(April 13, WEB EXCLUSIVE) California’s prune growers and processors have established a new level of cooperation to deal with on-going friction between suppliers and packers — and the pressures of the global market.

“There are many more clouds on the horizon than we’ve had in the past, principally because of the South American crops,” said Greg Thompson, general manager of the Prune Bargaining Association, Yuba City, Calif.

As a result, representatives from both sides of the industry are scheduling monthly meetings to discuss how to address trade barriers, increasing world production and the sagging economy, he said.

A case in point is the free trade agreement that went into effect in 2003 between South America and Europe. South American exporters do not pay duty on shipments to Europe, but U.S. prunes are hit with a 10% tariff, Thompson said.

Still to be dealt with at the monthly meetings is finding solutions to the roadblocks that prevented suppliers and packers from reaching agreement on a field price for the 2008 crop.

“I think everybody sees it wasn’t pretty, and we must do a better job of figuring out how to go forward,” Thompson said.

If the two sides don’t work together, a worst-case scenario could have growers being forced — reluctantly — to sell their fruit on consignment.

“Packers don’t want to really see that either, because if there’s not a solid situation, it could lead to chaos,” Thompson said.

The monthly meetings do not represent a new era in the supplier-packer relationship, but more of a transition, he said.

“There’s much more pressure on everyone,” Thompson said.

Shipments are off about 10% this year, but that was expected in light of the world economy, he said. What was not expected is the rising world production. South American prune volume is projected to be 95,000 metric tons this year, up from 75,000 metric tons in 2008, Thompson said.

South America does not export a substantial volume of processed prunes to the U.S., he said, but the continent’s prune concentrate is affecting the domestic industry.

“We rely on the prune concentrate market for our smaller prunes and off-grade prunes,” Thompson said.

Despite the cloudy horizon, there are positives for the California prune industry.

“The expectation is that we’ll have a fair crop this year,” Thompson said. “The bloom was good. Weather conditions were a little dicey, but in a month or so we’ll have a better idea.”

The Prune Marketing Committee, Sacramento, Calif., projected global demand for the California crop this year would be 134,000 tons. But the economy could reduce demand to about 120,000 tons, Thompson said.

Domestic supplies for the 2009 crop are expected to be adequate, even though last year’s smaller crop will mean the pipeline will likely be near empty when the 2009 deal hits market, Thompson said.

A major advantage of the California fruit, he said, is that growers and packers must abide by the toughest food safety regulations, many of which are not in place in other countries.

“While offshore competition is increasing, it’s important to highlight the quality and consistency that comes out of California,” Thompson said. “We just have to do a better job of marketing.