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California Fires Hit Avocados Hardest; Lush Avocado Acreage A Firebreak Spares County From Worse Damage

All America has been aghast watching the fires rage in southern California. It is always difficult to gauge the impact on the industry in the midst of a natural disaster, so we’ve been standing by for more clarity. Then all the sudden, the Associated Press came out with a bizarre report exaggerating the possible damage to the avocado crop.

A destroyed avocado grove in Orange County shows the power of Santa Ana wind-driven wildfires that swept across large swaths of the State’s most important avocado production areas this week. Despite the damage to this and some other groves, the green irrigated avocado groves are not readily combustible fuel sources for wildfires and the bulk of California’s acreage was spared.

Fire rushed through dry chaparral and across ridges. An avocado grove on the ridge in the foreground was scorched by the fire but the trees will be salvageable. The Santiago Fire still burns out of control in the background.

In most cases the lush greenery of avocado orchards offered little fuel to the firestorms. The brown colored leaves in sections of this avocado grove are from small fires that started from blowing embers but with little to burn were self-extinguished.

According to Guy Witney, Director of Industry Affairs, California Avocado Commission, the AP report that 20,000 acres lost is not accurate. He says there are 24,000 acres total in the county, unimaginable that the loss was 80 percent of total. Likely 10 to 20 percent, perhaps 5,000 to maybe 8,000 acres are damaged on the high side. In order to gain some clarity, we asked Mira Slott, Pundit Investigator and Special Projects Editor, to speak with several individuals who could help provide insight as to what the situation really is.

Guy Witney
Director of Industry Affairs
California Avocado Commission

Q: How is the avocado industry coping with the California wild fires?

A: In terms of crops here, the avocado industry by far has the largest investment. Fifty-five percent of total acres are concentrated in North San Diego County and Southwestern Riverside County areas. Those are the areas worst hit as far as we can determine because there is still very little access. Avocados are a big enterprise here, but other produce crops and agricultural industries are affected as well. Oceanside Farms, large tomato growers, are located very near the flames, but the fires didn’t hit them.

The first big arson fire overtook the area Sunday night five miles upwind in a wildlife preserve, and the wind was flowing extremely hard with gusts of 40 to 50 miles an hour straight down to Irvine Ranch, in Orange County, and literally burned from one end to the other of the largest grower in the country.

Q: What you describe sounds horrific.

A: The fire caused considerable pain and damage to this ranch, but it could have been worse but for avocados coming from tropical trees, green, lush and full of water. I looked with an executive at Irvine Company, one of the top five avocado growers in the state, to assess the damage. Approximately 30 percent or about 300 acres were seriously damaged, and 100 acres of trees need to be replanted there.

The main point the Associated Press put out in a statement mid-afternoon [Wednesday] of 20,000 acres were lost is not accurate. There are 24,000 acres total in the county. It is unimaginable the loss was 80 percent. It is likely 10 percent to 20 percent, perhaps 5,000 to maybe 8,000 acres, are damaged on the high side.

Avocados are more of a fire break than acting as fuel. Of course, there are tragic cases, where the fire literally cooked very-hard-to-burn moist trees. I’ve heard back from growers that the intense energy of the fires and wind generated so much heat that their houses and livelihoods did in fact burn to the ground. In most cases, though, the avocado groves have been welcome relief to firefighters. They actually protected the houses in the surrounding areas.

Definitely on an individual basis, there have been very serious and sad situations where farmers have lost homes and orchards and it has been devastating. Obviously we are concerned about the crop but our first priority is their well being. Our immediate reaction is helping people who have been displaced. There are reporters contacting me like vultures wanting to interview growers in their plight. It’s very hard for these guys right now. Some have lost big money. Some are third generation growers and this is the end for them.

Water rationing is coming January 1 in many areas with this drought. Having this fire come through after losing 27 percent of their crop with the freeze, facing a couple of years of drought, and then the onslaught of foreign fruit and dealing with new regulations is a tremendous amount to handle. Growers are being hit from all sides.

Dave Kranz
Manager Media Services
California Farm Bureau Federation
Sacramento, California

Q: Could you update us on the damage in different industry segments from the wildfires?

A: Everybody is looking for hard numbers on how many acres and what proportion of crop and these are very hard to come by. A lot of people are restricted from going back to their farms and nurseries. Many are under mandatory evacuation. It will take some time to assess the damage.

We’ve seen inaccurate reports. I was a little shocked when that 20,000 number of acres destroyed came out in the press. The facts just didn’t add up. There was a story in the San Diego newspaper Thursday morning that quoted the County Agriculture Commissioner’s office with a more reasonable account. It said 11,000 acres of farmland was in the path of the fire and roughly 5,900 acres of that was devoted to avocados. That doesn’t necessarily mean they’re damaged.

In these awful wildfires, you’ll see three houses standing and three wiped out and nobody knows why. The same scenario happens with avocado groves. Some may look wiped out and turn out to be OK. The bark may appear charred, but the tree itself will be ok. Farmers will drill into trunks and take core samples to figure if trees are still viable.

