2002 Fruit and Vegetable Situation and Outlook1
Edmund A. Estes
Introduction
In recent years consumers have placed greater emphasis on health and diet while
also wanting to spend less time shopping for food and preparing meals. Federal agencies,
private health organizations, and industry trade associations have initiated several public
education campaigns designed to inform consumers about the benefits of eating fruits and
vegetables. Greater consumer awareness about the health positive benefits from eating
fruits and vegetables as well as increased availability, greater convenience, and rising
income levels have spurred fruit and vegetable consumption to record levels. Since 1990,
U.S. fruit and vegetable per capita consumption has increased about 10 percent to while
fresh vegetable consumption has risen nearly 21 percent (USDA). While consumers eat
increasing amounts of fruits and vegetables, they also desire better quality, improved
taste, greater convenience, year-round availability, and greater assurances about the
safety of food particularly concerning pesticide residues and genetically modified crops.
The 2002 Farm Bill contains a country-of-origin provision that requires food (including
fruits and vegetables) to have a country-of-origin labeled affixed effective in 2004. The
Packer reports that consumers often select a specific store to shop at on the basis of the
freshness and availability of fresh produce in the store. The typical grocery store carried
350 produce items in 2000, nearly double the number of items stocked in the mid-1980s.
American shoppers are buying more fruits and vegetables but they also want the widest
possible selection of traditional fruits and vegetables as well as exotic specialty items at
the low competitive price.
Increased consumption has created new marketing opportunities for both new and
existing fruit and vegetable growers. For example, most American shoppers can choose
from myriad of tomatoes for their salad starting with as the traditional mature green
tomato but progressing to imported greenhouse tomatoes, roma tomatoes, cherry and
baby grape tomatoes, imported and domestic cluster tomatoes (stem attached),
organically grown tomatoes, heirloom varieties, or even a yellow flesh tomato. It is also
commonplace for a supermarket to stock four different bell peppers ranging in color from
red and green to purple plus an assortment of hot peppers. Consumers want fresh fruits
and vegetables 52 weeks per year so retailers must stock an assortment of fresh fruits and
vegetables 52 weeks per year. In an effort to increase efficiency and lower procurement
costs, supermarkets reexamined traditional ways to source fresh fruits and vegetables in
the 1990s. Marketing and distribution gains were realized through mergers and
acquisitions, expanded use of inventory replenishment programs, and enactment of
contractual agreements. Mass merchants such as Wal-Mart and Target were able to
transfer their very efficient and effective drygood product handling system to perishables.
1
Professor, Department of Agr. & Res. Economics, North Carolina State University, Box 8109, Raleigh,
NC 27695-8109 (919) 515-4553 and email (Ed_Estes@ncsu.edu). Remarks prepared for presentation at
the Southern Region Agricultural Outlook Conference in Tunica, MS September 23-25, 2002. Thanks and
appreciation is extended to land-grant research and extension colleagues who completed a fruit and
vegetable survey form. Their responses were used, in part, to develop points discussed in this paper and in
the oral presentation.
The increased importance of mass merchants and direct store delivery sales coupled with
the decline in importance of terminal markets resulted in lower handling costs, less waste,
cost savings to retailers, and lower retail prices. System gains encouraged even greater
consolidation in the wholesale and retail sectors and has propelled Wal-Mart to become
the leading low-cost merchandiser and food supplier in the U.S. The everyday low price
(EDLP) approach pioneered by Wal-Mart was reconfigured, copied, and enhanced by
other mass merchants. Alternatively, other food retailers recognized that they could not
succeed in competitive price war with Wal-Mart, examined the high service, value added
approach to expand sales and profit. These stores attempted to appeal to shoppers who
were willing to pay for superior produce quality, familiar name brands, and convenience.
In high service food stores, grocers often competed with take-out restaurants and awayfrom-home eating establishments by offering fully prepared meals, salad bars,
sandwiches, sliced fruit, and fully cooked chickens as take home goods. In addition,
loyalty cards identified regular shoppers and offered frequent shoppers significant price
discounts, special mailings, and self-service checkout.
