Walnut Prices Spike Downward

Tulare County - Walnut prices fell rapidly in the past three weeks as a perfect storm of events reduced demand just as supply was coming on.

“In more than 35 years in the walnut business, I've never seen anything like this,” says Brian Blain of Atlas Walnuts of Visalia. “Prices have dropped by about half from last season,” says Blain, suggesting a record high price last year could not last. But then there was the worldwide economic collapse and a rising dollar that helped cut off international demand for walnuts.

Blain says as more growers left Diamond Walnuts this past year, some independent processors were left with a big supply to get rid of. On top of that, the banking crisis made it hard for some of the processors to borrow money and they “felt they had to sell into a falling market. That's the problem with a falling market. People don't want to buy because they think it will be cheaper tomorrow.”

That's the situation with the housing industry, the car business and even holiday shoppers all fueling the trend that some say will lead to deflation.

But the other factor is that “we have a big crop this year,” says Blain, contributing to the retail price falling from around $4 a pound last year to just $2 a pound today, in just a few weeks. November saw a big sell-off in values in many commodities this month.

Blain says the market is now leveling off. Almonds and pecans are also selling at lower prices this year. “But it's been walnuts that have been falling so far so fast” this year.

For Tulare County, where walnuts were a $119 million crop last year – ranked seventh in value – news that a major crop is suffering is not good news. Add to that the fact that number one, milk, is heading lower this winter and that tree fruit this year has suffered again, and it doesn't paint a pretty picture.

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Red China: Trading
Our Milk for Their Clothing

California - AChinese company announced it would make a $30 million investment in Gottschalks department stores Nov. 21, effectively controlling 75 percent of the stock of the troubled retailer.

The purchase will allow a direct conduit for the Chinese firm – Everbright – to bring in Chinese apparel to the California marketplace. Chinese imports of apparel and textiles into the U.S. are now a $48 billion business. That's almost the same size as all U.S. goods exported to the Chinese mainland so far this year ($55 billion).
By comparison, so far this year, China has exported more than $250 billion worth of all goods to the U.S.A. – that's about a 5 to 1 margin of Chinese exports compared to our exports to them.

The investment deal is set to close in January and still needs approval of shareholders. After the announcement, the share of Gottschalks' stock fell to just 22 cents – over a 70 percent drop the same day and down from around $4 a share this time last year. For several years, the company's stock has been in a downfall as the retailer has suffered month after month of declining sales.

The day of the announcement, more than 460,000 shares traded hands, compared to an average of less than 6,000 shares, and it amounted to the biggest trade day for Gottschalks – unfortunately a virtual crash of the stock, down to 22 cents.
By Monday, the stock had rebounded to 80 cents.

Lower Price Points?

On a positive note, the infusion of $30 million will allow the company to survive for now and perhaps rebrand itself as a lower price point outlet, CEO of Gottschalks Jim Famalette commented. “This strategic business partnership will enable us to leverage Everbright's international sourcing network to enhance our operations and also provide our customers with new quality products at very attractive price points.

“In addition, we would be able to launch and test an expanded merchandise assortment with very limited risk as select manufacturers utilize our stores to provide consignment products. Further, we expect the agreement will allow us to diversify our traditional business model with more direct business to business, and direct to consumer product sales from the network through our relationship with Everbright. Taken together, we anticipate our partnership with Everbright will support our long-term growth initiatives, allow the company to diversify its business model, and have a positive impact on our results over time,” said Famalette.

Mai Wong, chairman of Everbright, stated, “We are pleased we have signed this definitive agreement to invest in, and partner with, Gottschalks to help them achieve their future growth plans. Over the years, the company has established itself as a leader in offering the best brands and quality merchandise to customers in their markets and we look forward to utilizing their presence to provide many of our international manufacturers with an attractive entrance into the U.S.

Gottschalks' news release says the “investment anticipates the acquisition by Everbright of 40,000,000 shares of Gottschalks common stock, to be issued by the company at a price of $1.80 per share, which will amount to approximately 75 percent of the company's common stock then outstanding.”

