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Northeast distributors and retailers dealing with short supplies and high prices

by Christina DiMartino | January 13, 2010
As the extended cold snap in Florida wound down the week of Jan. 11, produce distributors and retailers in the Northeast were facing shortages and high prices on a number of items.

"We tend to react quickly to situations like the Florida freeze because the demand is so high in New York," Pete Napolitano, a broker for S. Katzman Produce Inc., located in the Bronx, NY, told The Produce News Jan. 13. "All tender leaf items like basil and arugula are already strongly affected in both price and supply, as are strawberries. Arugula was up to $35 a case today, and there isn't any around. These items are basically shot in the current Florida crop."

Mr. Napolitano said that Florida growers will replant what they can as quickly as possible. New strawberry crops take around 20 days to mature. Leafy greens, depending on the type, are in the 30-day range. Cabbage, which typically holds up well in cold weather, is also suffering.

"Prices have been climbing in the last couple days on all items," added Mr. Napolitano. "We're seeing double-digits on some."

Items now in the pipeline have already spiked in price. Mr. Napolitano said that eggplant has jumped from $12 to $24, cabbage from $12 to $20 and strawberries have gone from $18 to as high as $40. Prices are expected to move even higher in the coming days. Field vegetables are also commanding prices well above normal - when they can be found.

"There will be strawberries on the market in a few weeks, but there's a good chance they will be misshaped," said Mr. Napolitano. "Growers flood their fields in order to protect the crop during a freeze. That process protects the berries that are coming on, not the ones that are already mature. The new berries will be what we call 'finger' berries because they will be a little flatter. Although the flavor is not affected, consumers buy with their eyes, so that can affect sales."

In citrus, Mr. Napolitano said that he heard Honey Bells were hit hard and will be very short, adding that other citrus varieties have also suffered from the freeze. In a short market, however, supplies are likely to increase from other parts of the world, such as South America and Italy.

Mr. Napolitano said that high prices will likely cause consumers to back off. That, in turn, typically creates a glut that drives prices down as product starts coming on strong again.

"Typically, prices will stay high until the next crop comes in," he said. "Growers will replant and turn their crops over a little faster, with the exception of citrus."

He added that producers in New Jersey are fearful that Florida will replant strongly and have late crops that will cross over with movement farther north. If that happens, prices will be down for growers in the north. It will take about 90 days for the entire movement to turn around -- if Florida has good weather for the remainder of the season.

Marc Rubin, president of Rubin Bros. Produce Corp. in the Bronx, NY, said Jan. 12 that prices have been high for the past three weeks.

"Florida has had cold weather for some time," said Mr. Rubin. "Cold temperatures retard growth, and produce doesn't grow as quickly. The freeze fell in behind that cold spell, injuring product considerably. Prices on products are high across the board, and bad weather in Texas has amplified the situation."

Rubin Bros. handles beans, cucumbers, leaf lettuces, sweet corn and more from Florida, and all are being affected by Florida's cold weather.

"To a certain extent, consumers must have produce," added Mr. Rubin. "But if prices are very high, they'll back off, especially in the current economy. If it's cold in the Northeast, they won't go out to shop, adding to a decrease in sales."

Once product starts moving strongly again, Mr. Rubin agreed that prices could drop quickly and dramatically.

"We're seeing prices in the double-digit range now on some items," he said. "It depends on supply and demand. Leaf items can be cleaned up a little and shipped, but some will be beyond cleaning. Cabbage may be small. We should see signs of damage and pricing as a result of this freeze showing up in the next week."

Matthew D'Arrigo, vice president of D'Arrigo Bros. Co. of New York, also in the Bronx, said that the company handles a full line of field vegetables, including tomatoes, strawberries and citrus, from Florida.

"Every one of those deals will be affected by the freeze," said Mr. D'Arrigo. "It will slow down production and do short-term damage on some items. Others will suffer long-term damage. Tomatoes, for example, will be affected for a longer time. Strawberries can make a quicker comeback. It's hard to tell what is going on with citrus as growers are still assessing. But overall, prices are high and shipments are way down."

Mr. D'Arrigo said that tomatoes are beginning to react to the supply-and- demand pressure. Prices have gone to $22 from $16, and are continuing to climb. Strawberries are very high, as are the vegetables.

Mr. D'Arrigo added that high prices at retail are signals for consumers to back off, and he expects some economic resistance.

"Supply and demand are functions of the market," said Mr. D'Arrigo. "I think the high prices will hold for some time, and consumers who can afford to buy will, and others will not. It's turmoil, but the market is always in some level of turmoil. A steady market is not really steady. It's always going in some direction, even in the quietist of times."

Retailers also bracing
Greg Veneziano, vice president of perishables for Bozzuto's Inc., a wholesale grocer headquartered in Cheshire, CT, said that he expects prices to be outrageous and quality not good.

"It's devastating for farmers in Florida," he said. "It is a difficult time for them."

Mr. Veneziano said that the extensive consumer media reports on the Florida freeze are preparing consumers for what they will likely see on produce shelves in the coming weeks, including the high prices.

"People won't be up in arms over the prices because they'll be expecting to see increases," said Mr. Veneziano. "Strawberries will be available from Mexico and California, so there are supplies to be had if Florida is short. But prices will likely be outrageous and the quality below normal."

Consumers will still buy strawberries, but probably not as many as usual, said Mr. Veneziano, who added that prices on peppers and some other field vegetables have more than doubled in price.

"Our ads are already in print, so we can't change pricing on upcoming promos," he said. "We are worried about sweet corn because it's a huge item for us in May and June. If growers can get more into the ground quickly, we may see some movement by Memorial Day, which we are hoping for."

Mr. Veneziano added that until Eastern production is back on track, the company may have to bring product in from the West, including Nogales, AZ.

Paul Kneeland, vice president of produce and floral for Kings Super Markets Inc., which operates 25 stores in New Jersey and New York, and is headquartered in Parsippany, NJ, told The Produce News, "Our ads are four weeks out in the hopper, but we can manipulate them about two weeks out. This time of year, half of the states in the Northeast are on promotion with strawberries, and people are trying to grab what they can. We will feel strong effects if growers can't get into their fields to pick right away. That will cause us to have supply gaps."

Mr. Kneeland said that the company's strategy, in the case of high prices and low volumes, will be to reduce the sizes of displays, but Kings must honor its ad prices.

"We've pulled some strawberries from Mexico, and we're still getting product from Florida," he added. "We'll try to get berries from multiple sources, including buying direct from growers.

"The Valentine's Day strawberry situation will definitely be affected," Mr. Kneeland continued. "We expect to see more than double increases in prices. That will be reflected in fewer promotional ads and higher retail prices. But there is a threshold that we cannot exceed. We'll likely take a hit on some items."

With green beans and other field crops from Florida expected to be in short supply in the coming month, and projected price increases, Kings Super Markets has moved some sourcing to Mexico, but prices from there are also reflecting product shortage.

Mr. Kneeland concurred that consumers will likely be prepared for higher prices because of the strong media coverage on Florida's freeze in recent days.

"If supplies get so tight or high that we can't buy them, we will post signs in our stores explaining the situation to consumers," he said.