With supplies of perishable foods increasing due to expanded imports, the old-time belief that “one farmer's misfortune is another farmer's good fortune” often is violated in the vegetable and fruit industry.
In recent years, Southern fruit and vegetable growers have experienced a confounding situation where poor growing conditions and low yields exacerbate troubles when they receive lower-than-normal prices because of abundant harvests in California or Mexico, says Edmund Estes, economist with North Carolina State University.
For the spring, summer and fall 2002 seasons, USDA reports that total vegetable acreage will increase about 9 percent compared with 2001 and output will expand more modestly at roughly 5.3 percent, says Estes. While imports and exports are expected to increase slightly (less than 1 percent), strong domestic demand as the economy continues to rebound, and continued growth in per capita consumption will result a slight gain in grower prices — about 1 percent — compared with one-year earlier levels.
For the 2002 crop, USDA forecasts that U.S. sweet potato production will decline since 3,500 fewer acres (3.5 percent) will be planted and, with a normal yield, fewer sweet potatoes would be available for sale. Fall white potato production is expected to increase about 5.8 percent since USDA expects an additional 53,000 acres of fall potatoes to be planted.
If yields were similar to 2001 levels, then output would increase about 5 percent. Fall white potato growers can expect lower season average prices during 2002 and early 2003 since output was greater than year ago levels, says Estes.
“If consumer demand remains strong for chips and seasonal sweet potatoes, then grower prices might improve above expected lower levels,” says the economist.
Slightly smaller summer crops for cabbage, cauliflower, sweet corn, and vine ripe tomatoes were offset by considerably larger snap bean and head lettuce crops, so the result was little change in domestic summer vegetable output during 2002, notes Estes.
Per capita consumption of fruits continues to increase. In recent years, the annual rate of increase was about 1 percent. Since 2000, total vegetable per capita consumption has remained relatively flat at about 452 pounds per person. However, some commodities did realize significant consumption gains.
Greater than average increases in consumption were noted for watermelon (7.2 percent), fresh tomatoes (5.2 percent), sweet corn (4.3 percent), cantaloupe (3.7 percent), and carrots (2.9 percent).
“For fall 2002 crops, USDA expects that fewer acres will be planted, imports will increase, and higher-than-average grower prices will be observed compared with fall 2001 levels.”
Americans continue to eat significant amounts of fruit each year with about 103 pounds of fresh fruit (79 pounds non-citrus and 24 pounds citrus) eaten annually plus an additional 189 pounds of processed fruits (93 pounds non-citrus and 95 pounds of citrus) consumed.
“In total, an average American eats about 740 pounds of fruits and vegetables — fresh and processed forms — and we spend about $76 billion to buy our fruits and vegetables. Collectively, fruits and vegetables are a small but important sector in the U.S. agricultural economy.
“However, the paucity of timely crop commodity information exacerbates short-term marketing difficulties and frustrates analysts and advisers who provide commodity situation and outlook assessments.
“It is somewhat futile and likely foolish to predict outcomes for next year when so little is known about the current year's situation.”
Multi-year storage is not possible for most perishable crops so carryover stocks are not a market consideration, says Estes.
Trade of horticultural products remains an important element within the U.S. economy, says Estes. Prior to the enactment of NAFTA, Mexico and Canada were the primary trading partners for the U.S. fruit and vegetable industry.
“Mexico was the dominant foreign supplier of fresh fruits and vegetables, providing nearly 80 percent of imported vegetable volume. Canada was the largest export market for most U.S. grown vegetables, receiving about 70 percent of U.S. export volume.
“Since NAFTA, trade has increased among the three countries with many U.S. fruits and vegetables shipped to Canadian markets and the U.S. market serving as an attractive target for many Mexican growers.”
Favorable temperatures in Baja and Sinaloa, Mexico, combine with seasonally higher U.S. prices to make the late fall, winter and early spring seasons an attractive market for Mexican-based fruit and vegetable growers, he says.
While phased-in NAFTA tariff reductions are small, trade statistics suggest that NAFTA indeed has stimulated U.S. vegetable imports. Since 1994, the rate of growth in U.S. imports is rapid, particularly when compared with declining or flat rates of growth in U.S. vegetable exports.
Between 2000 and 2002, the value of total U.S. vegetable imports increased 11.4 percent while the total value of U.S. exports declined 1.3 percent. “The magnitude and timing of the Mexican import volume increase remains of some concern to selected commodity organizations in Texas and Florida.”
Since 2000, growers, handlers, and sellers of Southern-grown produce had to react to a number of changing domestic and trade variables that impacted profits and affected industry welfare, including the following, says Estes:
1) full implementation of NAFTA terms and its impact on market share and competitive positions; 2) increased consumer and media attention to sanitation, food safety, pesticide residues and product traceback; 3) implementation of supply-chain management notions; 4) evolvement and expansion in the fresh-cut produce industry, including the introduction of slotting fees for produce items; and 5) third-party certification and safety audits requested (and in some cases required) by wholesalers, chain stores, retailers and food service companies.
Despite these important structural and policy changes, however, several longer-run U.S. industry trends seemed to continue unabated during 2002, says Estes, including: 1) steady expansion of domestic fruit and vegetable per capita consumption with 2) new federal guidelines for organically grown products; 3) increased concentration and consolidation in the grower, wholesale and retail sectors, that is, the produce industry seems to be moving away from its historic decentralized, fragmented structure to one that is highly integrated, with joint partnership agreements featuring long-term contractual arrangements; and 4) expanded use of contracts between retailers and fresh-market suppliers concerning long-term availability and pricing of items to reduce price and output variability.
“Growers believe performance-based fixed-price contracting will increase in fresh fruit and vegetable production since many Southern-based industries such as poultry and tobacco have switched to contract arrangements.
“USDA statistics suggest that fewer farmers generate an increasing proportion of output that, in turn, provides them with greater market access and enhanced price negotiation leverage.”