Mushroom prices expected to keep rising
Mushroom prices expected to keep rising
The price for mushrooms from the farm to the retail shelf rose significantly in recent months, and that is expected to continue, at least in the short run, according to a number of mushroom industry marketers.
Speaking both off and on the record, several mushroom industry executives painted the same picture of demand continuing to exceed supply with no letup in sight.
The price paid to growers for mushrooms destined for the processor have gone up dramatically in the past six months, and the effect in both price and supplies has spilled over to the fresh market. Combine this with increasing demand and no new supply source, and there is what one long-term marketer who asked to remain anonymous called "the perfect storm for mushroom marketing."
Another marketer, Monterey Mushroom Vice President Joe Caldwell, expects mushroom supplies "to remain tight for the majority of 2007, ... at least the next six to nine months." He said that there should be some short-term relief over the next six to eight weeks but not enough to bring supply and demand back to equilibrium.
Mr. Caldwell and the others interviewed pointed to the same handful of factors affecting the current supply situation: a 30-million to 50-million pound decrease in U.S. mushroom production because of two firms going out of business in 2006, a decrease in imports for the processor market, increased demand for fresh mushrooms, and the recent cold snap that began in California and spread across the nation, which has also decreased yields.
Mr. Caldwell said that China is the world's largest producer of mushrooms with the vast majority of its product going to processors for use in soups and sauces. He said that China's production is largely produced outdoors in temporary huts that must deal directly with the weather. China has had a very cold winter, tremendously reducing mushroom production.
This has created an enviable situation for the small U.S. mushroom grower who does not have contracts with retailers or other end users. Mr. Caldwell estimated that the "small" mushroom grower produces probably about half of the U.S. production. Because the price paid by processors has tripled in the last six months, from somewhere around 30 cents per pound to more than 90 cents per pound, no doubt some growers have diverted their production from the fresh market to the processed market.
Bart Minor, president of The Mushroom Council, the industry's commodity promotion group, said that a grower can significantly increase production per square foot if the mushrooms are destined for the processor market rather than the fresh market. He said that the size and shape of the mushrooms are not as critical for processing, so a grower can get greater yields out of a smaller area if he or she is not concerned about these all-important factors to the fresh market. Mr. Minor estimated that for a typical fresh-market producer, six to eight pounds of production per square foot is a good industry average. Just going for weight and not worrying about shape, Mr. Minor estimated that a grower could push his production to nine to 12 pounds per square foot.
In a typical marketing situation where the processed market price is only half or one-third of the fresh market price, it makes sense to limit the production and concentrate on producing nice, well-shaped mushrooms. But with the processed price rising close to $1 per pound, it makes economic sense for a grower to push his or her production and sell to the processor.
Mr. Caldwell said that larger companies such as Monterey Mushrooms are committed to the fresh market and are not diverting production. But he said that for a smaller grower concerned more about short-term economics than long-term commitments to the fresh market, it is somewhat of a no-brainer. Currently for the processor market, a grower can produce more pounds and receive a higher net return going in that direction.
The long-term marketer who asked to remain anonymous said that fresh- market mushroom f.o.b. prices have risen in the last six months to about $1.20 to $1.65 per pound. That includes the packaging and other steps that must be taken to service that market. "I think the fresh-market prices will continue to inch up for about two to three more months," he said, "but then they will level off."
This marketer, with more than 25 years of mushroom marketing history in his background, said that the fresh-market price is rarely dictated by supply and demand or the cost of doing business. "The mushroom industry mindset when it comes to pricing is to keep it steady," he said. "We haven't had a lot of increases."
Mr. Caldwell of Monterey Mushrooms said almost the same thing. "We have had a couple of price increases recently and they really weren't related to the current shortage situation. We have been in an oversupply situation for the last couple of years, and we haven't been able to pass our cost increases on to our customers. This situation has allowed us to do that."
Most of those interviewed agreed that the situation is unlikely to change quickly. "I don't see any new farms going in," said the unnamed source. "It is very difficult to get the permits to put in a new mushroom farm. I don't see that happening. Growers are going to have to come up with a way to increase yields."
Mr. Caldwell said that as Monterey Mushrooms has been faced with the prospect of having to short some of its customers, "we have looked everywhere to increase supplies and have come up with nothing."
With this perfect storm brewing, The Mushroom Council is aggressively attempting to increase demand further through more promotions and advertising. Just this past week (Jan. 15-19) the council announced an affiliation with Bob Greene, Oprah Winfrey's personal trainer, whose "Best Life" diet and book are gaining much national attention. Mr. Minor said that the licensing agreement allows mushroom growers to tout the affiliation on their consumer packaging, and it features other cross promotions. He said that other licensees have seen significant increases in sales based on the tie-in with Mr. Greene's diet. "We think the connection with Oprah will give us a boost," said Mr. Minor.
The Mushroom Council has gone through a difficult few years dealing with a U.S. Supreme Court ruling basically knocking out its advertising campaign a few years ago and another ruling basically reinstating it for the 2006 season. This year the council is assessing growers at the rate of 4.3 cents per pound, a more than 25 percent increase over last year and getting closer to the 4.5 cents that was assessed before the original Supreme Court ruling. Mr. Minor said that inflation has reduced the buying power of the budgeted amount, but the industry has a stated plan, and it is starting to see it pay off. The promotion group is geared toward exposing consumers as often as it can to mushrooms and the concept that mushrooms are good for you. He said that the "Best Life" diet connection potentially could appear on 500 million packages of mushrooms annually, sending a powerful message to consumers.