It was evident during the 1990s that American shoppers broadened the definition
of quality to include many nontraditional features such as nutrition content, country-oforigin labels, genetic composition, pesticide residues (organic), and traceback capability.
While standard demand factors such as price, visual appearance, taste, and maturity, and
substitute availability remain important purchase criteria, undeniably value-added
characteristics influenced family buying patterns. Purchase frequency rates, the array of
items bought, and store selection are examples of the broader impacts that quality can
have on individual spending patterns. Beyond dynamic demand considerations, grower
price volatility and wide swings in supply availability also characterize the fruit and
vegetable industries. Seasonal availability is influenced by weather conditions, the short
shelf life of most crops, relatively few barriers to entry in production, and a desire to
examine new and/or alternative sources of farm income. This dynamic production and
marketing environment contrasts with many other agricultural commodities and often
complicates local, regional, and national supplier efforts to match available supplies with
effective market demand.
While agronomic crop marketing decisions often focus on production planning
and when or where to sell considerations, factors such harvest timing, market access,
method-of-sale logistics, and risk management are also essential marketing details in
fruits and vegetables. Predictably, lower-than-expected grower prices and “marketing
problems” abound during short-term periods when marketable output exceeds buyer
immediate needs. Marketing and price determination topics are complicated because of
the uncertainty surrounding import and export volumes. Domestic as well as international
trade factors influence the price and supply availability of U.S. fresh produce. NAFTA
has increased export opportunities for many American farmers and has increased supply
availability for U.S. fruit and vegetable consumers. However, Mexican fresh vegetable
import volume increased 65% between 1994 and 2001 and the share of vegetable
consumption derived from imported vegetables grew from 10% in 1994 to slightly more
than 14% in 2001.
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U.S. Fruit and Vegetable Situation
Since perishable supply availability has increased because of expanded imports,
the old time belief that “one farmer’s misfortune must be another farmer’s good fortune”
is often violated. In recent years Southern fruit and vegetable growers have experienced
the confounding situation where poor growing conditions and low yields exacerbate
troubles when grower receive lower-than-normal prices because of abundant harvest in
California or Mexico. For the spring, summer, and fall 2002 seasons, USDA reports that
total vegetable acreage will increase about 9% compared with 2001 and output will
expand more modestly at roughly 5.3%. While imports and exports are expected to
increase slightly (less than 1%), 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%) compared with one year earlier levels. For the 2002 crop,
USDA forecasts that U.S. sweetpotato production will decline since 3,500 fewer acres
(3.5%) will be planted and, with a normal yield, fewer sweetpotatoes would be available
form sale. Fall white potato production is expected to increase about 5.8% since USDA
expects an additional 53,000 of fall potatoes to be planted. If yield were similar to 2001
levels, then output would increase about 5%. Fall white potato growers’ can expect lower
season average prices during 2002 and early 2003 since output was greater than year ago
levels. If consumer demand remains strong for chips and seasonal sweetpotatoes, then
grower prices might improve above expected lower levels. 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.
Per capita consumption of fruits (citrus, tree, and small) continues to increase and
in recent years the annual rate of increase was about 1%. Since 2000, total vegetable PCC
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%), fresh tomatoes (5.2%), sweet corn (4.3%), cantaloupe
(3.7%), and carrots (2.9%). 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 noncitrus and 24 pounds
citrus) eaten annually plus an additional 189 pounds of processed fruits (93 pounds
noncitrus and 95 pounds of citrus) consumed.
In total, an average American eats about 740 pounds of fruits and vegetables
(fresh and processed forms) and in total 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. To supplement available USDA information, I requested
agricultural economists working with fruit and/or vegetable crops in twelve Southern
states (Virginia to Oklahoma inclusive) to complete a brief survey form. In some states,
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multiple surveys were distributed and returned because the extension economist
requested assistance in filling out the survey forms. Most often, an Extension
horticulturist provided survey assistance. In multiple form cases, state responses were
compared and a ‘single’ state response was developed. Because the survey and response
time was very brief (roughly three weeks from survey development to response returns), I
was unable to obtain survey responses from individuals in Louisiana, Texas, and
Oklahoma. Thus, surveys were obtained from respondents located in ten southern states.
