Lettuce market expected to stay strong
Lettuce market expected to stay strong
Shippers in Salinas, CA, are enjoying a very strong lettuce market, and all indications are that it will remain that way through the transitions from Salinas to the San Joaquin Valley and to Yuma, AZ, that will take place over the next six weeks.
The market for a carton of cello-wrapped Iceberg lettuce hovered in the $16- $18 range during the week of Oct. 13.
"We think the lettuce market should be good for the balance of the Salinas deal, all of the Huron deal, and at least to the mid-part of the Yuma deal," said Peter Romero, vice president of sales and marketing for Salyer American Fresh Foods Inc., which is headquartered in Salinas but, like most large Salinas shippers, has production in all three areas.
Mr. Romero said that a combination of decreased yields and a reduction in acreage created the strong market and should continue to tip the scales toward the demand side of the supply-demand curve.
"Salinas is winding down. We only have a couple of weeks left over here," he said Oct. 15. "We are in that time of the year when we have shorter days, so we have lower yields. And production as a whole is down, so that creates a good market."
With Salinas waning, production typically shifts to the San Joaquin Valley's Huron district, which fills the supply gap for about a month until desert production kicks in.
Grower Mark Borba of Borba Farms in Riverdale, CA, said that Huron has two lettuce production windows during the year. "We usually supply the nation from about October 20 through Thanksgiving, and then again from late March through Easter."
Mr. Borba said that Huron can typically be counted on to harvest 11,000 to 14,000 acres during those two periods. He does not have a good handle on how much acreage was planted for this fall season, but he suspects it is even below the low end of that range.
"I don't know for sure, and if you ask the shippers, they aren't going to give you a straight answer," he quipped.
He did say that he would typically grow about 1,100 acres for various shippers, but this year he is down to 740 acres. "I don't know what other growers did, but I'm probably about average."
If Borba Farms' 35 percent reduction is typical, then supplies will be very tight for the next month at least.
Mr. Borba said that the lack of acreage is largely due to a lack of water allocation. Because of drought conditions in California, San Joaquin Valley growers received only about one-third of their contracted allocations in 2008. Growers with diversified crop portfolios -- and that definition represents most of them -- had to use most of that water on permanent crops, such as almonds and tree fruit. Many of the less water-intensive grain crops were also a good bet this year, as they returned record prices. That left growers with very little water as the Huron lettuce planting period approached in August.
Mr. Borba said that for his farm, he was actually able to add some lettuce acreage that he feared he wasn't going to be able to plant. During the summer, he estimated that he would plant only 300-400 acres of lettuce in August and September. "I was able to pump more water from my wells this summer than I thought, so I ended up with more of my water allocation left over."
So he upped his acreage to 740, which is still significantly less than last year. When Huron is finished shipping in late November and the harvest moves to the desert, primarily Yuma, AZ, there is still expected to be a gap between supply and demand.
Desert growers are still planting their winter acreage, so there is no firm number on supplies. But anecdotally, it appears that acreage is down significantly. A representative of a Yuma grower who asked not to be identified said that most people are planting less than they did a year ago. Matt Seeley, vice president of marketing for The Nunes Co., based in Salinas, CA, said that the economy may also be playing a role in the strong lettuce market.
"In times of an economic slowdown, conventional wisdom says that consumers return to the basics," he said. "And typically, that means they return to the commodities where they perceive there to be a better value."
Mr. Seeley said that September was a very good month for head lettuce as well as many other items such as Romaine, the leaf lettuces and cauliflower. He said that the media are filled with stories about how restaurants are being hit hard as consumers cut down on their meals out, but "retailers tell us they are doing very well. There may be a shift away from foodservice back to retail."
During economic slumps, retailers often talk of the trading-down effect where consumers buy cheaper cuts of meat, going from filet mignon to round steak. In the produce department, that same trade-down effect may involve going from packaged, value-added items to commodities, which are typically priced much lower on a per-pound basis.
Mr. Seeley said that the years of poor markets have also taken their toll on the grower-shipper community. He said that there are fewer growers and fewer shippers, and one should expect fewer acres as well.
Grower-shippers said that the recent E. coli outbreak in Michigan tied to California lettuce has had no measurable effect on demand. Close to 50 cases of E. coli contamination were reported in September and early October, but they came during a time when the market was hot and supplies were down. If there was an effect, it would be difficult to see it as the market price was on the rise.
