2002 FRUIT & VEGETABLE
SITUATION & OUTLOOK
Southern Ag. Outlook Conference
Tunica, MS September 2002
Ed Estes, N.C. State University
1
Three areas of emphasis:
F & V data inconsistently collected across states,
& diversity of industry creates S & O problems
so only limited USDA will be presented;
Focus will be on major topics and issues that are
important to industry such as safety, traceback,
value added, Farm Bill impacts, contracts, etc.
Present findings of an email survey of F&V
extension specialists working in the South (10
states) plus national (USDA) S & O information.
2
U.S. Fruit and Vegetable Industry:
Consumers spend ~$76 billion to buy fruits and
vegetables (2000):
 $37 billion (49%) from retailers;
 $38 billion (50%) from foodservice;
 $1 billion (1%) direct from growers.
Grower’s share was ~$19 billion (25%). Market
margin was ~$57 billion (75%).
Fresh produce often determines store choice.
3
Several issues and trends are
important to the
Fruit and Vegetable Industry
4
Most important issues/trends
ranked by respondents:
risk / price mgt.
inattention to mkt.
poor post harvest
consolidation
no mkt infrastruct.
access to labor
food safety
decreased pesticides
17.5
12.5
11.5
11.25
11.25
11.0
9.5
8.25
5
Southern states survey conducted
in September 2002:
 Survey sent to people in 10 states: AR,
AL, GA, FL, KY, MS, NC, SC, TN, VA:
No response from LA, OK, TX, MD.
 Extension economist +/or horticulturist;
 represents views and did not ask for
evidence to support views;
 three page, choose or short answer form.
6
Survey ranking methods:
 Issues ranked from 1-8 with most
important issue assigned a value of 1,
second most important issue assigned a
value of 2, etc;
 Responses ranked #1 were assigned a
value of 20, #2 were assigned a value of
18, #3=16, #4=14, #5=12, #6=10, #7=8,
and #8=6. Range was 17.5 to unranked.
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Most important issues/trends
ranked by respondents:
risk / price mgt.
inattention to mkt.
poor post harvest
consolidation
no mkt infrastruct.
access to labor
food safety
decreased pesticides
17.5
12.5
11.5
11.25
11.25
11.0
9.5
8.25
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1. Risk - price management:
Blank’s Crop Farming Hierarchy Model
Profit squeeze exerts pressure to change
plant mix to maintain income;
generates more $/ac but also more risk;
rising input costs & lower prices lead to
another profit squeeze and more risk. As
risk increases, farmer often sells an asset
(usually land) to raise more money;
use money from sale to stay in farming.
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Fruit, vegetable, & specialty crop
planting hierarchy :
Commodity
Investment, Fixity
4. High value perennial
(Christmas trees)
3. High value annual
(tomatoes, peppers)
2. Low value perennial
(irrigated alfalfa)
1. Low value annual
4. Very high, fixed
3. High, inflexible
2. Moderate, flexible
1. Low, very flexible
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2. Fruit, Vegetable, & specialty crop
market assessment considerations:
niche market Vs market niche concept;
PHH availability & services for markets;
item must fit image conveyance for food
service, supermarket, or household;
More DSD, coops, & fresh contracts
Market success often requires high quality,
safety & traceability, year-round supply,
price contract, computer skills, labels, etc.
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Examples of Niche Markets
& Market Niches:
Niche market:
 organic produce
 medicinal herbs
 elephant garlic
 microgreens
 Specialty outlets
 Demand dominates but
often there is easy
market saturation.
Market niche:
 greenhouse tomatoes
 yellow peppers
 sweet onions
 seedless watermelon
 Mainstream grocery
 Supply availability &
comparative price dominate
buy decision.
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3. PHH attributes now include safety
dimension traceback (Q. Assurance):
3rd party audits, Good Handling Practices,
certifications (added benefits & costs);
Food safety, food recalls, GMOs,&organics
often require flow-to-market documents;
Leads to store and brand ‘label’ value;- new
country of origin label in 2004;
Shorter flow-to-market supply chain mgt.
adds value & provides access if you provide
offer enhanced quality (traceability).
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4. Consolidation (bimodal) retailing: EDLP
Vs. Value Creation Supermarkets:
High service supermarkets try to reduce
the importance of price in the buy
decision by attribute bundling! Fresh
Cut, cooked chickens, i.e, assembly meal
rather than cook-from-scratch;
Focus rewards & discounts on heavy
shoppers (spend the most money) thru loyalty
card use (less coupon use)!
Produce image emphasis is on new & colors!
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5. Refinement of market window
concept as SCM impacts market:
SCM hastened centralized procurement where
retailer arranges with large companies (A.
Duda, etc.) to source f & v needs over 52 weeks:
Duda either grows, contracts, or
imports item for the retailer;
local grower then deals with Duda on
contractual basis;
contract price, yield, location often
determined by market window.
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Marketing Trends
in Perishables:
1980
2000
70%
commodity
30%
20%
contracts
50%
10%
value added
30%
Due to biotech, internet info, media, free trade
agreements, & consumer tastes & preferences
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Changes in U.S. per capita consumption for
selected fruits & vegetables, 1991-2002:
WINNERS (+%)
Leafy Let. (132%)
Peppers (49%)
Cucumbers (36%)
Strawberries (25%)
Carrots (23%)
Cantaloupe (22%)
Tomatoes (16%)
Snap beans (15%)
LOSERS (-%)
Cauliflower (20%)
Head Let. (15%)
Apples (9%)
Celery (8%)
Sw. Pot. (6%)
Fresh F&V’s PCC up
10% 1990-02.
