Good Fruit Grower

February 15

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courtesy of okanagan plant improvement corporation B.C. co-op seeks higher returns A large crop put pressure on the industry���s weakest link���its storage facilities. by Peter Mitham F ruit growers in British Columbia, Canada, centered in the Okanagan Valley but The excess volume puts pressure on the weakest link in the industry���s marketing with sizeable operations in the Similkameen and Creston valleys and other chain���its regular storage facilities. regions, enjoy natural barriers that have limited the spread of pests and disease While controlled-atmosphere (CA) facilities have limited space, regular-storage space and fostered strong regional identities backed up by myriad local packing houses. can expand to accommodate excess fruit. But the quality of this fruit deteriorates more But in 2007, in order to make the industry more competitive, rapidly, reducing the crop���s value, and the return on the capital members of the B.C. Fruit Growers��� Association backed a reorganization investment in the storage space. plan to consolidate the province���s four cooperative packing houses Tyabji thinks selling excess assets, and consolidating production under the banner of the Okanagan Tree Fruit Cooperative. The number around CA facilities will allow fruit to deliver greater value, and in turn of packing lines would be cut, and surplus facilities sold. Proceeds from improve the return on the cooperative���s assets. the sales would fund upgrades to packing lines and storage facilities. Tyabji believes growers who choose to leave the cooperative to set up But the financial crisis of 2008 stalled the sales plan, and declining packing houses that lack CA facilities, ���are flirting with huge risk.��� Their returns through 2010 weighed on growers��� confidence in the reorganizafruit would be competing with fruit in regular storage, a segment of the tion plan. Discontent led some growers to take action; new packing market Tyabji deems ���a disaster.��� houses were set up as impatience with improvement grew. While a new packing house could address the issue by developing its The depth of the woes made headlines last fall when Kirpal Boparai, own CA facility, construction costs run upwards of $300 a bin for a who became president of the B.C. Fruit Growers��� Association in January 10,000-bin facility, or $3 million, with an additional $1.5 million required 2012, was reported to be in a contract dispute with the co-op. Co-op for sorting and packing equipment. members called for his dismissal, arguing that the co-op���which con���It���s not a thought to be taken lightly,��� Tyabji said. tributes financially to the growers��� association���shouldn���t support an Niche varieties organization headed by a grower with which it was at odds. Jind Fruit Company in Osoyoos, one of the province���s new private Boparai resigned, but Alan Tyabji of the Okanagan Tree Fruit Cooperpacking houses, handles packing and distribution for the Okanagan ative acknowledges that the underlying issues driving grower discontent Plant Improvement Corporation (PICO), which launched its own ���Born have yet to be addressed. ���Alan Tyabji in B.C.��� banner in October 2012, for niche apple varieties. Jind doesn���t Tyabji was appointed chief executive officer of the cooperative in have CA storage, but it offers a market-oriented approach that PICO believes will help November. The packing business was familiar to him as he had spent more than 20 years boost the returns growers see from Aurora Golden Gala and Salish, the first two apples at the packing house in Oliver, ultimately overseeing operations following consolidation marketed through the Born in B.C. program, says PICO���s chief executive officer John in 2007. Kingsmill. Returns need to stabilize, he said, and that depends on improving fruit quality and The two varieties were ideal for this approach because production is limited, licensed reducing the co-op���s overhead. by PICO, and separate from the major varieties handled by Okanagan Plant Improvement During his oversight of the cooperative���s southern operations, he halved volumes and Corporation, which found Aurora Golden Gala difficult to handle. turned it into the most profitable division of the co-op, which sells $100 million of fruit ���We���re able to take advantage of the diversification in packing houses that���s now availannually. able,��� Kingsmill said. ���We���re looking at very small packing runs, and for big houses, they ���Tonnage is not the critical issue. It has to do with the quality of the fruit,��� he said. simply wouldn���t be economic.��� ���Hanging on to volumes because you think that that somehow reduces your overhead is Born in B.C. will deliver a better return per apple than any other variety, Kingsmill the wrong way to go.��� hopes. He said growers should be able to count on receiving 50 cents a pound for apples While a large, good-quality apple crop has been good news for Pacific Northwest marketed through the program���well above the average return of 3.4 and 12.5 cents a growers this fall, thanks to short crops elsewhere in North America, Tyabji says the pound noted in a 2011 report for government. cooperative���s annual production is 220,000 bins���40,000 bins above its ideal production level of 180,000 bins a year. The Canadian dollar has approximately the same value as the U.S. dollar. ���Hanging on to volumes because you think that somehow reduces your overhead is the wrong way to go.��� ��� B.C. COOPERATIVE plans upgrades U nrealistic expectations of sale value contributed to delays in the disposal of surplus properties held by the Okanagan Tree Fruit Cooperative, says Alan Tyabji, who was appointed chief executive officer of the British Columbia, Canada, cooperative in November 2012. The co-op came into being in June 2008, months before the credit crisis that roiled financial markets and stalled real estate sales and development across North America. Sales in the Okanagan stalled, and many owners had to revise expectations of what their properties were worth. Some resort property owners sold at 30 percent discounts, while developers slashed prices on new residential units by up to 40 percent. But the former management team at the co-op stubbornly stuck to existing appraisals, hoping buyers would pay. The former packing house in Naramata was listed as late as last year for $10 million, while its Summerland property was advertised at $4 million. ���The previous management had come from an environment where real estate prices had been very high,��� Tyabji said. ���Rather than market properties at market value, they retained the vision that the properties were worth more.��� 40 FEBRUARY 15, 2013 GOOD FRUIT GROWER The co-op continues to entertain queries from serious buyers, but pricing will be based on existing market conditions rather than historic pricing. Tyabji is optimistic that deals will be done, yielding cash for the co-op and relieving it of the significant carrying costs the vacant properties incurred. ���If I can execute my plan with current market values, we will have a very strong surplus of capital,��� he says. ���I���m not worried.��� The cash will eliminate a small amount of debt the co-op carries, as well as fund upgrades to its remaining properties. Those upgrades include: ���a $7 million improvement to make the coop���s controlled atmosphere (CA) facility in Winfield more efficient and environmentally friendly ���a $3 million upgrade to its packing line in Winfield, including the installation of the latest defect sorting and sizing technologies ���expansion of its cherry packing line in Oliver, increasing capacity by 66 percent All told, the cooperative hopes to undertake $44 million in infrastructure upgrades in the coming years. ���P. Mitham

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