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Tomato shortages causing sky-high prices and volatile markets

by Christina DiMartino | November 17, 2009
Weather-related tomato shortages in some areas of North America, combined with seasons winding down or yet to start in others, have resulted in some of the higher tomato prices in history.

The buzz around the East Coast Nov. 18 was that bulk boxes of vine-ripened tomatoes were commanding $35-$40.

Jeff Ornstein, co-owner of Eli & Ali's in Brooklyn, NY, told The Produce News that prices spiked during the preceding couple of weeks due to shortages.

"It's a pretty volatile market at the moment," said Mr. Ornstein. "We are also hearing that there may be a backlash from this. People don't want to pay these prices, and that could end up in an excess of product. The tomatoes that are available have to be moved."

The current situation is being spurred by several factors. Canada is winding down its seasonal movement, and Mexico has not yet started moving tomatoes heavily. Florida field-grown tomatoes are also feeling a crunch due to bad weather, which has shortened its crop and caused prices to jump.

"Tomatoes volumes should be coming on the first or second week of December," said Mr. Ornstein. "That will help level off this situation. In the meantime, we're getting a little from Mexico and Canada, but there are slim pickings across the board on tomatoes at the moment."

Mr. Ornstein added that once Thanksgiving is behind, prices will have to drop.

Jim DiMenna, president of Jem-D International Partners in Leamington, ON, pointed out that when supply exceeds demand in any market situation, prices go up, but fewer people buy because of the higher cost.

"It was once explained to me as the 'sticky downward' scenario," said Mr. DiMenna. "People try to hold the market up long after it's due to come down. Sometimes customers are lost because they've been chased away by price. Then you start to drop your price, but the retailer says he can't drop his prices until his inventory is down. You're dropping prices fast in an attempt to get your product to market, but your customer is moving much slower. They can't run a new promotion overnight. This is historically what happens."

Mr. DiMenna said that what ultimately happens is that suppliers end up dropping their prices below market value. Once demand picks back up, prices gradually work back to a normal price scale. But in the meantime, the effects can wreak havoc throughout the industry.

"We have good production in Canada this week," Mr. DiMenna said Nov. 17, "but nothing is coming in behind it because the crop is finishing. Mexico is still a couple of weeks out from having volumes, so it's likely that the high prices will hold for a spell."

Florida field-grown tomatoes are also about double the price of normal for this time of year.

Reggie Brown, manager of the Florida Tomato Committee, said that red round tomatoes are very tight due to bad weather.

"Florida's acreage is down slightly, and wet weather and disease pressure put a dent into supplies," Mr. Brown said Nov. 17. "Prices are in the $20 range right now, when they're typically $10 to $12. But growers aren't making money because they're playing the demand-against-supply game. We expect supplies to remain tight until mid-December. If the weather holds out, supplies from Florida will improve before Christmas."

Mr. Ornstein said that what is unusual is that there is no demand for tomatoes compared to during good economic times. "But you still have these high prices, despite demand being low," he said.