The drivers behind low U.S. fruit and vegetable prices
Consultant Dick Spezzano says current low fresh produce prices in the U.S. can be attributed to both supply and demand issues, with strong growing conditions for some products and food safety concerns for others.
“In the vegetable category last year we had weather in Mexico and Florida that caused a real supply problem on all row crops for the entire season, with FOB (freight on board) prices at US$20-40 on all peppers, cucumbers, eggplants, field tomatoes, broccoli, cauliflower, beans, corn, and squashes,” he says.
“This year we have had great growing weather in Florida, California, Texas and Mexico with very high yields per acre and this has caused low FOB prices and oversupply; this is the nature of our business with wide supply and demand swings.
He says field tomatoes are probably the hardest hit vegetable category with FOB prices less than half of what they were last year.
“This coupled with increased acreage of hot house and shade house tomato production from Mexico has really hurt the farmers in Florida and Mexico – often when this this occurs the Florida growers file “dumping” charges against Mexico.”
He says a similar situation has arisen with strawberries with half the normal amount of rainfall recorded in Florida and California.
“The rest of the berry category is down in FOB prices just because of the new acreage and countries that are exporting to the U.S. – this being said the berry category continues to see great growth both domestic and imported.”
In contrast, the melon category supply acreage has been cut back in Central American countries, as well as for the early deal out of the Arizona and Californian desert, but Spezzano says this has not been enough to offset lower FOB prices.
“It will be interesting if this situation prevails in the western side of the San Joaquin Valley where the U.S. gets 85% of its cantaloupes, honeydews, and mixed melons.”
Despite the difficult situation, Spezzano points to berries, apples and mandarins as the ‘shining lights’ for the produce industry at the moment.
“All berries are increasing in consumption as more year round supply, at reasonable retails, and the health benefits continue to come forth from the health community.
“The apple category continues to do well are the growers now have a handle on acreage per variety; the newer varieties are just outstanding in eating quality.”
He says an increase in supply and length of season for Californian mandarins, combined with reasonable pricing, has taken away sales from navels; especially at the front part of the season.
“The Californian navel growers have done the smart thing and pulled out some of the poorer tasting early varieties and planted some end of season varieties.
“This has kept the navel crop pretty steady with mandarins going from zero 12-14 years ago to about 70 million cases.
“We had a freeze in central California this mandarin season that reduced Murcott sales by 30% so the crop held at about the same as last year. If all goes well for the 2012/13 season with new acreage and no weather issues this crop could go to 90 million boxes.”
He adds that growers in all areas of the U.S. will feel the effect of insufficient labor to harvest all items.
“We do not have an effective immigration or temporary labor force to meet the needs of agriculture in the U.S. With this being an election year we won’t see any effective legislation until after the November elections.”
Spezzano says that while the Northwest is expecting a bumper cherry crop this year, it is best not to count the crop until it is “in the box and off to market”. Nonetheless, the category remains a key promotional item.
“Americans can’t get enough US grown cherries during the season and that is why the retailers uses them as their number one ad item so many weeks during the season.
“Retailers tell me that a lead domestic cherry ad produces significantly more sales dollars than any other fruit and in fact any other fresh produce item.
“California suffered crop losses due to a late rain and cold and the Northwest crop is just starting up. If this is a large crop it will take some promotional space in the retailers’ ads and more shelf space, and this will only temporarily affect fruits during this time.”
He adds the issue of small Californian avocados has improved recently.
“With the later crop coming in from the northern growing regions we are seeing better sizing.
“I believe the Californian growers and the Californian Avocado Commission are doing a great job of managing their crop and marketing to meet the needs of the retailers and positioning themselves as the local high quality suppliers.”
Spezzano believes the trend towards “locally grown” produce and marketing will continue, having an effect on major competing growing areas as the “locally grown” produce will “steal retail space and promotions from them”.
“Many retailers are doing a great job of sourcing, displaying, and marketing “locally grown” fresh produce”.
He highlights the trend is proving to be as strong as the organic trend.