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Freight rates spiking higher

WEATHER

Salinas, CA: Daytime highs will range from the mid-60s to low 70s through June 14 with overnight lows in the low 50s. Dry skies are expected into mid-June.

Fresno, CA: Daytime highs will be in the mid-80s through June 14 with overnight lows in the upper 50s to low 60s. Dry skies are expected into mid-June.

DEMAND

New Mexico and California yellow onion shippers are on the verge of a demand-exceeds-supply market. Idaho shippers were seeing good demand across the board. Salinas row crop shippers said that limited truck availability is curbing demand.

TRANSPORTATION & FUEL

Demand for trucks on the West Coast exceeds availability, causing freight rates to suddenly spike higher.

The price of crude oil increased $1.75 June 8 to $100.84 per barrel, which is 31 percent below record levels of July 2008. The nationwide average price for a gallon of diesel the week of June 6 was $3.94, which is 34 percent higher than one year ago. The average price in California for a gallon of diesel is $4.22, which is 38 percent higher than last year.

ICEBERG LETTUCE

The Salinas Valley endured yet another late-season storm the weekend of June 4. Temperatures were unseasonably cold, and the amount of rainfall was unprecedented for early June. A Salinas lettuce salesman stated, "If we had to have rain, thankfully the temperatures remained cold. It turns out we had the right conditions, and the rain acted liked Mother Nature's fertilizer."

The chronic pattern of cold temperatures during April and May in the Salinas Valley delayed crop maturity through the week of May 30. A Salinas shipper said, "The recent rain and pending warmer temperatures will ensure good supplies heading into the week of June 13. We are no longer 10 days behind our harvest schedule."

Truck availability is very limited, and receivers cannot find all the trucks they need. A buyer for a large receiver in Boston recently stated, "We have good demand and could sell more product if we had complete access to transportation." A Salinas Valley shipper added, "There's decent demand for our product; however, there aren't enough trucks to fill all the orders. Our product doesn't move, and this artificially reduces demand. The net result is we have an excess supply."

Current lettuce quality is strong, and today's harvest will arrive with ample shelf life. Lettuce supplies will be more than adequate heading into mid-June, and the market is expected to remain at very reasonable levels.

LEAF LETTUCE

The rain and cold temperatures over the weekend of June 4 will encourage production and ensure good supplies of leaf lettuce in mid-June. The current quality of Romaine and green leaf is excellent with good weights, color and shelf life upon arrival.

Regional leaf deals in the Midwest and East are offering good supplies of leaf lettuce. The net effect is less demand for product from the West Coast. The leaf market in California will remain fairly quiet until the regional deals are hit with either excessive summer heat and/or rain. When this happens, and it will, demand unexpectedly swings back to California and the leaf markets quickly react higher. For now, the West Coast leaf market will remain very reasonable heading into the week of June 13.

BROCCOLI

The West Coast broccoli market remains in the grip of limited availability and expensive prices. Rain gaps and the persistently cold spring in the Salinas Valley have combined to create inconsistent production. A Salinas Valley salesman recently stated, "The chronic cold daytime temperatures are creating a roller coaster effect in supply and the market. It's difficult to sell against our two-week production estimates when the flow of supplies is so inconsistent." Slightly warmer temperatures and decreasing truck availability should result in better near-term supplies and provide market relief.

CELERY

The California celery industry is on the verge of its annual spring transition. Production in Oxnard is fading, and many shippers will soon conclude their seasons. The annual 30-day soil moratorium in Oxnard begins July 15. New-crop celery will be ready in the autumn for Thanksgiving.

The Salinas celery season will begin Monday, June 13. A Salinas celery salesman recently stated, "The cold and wet weather through much of April and May has delayed the crop somewhat. Initial production will be slow, and sizes will lean towards 30s and 24s. The large sizes (24-count) may very well command a premium." Quality from the Salinas Valley will be excellent. A two-tier market may soon develop if Santa Maria shippers attempt to lure orders and trucks away from Salinas.