On the other side of the coin, there will be trees that look fine but won’t come through. For example, if leaves on the floor of the grove are burning hot next to a tree, the heat might have damaged the tree. It’s an awfully complicated thing to figure out. There are lot of moving parts; where did the fire hit, what percentage of the grove was affected. There may be short term affect on this year’s crop but in the long term it’s ok.

There are also impacts unrelated to the fire. For example, strong winds that propelled the fires caused damage in areas where avocado growers reported fruit blown off the trees. This is not uncommon, but because winds were stronger than usual, the impact was greater. Some of that fruit can be salvaged if picked up fast enough.

We have no specific reports of people getting hurt. But given the scope of the damage, it’s entirely possible if not likely some farmers or nursery people lost homes and livelihoods. The thing about farmers is that field damage can cause loss of crops far into the future. We’re working on staying in contact with legislatures, both congress and state agencies so relief is made available and remains available, particularly to people who have suffered severely.

Q: Have you been in contact with any of the growers directly to get first-hand accounts?

A: We are in Sacramento hundreds of miles away, but we’re working with colleagues down south, posting new information at least one a day on our website.

We’ve read about a couple of small scale vegetable growers that had to evacuate and couldn’t irrigate their crops, and it’s been very dry there. They are returning to farms and finding a lot of their fruits and vegetables destroyed. I read one account from a grower who sells direct to local restaurants in San Diego County. Because they’ve evacuated, they haven’t been able to tend to their crops as they would normally.

This is a diverse farming region, encompassing 12 of the largest agriculture producers in the U.S. Some people don’t realize north of San Diego County proper is ag-based with 200 crops. Our colleagues tell us just about all will be affected to some degree because of the winds.

From what we’ve seen, strawberries will be ok. With lemons, strong winds are an issue, knocking the fruit together and causing scarring, but this is not a big problem. At this time of year in that region, those are crops that could be impacted. San Diego County is one of the largest producers of flowers and nursery crops in California. That’s one sector trying to get a better handle on the situation since many were forced to evacuate and have been unable to irrigate plants.

This is not the first problem farmers have had to confront. They had the damaging freeze in January, drought for a couple of years, particularly in Southern California, and now strong winds and fires. Some of the farmers are dealing with all of these. If a tree was weakened by the freeze, and then weakened by the drought, it makes it that much more prone to trauma and much less able to withstand it.

Eric Larsen
Executive Director
San Diego County Farm Bureau

Q: Tell us what you’ve learned being so close to the action?

A: I’ve been talking to people all day. We’ve got stories of produce folks who have lost their homes in residential neighbors. Then in the field, it’s been so chaotic and fires are still burning so reports continue to trickle in. The amount of acreage damaged is estimated to be in excess of 10,000 acres. The largest amount of land damaged is grazing land, and all that can be restored with some good rain.

The avocado crop probably has the greatest amount of lost acreage. Early estimates show that it amounts to one half of the total damage in acreage, by virtue of maybe just bad luck. When you look at the footprint of where the fires ran, those are all in avocado producing areas.

Q: Have you been able to get a first hand look at the damage?

A: I can’t get through the fire line. Growers can’t get back to farms to get sprinklers going because of security and mandatory evacuations. Only those aggressive reporters that slog out into the fire areas find someone to quote. We understand the need for coverage, but it’s already too much stress and anxiety for these folks who have lost homes and business and are still facing potential fires and further ramifications.

We spoke with one avocado grower who lost 25 to 30 percent of his production. Another 45 to 50 percent and a third 20 to 25 percent. That gives your readers a sense for what people in the path of fires are experiencing.

The bright thing to report is that avocado groves acted as fire breaks and burned themselves out to protect property on the other sides. We had the driest year in history in Southern California, and very, very, dry brush helped fuel these catastrophic events. Areas adjacent to avocado groves benefited by the irrigation and moisture in branches and trunks and served a viable purpose as fire suppressors.

I will be conducting field observations [today] and will build a much better report based on what I’ve seen to share with you when I return.

Dan Legard
Director of Research
California Strawberry Commission

Q: Has the strawberry industry been spared from the wildfires that have engulfed much of Southern California?

A: The fire hasn’t caused damage to strawberries. We’ve had some high wind damage in the Oxnard area mainly; sandblasting of the plants twisting them around and beating them up a bit. But the plants should come out of that. This is just a setback, but the crop should be fine. There may be some concerns from new plantings.

We’re fortunate the fields weren’t affected directly. The fires got close in some areas of Orange County, but fortunately they didn’t affect the growers themselves.

Q: Has the evacuation process created hardships?

A: Evacuations have caused minimal impact. Clearly evacuation traffic and closed roads made it so growers weren’t able to get around, but these barriers didn’t last long relative to the damage done to other crops and the costs to those growers.

We don’t anticipate a large impact from this event in production for the strawberry industry. Clearly it caused problems. With the strong winds, plastic was blown loose, issues with running water, etc., leading to additional expenses and hardships for growers.