Survey questions were intended to offer respondents an opportunity to provide subjective
opinions based on their experience and knowledge about their state’s fruit and vegetable
industry. The survey did not ask respondents to provide scientific support or data to
substantiate the views expressed. Readers are reminded about the limited scope and depth
of this survey. Beyond the survey, I utilized information contained in recent issues of
USDA’s “Fruit and Tree Nut Outlook” as well as the “Vegetable and Melon Outlook”. In
addition, background information was obtained from recent reports prepared by Dr. Wenfei Uva (Cornell University) and Dr. Roberta Cook (UC-Davis) as well as summary
information available in The Packer (Vance Publishing, Inc) and Fresh Trends 2001
(Vance Publishing, Inc).
Trade of horticultural products remains an important element within the U.S.
economy. Prior to 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% of imported vegetable
volume and Canada was the largest export market for most U.S. grown vegetables
receiving about 70% 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 Mexicanbased fruit and vegetable growers. While phased-in NAFTA tariff reductions are small,
trade statistics suggest that NAFTA has indeed 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% while the total value of U.S.
exports declined 1.3%. The magnitude and timing of the Mexican import volume increase
remains of some concern to selected commodity organizations in Texas and Florida.
Primary Issues Important to the South
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: 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
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and policy changes, however, several longer run U.S. industry trends seemed to continue
unabated during 2002: 1) steady expansion of domestic fruit and vegetable PCC with 2)
new federal guidelines for organically grown products effective next month; 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, 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 that performance-based fixed-price contracting
will increase in fresh fruit and vegetable production since many Southern-based
industries such as poultry and tobacco industries 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.
Summary of survey responses (10 states)
Survey responses were obtained from individuals located at ten land grant
institutions. The ten states represented in the survey were Alabama (AL), Arkansas (AR),
Florida (FL), Georgia (GA), Kentucky (KY), Mississippi (MS), North Carolina (NC),
South Carolina (SC), Tennessee (TN), and Virginia (VA). As noted earlier, surveys were
also sent to individuals located in Oklahoma, Louisiana and Texas but usable survey
forms were not returned. For five states (FL, GA, NC, MS, and VA) multiple response
forms were obtained. A single state survey response was obtained using a simple decision
rule: if the question was primarily production focused, then the horticulturist response
dominated but otherwise the extension economist response dominated. Please note that
the survey asked respondents for their “best guess” concerning the 2002 fruit and
vegetable season in their state and asked them to check only one item per question.
2002 Survey Summary
1.
State-wide yield for most fruits and vegetables in 2002 are expected to be:
GA, MS, NC_______________________________________better-than-average
AR, FL, KY, SC, TN, VA_____________________________about average
AL_______________________________________________worse-than-average
Commodity-specific comments about yield:--AL Drought impacted production
but not as badly as several years ago; North MS was about 10 inches above
normal rainfall while Southern MS was 15 inches below normal in precipitation .
2.
Statewide farm prices received for 2002 in fruits & vegetables are likely to be:
GA, KY_______________________________greater than last year’s price level
AL, AR, FL, MS, NC, SC, TN, VA____about the same as last year’s price level
______________________________________less than last year’s price level
Commodity-specific comments about price: None received.
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3.
The two most important factors influencing 2002 state f & v sales were:
a) Weather influenced yield greatly in many areas (mostly negatively); b)
risk management and trade; c) oversupply of product available given our
poor economy (national and local) especially in light of increased imports
and expanded local output; d) inattention to marketing details; e) new farm
bill; g) poor postharvest quality.
4.
Do you believe that the new Farm Bill will affect fruit and vegetable production
in your state:
MS, NC, TN___________________________________________yes
AR, FL, KY, SC,VA_____________________________________ no
AL, GA ________________________________________unsure.
If yes, how and why: Farmers will find the 2002 Farm Bill so attractive for
traditional programs crops plus soybeans that there will be less interest in
fruits and vegetables as alternatives. Growers will work on building base
acres.
5.
