Continuity and Changing Times

Dearly beloved:

Change, change change.

Anyone with half an eye should be able to see the citrus world has changed and, likely, will never be the same again.

And anyone who follows the Lakeland citrus scene should be able to see that the DOC agenda changes whenever the Director changes.

It should not be that way. There should be a constant, focused, effort seeking FCC/DOC actions leading to the Well-Being of Florida’s growers, But, it doen’t always work that way.

In late 2005, a blue ribbon group of 13 citrus leaders was charged with crafting a vision for the Florida citrus Industry (That’s how it was describe in official FCC report of the October 05 meeting). The group was named the Special Industry Committee. (SIC).

The SIC’s final report (dated July 11) was presented to the FCC at its July 2006 meeting. So far as DOC actions are concerned the FCC report for that meeting simply says: “The FDOC should continue to utilize the skills and experience of its staff and agencies to generically market citrus for the benefit of the Florida citrus grower”.

BUT, the report had some other, powerful, recommended next steps:

FDOC staff, where fiscally feasible, should conduct research, prepare reports and present to the FCC:–

Prioritized options for elimination of free-riders to generic advertising.

Pros and cons of various marketing strategies, i.e. Florida quality, NFC only, seals and symbols, etc. -

Opportunities to partner with (other) producer states and countries.

Now, that is forward thinking.

Now, almost a year later, we are bogged down and our efforts focused on a will of a wisp idea of a Federal Marketing Order. 

This is not to say such an order might not be useful. BUT, we should NOT wait on dealing with our problems while that idea is “thrashed” out. Our FCC/DOC state marketing order is ready to hand and can do more than it is being asked to do. And, I think we should be looking into those “opportunities to partner with other producer states and countries” referred to above.

I am told Ken Keck, the new DOC Director has discovered the recommendation re investigating “Pros and cons of various marketing strategies, i.e. Florida quality, NFC only, seals and symbols, etc” and that is good, of course.

Implicit in the situation is that Brazil has the potential to “swamp” us. Do we differentiate our products, join (somehow) with them, stay ahead (maybe) with new products and forms, or something else.

Nothing stands still. We cannot stand the way our leadership works in “fits and starts”. We cannot stand waiting for the potential of a Federal Marketing Order and not use, now, the present power of the FCC/DOC.

The old ideas will no longer work.

We need the SON OF SIC. A permanent Special Industry Committee. But, this time it should be a grower group. The FCC has to short a view and is to dominated by processors whose view points are too foreign to those of growers.

I propose the Grower associations designate members to the new SIC. I think no pertinent public body would refuse expert help. Incidentally, there is a precedent. Many year ago, the orange supply situation looked impossibly great. Someone had the idea of a reserve pool as a supply management device.

There was a grower study committee with borrowed expert staff. 

Well, the point is we have new conditions and new problems. We have the tools to act now and we should use them, now, to deal with the new Florida citrus conditions.

In the words of the immortal Pogo, “We have met the enemy and he is us”.

Marvin Kahn
Frank Bouis
POB 8, Yalaha, Fl 34797

-  Production-Can the Citrus Grower Survive Greening

-  Harvesting

-  Marketing

-  DOC program and legal issues

FCC Issues - Equalization Tax

Equalization tax was assessed on citrus products, mainly frozen concentrated orange juice, imported into Florida to be blended with Florida juice. Then, in 1999 five companies sued the State of Florida and the Florida Department of Citrus challenging the legality of the equalization tax.

After several years and Court decisions the Citrus Commission was given the option of settling by returning the taxes paid by the litigants over the past few years, or charging those who had brought in California and Texas juice with the amount that they would have been assessed during that same period of time, or some combination of the two. (see Griffiths June 2, 2002).

Then, in January 2007, the DOC staff proposed a Federal Marketing Order for processed Orange Juice as a remedy. 

A Lakeland Ledger report, Feb 4, 2007:, described the situation as follows:

The Free Rider

The Citrus Department had been working on getting a share of the Brazilian tariff money for 18 months before the election, said Ken Keck, the department's executive director. The measure was an attempt to solve the "free rider issue."

"Obviously the prospects are diminished, but we're going to continue with the legislative effort," he said.

But with the prospects diminished, Keck and Steve Ryan, chairman of the Florida Citrus Commission, the department's governing body, have proposed the industry explore another, more radical solution.

The commission, on Jan. 17, unanimously approved their proposal to have a committee of seven industry leaders explore turning over the department's marketing and research activities for orange and grapefruit juice to a new federal agency.

Since those activities account for more than 80 percent of its current $52 million budget, Keck and Ryan have proposed essentially putting the Citrus Department out of business.

The Citrus Department is a state agency charged with marketing Florida citrus products. It also finances scientific research for the benefit of the industry.

The citrus agency and similar domestic commodity groups consider imports "free riders" if they do not support the organization's programs financially. The Citrus Department raises most of its money through a tax on every box of commercial citrus harvested in the state.

Although the U.S. companies import some small amounts of orange juice from Central America, the lion's share of OJ imports come from Brazil, the world's largest orange grower and citrus processor.

