Consumption at Record Levels but Profit Margins Shrinking : Raisin Growers Get Bitter With Sweet

In a normal year, the news out of Fresno this week would be good indeed: Consumption of California-grown raisins, almost all of them from the San Joaquin Valley, set a monthly record last November--22.7 million pounds. And early indications are that December improved on that.

“It’s half good news,” said Bob Phinney, director of advertising and promotion for the California Raisin Advisory Board in Fresno.

The half that’s not good, explained Clyde Nef, the board’s manager, is that the increased sales have come at bargain-basement retail prices that bring no financial relief to hard-pressed growers in the $300-million-a-year industry.

On the other hand, increased consumption is at least eating away at bulging stocks of surplus raisins--an estimated 85,000 tons--that have accumulated after two exceptionally large growing seasons that came at the same time that the world price plunged and California wineries cut back on their usual purchases of Thompson seedless grapes. (Thompsons, the prime raisin grape, are also used in wine blending.)

The dried raisin crop, which varied from 254,000 tons in 1980 to 205,000 tons in 1982, suddenly soared to 347,943 tons in 1983, and only tapered off to 191,857 tons last year.

Before 1983, 40% of the state’s Thompson seedless crop was sold as fresh grapes to the wine industry for blending. But wineries, themselves beset by overproduction and no increase in consumption, canceled their orders and the grapes went to raisins--most of them stockpiled by the growers in unsold reserves.

Thus, while raisin field prices appear stable in 1983 and 1984 at $1,300 a ton, that price applied only to so-called free tonnage--that fraction of the total crop that is bought at the contracted price. The balance was stored in unsold reserves, reducing the true return to growers for their crops to about $600 a ton last year, Nef said. That is well below the average cost of production.

In an effort to bring supply into line with demand, industry leaders last summer offered packers surplus raisins at just $100 a ton for every ton of raisins the packers still held in inventory. This netted growers next to nothing, but it did allow packers to reduce their cost of inventory to about $700 a ton, which is about what last fall’s market price of the 1984 crop was to bring.

This resulted in bargains for consumers--and further financial losses for growers--but significantly reduced packers’ inventories and the growers’ unsold reserves. Retail prices, which stood at $1.51 a pound in November, 1983, have dropped to as low as $1.11 a pound this year, Nef said. This produced the record consumption.

Growers have taken another step this year to clear remaining surplus stocks. About 75,000 tons of unsold raisins have been made available for growers who agree to cut back 1985 production from their 1984 output. Participating growers will get a ton of surplus raisins from unsold reserves for every ton that they do not produce this year.

That will hold down the surplus and help future sales, grower Dick Markarian noted, but in terms of helping growers financially, he added, “the growers weren’t helped at all.”

“It’s going to take a long time,” Nef agreed.