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Fruit, vegetable growers face pay to play proposals
What frustrates Michigan apple growers and packers most, aside from losing game after game to Washington State's growers, is that they can't seem to catch a break.
Call it a long stretch of bad luck or a competitive disadvantage, both of which may be true. But the final score doesn't change.
Michigan's apple industry loses again if a proposal to further cut the number of fruit and vegetable inspectors and raise inspection fees up to 67 percent gets approved by the Michigan Agriculture Commission and the Legislature.
Far from being set in stone fruit at this point, the proposal is a response to the many difficult budget decisions that must be made during tough economic times, said Keith Creagh, deputy director with the Michigan Department of Agriculture (MDA).
"The department has taken severe budget reductions over the last few years, and we're down to a skeletal staff for fruit and vegetable inspectors," he said. "When we asked how much money we would need to keep from increasing (inspection) fees, the answer was $300,000. But we don't have access to that money from the general fund anymore."
The program about which Creagh speaks is the fruit and vegetable inspection program, part of the MDA's Pesticide and Plant Management division. Full-time inspectors, which once numbered 16, provide services such as grade and quality inspections, phytosanitary inspections, controlled atmosphere inspections and market inspections, among others.
But now, with only eight full-time inspectors (and several seasonal inspectors) left to serve 16 shippers and 14 processors, the entire industry might finally lose not only the game to Washington State, but the entire franchise.
Budgets and competition
The first hint of such a loss, according to Julia Baehre Hersey, chairwoman of the Michigan Apple Committee, is losing the competition for 2005 crop markets.
"We need these inspections (they are required by law) to get apples into the federal school lunch program and to export, but the MDA proposal is kind of contradictory," she said. "The Governor's message is to expand exports, but the MDA is being put in a position to limit the tools we need to facilitate exports. We're trying to be competitive with Washington, which has (inspection) fees that don't come close to the ones we're paying, and now they want to add more to us."
The decision to put the current proposal on the table was no easy choice, Creagh said.
"The problem is that we've had budget reductions from $62 million to $28.4 million, just on the general fund side" he said. "You don't go through that kind of reduction without an impact. The decision had to be made between grade and quality inspections and food safety inspections, so we said we should keep a high priority on food safety and zoonotic diseases. That makes some people irate, and we understand that, but we can't keep people on the payroll with those kinds of cuts. General fund money is no longer available. One solution is that if the industry wants to pay the full shot for inspectors to deliver the services they need."
The state's apple industry certainly understands the state's budget problem, said Denise Yockey, executive director of the Michigan Apple Committee, but increased fees and fewer inspectors could put apple growers at a competitive disadvantage that's even worse than it is now.
"Five years ago, when (former MDA Director) Dan Wyant laid out a proposal to cut fees and inspectors, fees had been stagnant for a few years, so the apple industry did the right thing and said it would help out and pay higher fees, but now it's become a serious handicap to foreign exports and domestic sales," she said.
Current fees for inspections, she said, are $225 per semi-load, and proposed increases would bring it to $375. Fees for having an inspector in the apple shipping facility, she said, are $840 per week now, and proposed to reach $1400.
If all the nation's apple shippers paid the same rate, said Don Armock, president of Riveridge Produce Marketing Inc. in Sparta, there would be no problem, but Washington apple growers pay about half of the proposed increase, he said, and 20 percent less than current Michigan fees.
"They also can get daily inspections," he said. "They're doing a spectacular job, which is one reason they do 20 percent of their business in exports."
There are other reasons for that as well, including the fact that the Washington industry is much larger than Michigan's.
Washington's industry is so large, in fact, that it was much better able to handle a punitive 46 percent anti-dumping duty on Golden Delicious and Red Delicious varieties going to Mexico, a duty imposed on Michigan growers in 2003 even though they had never shipped a single apple south of the border.
In response to that loss of revenue, Yockey said, Washington began to compete in the Chicago market, and has pulled ahead of Michigan in that game.
"With six million people, Chicago is a natural market for us," she said. "But a few years ago, Washington spent tons of money and played real hard for that market, and today they own it. We've set a goal to win it back, but we need a level playing field."
More than just apples
The field of which she speaks is sloping for more than just apple growers. Grapes, blueberries, peppers, cherries, celery, cucumbers, potatoes, onions and other crops require inspection certificates.
And with slim to no profit margins already in many of those industries, increased fees for fewer inspections might cause losses that permanently damage Michigan's marketing power.
"When we have to cut our costs because we can't afford to pay inspectors; or if the fruit has to sit two or three days while we wait for inspectors, that means we can't compete in certain countries," Armock said. "It's one more burdensome aspect that will restrict our ability to do business, and it will weaken the state's fruit and vegetable industries."
It might even eliminate them, said Dawn Drake, manager of the Michigan Processing Apple Growers.
"Margins are slim to none now," she said. "The MDA's job is to keep the second-largest industry in the state moving forward, but we're getting no help. If the markets dry up and we lose the opportunity to get price increases for processed apples, there are farmers who won't be able to pick this fall."
It appears that it may be April before the proposed cuts go before the ag commission, said Tonia Ritter, Michigan Farm Bureau lobbyist. She said there may be hope for a supplemental bill that would give back the $300,000, but the legislature has to concur if the industry hopes to get the money. But it may be too little, too late.
"Even if we get the $300,000 that would put us back to the status quo, that would be next year," Drake said. "It won't help us market the 2005 crop."
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