The plants in the affected areas with fruit on them now are summer-planted varieties. But that shouldn’t impact the market, since we’re still able to harvest fruit in the North. Since it’s dry up in the North and there haven’t been heavy rains, losses from wind damage in the South will be offset by continued production in the North. We got spared largely. We anticipate the overall market will be fine.

Mira also checked in with a local, Mike Spinazzola, to find out if all is OK with him. We had spoken with Mike back in December to get input on food safety — a piece you can read here.

Mike Spinazzola
Diversified Restaurant Systems

Q: Are you OK? How is everyone around you fairing since the wildfires swept through your area?

A: Fortunately everyone close to me is doing fine. We all had to evacuate. It was mandatory. None of my close friends lost homes in this one. One of my closest friends lost his home in the last fire.

Everyone had to leave the area. Stores and restaurants closed down. Subway was putting together a program to deliver sandwiches to evacuation centers. A lot of volunteers went down to help. San Diego has done a terrific job bonding together.

One of the touching moments to me was hearing that Qualcomm Stadium executives managing the crisis turned down volunteers because so many people wanted to help.

Q: Where did you evacuate to?

A: We went to a hotel. My father and brother and I were all in mandatory evacuation areas so we went downtown. Several others went West and South to the beaches. We had friends who couldn’t get hotel rooms downtown Monday evening. We’re in the Carmel Valley/Del Mar area. The fire didn’t get within eight miles but it got very smoky.

Restaurants in certain areas on the border off the freeway opened up before residents were allowed in their homes. Other restaurants opened up for people to have dinners and watch the TV news. www.10news.com is a good website to view images of people impacted by the fire. For those who want to help, there’s a fund for the San Diego Red Cross or Wildfires Relief 2007.

Q: Has your business been impacted in any way?

A: In terms of my company, we’re just offices here. The fields and various crops we are using are not in San Diego, so there is very little impact other than avocados. My understanding is that 30-plus percentage of crop will be lost, and with the air out there — particles and ashes — it will be difficult for people out picking. We’re having troubles getting the San Diego avocados to the distribution center. But that’s a minor setback.

The produce industry is filled with good people used to dealing with weather-related catastrophes and banding together to overcome tragedy.

And the California Avocado Commission also provided this supplemental information:

CALIFORNIA AVOCADO CROP LARGELY INTACT REPORTS
THE CALIFORNIA AVOCADO COMMISSION

IRVINE, Calif. (Oct. 25, 2007) — Wildfires that swept through Southern California this week affected the state’s largest avocado growing region, but the California avocado crop remains intact, according to the California Avocado Commission.

“Our primary concern has been the personal safety of our growers and their families,” said Commission President Mark Affleck. “Some growers have suffered losses and we will do everything possible to help them through this difficult time.”

Although damage reports are still coming in, and fires continue to burn in portions of San Diego County, accounts of avocado losses have been overstated.

“Early reports from other sources stated that 20,000 acres of avocados were lost in the fires in San Diego. This information was incorrect,” said Guy Witney, the Commission’s Director of Industry Affairs. “The actual area affected is expected to be only a fraction of that amount.”

Before the fires, California was expected to produce about 365 million pounds of avocados during the 2007-08 crop year. The Commission is now reevaluating the crop, which is likely to be

10 percent smaller than initial projections because of the fires and Santa Ana winds.

“We’ll know more in the coming weeks,” Witney said. “The Commission will issue an updated crop estimate once all the information is in.”

And the California Avocado Commission also provided this supplemental information:

Santa Anna winds fanned wildfires in Southern Califonia this week, scorching orchards in the south and whipping fruit from trees across the industry from San Luis Obispo to the Mexican border. Overall preliminary crop losses across the avocado industry are estimated to be around 10%. Prior to this disaster growers reported the total crop to be 365 million pounds for 2008, however, considering the past four days of wind and wildfires, the crop is more likely to come in at around 325 million pounds by season end in November 2008.

The wildfires that swept across Southern California this week forced the evacuation of thousands of growers from their homes and groves, and caused considerable anxiety for many of our industry’s farm families. As the fires and smoke subsided, the avocado community was saddened to learn of individual loses to homes, property and groves. The California Avocado Commission is deeply concerned for the safety and welfare of every one of the more than 3,000 farm families affected by theses devastating wildfires and will do all in our power to provide support during recovery.

We know from information gathered by our staff, called in by growers, reported by media, and from federal, state and county agencies, that while many families have suffered serious losses the situation could have been considerably more serious. Our deepest sympathies go out to all those who face despair and anguish from their loss, and our gratitude to those who have worked tirelessly to save properties and lives in these firestorms.

Once evacuees are allowed to return home to their farms, and qualified local survey crews are able to assess crop and tree losses in burn areas first hand, it is impossible to provide an accurate assessment of crop and property losses. National media reports of avocado acreage losses amounting to 20,000 in San Diego County are grossly exaggerated. In total, San Diego County avocado orchards cover 24,000 acres, these groves are cover the hillsides between the small north county towns of Fallbrook, Valley Center, Pauma Valley and other small close-knit communities. It is likely that severe damage has occurred in places, but generally avocado groves are far less combustible than chaparral, oak scrub, pine trees or citrus orchards. In most cases, even fast moving fires with an abundant fuel supply are slowed, even stopped, by the green “firebreak” offered by the lush canopies of avocado trees.