STRAWBERRIES

The late-season storm over the weekend of June 4-5 produced unprecedented rainfall for early June. Strawberry quality will not suffer greatly thanks to continuing cold temperatures. Local strawberry production in Salinas and Watsonville is expected to reach its peak in late June. The near-term market will remain steady and/or ease slightly heading into the week of June 13.

ONIONS

The New Mexico deal is getting off to a very slow start and will be plagued with poor yields and undersized onions well into July. The early February freeze brought overnight temperatures between zero and 10 degrees in the onion-growing districts. Onion tops in countless over-wintered fields fell and did not recover. A New Mexico salesman recently stated, "We knew onions were in trouble when the cold temperatures killed some palm trees. We believe New Mexico lost 20 percent to 30 percent of the entire summer crop." Another New Mexico shipper said that initial production will be just 35-40 percent of normal through June 24. New Mexico shippers with transplant onions -- and there are very few of them -- will have decent supplies beginning the week of June 27. There are 4,700 acres of onions this season in New Mexico and only 500 acres are transplants.

California has its own set of problems. Daytime high temperatures have been far below normal throughout much of the spring, and several late-season storms have brought unwelcome rain. Shippers expect initial delays and light production at least into the week of June 20. It's just a matter of time before the nation's onion buyers wake up to the fact that New Mexico has a huge problem and that California cannot even begin to compensate for the mammoth shortfall.

Despite limited demand, the current jumbo yellow market has increased noticeably since late May. A New Mexico shipper added, "Today's jumbo yellow market would be markedly higher if Mexico wasn't crossing 50 to 60 loads a day."

The yellow onion market is poised to catapult substantially higher any moment and remain a strong seller's market through June and well into July. The red and white markets will follow quickly. Buyers are highly encouraged to stay ahead of the rising market and expect replacement costs to be higher. Supplies soon will be subject to availability and priced the day of shipment.

RUSSETS

Storage supplies in all shipping districts are much thinner than usual for early June. A good number of Washington state and Colorado shippers, who customarily ship into July, will conclude their seasons in the near term. This will put the remaining supplies in fewer hands as July approaches.

Idaho shippers are reducing packing hours in an effort to stretch the remaining supplies and prevent or minimize a gap in July between the old and new crops. Idaho shippers were seeing continuing brisk consumer bale and No. 2 business. Demand for cartons has increased since late May and is expected to rise further in mid- to late June. Receivers can expect near and moderate term prices to rise steadily.

Buyers are encouraged to begin buying extra supplies now and stay ahead of what promises to be a strong seller's market from mid-June through July.

LEMONS

Strengthening summer demand is pushing the lemon market higher. Prices for fancy 165s and larger, and choice 200s and larger, are noticeably higher from the week of May 30. Shippers expect weekly price increases to continue into the foreseeable future. Overall quality is strong. Lemons are available in Oxnard and the Central Valley, and can load with Valencia oranges.

ORANGES

Daytime temperatures throughout much of April and May were far below normal. Daytime highs are finally on the rise and will be in the mid-80s June 8-14. Historically, daytime temperatures in early June should be well into the 90s. The Central Valley experienced a strong, late-season storm over the weekend of June 4 which produced widespread rain showers and periodic heavy rainfall.

The unprecedented cold spring in the Central Valley is altering the size profile of new-crop Valencias. Shippers said that fruit is peaking on 72s followed by 88s and then 56s instead of the customary 88s through 138s. This is good news for retailers and unfortunate for foodservice operators. Overall quality is strong with good sugars. Oranges are available for loading in the Central Valley followed distantly by Oxnard and Riverside. Oranges and lemons can load together in either district.

CARROTS

The four-month struggle with light volume and undersized carrots is nearly over. California carrot shippers said that production of jumbo carrots and two-inch plug carrots has returned to normal levels. Production of four-inch plug carrots is expected to reach seasonal levels beginning the week of June 13.

 

(Bill Armstrong is a self-employed produce broker who operates Armstrong Marketing in Salinas, CA. His column appears here every Wednesday afternoon/Thursday morning. He may be reached by phone at 888/484-0800 or at ArmstrongMarketing@comcast.net)