Romaine tops hot vegetable market
by Tim Linden | November 19, 2009
As the Thanksgiving holiday approached, bringing with it an increase in demand for vegetables the week of Nov. 16-20, Romaine prices shot through the roof and many other items experienced very strong markets.
On Nov. 18, Romaine prices from California and Arizona topped $40 for a 24-head carton, with most sales in the high $30s. The Federal-State Market News Service Report showed that red leaf was trading for $26-$28 and green leaf was in the $18 to $20 range. Iceberg lettuce was in the $19 to $21 range, with spinach prices registering an f.o.b. of $16 to $18. Broccoli, cauliflower and celery were not doing quite as well, but prices were in double-digits and close to the mid-teens as Thanksgiving demand peaked.
For East Coast buyers, Thursday, Nov. 19, was expected to be the last day that would include the Thanksgiving pull, traditionally one of the top three produce-demand holidays of the year.
"It is the perfect storm of events converging that made this strong market," Matt Seeley, vice president of marketing for The Nunes Co. in Salinas, CA, told The Produce News. "The market has been hot this entire month."
He said many factors converged: limited supplies because of late-October and early-November rains in coastal and Central California; the normal transitioning of supplies from summer and fall production to the winter desert deals in Arizona and California; reduced yields from disease problems; and increased demand from the Thanksgiving pull.
Although supplies are down, Mr. Seeley said, "The processors need to continue to feed their plants," which has created the extreme demand- exceeds-supply situation for carton lettuce and the spot-market pricing. "I do not think we have seen the market so volatile since the floods of 1998, but I do not know how long this will last," he added.
The Nunes executive said that supplies should still be light after the Thanksgiving holiday and that demand will diminish a bit, but the big question is whether supply and demand will come into balance.
Butch Corda, general manager of Salinas-based Ippolito International, who was inspecting fields in Yuma, AZ, Nov. 18, told The Produce News, "I'm seeing nice quality lettuce and a good stand. But I also see that most companies, to meet demand, have moved ahead of the crop."
In other words, companies are cutting their fields a bit early, which results in fewer heads per acre and fewer tons per acre for processors. In effect, growers are "stealing" from next week's supply to fill this week's orders. Mr. Corda said that this means that the demand-exceeds-supply situation could last for quite a while because cutting the crop early not only takes next week's supplies but also reduces yields per acre and results in the need for more acres to fill the same number of orders.
"I can tell you what happened yesterday, but I can't tell you exactly what's going to happen next week or next month," he quipped. "I do know that it is going to be a good market, but I can't tell you whether than means $40 lettuce or $30 lettuce or $20 lettuce."
He added that the current situation is the result of at least several weeks of both processors and head shippers cutting ahead to meet demand. "This isn't going to be cleared up in a week. History tells you that the demand the week of Thanksgiving is lighter than the week before, but we are not in a normal situation. I don't see the lettuce to meet the upcoming demand. There certainly isn't a glut of product out there. I tell you one thing: You need good-quality lettuce to sustain a hot market, and we definitely have that."
Dean Barbis, an account manager at Bonipak Produce Co. in Santa Maria, CA, said that the market is not quite as hot for some of the other vegetable items but still strong as Thanksgiving approached.
"Broccoli and cauliflower [supplies] are still tight and probably won't ease up until the first week of December," he said. "But Napa [cabbage] is going to remain hot and so are snap peas. They had supply problems out of Peru because of weather, and there has been a shortage of snap pea seeds up here, so acreage is down. I think that market will stay hot."
Although much, if not most, of the various lettuce varietal production is sold on contracts with a set price, virtually all those contracts have an escalator clause that allows for adjustments when the market climbs to such lofty heights. Consequently, most growers and shippers are able to reap some benefit from the current market situation.