be as transparent as possible. We’re a federal marketing order and we follow the procedures on how this is done. I’m surprised the Cornucopia Institute as a watchdog wouldn’t be tracking this all along. Those in the industry who wanted to participate did, representing their interests and those of customers and consumers.

We had organic and traditional growers and processors involved and received very thorough evaluations. There may have been constituents not involved, but we don’t have the resources to get on the national news every day. Cornucopia also gives the impression this is a USDA program. This is an industry-enacted program that will be sanctioned by USDA. This is 100 percent industry initiated.

Cornucopia started an anti-pasteurization petition and a vocal niche of raw food advocates — some 15,000 — signed on to it in a concentrated period of time. The people committed to a certain dietary regiment would have to be under a rock not to know about it. The numbers have run their course and the signatories after that initial timeframe have dwindled.

When the mandatory rule went through and the AP and national publications picked it up talking about the raw foods angle and pasteurization, we expected there might be inquiries from the mainstream public, but we didn’t receive one call. The mainstream consumer is OK with pasteurization and wants to make sure food is safe.

Q: The Cornucopia Institute claims there is toxic danger with use of propylene oxide (PPO) for pasteurization, and that it is banned in the European Union, Canada and Mexico. It also is troubled by effects of the alternative steaming technology process on the product.

A: PPO is in the process of being registered in Canada and the EU. Mexico accepts U.S. maximum residue limits and therefore, PPO would be accepted in Mexico. There is not a minimum or maximum residue level established in Europe at this time. Many products are possibly carcinogenic if misused. We went through an extensive process and a rigorous review with the EPA last year to get the product registered.

It is fully acceptable to the USDA and the California Department of Agriculture. PPO has been used on many foods for decades and is not considered a carcinogen when used in conformance with application protocol. Aberco is the PPO manufacturer and is considered the applicant that files the permits to use it in terms of the review process for the EPA

Q: Could you discuss the issue with labeling? Should consumers have a right to know if the product is pasteurized or not?

A: Cornucopia felt… or part of its membership… wished to distinguish pasteurization in the marketplace through consumer labeling. We have no jurisdiction over consumer labeling and have explained this to them. Consumer labeling would be a ruling an organization like the Food & Drug Administration would take up.

In the business-to-business setting, we have a requirement through regulation that you have to label product as un-pasteurized to help with things like inventory control.

We consider pasteurized product raw. The FDA considers pasteurized product raw.

I think the Cornucopia Institute is trying to get traction anyway it can to reopen the rule. But the rule is not going to be reopened.

The Cornucopia Institute comes across as a bit random, shooting off ammunition every which way in the hopes something will hit and kill or delay the program — at times trying to present themselves as more concerned with almond sales than the Almond Board. The institute is a bit disingenuous as it is clear their objections to specific processes are merely expedient and that no process at all would ever be acceptable to them.

Once you get past all this, they do raise real issues that are worth reflecting upon:

1. The use of the word “pasteurization.”

Traditionally this referred to a specific process, named after scientist Louis Pasteur, which used the application of heat to destroy human pathogens in foods.

In the 2002 Farm Bill, however, the FDA was asked to draft a new definition and the committee tasked to do this came up came up with this:

“Any process, treatment, or combination thereof, that is applied to food to reduce the most resistant microorganism(s) of public health significance to a level that is not likely to present a public health risk under normal conditions of distribution and storage.”

Under this definition, the use of a chemical on an almond or irradiation on a mango would qualify as pasteurization.

The problem is that although this may be fine for internal governmental use, in the U.S. we don’t have a central academy as they do in Paris to judge what words mean and what words are permissible.

So by legally defining things in a way counter to common usage, the government allows a kind of deception to take place. And it strikes us that this is intentional. After all, the government could just have made up a new word but, in this case, they hoped to piggyback on the goodwill a well-established food safety protocol such as pasteurization suggests.

We are big believers in irradiation, but find the redefining of words this way a bit Orwellian.

2. Are we doing things for “liability” or “food safety” reasons?

Although Richard Waycott took some umbrage at this characterization, we don’t think he should. Our liability system is the way we, as a people, express what our standards are. Even during the scariest moments of the spinach crisis, there was never a risk that this was some kind of a new black plague that would kill tens of millions of Americans.

Yet the FDA basically shut down the industry, and if told in the future that a shut down of a particular crop can save a few lives, we suspect they would do it again.

A few more outbreaks can damage the marketability and image of a crop long-term because consumers don’t like the risk.

It is not really liability because that is typically covered by insurance, and the risk is small enough that insurance companies gladly cover the almond industry. But it is for business reasons that these types of things are undertaken.

If we had a cultural response to food safety issues that a few deaths each decade were acceptable, then nobody would propose these types of efforts.

3. What is the proper use of a marketing order?

There is, of course, no law against treating almonds right now. Also plenty of almonds are sold blanched or roasted.

So one answer to this question is to say that those who wish to use these treatments are free to do so, free to market their benefits to consumers and free to reap the benefits of doing so.