Early tree loss estimates from growers and grove mangers in the field have been coming in to the Commission both voluntarily and through direct contacts made by staff. Our first rough estimates by area are:

Growing Area Producing Acres Fire Loss Acreage % of Producing Acres
Orange County 1390 300 21.6%
San Diego Co. 24,171 2500 10.0%
Riverside County/Temecula 7,664 300 4%

Also the California Farm Bureau Federation recommended this most recent summary for perspective on crop size by location, etc.:

http://awqa.org/pubs/cropreports/2005sumcropreport.pdf

Up-to-date information on the fires themselves can be found here:

http://www.calfires.com/

The California Farm Bureau Federation is publishing frequent updates of damage by crop and section. We publish the most recent update below and you can continue to get updates at:

http://www.cfbf.com/fire/

Wildfires and strong winds have harmed crops and livestock in many parts of Southern California. Percentages of damage and dollar-loss figures will be hard to come by for several days, because farmers, ranchers, nursery owners and agricultural officials will need time to assess losses once the fires and winds have died down.

The California Farm Bureau Federation reports the following impacts on individual crops and commodities, based on interviews today with individual farmers and ranchers and with representatives of commodity organizations:

Avocados: Avocados have been affected by both wind and fire. Marketers have estimated that at least 10 percent of the state’s overall crop will be lost. Impact on prices and supplies will be moderated by the availability of avocados from other growing regions. A California Avocado Commission representative says fierce winds blew fruit from trees in Orange, Riverside, San Diego and Ventura counties. Groves have also been damaged by fire, particularly in San Diego County. Emergency officials estimate as much as one third of the state’s acreage stood in the path of wildfires. The commission will survey farmers to gather updated information about losses, but the combination of wind and fire causes serious concerns.

Lemons: Farmers report wind damage in lemon groves, as lemons knocked against limbs during the windstorms. That can cause scarring on the outside of the fruit. There are no estimates yet as to how much of the crop has been affected. The grower organization California Citrus Mutual says it does not expect significant damage to the crop.

Winegrapes: Most winegrapes have been harvested in Southern California, but there’s concern about fire damage to vineyards, particularly in the Ramona Valley region of San Diego County. The California Association of Winegrape Growers reports that one Ramona-area winery was destroyed by fire. The Los Angeles County agricultural commissioner’s office says winegrapes grown near Malibu escaped damage; one farm in that area has resumed harvest.

Nursery crops: The California Association of Nurseries and Garden Centers says it is working to assess damage. Many nurseries have been evacuated and their owners have not been able to return to learn if there has been damage. San Diego County leads the state in production of nursery crops and a number of plant nurseries sit in the path of wildfires.

Pumpkins: Dust blown by high winds scarred pumpkins awaiting sale for Halloween; the Riverside County Farm Bureau said pumpkins there had been “sandblasted.” A popular pumpkin patch in the Saugus area suffered fire damage. The Los Angeles County agricultural commissioner’s office said the fire scorched pumpkins and also burned storage bins, hay bales, antique vehicles and one home on the property.

Strawberries: Most strawberries grow in regions near the coast. The California Strawberry Commission says farmers have not reported damage to date. Southern California farmers have just planted berries to be harvested near Christmas. Farmers express concern about the hot, dry weather, which is not good for the strawberry plants. Farmers are irrigating their plants to compensate and the commission says it expects little impact on production.

Chickens: The Pacific Egg and Poultry Association reports fire damage to some egg ranches in San Diego County. It has received no reports of hen losses, but it says outbuildings have burned. In addition, ranches have lost power at times. Most farms have backup generators to keep cooling and ventilation systems in operation. Local authorities have worked with the Highway Patrol to maintain deliveries of feed to egg ranches and to assure that eggs can be delivered.

Dairy cattle: The state Department of Food and Agriculture and other agencies have been working to make sure milk tanker trucks can reach dairy farms in the fire area. Cows must be milked regularly to protect their health and the perishable milk must be moved quickly to processing facilities, which is complicated by road closures in Southern California. Dairy farms in the Ontario area have suffered structural damage from the strong winds. Farmers have been removing wind-blown debris from their farms to protect their cows, and keeping the cows cool by using misters.

Beef cattle: Ranchers in Southern California say they expect to see beef cattle and other livestock lost in the wildfires. Many ranchers have been unable to return to their land to determine the fate of their animals. Most California rangelands were already in very poor condition because of dry weather, and a San Diego County cattle rancher told us the fire had burned what forage remained on his land. As a result, he said he would be forced to sell his remaining heifers, though he will keep any pregnant cows and feed them hay. A Ventura County rancher and brand inspector says she expects it will take a week after the fires are out for anyone to be certain how many cattle have been lost. She expects the number to be low, though, in part because herd sizes had already been reduced because of the drought.