No taxes have been paid to support the Citrus Department's marketing on Brazilian juice since 2003. That's when the department settled a lawsuit with five Florida processors that challenged an existing state tax on imports as an illegal state tariff. The U.S. Constitution gives Congress the exclusive authority to levy tariffs.

The department had collected from $4 million to $5 million annually from the imports tax, Keck said. It had sought at least that much, if not more, from the $40 million to $70 million collected annually from the OJ tariff.

The 2003 settlement "aggravated an existing free rider issue" among Florida growers, said Kristin Gunter, the lawyer for the five processors and a member of the committee looking into replacing the department with a federal program.

Gunter and Keck agreed the free rider controversy has become a leading issue in the decades-old competition between Florida and Brazil, which together account for about 90 percent of global OJ products.

"When a Florida grower hears Brazilian labor is much less, the cost of land is much less and water and other cultivation practices are much less, the Florida grower doesn't want to add to that list," Keck said.

The free rider debate goes beyond avoiding Florida taxes. Florida citrus officials also complain Brazilian processors get a free ride when they ship OJ directly to U.S. processors and bottling plants outside Florida, thus completely avoiding the state's taxing authority.

Eliminating that loophole is one advantage of a federal marketing system, Keck and Gunter said.

Brazilians see things differently

"The biggest part of Brazil's business is in the rest of the world. I'm not sure Brazil gets any benefit from the Department of Citrus programs," said Hugh Thompson, the president of Cutrale Citrus Juices USA Inc. in Auburndale, the subsidiary of Brazil's largest orange grower and OJ processor.

In fact, Brazilian processors export most of their orange juice to Europe. But even in the best of years, Florida cannot grow enough oranges to meet U.S. orange juice demand, so it depends on hundreds of millions of gallons of Brazilian juice to meet that demand.

And U.S. juice companies will increasingly rely on Brazilian imports for at least the next decade because Florida orange production has declined by about a third from the average levels before the 2004 and 2005 hurricanes.

Thompson called for a truce in the economic warfare between the world's citrus titans. He envisioned avenues of cooperation in scientific research on canker and greening and even in marketing.

"I really think the Department of Citrus and Florida Citrus Mutual (the state's largest growers' trade group) should be trying to work closely with Brazilian processors," he said, "rather than going to the federal government to try to tax Brazilian processors."

-  New varieties

-  Federal marketing order

-  Fresh juice and regulation

Florida Legislation - Box Tax Date

The adoption of the new DOC Budget focused attention on the manner in which the industry is changing and it is suggestive of the need to make some modifications in Chapter 601. Some of these changes are purely operational, but some of them require statutory authority. I won't have everything included here, but I'll have some things that have been bothering me for a long time. 

The grower organizations in this state ought to wake up enough to start thinking about this and making recommendations. We have plenty of time to get ready for next fall and make some changes.

Budget Process

Our current budget process requires that the Commission estimate the crop size in June, set tax rates before August 1, and have a final budget in place by June or July. It forces newly appointed Commissioners to vote on a budget in June at their very first meeting.

Shouldn't we change Chapter 601 so that we could operate with a preliminary operating budget during the first few months of the year and then set both final budget numbers and tax rates after the October 10th crop estimate. That way we know how much fruit we really have and we can better make meaningful decisions. It seems to me this would offer a considerably improved procedure for handling the Commission's budget responsibilities. 

Commission Membership, Qualifications, and Appointment 

As I looked around the Commission room at the last meeting, I had to wonder how many of these individual Commissioners really had any sand in their shoes, or knew anything about, or even owned, citrus groves and how you handle them to produce fruit. (Current Bio’s {Feb 6, 07} for SOME Commissioners can be found at http://www.floridajuice.com/about_fcc_bios.php)

Today processing plants are largely owned by non-grower capital, and with something close to 50% of the industry being owned by Brazilian capital, there is a legitimate ques-tion about whether, or not, the processing segment of the industry is entitled to three seats on the Citrus Commission. If they are, then we ought to have three Commissioners who actually own grove and derive a substantial portion of their income from the growing of citrus. I don't think we have that today. The three sitting processor representatives are Andy Taylor, Bill Ferrari, and Tris Chapman.

We probably need to look at all Commissioners and make a more meaningful statement about what is required as to grove ownership and income. Shouldn't we probably have some kind of a requirement that says either 50% of gross income, or 50% of net worth be from the growing of citrus in Florida and maybe we should make that apply to a proces-sor who wants to qualify one of its officers to sit as a grower member of the Commission. We need to talk about this. 

There has been discussion about the election of Commissioners, but I'm inclined to think that's a bad idea. However, we could have a system in which the Governor has to appoint Commissioners from amongst those who have been nominated by grower groups within the industry. That could be a Packing House Association, it could be Florida Citrus Mu-tual, it could be any one of a number of organizations, but they would have to write the Governor and recommend certain individuals and explain why. That's the way that the Box Tax Committee is currently being appointed. It has worked well there. It would work well at the Florida Citrus Commission.