Speaking both off and on the record, several mushroom industry executives painted the same picture of demand continuing to exceed supply with no letup in sight.
The price paid to growers for mushrooms destined for the processor have gone up dramatically in the past six months, and the effect in both price and supplies has spilled over to the fresh market. Combine this with increasing demand and no new supply source, and there is what one long-term marketer who asked to remain anonymous called "the perfect storm for mushroom marketing."
Another marketer, Monterey Mushroom Vice President Joe Caldwell, expects mushroom supplies "to remain tight for the majority of 2007, ... at least the next six to nine months." He said that there should be some short-term relief over the next six to eight weeks but not enough to bring supply and demand back to equilibrium.
Mr. Caldwell and the others interviewed pointed to the same handful of factors affecting the current supply situation: a 30-million to 50-million pound decrease in U.S. mushroom production because of two firms going out of business in 2006, a decrease in imports for the processor market, increased demand for fresh mushrooms, and the recent cold snap that began in California and spread across the nation, which has also decreased yields.
Mr. Caldwell said that China is the world's largest producer of mushrooms with the vast majority of its product going to processors for use in soups and sauces. He said that China's production is largely produced outdoors in temporary huts that must deal directly with the weather. China has had a very cold winter, tremendously reducing mushroom production.
This has created an enviable situation for the small U.S. mushroom grower who does not have contracts with retailers or other end users. Mr. Caldwell estimated that the "small" mushroom grower produces probably about half of the U.S. production. Because the price paid by processors has tripled in the last six months, from somewhere around 30 cents per pound to more than 90 cents per pound, no doubt some growers have diverted their production from the fresh market to the processed market.
Bart Minor, president of The Mushroom Council, the industry's commodity promotion group, said that a grower can significantly increase production per square foot if the mushrooms are destined for the processor market rather than the fresh market. He said that the size and shape of the mushrooms are not as critical for processing, so a grower can get greater yields out of a smaller area if he or she is not concerned about these all-important factors to the fresh market. Mr. Minor estimated that for a typical fresh-market producer, six to eight pounds of production per square foot is a good industry average. Just going for weight and not worrying about shape, Mr. Minor estimated that a grower could push his production to nine to 12 pounds per square foot.
In a typical marketing situation where the processed market price is only half or one-third of the fresh market price, it makes sense to limit the production and concentrate on producing nice, well-shaped mushrooms. But with the processed price rising close to $1 per pound, it makes economic sense for a grower to push his or her production and sell to the processor.
Mr. Caldwell said that larger companies such as Monterey Mushrooms are committed to the fresh market and are not diverting production. But he said that for a smaller grower concerned more about short-term economics than long-term commitments to the fresh market, it is somewhat of a no-brainer. Currently for the processor market, a grower can produce more pounds and receive a higher net return going in that direction.
The long-term marketer who asked to remain anonymous said that fresh- market mushroom f.o.b. prices have risen in the last six months to about $1.20 to $1.65 per pound. That includes the packaging and other steps that must be taken to service that market. "I think the fresh-market prices will continue to inch up for about two to three more months," he said, "but then they will level off."
This marketer, with more than 25 years of mushroom marketing history in his background, said that the fresh-market price is rarely dictated by supply and demand or the cost of doing business. "The mushroom industry mindset when it comes to pricing is to keep it steady," he said. "We haven't had a lot of increases."
Mr. Caldwell of Monterey Mushrooms said almost the same thing. "We have had a couple of price increases recently and they really weren't related to the current shortage situation. We have been in an oversupply situation for the last couple of years, and we haven't been able to pass our cost increases on to our customers. This situation has allowed us to do that."
Most of those interviewed agreed that the situation is unlikely to change quickly. "I don't see any new farms going in," said the unnamed source. "It is very difficult to get the permits to put in a new mushroom farm. I don't see that happening. Growers are going to have to come up with a way to increase yields."
Mr. Caldwell said that as Monterey Mushrooms has been faced with the prospect of having to short some of its customers, "we have looked everywhere to increase supplies and have come up with nothing."
With this perfect storm brewing, The Mushroom Council is aggressively attempting to increase demand further through more promotions and advertising. Just this past week (Jan. 15-19) the council announced an affiliation with Bob Greene, Oprah Winfrey's personal trainer, whose "Best Life" diet and book are gaining much national attention. Mr. Minor said that the licensing agreement allows mushroom growers to tout the affiliation on their consumer packaging, and it features other cross promotions. He said that other licensees have seen significant increases in sales based on the tie-in with Mr. Greene's diet. "We think the connection with Oprah will give us a boost," said Mr. Minor.
The Mushroom Council has gone through a difficult few years dealing with a U.S. Supreme Court ruling basically knocking out its advertising campaign a few years ago and another ruling basically reinstating it for the 2006 season. This year the council is assessing growers at the rate of 4.3 cents per pound, a more than 25 percent increase over last year and getting closer to the 4.5 cents that was assessed before the original Supreme Court ruling. Mr. Minor said that inflation has reduced the buying power of the budgeted amount, but the industry has a stated plan, and it is starting to see it pay off. The promotion group is geared toward exposing consumers as often as it can to mushrooms and the concept that mushrooms are good for you. He said that the "Best Life" diet connection potentially could appear on 500 million packages of mushrooms annually, sending a powerful message to consumers.