17
“Weather” impacted yield, output, and
price for many fruits and vegetables:
VA, TX, MD, & Carolinas were extremely dry
for most of spring and summer; upper
Mississippi was extremely wet; most other
areas were about normal temps and rainfall;
Favorable weather in California & Florida plus
increased imports resulted in adequate supply
availability for most crops;
Nationally, AH for fresh /processed vegetables,
melons, potatoes, & dry beans up 9% above
2001 but fresh veggie AH mostly unchanged.
18
2002 statewide rainfall levels
indicated by respondents:
Precipitation
Southern States
Very dry
GA, NC, SC
Moderately dry AL, KY, North MS,
VA, TX
Normal rain
AR, FL, TN
Moderately wet
Very wet
Southern MS
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2002 US Vegetable Highlights:
 Sweetpotato AH down 3.5%, demand
weak so grower prices likely unchanged;
USDA -expects 5% AH increase in fall
potatoes; Spring and summer acreage
was up slightly so ’02 output up 4.5%;
Potato price likely higher despite lower
fall ’02 price;
Fall veggie AH, output down, prices up.
20
2002 US Fruit Highlights:
Leaner apple crop in East and Central
states (~ 16%) somewhat offset by larger
Washington crop (up 5%). Carolinas,
GA, AR, up but most down. Prices up.
Strawberries AH up slightly but demand
strong so prices up 6%; grapes output up
and prices down 12%;
Sweet cherry prod. <11%; tart off 95%.
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U.S. Horticultural Crop Trade:
Both F & V imports and exports are
expected to increase in 2002 but fresh
vegetable imports expected to decrease
by about 3%; frozen veggies, potatoes,
& specialty crop imports up 5%;
grapefruit, apple, citrus exports down.
NAFTA tomato wars continue despite
some lawsuits dropped.
22
Food marketing purchases from
US agriculture, 1990-00:
Item
Meat
F & V Poultry Dairy
1990
36.9
16.5
11.1
20.5
2000
34.8
27.3
16.3
22.7
23
Other 2002 Survey Responses
Email survey done in
September 2002
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Change in output over the
2000-2002, by category:
Increase
Vegetable AR, AL,
KY
Sm. Fruit AL, GA,
FL, KY,
MS, NC,
TN, VA
Tree
AR, GA
Fruit
Decrease
Same
GA, FL,
MS, SC
NC, TN,
VA
AR, SC
FL, KY,
MS, NC,
TN
AL, SC,
VA
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Between 2000 and 2002, entry
of new F & V farmers has:
INCREASED DECREASED SAME
GA,KY, NC
NC-veggies,
SC
AL,AR,FL,
MS,TN,VA
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Since 2000 direct farm-toconsumer sales have:
INCREASED DECREASED SAME
AL, AR,
GA,KY, MS,
NC, SC
FL,TN,VA
27
Since 2002, organic
f & v sales have:
INCREASED DECREASED
AR, FL, MS,
NC, SC
KY
SAME
AL,GA,TN,
VA
28
Since 2000, retailer interest in
buying locally grown f & v has:
INCREASED DECREASED
AL, KY, MS,
NC, SC, TN
SAME
AR, GA,
FL,VA
29
Since 2000, number of F & V
extension meetings has:
INCREASED DECREASED
SAME
AR,GA, KY
AL, SC,
TN, VA
FL, MS, NC
30
Interest in intensive F & V
production systems has:
INCREASED DECREASED
SAME
AR, FL, KY
MS,SC, TN
AL,GA,
NC, VA
31
Grower interest in export sales,
based on survey:
Increase
Decrease
Same
FL, GA, KY,
NC, VA
MS
AL, AR, SC,
TN
32
Farm Bill impacts:
Some growers will view f&v’s as a less
attractive alternative because of desire to
build base & the attractiveness of FB so
there will fewer ‘alternative’ growers;
2004 mandatory country-of origin labels;
$2 M/yr. for food safety and $200 M/yr
year in Sec. 32 purchases
$50 M/yr. in school & military purchases.
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Specialty Crop comments:
Medicinal (nutriceuticals) & culinary
herbs expanding rapidly in southeast US;
NC Specialty Crops Center work on
pyrethrum, garlic, grape tomatoes;
Good success with sprite melon, savory
& hot peppers, nursery & green industry.
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5-point differential scale, broker
survey, NCSU & NCDA, May 2000:
grape tom.
4.5
color.peppers
4.5
seedless wat.
4.1
romaine let.
4
3.9
GH Tomato
3.7
Leaf Lettuce
3.2
hot peppers
0
1
2
3
4
5
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2003 Fruit & Vegetable
Summary (1):
Fresh demand strength strong but
renewed value added emphasis (fruit)
Small fruit production strong but tree
fruit demand weak;
Vegetable output may be down slightly as
it is a less attractive alternative for some
given specialty crop demand & 2002 farm
bill attractiveness.
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2003 Fruit & Vegetable
Summary (2):
Despite few visible changes, global
sourcing has changed the reality of fresh
produce marketing and the new sourcing
reality for fresh produce depends on
strategy, alliances and contracts;
Efforts to be more efficient in handling
but neglect consumer preferences are
doomed (K Mart vs. Wal-Mart)
37