“The agreement requires Everbright to make cash contributions in the form of a capital contribution or a loan of up to $15 million, in increments of $5 million, dependent upon the borrowing availability under Gottschalks' credit facility.”
Everbright is engaged in the business of providing trade facilitation, credit and logistical support to manufacturers and merchants engaged in international trade between the People's Republic of China and the U.S. Everbright was founded by Guangying Wong and is controlled by his family. Wong's daughter, Mai Wong, has served as chairman of Everbright since its inception.

A Cancer Runs through It

Former manager of the Visalia Gottschalks store, Joe Pinto, a veteran of 28 years in retail, says the economic situation in the U.S. right now essentially forced Gottschalks' hand. “Banks in the U.S. are frozen up, companies are having to go offshore to borrow money and selling shares of your stock today seems to be a smart move on the company's part – it helps shore up the balance sheet.”

Pinto says that making an alliance with the low-cost manufacturers in China also makes sense to get the price breaks needed by the retailer to survive.
Pinto says most retailers are finding a brutal, unforgiving environment of declining real estate values, a lack of borrowing capacity and discounted merchandise. “Gottschalks has to discount the value of its inventory as soon as it hits the store.”
“The decline started with housing and it's been a cancer that is running through the commercial real estate market now.”

Pinto says Gottschalks is not the only one feeling the heat. “Look at Macy's who is in the same boat.” That company stock has fallen to $6 from $30 a year ago making it harder for the company to borrow money and contributes to the decline. Real Estate Investment Trusts (REITS) like General Growth that owns the Visalia Mall and Passco Real Estate that owns the Hanford Mall are finding tough times too due to the same decline in real estate value problem.

Pinto came to Visalia, demolished the old Gottschalks building and built the new one and stayed on through the year 2000. He says right now it is simply “the survival of the fittest” suggesting more retailers are likely to fall before this thing turns around, he believes.

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With Falling Milk Prices,
Producers Look to China

Tulare County - Dairymen will be getting just $16.57 per hundredweight for their Class 1 fluid milk next month which is $6.42 cents below what they got a year ago, and a drop of more than $2 in one month. While this price is for fluid milk, the falloff has been in futures prices for all milk commodities in recent months.

The plunge in milk price reflects the worsening economy as consumers cut back, says Richard Cotta, CEO of Visalia-based California Dairies. “It looks like this is going to be a gloomy first half of 2009,” says Cotta, and a “very tough period for the local dairy industry.”

Cotta believes higher prices prompted dairymen to boost production in the past year compared to 2006. But now consumption has slowed dramatically as consumers are not eating out as often. Only in export sales has there been a brighter picture and now mainland China appears to be a new key market for California producers.

Cotta joined other industry representatives on a 10-day tour of China earlier this month led by the California Milk Advisory Board. Industry representatives included Leprino, Land O'Lakes, California Dairies and Dairy Farmers of America – all representing Tulare County and Kings County dairies. They met with food company relatives in China on the visit.

“We are expecting to do some business based on the trip,” says Cotta who says the cooperative has now hired a new VP for global operations joining Leprino in hiring a direct sales representative for locally made products in China.

“I've been invited to join (California) Lt. Governor Garamendi in February when he leads a trade delegation to China,” says Cotta.

“We've already sold some product there and we can build on that,” he says. Cotta notes that the Chinese are just now acquiring a taste for pizza which uses mozzarella. Western United Dairymen CEO Michael Marsh says the plan to work with Chinese chefs to use more U.S. cheese includes sharing tips on how U.S. companies use mozzarella cheese. Already Papa John's and other U.S. pizza firms doing business in China buy California cheese for their pizzas.

Chinese Acquire U.S. Food Tastes

“The country is already trending toward U.S. food tastes” and that bodes well for the demand of California milk – the closest producer to the Chinese markets.
“I'd say we can't compete with New Zealand on the basis of price, but we can sell ourselves based on the highest quality, strictly regulated, safer and reliable product – a product that varies little from shipment to shipment, year to year,” says Marsh.

Cotta says it will take some time to develop the market in China that has been in turmoil since the discovery of melanine in its milk supply – a material used to make plastics that has killed a number and sickened thousands. The disaster set up this sudden opportunity for California milk producers.