The use of a marketing order has traditionally been to avoid the “free rider” problem. So if a group, say, advertises a commodity, a voluntary group will tend to lose members or not get members at all because the financial interest of a given grower is to not contribute to the marketing but to get the benefit of the marketing effort.

Here, each product can be clearly marked with whether or not they have been treated and by what. A logo could be given out and promoted to consumers. It is not clear that the same “free rider” justification exists in the case of food safety.

On the other hand, intrinsic in the marketing order concept is the notion that an industry rises or falls together where a commodity is concerned. One outbreak, anywhere in the industry would hurt everyone.

Besides, even marketing an almond as being treated is a kind of reminder of food safety problems.

4. The limitations of a Marketing Order

It is obvious that the failure to include producers from other states or other countries is problematic. To the extent the requirement raises costs, it will tend to create opportunities for imports and reduce our competitiveness in export markets.

More specifically, citizens are bound to get concerned over time with efforts such as this. If this process is so important for food safety, why do our regulators not require it of imports? And if it is not that important, how can we justify using the “majority rules” ethos of a marketing order to impose it by force on producers who wish not to use it?

5. How are we measuring the costs and benefits?

How many people would get seriously ill or die from eating almonds over the next hundred years in the absence of this treatment? At what number would we say it is not worth the cost of this effort?

Or put another way — this money could be used for other things. Don’t we, as a society, need to articulate a standard that will guide our behavior?

6. Labeling

For many the saving grace of this plan is that raw food consumers will be able to get the untreated almonds they want by buying from overseas sources. Perhaps other states will start to grow some almonds to meet this demand as well.

Yet because they will not be labeled in any way, consumers with this preference will have to be knowledgeable enough to deduce that California almonds don’t meet their desires.

Isn’t the purpose of labeling to help consumers? Whether a steam-treated almond is still “raw” according to the government is not the key question. It is whether a consumer would view it that way.

To sell steamed broccoli as raw would be fraudulent. The Almond Board of California doesn’t control legal labeling requirements, but, some action on this end might make some sense.

We commend the almond growers and the Almond Board of California. They have looked around and realized that no foodborne illness is going to be acceptable. So, with this zero-risk standard in place, they have used what tools they have to implement a “kill step” and thus save their businesses by meeting social norms.

98% of the people won’t know or care and, if asked, would probably be thrilled to know that their snack is “safer” than it was before.

The Cornucopia Institute, though, sort of “represents” people who are idiosyncratic. If that group is 2% of the population, they still could represent over six million people. We are a country founded on the idea that people here have the right to believe what they will.

For right now, consumers will maintain their right to buy untreated almonds — albeit not from California. Down the road, though, especially if foreign nuts pick up market share, someone is bound to say the standard is unfairly burdensome to California growers and they’ll demand it be applied to imports.

The question will then be: Is the threat of a food safety problem with almonds sufficient to lead us to restrict the freedom of consumers to buy what they choose? Hopefully, by the time we need to confront that issue, we will have a clearer standard than exists today.

We appreciate the time that Mark Kastel and Will Fantle of the Cornucopia Institute and Richard Waycott of the Almond Board of California took to help inform the industry on this important issue.

Pundit’s Mailbag — Tents Needed In Peru

Our piece, Earthquake In Peru Prompts Appeal For Help To Farm Workers There, featured an appeal by Bruce McEvoy of Seald Sweet LLC for the industry to act to help the farm workers and their families who have been displaced by the earthquake. The article has brought some additional information from Lima:

I live in Lima and act as broker for an asparagus producer in the disaster area. I see images of distress in the TV news that suggest an immediate need — and that is of shelter… there are not enough TENTS, and there are thousands of people in the street.

You can rapidly count them, pack them and send them in the same airplanes that usually thrive on the cargo demanded by asparagus (ask the airlines for free space). The asparagus industry here can distribute them.

In that way we can be all socially responsible people.

Thanks America for your intent in helping.

— Luis R. Poirier
Broker Consultant
Agricola Chapi S.A.

Yesterday we reported that: We spoke to Priscilla Lleras, the director of the Peruvian Asparagus Importers Association, and she indicated an immediate need for water, canned goods, blankets and tents delivered to Miami. This aid would go through the association to the produce workers most affected by this earthquake.

Mr. Poirier has focused in on tents as a prime need. With the growth of produce into general merchandise stores — Wal-Mart, Target, Kroger’s Fred Meyer and others — there are many Pundit readers working for organizations that sell tents.

Surely some would like to make a donation.

The Peruvian Asparagus Importers Association has secured both some sea and air space out of Miami and can handle the logistics of distribution.

We realize that it is not typically in the Pundit reader’s department that tents, water, canned goods and blankets are sold. Still it is the same organization and surely many will want to support the workers who normally supply their stores with asparagus, onions and other products.

If your organization is in a position to donate any of the needed items, or if you would like to donate cash but want to make sure it gets to where it is needed, please send us an e-mail right here.

We are happy to help.

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