Horses: Thousands of horses have been evacuated to fairgrounds and other facilities. More than 2,400 have been sheltered at the Del Mar fairgrounds in San Diego County. The California Department of Food and Agriculture says it is working to supply hay for the animals. For every 100 horses being sheltered, officials need to find about 1 ton of hay per day.

Goats: Fire killed 52 goats that gathered in a shelter near Malibu, according to the Los Angeles County agricultural commissioner’s office. In a sad irony, the owner kept the goats to lease to landowners for brush clearing, in order to reduce fire danger.

The California Farm Bureau Federation, the state’s largest farm organization, works to protect family farms and ranches on behalf of nearly 92,000 members.

We should have much more accurate information early next week. In the meantime, those who want to help can donate to the San Diego Red Cross here.

Also to those in the industry affected by the fire, many Pundit readers have asked if people need to borrow office space, need clothing sent or require other kinds of help. If you contact us here. and describe your need, we will try to play matchmaker.

This is obviously a serious situation, made worse by evacuations that prevent people from tending their crops. Maybe the industry can take some solace from the fact that well irrigated avocado trees may actually have sapped strength from the blaze.

God speed to all affected.




Tesco May Face Opposition Not Only From Unions But Also Animal Rights Activists

Tesco has to no small extent staked its claim in the American market based on a reputational appeal. It wants to be seen as the company that always does the right thing. Thus it promotes its solar panels on the roof of the distribution center and promises to locate stores in underserved areas. It promises to provide ‘good jobs’ with health insurance and to keep its private label offerings free of transfats.

As Tesco prepares to open in the U.S.A., it can expect, of course, vigorous competition from U.S. competitors. It also can expect opposition from labor unions as Tesco is expected to fight unionization efforts.

Yet Tesco may wind up with opposition from an unexpected corner: animal rights activists and normal Americans simply horrified by practices that are acceptable in other countries.

Just this week in the United Kingdom, Care for the Wild International, handed out leaflets outside a lecture theater where Tesco’s CEO Sir Terry Leahy gave a speech. They were protesting the sales of live turtles in Tesco stores in China.

The protests are all over the web at sites such as this, which often contain gruesome videos that can make a western stomach turn.

Direct appeals have been made to the Tesco Board of Directors:

We write on behalf of our 3,500 UK members who will be shocked and sickened to learn that your Chinese operation is actively involved in inflicting some of the most extreme forms of animal cruelty imaginable. The level of suffering caused to turtles and frogs in Chinese markets is well documented. These animals are shipped and handled with no regard to their welfare and without any attempt to minimize their suffering.

They are maintained in-store under totally unacceptable conditions, and are killed in a grossly inhumane and barbaric fashion. These animals are essentially dissected alive. They have highly developed sensory capabilities, and without question suffer the most extreme pain and distress over an extended period.

It is frankly revolting that any UK company should be promoting this kind of thing.

Should such actions be repeated in the UK it would be a serious criminal offence for which you would undoubtedly be prosecuted. We can only presume that because you are committing these offences in China, you believe that it will escape the notice of your UK customers. We are determined to ensure that this is not the case. We are writing to all of our members to inform them of your direct involvement in this vile trade and to urge them to shop elsewhere….

Your company has sought to present a “green” image to UK consumers. You have also sought to promote a range of “ethical” and vegetarian products. Your corporate website states: “We will continue to promote high standards of animal welfare” and “We demand high standards of animal welfare”.

Your activities in China reveal these statements to be completely false. You are not promoting animal welfare; you are actively promoting the most obscene levels of cruelty. I would venture to suggest that no vegetarian or consumer who cares at all about the environment or about humane issues could with any conscience set one foot in your stores while you continue to be involved in this particularly horrific and destructive trade.

Tesco has tried to respond to these pleadings, and those responses have generally not been sufficient to satisfy the complaints.

To us the whole matter demonstrates the problematic nature of operating a global company. These companies will, almost inevitably, come to be seen as evil because their ethics, inevitably, will be situational.

In China, people seem to enjoy eating turtle. They like to see the live turtles and then have them decapitated. In the U.S. or the U.K., you could probably go to jail for violating cruelty to animal laws if you did the same thing.

So, Tesco or any other multinational is faced with a choice: Remain true to one’s homeland values, which means that one will be somewhat irrelevant in some markets, or adopt the views of every local market, which means the company doesn’t have values at all.

It is interesting to note that Wal-Mart, with its own Chinese operation, seems to have mostly avoided the controversy. It has been attacked for similar reasons but, perhaps because the animal rights movement is so strong in the UK, it doesn’t seem to have reached the same fevered pitch.

Still, between the unions and the animal rights activists, there are plenty of forces conspiring to attack the virtuous reputation that Tesco has attempted to build for its Fresh & Easy format.

We suspect the stores will be quite fresh, but we doubt this rollout will be particularly easy.




Wal-Mart’s Global Procurement Division
Gets Special Pass On Quality

Wal-Mart suppliers in the U.S. are now objecting to new plans for how Wal-Mart will receive, handle and evaluate at least some products supplied by Wal-Mart’s global procurement effort.

We’ve been running a series of pieces on Wal-Mart focused on the fact that it has toughened up procurement standards, although the real problem is store-level execution.