Marsh says while not all of China is a potential customer for U.S. dairy product, there is a market of 600 million consumers ready for our product – double the size of the U.S. market.

CEO of the California Milk Advisory Board Stan Andre says California dairy industry only recently got the opportunity to sell more product on the world market since the European Union stopped subsidizing its dairy products worldwide about a year and a half ago. Until this year, the U.S. sent only bulk whey and dry milk to China, but since May it started to ship cheese and butter highlighting the California brand at this year's Olympics.

Andre, who went on the trip as well, says sales are likely to increase rapidly this year to China, with one customer alone saying it would be buying perhaps $250 million worth of California dairy products this year alone.

Save on the Freight

“We worked to make the point to the Chinese that it makes more sense to buy our butter and cheese than to ship U.S.-grown corn by the ton to feed their dairy cows which produce at about a third of what our California cow produces every day.” It takes 60 pounds of feed to make 10 pounds of cheese.

Andre says shipping product to China also makes sense because of the volume of shipping containers that come in from China and the need product to carry back on the return trip.

“Chinese consumers are consuming milk products and their consumption is rising by double-digit margins.” Add to that the local dairy industry is in shambles and somebody needs to fill these orders.

Some names are seen in China including Haagen Dazs which markets itself to women with the phrase, “If he really loves you, he will buy you Haagen Dazs.” Marsh says he sees no slowdown in the booming city of Shanghai, even as world markets were closing in the past few weeks, “They are still looking at a 7 to 9 percent growth in their economy.”

U.S. dairy processors have only been in the market since May of this year but see a “tremendous opportunity” there to increase exports in the future, says Marsh.
Increasing exports could be the key in reducing the surplus milk supply statewide that is dropping prices this winter.

Already, export sales are a bright spot for the industry. The value of U.S. dairy exports for the latest fiscal year through September of this year topped $4 billion – up 63 percent from the last fiscal year when exports totaled $2.5 billion. With the world economic slowdown, new markets in China could help fill orders in the export market that elsewhere, are likely to fall.

U.S. dairymen in 2008 have seen rising costs in producing a gallon of milk with feed cost recently reaching a record 60 percent of the cost of production in the second quarter of 2008, and total production costs near $18 cwt – above the prices dairymen are getting for their milk right now. The good news is the input costs, feed as well as fuel, have dropped nicely reflecting a recession in the economy.

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Card Will Help Those in Need

Visalia - Often times, police are not the ones who can give the best help, but they are the ones who respond. Now, Visalia police officers have been given a tool to assist them, and more importantly, assist those who are in need of help.

First Call, a small business-size card printed in English and in Spanish, is now another tool officers have to help those in need. The card contains a phone number – 1-800-283-9323 – that will connect people to a wealth of information where they can turn to for help. Officers began handing out the cards this week.

“The idea is, if somebody needs help, call that number and someone directs them where to get that help,” said Lt. Jason Salazar, head of special operations and helping to get the program off the ground.

United Way has had First Call card in place for about five years, said Ernie Hernandez, executive director of United Way of Tulare County. Cards have been distributed though schools and churches.

“It has served us well. You always need a central number that people can call and then be given information on services available in the community,” he added. He said it was especially helpful during the last freeze in the county.

The effort with Visalia Police is a six-month trial program. “If it's successful, and we think it's going to be, we want to replicate it at other agencies,” said Hernandez. The Tulare County Health and Human Services Agency is paying for the cards and First 5 of Tulare County has been a major funder of the program for several years, said Hernandez.

The phone is being manned by Fresno Exchange, an answering service that is already working with the Fresno Police Department on a similar program. Now, residents of Tulare County will be able to be connected with resources in this county.

The United Way of Tulare County annually compiles a list of resources available, a comprehensive list that the answering service will use to help those who call. Hernandez said there are approximately 600 different programs offered in the county to assist people with problems.

Salazar explained that until now, officers could give some information as to what resources are out there to help, but not a complete list. The list of phone numbers in the United Way directory covers nine pages.

Not only can those who dial First Call get resources to contact, they can ask to have the appropriate agencies contact them, said Salazar.

