Vegetable growers feeling cost squeeze

Like with traditional row crops, vegetable and melon net returns are being eroded by rapidly escalating input prices, particularly for fuel and fertilizer, according to USDA’s latest Vegetable and Melons outlook report.

Based on an index calculated by the Economic Research Service (ERS) using items pertinent to vegetable production, average input prices paid by vegetable and melon growers increased 7 percent in 2006, 8 percent in 2007, and are currently running 14 percent above a year earlier so far in 2008. At the same time, average prices received by commercial vegetable growers have not kept pace and are currently running below a year earlier.

These increases in input costs easily exceed price changes in the general economy over the past few years, according to the ERS. At the same time, average prices received by commercial vegetable growers have not kept pace and are currently running below a year earlier.

“Price changes are not the only factors determining net farm revenue. Over the long run, rising yields can help spread escalating costs over more units, keeping the farm cost per pound of vegetables down. However, when input prices rise sharply over a short period of time as they have since 2007, increases in per-acre yields cannot overcome these rapid cost increases, pulling net revenue down,” according to the USDA report.

After a cool, wet spring delayed planting and crop progress across most spring and summer vegetable-producing areas, warmer weather has now spread across growing areas, helping to advance crop growth. Similar delays were reported in various areas for potatoes, dry beans, and processing vegetables.

However, while parts of the Midwest were flooded, California declared a statewide drought, resulting in reduced water for agriculture in the Central Valley. Although some processing tomatoes and melons could be affected, vegetable supplies are not expected to be impacted this summer as water is shifted from other crops or pumped from wells.

During the first five months of 2008, fresh-market vegetable prices at the point of first sale (e.g., grower or shipping point) averaged 16 percent below a year earlier, according to USDA. Lower average prices were received for vegetable crops such as celery, cucumbers, lettuce, snap beans and carrots, easily outweighing higher average prices for tomatoes and cauliflower.

With a large storage crop last fall, fresh dry bulb onion prices were a fraction of the highs of a year earlier through April. Fresh vegetable shipping-point prices will likely be under upward pressure this summer as growers battle higher production costs and water-related issues.

Similar to the situation a year ago, spring melon supplies have begun to improve after a late start caused by a combination of cool, wet weather. April-May producer prices for melon crops averaged 17 percent above a year ago. However, although May shipments of watermelon, cantaloupe, and honeydew increased seasonally, only watermelon volume managed to exceed year-earlier levels. As a result, average melon prices during May remained near the highs of a year ago.

In early June, the U.S. Food and Drug Administration (FDA) announced a salmonellosis outbreak appeared to be linked to consumption of fresh-market round or roma/plum tomatoes and products containing these raw red tomatoes. As a result, retailers and food service operators stopped using these types of tomatoes for more than a week, throwing the market into turmoil.

As growing areas were cleared by the FDA, shipments resumed and tomatoes slowly returned to the market. On average, about 14 million pounds of fresh-market tomatoes (excluding grape and cherry) are shipped each day. For example, if none were sold for 10 days, the loss would have a farm value of about $61 million (at the April-May average price), according to USDA.

The illnesses were caused by Salmonella serotype Saintpaul, an uncommon type of Salmonella. Since mid-April, there had been 652 illnesses in 34 States (nearly half of all illnesses occurred in Texas) linked to fresh tomatoes sourced from both retail and food service outlets.

Cherry tomatoes, grape tomatoes, and tomatoes with the vine still attached were not included in the FDA alert. According to the FDA, there have been at least 12 multi-state foodborne illness outbreaks associated with fresh tomatoes since 1990, mostly resulting from contamination with Salmonella. In response, the FDA began the Tomato Safety Initiative in 2007 to reduce foodborne illness by focusing food safety efforts on specific products, practices and growing areas that have been found to be problematic in the past.

During the April-June quarter of 2007, Florida shipped 71 percent of the field-grown round tomato market. The state was also the source of 30 percent of the roma/plum tomato supply, 69 percent of grape tomato supplies, 29 percent of cherry tomato supplies, and a small but unknown share of the greenhouse tomato market.

California, which does not ship tomatoes until June, supplies just 4 percent of the spring quarter tomato market (excluding greenhouse product). All other states, which also don’t begin shipping field-grown product until June, account for less than 4 percent of the field-grown market during the spring. Domestically grown greenhouse tomatoes account for 8 percent of the total tomato market during the spring, with imported greenhouse tomatoes garnering another 17 percent.

Thus, greenhouse-grown tomatoes now account for one-fourth of all tomato shipments during the spring months. Imports accounted for 40 percent of all tomato movement in the United States during the spring of 2007. Imports accounted for 14 percent of the field-grown round tomato supply, 67 percent of the roma/plum tomatoes, 69 percent of the cherry tomatoes, 26 percent of grape tomatoes, and 67 percent of the greenhouse tomato supply.

Mexico accounts for 85 percent of all tomato imports during this period, followed by Canada (14 percent, virtually all greenhouse grown), and the Netherlands (less than 1 percent, all greenhouse grown).

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