Hot lettuce market obscures 'Dateline' impact
Hot lettuce market obscures 'Dateline' impact
A hot lettuce market caused by decreased supplies blurred any impact that might have occurred following the late April report on NBC's television program "Dateline" linking several cases of E. coli-related sickness with bagged lettuce.
On Sunday, April 30, the television newsmagazine show featured a segment detailing the connection between bagged salads and an E. coli outbreak in the Midwest last year. At the United-Food Marketing Institute convention a week later, retailers and shippers were noting little effect. During one private meeting, a group of retailers told grower-shipper representatives that each had received only a handful of calls following the broadcast -- far fewer than would be expected if consumers were concerned about the issue. One shipper representative at the meeting said that the retailers noticed no decline in sales of bagged salads.
Sales figure for the period are not revealing much either because the show coincided with a shortage situation which saw the lettuce market rise to as high as $30 during the first few weeks of May. At this writing, the market has come down a bit but was still trading in the teens with some predicting a roller-coaster ride for the next month.
An executive with one of the bagged salad companies told The Produce News that it is always difficult to pinpoint sales trends during a hot lettuce market because there are so many factors that come into play. Add in the "Dateline" story, and it is virtually impossible to know what importance to place on all the different elements that make up the market. "Personally, I think the 'Dateline' impact was minimal and was overshadowed by the other factors," said the executive who asked not to be identified.
Sales of bagged lettuce are typically schizophrenic when f.o.b. lettuce prices skyrocket. In the first place, it is difficult for the packaged salad producers to get enough product to fill their orders. When the in-the-field price is high, growers are slow to fill their contracted orders. Human nature calls for these growers -- who have been on the short end of the market for the past three years -- to want to capitalize on the hot market with at least some of their production. At the same time, the consumer demand for bagged lettuce tends to increase when the price of head lettuce goes too high.
The bagged salad company executive said that processors are cutting orders or trying to hold the line just as demand is increasing. "In those situations, we try to hold our customers to their normal orders. We know some companies [handling packaged salads] were cutting orders by as much as 50 percent."
He said that looking at the retail scan data from the two-week period following the "Dateline" show produced nothing out of the ordinary considering the volatile market at the time.
John Baillie of Baillie Family Farms, a vegetable grower in Salinas, CA, said, "One processor was offering $20,000 per acre" to fill their supply needs. "That was last week," he said May 24. "This week there is not a problem."
But Mr. Baillie expects the market to continue its roller-coaster ride until at least July 4. He said that the market retreat that was being experienced around May 24 was a function of the upcoming Memorial Day holiday weekend, not the overall lettuce supply situation. "The Tuesday and Wednesday prior to a holiday weekend are always dead because of the delivery day."
He explained that lettuce shipped those days would most likely arrive on Monday, when warehouses are closed for the holiday. Hence orders are light on those two days. "Let's see what happens later in the week," he said.
Mr. Baillie was predicting a jump in the market and a further jump the following two weeks.
A shipper who asked not to be identified said that rain in late March and early April caused a planting gap which will be felt as a harvesting gap the first two weeks of June. "Prices should climb again, but time will tell," he said.
Mr. Baillie agreed with this assessment, stating that the Salinas Valley has not seen so much rain in April in generations. "I was talking to my dad [William Baillie Sr.], and he said there hasn't been this much late rain since he was a senior in high school in 1954 or 1955. And you have to go back to 1938 for the last time it flooded in the Salinas Valley in April. We didn't flood this year, but we got within a foot or two."
Mr. Baillie said that bad weather during the planting season is going to cause waves of incongruity between supply and demand for the next 40 days or so. But he noted that one wild card that may help fill those gaps is production from Mexico. "A couple of days ago, Mexico crossed 21,000 cartons of lettuce. That's a lot of lettuce and more than double what they usually cross."
Mr. Baillie said that Mexico's lettuce production has increased tremendously in recent years. "You go back 10 or 15 years and they didn't send anything up here."