We launched this series with our piece, High Lettuce Prices Strain Supplier Relations With Wal-Mart, and then followed up with an article entitled, Wal-Mart Tightens Quality Specs.

In response to a letter from a Wal-Mart vendor, we ran Pundit’s Mailbag — Wal-Mart’s Path of Decreased Store-Level Execution. All of these pieces built on a series we ran a few months ago that concluded with an article entitled, Wal-Mart’s ‘Opportunity Buy’ Policy Reveals Much About The Company.

Many vendors have no problem with higher quality specs; in fact, the best vendors tend to see them as a competitive advantage. What is more of a concern is uneven application of the standards.

On a spot basis, this can always happen because, despite objective measurement systems, people still play favorites.

But with Global Procurement, there is a sense that an institutional favorite is being selected.

The problem is this: Wal-Mart is moving to a system in which, on at least some products, Wal-Mart stores will accept and receive imported product from Global Procurement at a specific DC or port of entry.

So, many Mexican imports, for example, will be received, evaluated for quality and accepted or rejected in Nogales.

Aye but here is the rub: Nogales may be 2,000 miles from the DC that product will wind up in.

So, whereas a Wal-Mart vendor is responsible for meeting specs at the actual DC where the product is being delivered, Global Procurement gets off the hook at port of entry.

It is kind of like putting a thumb on the scale to favor Global Procurement over outside vendors — at the cost of allowing lower quality product directly into the DCs without having to meet each DC’s quality specifications.

Wal-Mart is a big believer in global procurement and for good reason. A company such as Wal-Mart, with vast geopolitical interests, feels that it needs to be seen as the actual buyer all around the world.

It causes a lot of problems, though, and can raise costs as domestic vendors, especially those who build repacking and other facilities right near Wal-Mart DCs to handle the business, can suddenly be left with unused or underutilized facilities and staff for weeks or months at a time. In many cases, it would behoove Wal-Mart to find ways to run that directly imported product through its incumbent vendors’ systems.

It is also notable that Global Procurement isn’t easy. Supervalu, which was the leader in a direct import program from Chile, eventually gave up.

The tough thing for a retailer is what do you do with sub-standard product? If you buy produce in Mexico or Chile or wherever, by the time it gets to a DC in Connecticut, a certain percentage won’t be acceptable for use.

The Pundit once made a fair living on the Hunts Point Market selling imported items retailers had brought in and rejected. The retailers generally lost money on this produce. But that is part of the overall cost of running an import program.

Another big cost of an import program is loss of timeliness. What if product is held up in a port and the retailer needs to buy in product to keep the stores full? Then when the imported product is released, it may not be needed or be too short of shelf life. An importer knows how to match each box with the right client — a retailer only has itself as a client.

As long as Wal-Mart and other retailers that want to directly import treat the imports as being done by a separate company and hold this fictional company to exactly the same quality specs and treat late delivery from this company in exactly the same manner as they would any other vendor, Wal-Mart and other directly importing retailers can actually judge the cost and benefit of the global procurement effort.

The minute they start giving their own operation special privileges — such as allowing them to make delivery at a port of entry — they all lose the ability to evaluate the success or failure of such an effort and alienate suppliers who feel they could win in a fair fight.




Organic Definition Under Attack By Group Opposed
To Air Freighting

The organic movement was already fracturing between advocates of local and advocates of organic. Now from the U.K., there is an indication that the organic standard will morph into something considerably different than its original meaning.

From the Guardian in the U.K.:

AIR-FREIGHT FOOD MUST PASS FAIR TRADE TEST
TO RETAIN ORGANIC LABEL IN FUTURE

  • Soil Association rejects widespread calls for ban
  • Bar would have hit jobs in developing countries

Food air-freighted to Britain from developing countries will only bear an organic label in future if it can be shown that it was produced to fair trade standards as well as high environmental standards, the Soil Association said yesterday.

The move by Britain’s leading organic inspectors follows concern about the climate change impact of food flown long distances and fears that some developing countries are in danger of losing markets due to new “green” protectionism.

The association rejected calls from the public, environmentalists and some of its own producers for a ban on all air-freighted organic food, deciding this would penalise many poor countries which benefit in terms of jobs and wages from growing organic food for British consumers.

The new ethical standards, which are similar to those that apply to Fairtrade products, will demand that organic food producers in developing countries contribute substantially to the social needs of communities and workers, and guarantee wages and good working conditions.

No date has been given for the change but it is not expected to be in place for at least a year. “It’s right to continue to allow some organic air freight. Most people say that they only support air freight if it delivers real environmental and social benefits. This linking of organic and fair trade standards does that,” said Peter Melchett, the Soil Association’s policy director.

But he said that the long-term aim was to minimise air freight: “We think there will come a time where air transport becomes a thing of the past because of the cost of carbon emissions.”

The shift will only affect the trade of £46m of food, but it is considered significant because air-freighted fresh produce and organic food are two of the fastest-growing sectors of the giant global food economy. Other international certification organisations are expected to follow the lead of the Soil Association.