Additionally, an early-morning frost Oct. 14 in the Salinas Valley seemingly had no effect on supplies or price. Mr. Romero said that the frost delayed harvest for a couple of hours, but because it lasted only for several hours on one day, he expected no lingering impact.
The market for a carton of cello-wrapped Iceberg lettuce hovered in the $16- $18 range during the week of Oct. 13.
"We think the lettuce market should be good for the balance of the Salinas deal, all of the Huron deal, and at least to the mid-part of the Yuma deal," said Peter Romero, vice president of sales and marketing for Salyer American Fresh Foods Inc., which is headquartered in Salinas but, like most large Salinas shippers, has production in all three areas.
Mr. Romero said that a combination of decreased yields and a reduction in acreage created the strong market and should continue to tip the scales toward the demand side of the supply-demand curve.
"Salinas is winding down. We only have a couple of weeks left over here," he said Oct. 15. "We are in that time of the year when we have shorter days, so we have lower yields. And production as a whole is down, so that creates a good market."
With Salinas waning, production typically shifts to the San Joaquin Valley's Huron district, which fills the supply gap for about a month until desert production kicks in.
Grower Mark Borba of Borba Farms in Riverdale, CA, said that Huron has two lettuce production windows during the year. "We usually supply the nation from about October 20 through Thanksgiving, and then again from late March through Easter."
Mr. Borba said that Huron can typically be counted on to harvest 11,000 to 14,000 acres during those two periods. He does not have a good handle on how much acreage was planted for this fall season, but he suspects it is even below the low end of that range.
"I don't know for sure, and if you ask the shippers, they aren't going to give you a straight answer," he quipped.
He did say that he would typically grow about 1,100 acres for various shippers, but this year he is down to 740 acres. "I don't know what other growers did, but I'm probably about average."
If Borba Farms' 35 percent reduction is typical, then supplies will be very tight for the next month at least.
Mr. Borba said that the lack of acreage is largely due to a lack of water allocation. Because of drought conditions in California, San Joaquin Valley growers received only about one-third of their contracted allocations in 2008. Growers with diversified crop portfolios -- and that definition represents most of them -- had to use most of that water on permanent crops, such as almonds and tree fruit. Many of the less water-intensive grain crops were also a good bet this year, as they returned record prices. That left growers with very little water as the Huron lettuce planting period approached in August.
Mr. Borba said that for his farm, he was actually able to add some lettuce acreage that he feared he wasn't going to be able to plant. During the summer, he estimated that he would plant only 300-400 acres of lettuce in August and September. "I was able to pump more water from my wells this summer than I thought, so I ended up with more of my water allocation left over."
So he upped his acreage to 740, which is still significantly less than last year. When Huron is finished shipping in late November and the harvest moves to the desert, primarily Yuma, AZ, there is still expected to be a gap between supply and demand.
Desert growers are still planting their winter acreage, so there is no firm number on supplies. But anecdotally, it appears that acreage is down significantly. A representative of a Yuma grower who asked not to be identified said that most people are planting less than they did a year ago. Matt Seeley, vice president of marketing for The Nunes Co., based in Salinas, CA, said that the economy may also be playing a role in the strong lettuce market.
"In times of an economic slowdown, conventional wisdom says that consumers return to the basics," he said. "And typically, that means they return to the commodities where they perceive there to be a better value."
Mr. Seeley said that September was a very good month for head lettuce as well as many other items such as Romaine, the leaf lettuces and cauliflower. He said that the media are filled with stories about how restaurants are being hit hard as consumers cut down on their meals out, but "retailers tell us they are doing very well. There may be a shift away from foodservice back to retail."
During economic slumps, retailers often talk of the trading-down effect where consumers buy cheaper cuts of meat, going from filet mignon to round steak. In the produce department, that same trade-down effect may involve going from packaged, value-added items to commodities, which are typically priced much lower on a per-pound basis.
Mr. Seeley said that the years of poor markets have also taken their toll on the grower-shipper community. He said that there are fewer growers and fewer shippers, and one should expect fewer acres as well.
Grower-shippers said that the recent E. coli outbreak in Michigan tied to California lettuce has had no measurable effect on demand. Close to 50 cases of E. coli contamination were reported in September and early October, but they came during a time when the market was hot and supplies were down. If there was an effect, it would be difficult to see it as the market price was on the rise.
Additionally, an early-morning frost Oct. 14 in the Salinas Valley seemingly had no effect on supplies or price. Mr. Romero said that the frost delayed harvest for a couple of hours, but because it lasted only for several hours on one day, he expected no lingering impact.