“We'll probably see the most use coming out of family dispute calls,” said Salazar, but it can be used to help homeless people, drug abusers, alcohol abusers and families with gang problems to connect with those who can help.

“We deal with a lot of things that are out of the scope that we specialize in,” he added.

Hernandez said it is their job to do everything they can to connect the caller with the resources they are seeking. In addition, he said, United Way will follow up with the caller and the program helps his organization identify where there are gaps.

Besides getting people the specialized help they need, Salazar said another goal is if those people get help, it could reduce repeat calls to the same address.

He said the card also allows police to offer help in areas they are not trained.

“People don't want to hear, 'I'm sorry, we can't do anything for you.' Hopefully, this will take care of that,” he said.

On each card is a short list of the problems that can be addressed with a phone call. These include food and shelter, education and job training, rent and utility assistance, legal services, help for victims of abuse and neglect, day care, health care, immigration services, clothing and more.

“The idea is to have the appropriate resources deal with those issues rather than law enforcement,” stressed Salazar, adding the program could be expanded to include firefighters as well.

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Patriot Rail Looks at County Rail Line

By Miles Shuper

Asecond meeting is scheduled for early December between the Tulare County Rail Committee and officials from Patroit Railroad concerning plans for possibly saving a 30-mile stretch of rail line between Strathmore and Jovista.

Chuck Littlefield, a member of the county committee, called the initial meeting last week “positive,” adding that a second meeting, via teleconference, will focus on potential courses of action which might be taken to halt the potential ripping out the 30 miles of track by San Joaquin Valley Railroad for salvage.

Earlier this year, SJVR won approval from the Federal Surface Transportation Board to abandon the Strathmore to Jovista line, claiming it was too expensive to operate. The STB rejected SJVR's bid to abandon another nine-mile stretch linking Exeter and Lindsay.

Two Patriot Rail executives, J.D. Ventreck, vice president of transportation, and Thomas Cucci, operations manager, expressed interest in looking further into the possibility of attempting to purchase the 30-mile segment or possibly entering into a joint venture with TCAG or other entities, according to Littlefield. Patriot, a Florida based short line company, owns and operates five short-line railroads with about 320 total rail miles in seven states.

The Patriot executives toured the 30-mile section of track, Littlefield said, and reportedly termed it a viable and functional line. Littlefield said the Pioneer officials reported finding alignment of the rails was good although some ties likely would have to be replaced. San Joaquin Valley Railroad was not involved in last week's meeting. Patriot officials also expressed interest in the Exeter to Lindsay segment, according to a source at the meeting.

Tulare County mounted an aggressive effort to block both abandonment petitions, claiming rail freight lines are essential to existing and potential future commercial and industrial survival and growth, along with reducing trucking costs, cutting air pollution and promoting growth.

The county, acting through the Tulare County Association of Governments (TCAG) and the newly formed Rail Committee, fought the abandonment bids contending that SJVR intentionally downgraded service to customers along the line, imposed surcharges on rail shipments and filed misleading and incomplete financial data to show the operating those segments were too costly.

The STB subsequently set a price for the 30-mile segment at $3.308 million based on a bid by a salvage company after the county's revised offer of $1.2 million was turned down. But since that time, the price of scrap metal has dropped from around $450 per ton to about $125 per ton, a factor which could reduce the value of the Strathmore to Jovista line.

Meanwhile, the county continues waging a multifaceted attempt to block SJVR from ripping out the rails and ties for salvage by seeking federal and state legislative help to save the route. The county also is negotiating with Union Pacific which owns the rights of way on which the SJVR lines run.

While other members of the county rail committee were meeting with Patriot executives in Visalia, Tom Sparks was in Washington, D.C. meeting with the staffs of Senators Dianne Feinstein and Barbara Boxer and Congressmen Devin Nunes and Jim Costa to gain support for Valley rail issues in general and the SJVR matter specifically.

Sparks said he attended 14 meetings during his Washington trip, describing the sessions as encouraging.

“It looks like we're going to get some help,” he said, adding that a number of options were covered. Among the issues discussed, Sparks said, was the current speculation of a pending second federal economic stimulus package which proponents say would be geared to improving the nation's infrastructure which would create jobs among other means to boost to the nation's economic woes.