The move follows consultation with nearly 200 organisations, including the World Trade Organisation, governments and UN bodies. New Zealand, Kenya and the UK’s Department for International Development argued strongly against a ban. Supermarkets recognised the public disquiet and argued for a labelling system, and UN bodies urged extreme caution to protect vulnerable economies.

The prime minister of Tanzania, Edward Lowassa, pleaded with the association not to change its policy immediately because this would undermine opportunities for many developing countries to export high-value products to the UK. A study by the Danish Institute of International Studies, found that the world’s poorest countries account for 79% of the organic foods exported by plane to the UK. The biggest exporters are Egypt, Kenya, Ghana, Zambia and Morocco.

Growing demand for year-round fresh produce has seen the volume of fresh fruit and vegetables flown into Britain more than double in 15 years. It is now common to see produce from Africa, Latin America, Australia and New Zealand on supermarket shelves. Foods include pineapples, mangos, peas and salad vegetables.

Although air-freighted goods are less than 1% of the total UK “food miles”, the government estimates they are responsible for 11% of the CO2 emissions from food transport. The rise in air freight is due to increased globalisation of food supply and a relative decrease in the cost of air freight compared to other forms of transport.

The proposal was actually to prevent any air-freighted product from bearing an organic label. So the requirement for a Fairtrade-like certification is actually a concession. Yet the African farmers, though glad they are not facing a total ban, see the restrictions as protectionist:

The Soil Association — the body that certifies UK organic produce — will require farmers to prove they provide employment at fair pay and that they are trying to lessen dependence on air travel.

The BBC’s business reporter Mark Gregory says they can do this, for example, by developing local markets for organic produce.

However farmers’ representatives say that in practice there is no real alternative to air freighting goods to where the demand is — among wealthy consumers in countries thousands of miles from where the products are grown….

But a Kenyan oilseeds producer said he was not impressed by the new measures.

“I think it’s a protectionist measure. Competitiveness is at stake here and therefore because a lot of produce is from the Third World the local farmers lobby is against it,” Vimal Shah told the BBC….

Airfreight, which some see as environmentally damaging because of the harmful emissions produced by flying, is the only way they can get perishable produce to these markets.

The International Trade Centre issued a statement saying the proposed changes would just add further costs to poor African farmers seeking to enter UK markets.

“Organic production in Africa has been an export success story and we are disappointed that the Soil Association will make it harder for African companies to enter lucrative markets,” said Patricia Francis, ITC’s Executive director…

There are really three issues: Substance, trade and the meaning of organic.

• Substance

Even when we assume good will, on the substance of the matter, the Soil Association is simply making a mistake.

First, one cannot pluck out one and only one aspect of the supply chain and make any environmental judgments regarding the totality of the chain. It is possible that one’s freight method might give off a lot of carbon, but one’s production method might compensate. To base a decision such as organic certification on one input of production and distribution contravenes everything organic advocates have claimed they believe about the need to consider the entire ecosystem and avoid “silver bullet” approaches.

Second, it is highly unlikely that organic production in Kenya — even with airfreight — contributes to more carbon output than organic production in the U.K. for the simple reason that workers in the U.K. are supported in U.K.-style — automobiles, heated and air conditioned homes, vacations in southern Spain — the poor African farm workers get none of this, which, properly considered, is part of the total carbon footprint of the production and distribution cycle.

Third, due to seasonal reasons, some product that would substitute for African produce would be grown in greenhouses. These can involve plenty of carbon output of their own.

Fourth, the notion that airfreight produces disproportionate carbon output is a determination subject to factual analysis that must be assessed in each and every case. If, for example, the produce was being shipped in the belly of a passenger airline, as is often the case, we must determine if that airliner would continue to fly without freight. If it would, we have to refigure the carbon output to be based solely on the additional carbon output caused by the additional weight of the produce. Further, since this is all about transportation methods, we would have to contrast this newly figured carbon output via air with the carbon output by truck to Alexandria, boat across the Mediterranean and another truck to the U.K. It is not at all clear that the carbon output of the truck, boat, truck route is less than putting the cargo on a plane that was flying anyway.

Fifth, if the goal is to help the world deal with global warming, the Soil Association needs to think about wealth and increasing it. It turns out that wealthy countries have many ways of dealing with global warming and mitigating its negative effects and taking advantage of positive impacts. By imposing costs on industry that needs to use air freight, the Soil Association makes it likely that business will migrate from these poor African countries to other areas. This means that Africa will be poorer than would have been otherwise the case and thus less likely to be able to deal effectively with global warming, which will not be halted by this action.

• Trade

First, if this becomes a governmental requirement for being sold as organic, it would clearly be a restraint of trade and violation of the WTO rules. We would argue that operating under the patronage of His Royal Highness, the Prince of Wales gives it that imprimatur. Countries are just not permitted to select out and discriminate against the transport means that other countries use to get product to market.

Second, the Soil Association is imposing an additional cost only on those who need to air freight product. This discriminates against more perishable goods and countries that are landlocked. You can be sure that these issues will be objected to in trade talks.