He said that increasing numbers of U.S.-based growers are producing lettuce in Mexico, and noted that the high prices of recent weeks have played a role in increasing supplies from south of the border. How much more can be sent north from Mexico if the market warrants it is anybody's guess, he said.
On Sunday, April 30, the television newsmagazine show featured a segment detailing the connection between bagged salads and an E. coli outbreak in the Midwest last year. At the United-Food Marketing Institute convention a week later, retailers and shippers were noting little effect. During one private meeting, a group of retailers told grower-shipper representatives that each had received only a handful of calls following the broadcast -- far fewer than would be expected if consumers were concerned about the issue. One shipper representative at the meeting said that the retailers noticed no decline in sales of bagged salads.
Sales figure for the period are not revealing much either because the show coincided with a shortage situation which saw the lettuce market rise to as high as $30 during the first few weeks of May. At this writing, the market has come down a bit but was still trading in the teens with some predicting a roller-coaster ride for the next month.
An executive with one of the bagged salad companies told The Produce News that it is always difficult to pinpoint sales trends during a hot lettuce market because there are so many factors that come into play. Add in the "Dateline" story, and it is virtually impossible to know what importance to place on all the different elements that make up the market. "Personally, I think the 'Dateline' impact was minimal and was overshadowed by the other factors," said the executive who asked not to be identified.
Sales of bagged lettuce are typically schizophrenic when f.o.b. lettuce prices skyrocket. In the first place, it is difficult for the packaged salad producers to get enough product to fill their orders. When the in-the-field price is high, growers are slow to fill their contracted orders. Human nature calls for these growers -- who have been on the short end of the market for the past three years -- to want to capitalize on the hot market with at least some of their production. At the same time, the consumer demand for bagged lettuce tends to increase when the price of head lettuce goes too high.
The bagged salad company executive said that processors are cutting orders or trying to hold the line just as demand is increasing. "In those situations, we try to hold our customers to their normal orders. We know some companies [handling packaged salads] were cutting orders by as much as 50 percent."
He said that looking at the retail scan data from the two-week period following the "Dateline" show produced nothing out of the ordinary considering the volatile market at the time.
John Baillie of Baillie Family Farms, a vegetable grower in Salinas, CA, said, "One processor was offering $20,000 per acre" to fill their supply needs. "That was last week," he said May 24. "This week there is not a problem."
But Mr. Baillie expects the market to continue its roller-coaster ride until at least July 4. He said that the market retreat that was being experienced around May 24 was a function of the upcoming Memorial Day holiday weekend, not the overall lettuce supply situation. "The Tuesday and Wednesday prior to a holiday weekend are always dead because of the delivery day."
He explained that lettuce shipped those days would most likely arrive on Monday, when warehouses are closed for the holiday. Hence orders are light on those two days. "Let's see what happens later in the week," he said.
Mr. Baillie was predicting a jump in the market and a further jump the following two weeks.
A shipper who asked not to be identified said that rain in late March and early April caused a planting gap which will be felt as a harvesting gap the first two weeks of June. "Prices should climb again, but time will tell," he said.
Mr. Baillie agreed with this assessment, stating that the Salinas Valley has not seen so much rain in April in generations. "I was talking to my dad [William Baillie Sr.], and he said there hasn't been this much late rain since he was a senior in high school in 1954 or 1955. And you have to go back to 1938 for the last time it flooded in the Salinas Valley in April. We didn't flood this year, but we got within a foot or two."
Mr. Baillie said that bad weather during the planting season is going to cause waves of incongruity between supply and demand for the next 40 days or so. But he noted that one wild card that may help fill those gaps is production from Mexico. "A couple of days ago, Mexico crossed 21,000 cartons of lettuce. That's a lot of lettuce and more than double what they usually cross."
Mr. Baillie said that Mexico's lettuce production has increased tremendously in recent years. "You go back 10 or 15 years and they didn't send anything up here."
He said that increasing numbers of U.S.-based growers are producing lettuce in Mexico, and noted that the high prices of recent weeks have played a role in increasing supplies from south of the border. How much more can be sent north from Mexico if the market warrants it is anybody's guess, he said.
