Apr 7, 2007Globalization Hits Michigans Asparagus Industry
The challenge seemed reasonable and clear.
Without unity in the asparagus industry, it won’t survive long. said Ron Armstrong, sales president of Honee Bear Canning in Lawton, Mich. On that point, there was – and is – agreement among Michigan asparagus growers and members of the Michigan Asparagus Advisory Board. For too long, they well know, forces that would divide them have made significant progress, even if unintentional, such as the U.S. war on drugs inadvertently creating a strong Peruvian asparagus competitor.
And with polite deference to Armstrong’s assertion that his vision for unity reaches all of North America while others see only to the end of Michigan’s asparagus fields, the growers seemed a bit baffled by Armstrong’s call for unity.
The bafflement was because of one fact: They held in their hands Armstrong’s letter to Jeff Haarer, manager of the Producer Security Services Section at the Michigan Department of Agriculture (MDA), dated Aug. 25, that spelled out Honee Bear Canning’s intention to refuse negotiation of 2005 prices and terms of trade with members of the Michigan Agricultural Cooperative Marketing Association’s (MACMA) asparagus division.
“We are opting out now,” the letter said, “so that MACMA growers have ample time to make their marketing decisions and that the organization and redistribution of North American asparagus runs as smoothly as possible for Honee Bear Canning.” That decision, while legal under terms of Public Act 344 of 1972, effectively divides Michigan’s growers between MACMA members and nonmembers.
That’s far from his intention, Armstrong said.
“Grower affiliation is no concern of mine,” he said. “MACMA and P.A. 344 are two different things. Honee Bear has no issues with MACMA and never has. I’ve educated myself, and P.A. 344 says either side can opt out (of negotiations). We’re just exercising our rights under 344, and there’s no other news than that. I have no idea if I’m busting a union of growers. All I do is follow the rules of 344 and run this business to the best of my ability.”
Honee Bear has gone to arbitration with MACMA in both 2003 and 2004 (and in previous years) over MACMA pricing and terms of trade. MACMA is the only state-accredited organization that, under terms of P.A. 344, has the right to negotiate minimum prices of asparagus between growers and processors.
MACMA, while not officially known as a union, is an organization of Michigan asparagus growers representing an estimated two-thirds of the state’s production. By law, MACMA would not have been accredited unless it represented more than 50 percent of the state’s growers and production volume.
While MACMA cannot be considered a union as defined by today’s terms, Honee Bear’s declaration that it will opt out of negotiations is a union-busting tactic, said Ken Nye, manager of MACMA’s asparagus division.
“Because Honee Bear is our largest asparagus buyer, they are forcing Michigan growers to make a tough decision,” he said. “They’ll have to decide whether MACMA – and the price floor it negotiates – is worth belonging to or whether they’ll cancel their MACMA membership so they can sell to Honee Bear at whatever price they offer.
“This is a particularly bad time to make that decision, because with Seneca (Foods) announcing that it will not process asparagus in Washington state after next year, Honee Bear knows it can source plenty of supply from Washington. That puts everyone in a bad position, because while other processors may have the processing capability to handle all the ‘gras that Honee Bear is abandoning, they might not have the markets in place to sell it.”
“Michigan Farm News” left five phone messages at three Michigan asparagus processing companies to inquire about those potential markets, but no calls were returned.
They didn’t return the calls, Nye speculated, because they, too, face a serious decision. With Honee Bear heading into 2005 with no price floor via a contract with MACMA growers, the other handlers might feel they are at a pricing disadvantage, even though by signing a price agreement with MACMA, they will better know the cost of their raw product well ahead of the asparagus season.
However, under P.A. 344, a company that opts out is prohibited from buying from MACMA members.
Honee Bear will still have options under the law to negotiate with MACMA, Haarer said.
“The act does allow the company that opts out to reach an agreement later,” he said.
That appears unlikely, though, since it’s assumed that Washington growers, desperate to keep their heads above water when Seneca Foods abandons processing after 2005, may try anything to minimize their losses.
“I don’t think Washington growers will plant any new asparagus,” said Rodney Winkel, a Southwest Michigan fruit and asparagus grower and chairman of the Michigan Asparagus Advisory Board. “They may sell for a year in desperation, because when people become desperate, they’ll try anything to weather the storm. And who knows what options might develop for them.”
The option for Oceana County grower Gerald Malburg is simple. Either forfeit MACMA membership or find another asparagus market. The first option is much more practical, since he sells 100 percent of his asparagus to Honee Bear
“The handwriting is on the wall,” he said. “Unless something happens, I may have to forfeit my membership. And I’m not the only one in this position. I want to figure out what’s best for me and what’s best for the industry, and I’m upset that I’m being put on the chopping block. But I’m tied up with Honee Bear pretty tight. My ‘gras has no other home. But if Honee Bear opts out, who’s to say the other processors won’t? And if they won’t sign a MACMA contract, it will be awfully hard to negotiate without any leverage.”
If MACMA were indeed a real union, growers might hold back all their asparagus for a year, hoping that processors would feel the heat of unfilled contracts, and give in. But with fierce global competition, that’s impractical and risky, Nye said.
And while Malburg said he knows that cherry growers who let P.A. 344 negotiating powers lapse wish they had that bargaining power only a few years later, he also sees a cycle in the asparagus business.
“It seems that every 10 years or so, asparagus prices take a dive,” he said. “Farmers then take out their poorest quality fields, the industry rolls back and eventually gets back on its feet. But out-of-country growers don’t adjust their acres like we do, so the pressure is there now.”
While many growers feel it is Honee Bear who is applying all the pressure to the Michigan industry, Armstrong said P.A. 344 is facing pressure because it’s outlasted its mission.
“It worked real well when the only competition in the asparagus market was from the United States,” he said. “But today, in my opinion, 344 does not allow teamwork within the industry. That’s why the advisory board has to discuss a united industry. Michigan has a unique role in that industry if it is united. A united industry means all growers. And if the rules of P.A. 344 puts this company at a disadvantage, we’ll do what we have to do to survive. Growers in Michigan, Washington and California all have the same interest, and that’s survival. Profitability is another thing, and that’s in the eye of the beholder.”
While falling short of acknowledging that profitability for Michigan growers means survival, Armstrong said only his company has the historical experience to understand the global asparagus economy.
He said: “344 works for the state of Michigan, but the marketing and supply environment have changed dramatically. It’s outdated. We have a global supply now, and we have to be united as an industry, not as a state.”
But to hide behind global unity while dividing a state’s growers is bad for the entire industry, Nye said.
“If Honee Bear opts out and growers go with them,” he said, “It reduces the ability of all growers to bargain. Remember that MACMA prices benefit all growers, not just MACMA members. The ability to bargain creates a lot of stability for both buyers and growers. Honee Bear’s decision upsets that stability.”
Armstrong, however, insists he’s looking out for the good of the entire U.S. industry.
“If it was all just about the dollars,” he said, “I’d go to Peru and forget Michigan. But I have a conscience. And with the help of the marketing (advisory) board, we’re willing to build alliances with growers who are willing to adapt to the shared global opportunities and challenges.”
And if those willing growers are MACMA members?