Even if SJVR decides to sell the rail line for salvage rather than sell it as a viable line, it would have to meet specified environmental standards linked to the removal of the rails and ties, as well as a review by the State Historic Preservation Office to determine if any historic artifacts or structures are along the route.

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What's New

Tulare Motorsports projects EIR will get a hearing at the Tulare Planning Commission Dec. 8 with the likelihood that the city council will get the controversial proposal before the end of the year. That's important in part because escrow on the sale of the land to the developer is set to expire Dec. 31 and an extension of time would be necessary beyond that. Conventional wisdom is that there are at least three votes on the council to approve the project. Unknown is how the worldwide financial meltdown, as well as the fall off in race track sponsorships, will affect the financing on the 700-acre mega-project. “He's done everything he said he would so far,” says Lynn Dredge, consultant to the Agri Center speaking of developer Bud Long. “He says his financing is still in place.”

Local car dealer suggests economic stimulus idea. Visalia car dealer Frank Serpa has been lobbying Congressman Devin Nunes to help stimulate local economic activity by offering the idea of a timed voucher to get the economy moving. “I don't think a tax credit or just a check in the hand of people will do the job,” says Serpa. Instead, he says a voucher with a 60-day expiration date sent to each family could be used only for critical necessities that could be used for down payment on a car, house payment, toward a student loan, to buy a home or for a small business loan. “If Congress authorized this in December or January, it would have a tremendous effect on the economy,” suggests Serpa.

Danny Gilmore (R) held on to a slim lead over Fran Florez (D) in the 30th Assembly District race as counting in the Nov. 4 election nears an end. As of Monday, Gilmore had 42,282 votes to Florez' 40,552 votes.

Unemployment in Tulare and Kings counties has approached numbers not seen since 2003 and the highest October unemployment rate in Tulare County since 1999. The State Employment Development Department reported that for October Tulare County's jobless rate hit 11.8 percent and in Kings County it hit 10.9 percent. Last month, the rates were 10.8 and 9.3 percent, respectively. For the month, 175,500 were working in October, but 23,400 were looking for work in Tulare County, while in Kings there were 61,400 working and 6,700 seeking jobs. The average unemployment rate during 2003 in Tulare County was 12.3 percent. The statewide jobless rate hit 8.2 percent last month.

Wet pattern this week but seems to lack much punch. Cold pattern may be on the way.

There was a bumpersticker circulating this summer that says “When Bush Took Office Gas Was $1.46.” Now when he leaves office, it may be back to that, although not the in between years. Still gas is selling for $1.77 a gallon at the Visalia Costco and Prince gas station on Tulare Ave. this week. Diesel is still up there between $2.60 and $3 a gallon.

These rural folks who waited for their propane supply for the winter until now are being rewarded with dramatically lower prices. Ethanol producers are being squeezed by low gas prices that are dampening enthusiasm by oil companies to blend ethanol with gasoline. Wholesale ethanol prices are now higher than unleaded gas. E-85 is selling for about the same price as gasoline in some markets. Makes it so there is an ethanol glut.

Wall Street Journal confirms the Valley Voice story that Pappas TV stations, including KMPH, will sell at auction Dec. 11 with no buyer in the wings. That makes it likely the lender, Fortress Credit, ends up with the block of stations.

Not all gloom and doom. UCLA economic forecaster says home sales will recover next year and prices will stabilize. The real estate website Zillow puts the Visalia median home selling for about $177,000.

Retail outlook is mixed for holiday shopping depending on who you are. Department stores are likely to be off 15%, discounters flat while membership club stores like Costco are likely to see a 5% increase.

Dean Florez' star is rising in the state with the election of the Bakersfield state senator as majority leader beginning Dec. 1, with plans to run for Lt. Governor in 2010. Not always popular with farmers, the leadership post should help push Democrats toward a state water bond that includes dams, as well as support for building the peripheral canal that Valley agriculturists see as necessary.

