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California Pistachio Commission voted out by volume, not votes

Despite the fact more than two-thirds of California pistachio growers voted to continue their 26-year-old marketing, research and promotion organization, the California Pistachio Commission is going out of business.

It is the casualty of California’s agricultural commission law which says it also takes majority of production along with two-thirds of eligible voting producers to make or break a commission.

Los Angeles billionaire Stewart Resnick and his Paramount Farming Co. in Kern County, Calif., control 25-30 percent of the state’s pistachio production. Paramount’s one vote against the commission killed it in a recent statewide referendum.

“I’m extremely sad this situation developed the way it did,” said pistachio grower Ted Sheely of the AZCAL Management Co., Kings County, Calif. “One major grower can out vote 700 pistachio growers. With my experience in research and promotion organizations for other commodities, I know how difficult it is to establish them. When you vote one out, it will be very difficult to put something back in place other than a voluntary organization.”

Sheely said the commission closure would lead to reductions in generic advertising advocating pistachios as a healthy diet component.

Terrible timing

The demise of the commission could not come at a worse time as production is expected to increase dramatically in the next few years with 40,000 new acres coming into production. That is a third more than the 112,000 acres now farmed by the state’s 734 growers.

The 2006 harvest produced 237 million pounds and it was considered an off year for alternate producing pistachios. The record is 347 million pounds produced in 2004.

“With the California Pistachio Commission, the industry had a unified voice. If there was an Iranian (pistachio) dumping issue in the U.S., we went as a unified voice to Congress and said there is a problem and this hole needs to be plugged. Now there is no formal mechanism to do that. We are in a quandary,” Sheely said.

Officially, the two-thirds who voted to continue the commission produced only 41 percent of the voted volume. More than 60 percent of the state’s pistachio producers balloted.

“The CPC has served the industry extremely well for the past 26 years, and I know that many of my fellow growers share my profound disappointment that we could not resolve our differences that have ultimately resulted in this vote that terminates the CPC,” stated CPC Chairman Kevin Herman of Madera, Calif., “I have always been a strong believer in the democratic system and therefore we must accept the fact that the voice of the growers has been heard.”

Paramount filed suit against the CPC in October 2005 and since that time the CPC has been embroiled in litigation while attempting to negotiate a settlement resolution with the plaintiffs in the case. California Department of Food and Agriculture oversees the CPC and had conducted a public hearing last December to allow the industry to express opinions as to potential structural and governance changes for the CPC that was enacted by the state legislature in 1981.

Restructure options

Referendum ballots were mailed to all assessed growers on Jan. 25 and included options to restructure the CPC for the purpose of resolving the current litigation.

“This has been a very difficult time for the industry, and it is my sincere hope that the growers can move beyond their disappointment and start working together for the good of the industry,” stated Karen Reinecke, CPC president.

California produced its first commercial crop in 1976. The state is the largest producer of pistachios in the U.S. and the second largest in the world.

Paramount said in its lawsuit that the commission’s marketing programs are “totally ineffective” yet pistachios have emerged as one of the most profitable and fastest growing segments of mainstream California agriculture over the past decade.

"It is critical that, as an industry, we move beyond the CPC's commodity mindset and set our sights on the bigger goal of stimulating consumer demand and that is why we have taken these actions today,” said Chris Tuffli, Paramount Farms' communications director, in a written statement issued when the lawsuit was filed.

A large contingent of pistachio producers under the organization called “United Pistachio Farmers” lead the court fight and in the field.

To get Paramount’s attention some from this group pulled pistachios away from Paramount and placed them with other processors. It did no good.

In the last industry referendum, 96 percent of the ballots submitted supported the continuation of the commission.

“The commission’s next step is to develop a plan to gracefully and efficiently close up shop,” said Herman. “The pistachio industry should create a laundry list of the commission’s activities and determine who and how to get those accomplished by somebody else.”

Active promotion

CPC has fielded an aggressive California pistachio promotion campaign for several years. Health benefits have given pistachio consumption a big boost and the commission’s promotion activities played off that.

Besides promotion, the commission funds considerable, vital research, including root stock trials and insect control studies. Herman hopes that work and current advertising contracts would be honored.

“I’m still pretty disappointed but what’s done is done,” Herman said. “I would challenge those who voted the commission out to provide answers on picking up some of these pieces. Disgruntled folks need to step up and share their vision.”

Paramount farms about 30,000 acres of almonds, 25,000 acres of pistachios and 6,000 acres of pomegranates in the southern San Joaquin Valley.

Paramount Farming recently purchased 15,000 acres of row-crop land in Madera County from Newhall Land Co. that likely will be planted to almonds, pistachios or pomegranates.

The Resnicks purchased Paramount Citrus in the 1980s. They own 20,000 acres of their own citrus and farm another 10,000 acres through their subsidiary S&J Farm Management. Paramount Citrus is the largest citrus grower in California and supplies 20 percent of Sunkist’s citrus.

“I want to encourage all growers and processors in California’s pistachio industry to not look back and point fingers or place blame at anybody’s feet, but rather look ahead and focus on how the industry can continue to achieve the commission’s goals,” Herman said.

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