Third, the Soil Association is heavily influenced by British organic farmers. It cannot be objective in this type of decision.

• Meaning of Organic

Many people believe that the world would be a better place if synthetic fertilizers are not used or if their use is minimized. That does not mean that on all moral judgments people want elite committees to make decisions for them. The truth, unarguably, is that produce that is grown organically is not altered by whether it is transported in a plane, a boat, a train, a truck, behind a team of horses or on the top of a person’s head. So this issue simply doesn’t belong in a definition of organic.

This is an attempt to shove down the throat of consumers a particular economic and moral philosophy. In so doing, they will do untold harm to the Africans but also untold harm to the future of organics.




Pundit’s Mailbag —
PMA’s Opportunity To Learn From Friends And Foes

We started our analysis of the PMA convention with a piece entitled, PMA Analysis — Does Houston Merit A Permanent Place In The PMA Rotation?

We then ran PMA’s Attendance Just Shy Of 16,000, which focused on attendance. Peter Dessak, Vice President of Six L’s Packing Company, contributed to the industry discussion with a letter pointing out that with a hotel room in the Galleria area there were increased costs. We ran the letter as part of a piece entitled, Pundit’s Mailbag — PMA Needs To Factor Bus Time And Taxi Costs Into Convention City Choice.

Pundit’s Mailbag — Selling Versus Learning At PMA featured a contribution from Jack Vessey, Vice President and Marketing Director for Vessey & Company. The letter pointed out that increased attendance of growers can create educational opportunities for the whole industry. This piece also raised the issue of a disconnect between exhibitors there to sell and some attendees at PMA to learn.

We then ran a piece entitled Pundit’s Mailbag — Should PMA Facilitate Meetings During Program Times? The piece dealt with the tension between accommodating attendees’ desires to set up their own meetings and PMA’s need to maintain attendance at official functions.

Today we review a letter from a major sell-side player who takes exception to these two paragraphs that we had published:

One exhibitor at a fresh-cut organization told us a little story: He was manning his booth and a fresh–cut processor on another continent came over to ask questions and take pictures regarding the technology used in production of certain items. As our exhibitor politely tried to disengage himself to look for clients and prospects to help, the visitor kept asking questions.

When he didn’t get the honest and open answers he wanted plus felt exasperated as our exhibitor friend kept trying to pull away, the visiting fresh-cut processor finally announced: “Listen, I’m here at PMA to learn” and our exhibitor friend explained: “That’s fine, but I’m here to sell!”

Here is what our correspondent had to say:

I couldn’t help but roll my eyes when I read this on the Pundit because I have heard this before on the PMA floor.

If someone needs to learn and cannot get anywhere, send them my way. Even if they are a direct competitor.

I have found over time we can still learn from each other without compromising our competitive position.

Some of the most insightful things I have learned in this business have come from relationships I have had with direct competitors in both the USA, and abroad, not to mention having made some good friends.

— Eric Schwartz
President
Dole Fresh Vegetables
Monterey, California

There is little question but that Eric is correct. If someone does things very different from what your organization does, he is bound to know a lot of things you don’t — you can certainly learn a lot, and the key is to find what is relevant to you.

To the extent someone is a direct competitor, you have a lot in common and, because everything is so relevant, even if guarded in discussions — some pearls are bound to slip out.

Yet the very fact that Eric mentions having heard it on the floor indicates that our original letter-writer hit a nerve.

Eric has the great advantage of being part of the largest company in the industry. Anyone who stood in Dole’s incredible new booth this year — design was overseen by Rick Utchell, who we mentioned both here and here — could see the kind of support and staff Dole can field.

To some extent Eric can focus on very valuable long-term learning because he has a large team of salespeople whose job is to get the orders. In fact, one could argue that in his present position, it is Eric’s job to focus on such strategic relationships. After all, today’s competitor may be tomorrow’s acquisition.

For many of the exhibitors that don’t have the depth of staff, the focus is inevitably more short term.

Eric’s comment about finding friendships among competitors is certainly true. Who better understands your situation? Who can have more empathy?

The Pundit’s grandfather used to show pictures of an annual dinner dance in New York City for a Club known as The Scavengers. We don’t know much about it, but know that the Pundit’s grandfather, Harry Prevor, was always up on dais, and the dinner was always honoring some union leader or other industry kingpin. The all-male officers would sit on the dais and their wives were seated mixed in at the tables on the floor. Everyone was dressed to the nines — men in tails and women in ball gowns.

We understand that there was some kind of “clubhouse” down on the Washington Street Market and everyone down on the market was a member.

A clubhouse, annual dinner dances… they were certainly all competitors, but the industry was somehow more fun as well.

Our sense is that business has changed. The people are less homogeneous and their roles less defined. When The Scavengers met, there was no real concern that a potato and onion house would start competing with a tomato house. Today, anyone can do anything and so people are more guarded.

Certainly nobody spent money to market as they do at PMA today, so the stress level was less.

Many thanks to Eric for reminding us that there is value in relationships that cannot always be predicted at first meeting and that it is generally wise to keep ourselves open to learning in unpredictable places and unpredictable ways.

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