Hot lettuce market cools off, but f.o.b. remains strong
Hot lettuce market cools off, but f.o.b. remains strong
Although the f.o.b. prices for Iceberg lettuce that surpassed $35 in mid- October dropped considerably the third week of the month, the lettuce market remains strong, and experts said that the current conditions should hold for at least the next several weeks.
Iceberg lettuce shippers have had a pretty good market since the beginning of October, with f.o.b. prices at least in the high teens. Rain in the California coastal production areas around Oct. 10 led to lighter supplies as much of the industry was in Houston for the Produce Marketing Association convention. By Monday, Oct. 15, demand far exceeded supply, and the market started to climb quickly through the $20s and into $30s; by the end of the week, $35 was commonplace. The accompanying retail prices of $2.50 or more per head, however, quickly dissipated that demand.
"The market has corrected itself," Steve Davis, sales manager for Mills Family Farms Inc. in Salinas, CA, told The Produce News Oct. 24. "In fact, I think it has overcorrected and is going to get stronger again."
He said that supplies remain below demand, and no surge in production is expected through the Huron deal and into the desert districts in late November.
Mr. Davis said that there are currently four production areas as Salinas is finishing and Huron is getting started, and there are still some supplies coming from Santa Maria and Bakersfield. However, Salinas is on its last legs, and by Nov. 1 the bulk of the Iceberg lettuce will be coming from the Huron district in the San Joaquin Valley, which is typically a four- to five-week deal filling the gap between the spring-summer coastal production and the fall- winter desert deal.
"Acreage is light in Huron because of the water situation," Mr. Davis said. He explained that California's general drought conditions have led to a decrease in water allocations and a decrease in planted acreage. "Because of the water situation, we are staying in Salinas a little bit longer this year and leaving Huron a little bit earlier, truncating that deal a bit," he said of Mills Family Farms.
Mark Crossgrove, vice president of sales for The Nunes Co., which is also based in Salinas, agreed that the lettuce market would continue to remain strong for the foreseeable future. He said Oct. 24 that the market was mostly $15-$18, but it was starting to strengthen again. The Nunes executive said that it is a simple case of supply and demand, with the foreseeable demand outpacing the expected supplies.
As goes lettuce so goes most other crops, and Mr. Crossgrove said that this has been the case for the past several weeks. Romaine and the leaf items, as well as broccoli and cauliflower, followed lettuce as it spiked, and the market price on those items also came off as the lettuce market fell.
In late October, Mr. Crossgrove said that most of the vegetable items were trading briskly with good double-digit f.o.b. prices. He said that this scenario should remain as long as the demand for Iceberg continues to be strong. While the shift to Yuma, AZ, and the California desert regions might typically see a spike in supplies, Mr. Davis said that might not be the case this year. "We've heard that acreage is down a bit, and then the big unknown is labor."
For the last several years, there has been a growing labor shortage in the desert as the United States continues to tighten its border access without addressing the immigration issue, which is more acute in the border districts as growers rely on a constant stream of workers, many of whom come to the United States during the day and go back to their homes on the other side of the border at night.
Besides the crackdown on undocumented workers crossing the border, which decreases the labor supply, even those legally allowed to work in the United States often find the border hassle not worth the effort.
Mr. Davis said that the industry won't know if it is able to fully harvest its crops until the season begins.
Iceberg lettuce shippers have had a pretty good market since the beginning of October, with f.o.b. prices at least in the high teens. Rain in the California coastal production areas around Oct. 10 led to lighter supplies as much of the industry was in Houston for the Produce Marketing Association convention. By Monday, Oct. 15, demand far exceeded supply, and the market started to climb quickly through the $20s and into $30s; by the end of the week, $35 was commonplace. The accompanying retail prices of $2.50 or more per head, however, quickly dissipated that demand.
"The market has corrected itself," Steve Davis, sales manager for Mills Family Farms Inc. in Salinas, CA, told The Produce News Oct. 24. "In fact, I think it has overcorrected and is going to get stronger again."
He said that supplies remain below demand, and no surge in production is expected through the Huron deal and into the desert districts in late November.
Mr. Davis said that there are currently four production areas as Salinas is finishing and Huron is getting started, and there are still some supplies coming from Santa Maria and Bakersfield. However, Salinas is on its last legs, and by Nov. 1 the bulk of the Iceberg lettuce will be coming from the Huron district in the San Joaquin Valley, which is typically a four- to five-week deal filling the gap between the spring-summer coastal production and the fall- winter desert deal.
"Acreage is light in Huron because of the water situation," Mr. Davis said. He explained that California's general drought conditions have led to a decrease in water allocations and a decrease in planted acreage. "Because of the water situation, we are staying in Salinas a little bit longer this year and leaving Huron a little bit earlier, truncating that deal a bit," he said of Mills Family Farms.
Mark Crossgrove, vice president of sales for The Nunes Co., which is also based in Salinas, agreed that the lettuce market would continue to remain strong for the foreseeable future. He said Oct. 24 that the market was mostly $15-$18, but it was starting to strengthen again. The Nunes executive said that it is a simple case of supply and demand, with the foreseeable demand outpacing the expected supplies.
As goes lettuce so goes most other crops, and Mr. Crossgrove said that this has been the case for the past several weeks. Romaine and the leaf items, as well as broccoli and cauliflower, followed lettuce as it spiked, and the market price on those items also came off as the lettuce market fell.
In late October, Mr. Crossgrove said that most of the vegetable items were trading briskly with good double-digit f.o.b. prices. He said that this scenario should remain as long as the demand for Iceberg continues to be strong. While the shift to Yuma, AZ, and the California desert regions might typically see a spike in supplies, Mr. Davis said that might not be the case this year. "We've heard that acreage is down a bit, and then the big unknown is labor."
For the last several years, there has been a growing labor shortage in the desert as the United States continues to tighten its border access without addressing the immigration issue, which is more acute in the border districts as growers rely on a constant stream of workers, many of whom come to the United States during the day and go back to their homes on the other side of the border at night.
Besides the crackdown on undocumented workers crossing the border, which decreases the labor supply, even those legally allowed to work in the United States often find the border hassle not worth the effort.
Mr. Davis said that the industry won't know if it is able to fully harvest its crops until the season begins.