Plans by Porterville Rock and Recycling (Mitch Brown Engineering) to open a hard rock mining facility near Springville will likely move forward with a hearing in front of the county planning commission. County Supervisor Mike Ennis says he doesn't expect much opposition to the project.

Need another reason to support a state water plan? Drought in California has now led to weak water pressure in southern California due to most recent wildfires. L.A. Times reports several homes were lost due to lack of hydrant pressure. Drought and warm temps increased the fire danger and reduced the water supply needed to fight fires. Water officials say they need infrastructure to move water where it is needed in California.

Visalia Airport Manager Mario Cifuentez will move his office to the airport fire station once that station is moved to the new fire station under construction at Ferguson and Akers. The city is also in negotiations to lease out the space that Cifuentez now occupies, but a source with the city said those negotiations will go on for a while.

The San Joaquin Valley Business Cluster is hosting CEO to CEO forums at the International Agri-Center in Tulare on Dec. 3. The forms are designed for CEOs to share and collect information on issues and to identify solutions for increasing the competitiveness of businesses in the Valley. The event will be held from 9 a.m. to noon. For information, call Jennifer Faughn, Central California EDC, at 1-888-998-2345.

For the second time in as many biannual budgets, the Government Finance Officers Association of the United States and Canada (GFOA) gave the City of Visalia the Distinguished Budget Presentation Award for its budget. The award reflects the commitment of the governing body and staff in meeting the highest principles of governmental budgeting. Budget documents must be rated “proficient” in how well they serve as a policy document, a financial plan, an operations guide and a communications device. The award was presented to Finance Managers Renee Nagel and Melody Murch.

COS will hold a groundbreaking at 3 p.m. Monday of its new Hanford Center, 9631 13th Ave.

The California Ocean Protection Council (OPC) proposed banning polystyrene take-out containers and plastic bag use fees as part of a strategy to reduce ocean litter.

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Top of the News

JBT Food Tech to
Open Visalia Facility

Formerly FMC, JBT Food Tech plant will open a 10,000-square-foot office and warehouse for the company next year in the Visalia industrial park. The company will be relocating from a rural plant site near Lindsay.

“We plan to continue to use the Lindsay facility for truck drenching,” says JBT corporate communication director Ken Jones.

“We do plan to open the new Visalia office to better serve our customers.”
The company that supplies food pricing equipment to the industry will be on Nicholas Court – part of the Pickett industrial subdivision in a leased building. The building is currently under construction.
The JBT division was spun off from FMC in August. JBT is publicly traded on the New York Stock Exchange.

Price of Tulare County
Homes Decline in October

An estimated 389 new and resale houses and condos were sold in Tulare County last month at a median price of $183,500, down more than 20 percent from the same month a year ago, MDA DataQuick reported.

Statewide, an estimated 42,293 new and resale houses and condos were sold last month, an increase of 4.9 percent from September and up 63.7 percent from October last year. It was the strongest month statewide since December 2006 when 43,431 homes were sold.

In the county, Visalia saw the most homes sold (207), while Tulare saw 75 properties change hands. The median price of property in Visalia was 189,500, down from $254,000 from October of 2007, a 25 percent decline. The median price in Tulare was $225,750, a drop of 27 percent from a year ago.
Porterville had 49 residential sales in October at a median price of $165,000, down 28 percent from a year ago.

Court: Valley Rules
on Dairies Adequate

The 5th District Court of Appeal has ruled in favor of the Valley Air District's rule governing air pollution regulations on large dairies in two of three questions before the court.

A lawsuit filed by the Association of Irritated Residents and the Center for Race, Poverty and the Environment said they believed the rule should cover air pollution other than ozone precursors like VOCs and should include ammonia, for example. The court ruled in favor of the district and against the environmental group in an order signed Nov. 19.
On a second matter, the environmental group argued that the air district's rule that allows dairies to pick from a menu of pollution-reducing practices was not supported by science. But the court again disagreed with the assertion.

Thirdly, the court agreed with a lower court decision that the district should do a health study related to the rule that has been in place since 2004. District counsel Phil Jay said the district will take up the issue of the health study with its board soon. “I don't think they want us to stop enforcing the rule. It is already paying good dividends reducing the Valley's air pollution.”

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