CherrCo helps bring market stability to tart cherry industry

 By Pamela J. Karg
Field Editor

ife can change quickly in agriculture. At other times, it takes many years of hard work to develop necessary changes including new cooperative organizations. Yet leaders of the tart cherry industry were persistent in their work and have created an innovative cooperative marketing organization as well as a new federal marketing order program.

Both the new order and the new organization called CherrCo didn't happen as quickly as life can change. It took years of hard work. Some previous attempts at organizing new approaches had succeeded, and some had their ups and downs. For example, an earlier supply management federal marketing order had been discontinued in the early 1980s.

But a number of the industry's key underlying problems including surplus supplies, fluctuating production and weak pricing arrangements did not go away. So leaders explored alternative programs and organizational arrangements to try to improve their industry. Their efforts included in-depth discussions during the late 1980s and early 1990s about developing a new marketing order for supply management and a new, broad-based cooperative.

Throughout the early 1990s, the industry often grappled with surplus supplies and low cherry prices. The only exception was in 1991 when there was a short crop. Prices temporarily rose to exceptionally high levels 80-plus-cents-per-pound for frozen cherries. But the temporarily high prices were a deterrent for some users. More problematic than one season of high prices, though, were the years tart cherries drew very low prices.

In 1995, for example, prices had tumbled to 25 cents per pound for frozen cherries. By contrast, the costs for production, harvesting, processing and freezer storage were about 60 cents a pound.

"Another year or two [of low prices] and we estimate that about half our growers and a good share of our processing plants would have gone out of business," says CherrCo President James Jensen, who has been around the cherry business for 39 crops. "We knew we needed a consistent supply for the marketplace and pricing that was relatively stable. We knew by 1996 that, if the conditions that occurred in 1995 continued, many of our growers and processing plants would go out of business."

These kinds of difficult economic conditions set the stage for change. Growers and processors found themselves engaged in many industry-wide discussions that eventually led to the development of a new federal marketing order to help reduce some of the surplus supply problems. And discussions continued into the subject of a new federated cooperative for tart cherry growers.

"By 1996, we knew we'd have a marketing order in place. It was a new tool we could use to help turn the situation around. And we thought that, if we were ever going to put together a (super cooperative' like we'd talked about for years in this industry, this was the time to do it," Jensen says.







"Another year or two [of low prices] and we estimate that about half our growers and a good share of our processing plants would have gone out of business." James Jensen

The industry credits the creative thinking by some growers and processors who were willing to develop a strategic plan for CherrCo. While grain and livestock producers have developed "new generation" cooperatives, these fruit growers decided to stay the course by developing a "super cooperative" that bargained on behalf of its members rather than processing value-added products. Yet the tart cherry industry borrowed ideas from some of these other facets of agricultural cooperatives to put together its own organization.

In early 1997, CherrCo organizers brought Jensen on board as president of the "super cooperative." Months of hard work and many discussions across the country in cherry circles resulted in 78 percent of the industry willing to give the idea a try by a self-imposed deadline of June 1997.

During those grower and processor meetings, Jensen communicated CherrCo's two goals. First, CherrCo proposed to stabilize the price of the industry's commodity products No.10 canned or hot-pack tart cherries and frozen tart cherry products. Second, CherrCo wanted that stable price to be at a level that helped keep growers and processors in business.











CherrCo concentrates its efforts on No. 10 canned or hot-pack tart cherries and frozen tart cherries.
photo by Forest McMullin,/Agrilink


On July 1, the first CherrCo board voted to move ahead. By July 6, Washington state cherries were rolling into a processing plant. As a federated cooperative, CherrCo now has 28 member cooperatives in the United States and Canada. It represents 75 to 80 percent of Michigan's tart cherry production and significant portions of the production in New York, Utah, Washington, Wisconsin and Ontario. Members range in size from producing about 600,000 pounds to more than 10 million pounds annually.

The cooperative's primary directive is to establish minimum prices for various grades and packs of frozen and hot-pack tart cherries. Once a minimum price is set, individual members select sales agents, all of whom are licensed by the cooperative. Sales agents can represent more than one member.

But it is imperative that sales information be treated as proprietary and not shared with other members. Information about who is selling to whom and at what price is also confidential. By licensing the agents, CherrCo can ensure they follow procedures as well as abide by the established minimum price.

CherrCo also tracks and keeps a handle on the nation's tart cherry inventory. When and where possible, CherrCo and the licensed agents work to pool production to meet customer demands. Before cherries are processed, they are sent to storage facilities. At that time, the fruit is consigned to CherrCo.

However, the cooperative never has the cherries in its physical possession. Rather, the fruit remains in storage until a sale is made. If the minimum price requirement has been met, CherrCo releases the cherries. The cooperative then bills the buyer, collects from the buyer, subtracts an administrative charge to cover its expenses, and sends the balance of the proceeds to the cherry's growers.

"We're not in the retail business," Jensen emphasizes. "We don't have a brand name. We don't own any processing plants. Our members decide what they're going to do with their cherries and whom they're going to sell to. They hire their own sales staff licensed by CherrCo. We concentrate on ensuring we can maintain a price for our members."

Even though the issue of price is taken out of the marketing equation, CherrCo members find other avenues on which to compete against each other. Some members offer a mix of tart cherry and other farm-grown produce. Others specialize in just frozen or hot-packed tart cherries. Still others try to differentiate them-selves from CherrCo competitors by building on their reputations in the industry, product quality, processing plant standards and capabilities, and any other special services they may develop to attract customers.











CherrCo would like to increase exports and fine-tune supply management mechanisms.
Great Heilman Photo


"But I think what we didn't realize, when putting this together, is a third thing that would happen. We're facilitating better discussions, better communication, throughout our industry. We're all at the table together and, while we are not all holding hands, we are at least not throwing things at each other," Jensen says. "There have been a lot of things happening in the tart cherry industry that have benefitted many that were enabled by CherrCo. Several times I've heard, 'Five years ago, we would never have this conversation."'

People never really knew each other, even in an industry with only a couple thousand growers across the nation. But what they did know about each other was that it was always "the other guy's fault" for the marketing problems the industry faced. Now the individual members are getting to know each other and understand the collective power that occurs when they can work together.

CherrCo's 28 members each hold a seat on the board, and those directors meet quarterly in addition to serving on committees that include marketing, quality, grower relations and strategic planning. "It allows us to involve all our members in discussions and decisions. It doesn't mean we all agree on everything even now, but we're at the table," he adds.

Yet, despite the developments and progress that have been made through organizations such as CherrCo and the new federal marketing order, the industry continues to be challenged bv a number of ongoing fronts. Work is needed to expand exports. More could be done to fine-tune supply management mechanisms. And both could help to stabilize prices even further for growers as well as their customers. Talking through these challenges has become critical in this specialty fruit industry whose grower numbers are easily dwarfed by other segments of U.S. agriculture.

A commitment to continued, industry-wide communication by organizations such as CherrCo was the motivation behind a major conference this past spring. During their time together, industry leaders looked at the various problems or major gaps in the tart cherry industry, and how various programs and parts of the industry could work together more effectively to provide continued progress. And expectations are running high that events such as the conference, formation of organizations such as CherrCo and an ongoing dialog could act as catalysts to create even more changes. They may not happen overnight. But they certainly will require hard work.







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