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Shortages of field-grown tomatoes leaves greenhouse product in high demand

by Christina DiMartino | March 10, 2010
Supply gaps in field-grown tomatoes resulting from freeze conditions in Florida have caused a spike in demand for greenhouse-grown product that is expected to last at least another 30 days.

"The demand on greenhouse tomatoes has increased due to the shortages in Florida," Jim DiMenna, president of Jem-D International in Leamington, ON, told The Produce News March 9. "But we have felt an increase since last November because of the earlier weather problems Florida experienced. Greenhouse producers are fortunate in that we have consistent outstanding supplies because we're not subject to these types of environmental issues."

Mr. DiMenna noted that a substantial amount of greenhouse product finds its way into the market even when field tomatoes are moving well. Increasing consumer acceptance and consistent pricing has resulted in continuous growth for the greenhouse industry.

The spike in demand for greenhouse tomatoes that began the last week of February is specifically related to the freeze that occurred in Florida in January.

"Mexico has been in full production and is filling the void at relatively reasonable prices, although compared to a normal, non-eventful year, they are up by 25 percent and more," said Mr. DiMenna. "Gassed green tomatoes have a specific place in the market. They play a major role in foodservice, especially quick-serve and chain restaurants. This is why the demand is so strong on Mexico's product. Mexico starts in early December and continues through spring, which overlaps Florida's production, so this, too, is affecting the increased demand on Mexico."

Fried De Schouwer, president of Greenhouse Produce Co. LLC, headquartered in Vero Beach, FL, concurred that the greenhouse industry is feeling an increase in demand.

"Many grower-shippers work with retailers on a program basis," said Mr. De Schouwer. "Those programs are honored, of course, regardless of what is happening in the market. We have seen a strong market on greenhouse tomatoes for about four straight months. As to whether there an additional demand due to Florida's shortage, there is no clear-cut answer. There has been a significant increase in protective [shadehouse and greenhouse] production out of Mexico this year, and that production is making up for the lower Florida volumes."

Mr. De Schouwer said that prices on some tomato items have jumped close to 100 percent this year. Retail prices on tomatoes-on-the-vine at this time last year were 70 cents per pound. On March 9, they were about $1.20.

"It's been a yo-yo tomato market this season," he added. "Prices jump up and then drop back down every 10 days or so. We do anticipate a considerable drop in greenhouse demand when Florida comes back on, but who knows what will happen between now and then? It's early March, and we're still getting near-freezing temperatures here in Florida. We won't see Florida field tomatoes moving again until late April or early May, and then it might be 90 degrees, which can also play havoc on a crop."

Chris Veillon, marketing manager for Mastronardi Produce Ltd., headquartered in Leamington, ON, said that the company has also felt an increase in demand for tomatoes since late February.

"The foodservice industry is experiencing the biggest shortage," said Mr. Veillon. "Mastronardi has long-term contracts with all of our retail partners. These are planned well in advance. Consequently, we don't have a lot of excess product from which foodservice operators can draw. Florida is back in the ground now, so the demand and price increases will likely continue for another 30 days - or until growers there are shipping again."

Mr. Veillon added that the price increases he is seeing range from 25 percent to 50 percent higher than in a typical year.

Mr. DiMenna noted a serious issue related to when one sector of an industry feels strong demand because of problems in another sector, such as what is currently happening with tomatoes.

"It's important to not take an opportunistic approach to these situations," said Mr. DiMenna. "Smart suppliers won't push their prices up in an attempt to take advantage. Hopefully, our industry is mature enough to not get into gouge marketing."

Mr. DiMenna agreed that Florida will likely be shipping again in about 30 days, but he said there is a risk of a "perfect storm" at that time.

"There will be extra production out of Florida, and at the same time, every greenhouse in Canada will be hitting peak production," he said. "There is a good possibility that we'll see a real downward pressure [on prices] when this happens."

He also said that retail prices cannot drop back down as quickly as wholesale prices do.

"In defense of retailers, it's not that they are not willing to reduce retail prices immediately when their prices drop," he said. "You might, for example, tell a retail customer that your prices have dropped to $10, and he responds by saying, 'You sold me tomatoes last week for $25, and that product is still in my system.' Retailers cannot make changes that quickly. It takes time for the adjustment to work itself out."

It will be a normal scenario to see prices spike, dip and then level off when volumes are back to normal, Mr. DiMenna said.

"If you're a gouge marketer, you can't help but get into a yo-yo situation," he said. "If you shoot for the moon but it doesn't fly, you end up in the dumps." Mr. DiMenna added, "As a company, we try to take markets up slowly and steadily. When we see a decline, we don't drop through the floor. We try to keep things moving steadily and with caution. A long, extended average is always better than a distressed, radical move."