Statewide precipitation levels in 2002 were:
GA, NC, SC _____________________________very dry
AL, KY, Northern MS, VA _________________moderately dry
AR, FL, TN ______________________________normal rainfall
_________________________________________moderately wet
Southern MS _____________________________very wet
Comments about specific weather problems impacting particular fruits or
vegetables: AR-precipitation ok for vegetables but too wet for fruit; Southern
MS rain reduced watermelon yield and output.
For the next set of questions please consider circumstances during the past 3 years (20002002). I recognize that there is little factual information concerning actual events
occurring in each state so your best guess is fine. Please answer all questions and circle or
check only one response per question .
Since 2000, state tree fruit production has
AR, GA _____________________________________________increased
FL, KY, MS, NC, TN __________________________________decreased
AL, SC, VA ___________________________________________same.
Since 2000, state small fruit production has:
AL., GA, FL, KY (grapes), MS, NC (strawberries, & grapes), TN, VA ___increased
______________________________________________________________decreased
AR, SC ______________________________________________________same.
Since 2000, state vegetable production has:
AR, AL, KY ____________________________________________increased
GA, FL, MS, SC, ________________________________________decreased
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NC, TN, VA____________________________________________ same
Since 2000, farm price variability has tended to:
AL, NC, SC __________________________________________________increase
FL, MS _____________________________________________________decrease
AR, GA, KY, TN, VA __________________________________________same.
The # of farmers new to fruit & vegetable production has:
GA, KY, NC (strawberries and grapes)_______________increased
NC (vegetables), SC ______________________________decreased
AL, AR, FL, MS, TN, VA _________________________ same
Direct farm-to-consumer f & v sales have:
AL, AR, GA, KY, MS, NC, SC ________________increased
__________________________________________decreased
FL, TN, VA________________________________ same
Organic f & v production has:
AR, FL, MS, NC, SC _____________________________________increased
KY ___________________________________________________decreased
AR, GA, TN, VA________________________________________ same
The use of plastic mulch has:
AR, KY, MS, SC, TN ______________________________increased
________________________________________________decreased
AL, GA, FL, NC, VA ______________________________same
The use of drip irrigation has:
AR, KY, FL, MS, SC, TN _______________________increased
____________________________________________decreased
AL, GA, NC, VA______________________________ same
The frequency of pesticide sprays has:
TN ___________________________________________increased
MS ___________________________________________decreased
AL, AR, FL, GA, KY, NC, SC, VA __________________same
Fresh market fruit & vegetable sales to Canada have:
NC ___________________________________________increased
____________________________________________decreased
AL, AR, FL, GA, KY, MS, SC, TN, VA_________________same
Fresh market fruit & vegetable imports from Mexico have:
FL, GA, KY, MS ________________________________________increased
______________________________________________________decreased
AR, KY, NC, SC, TN, VA __________________________________same
7
Grower interest in export sales has:
FL, GA, KY, NC, VA __________________________________increased
MS _________________________________________________decreased
AL, AR, SC, TN _______________________________________same
Retailer interest in buying locally grown fruit & vegetables has:
AL, KY, MS, NC, SC, TN_______________________increased
____________________________________________decreased
AR, FL, GA, VA _______________________________same
The number of local extension-sponsored meetings involving fruit & vegetable
production and/or marketing has:
AR, GA, KY ___________________________________increased
FL, MS, NC ____________________________________decreased
AL, SC, TN, VA _________________________________same
In 2003, state fruit production likely will:
AL, AR, GA, NC (grapes, strawberries)___________ increase
FL, KY_____________________________________ decrease
MS, NC (tree fruit), SC, TN, VA_________________ same
In 2003, state vegetable plantings likely will:
KY, TN _________________________________________increase
MS____________________________________________ decrease
AL, AR, FL, GA, NC, SC, VA_______________________ same
Grower interest in fruit & vegetable financial information has:
AL, AR, GA, KY, NC, TN____________________ increased
___________________________________________ decreased
FL, MS, SC, VA______________________________ same
Grower interest in cost of production information has:
AL, AR, GA, KY __________________________increased
MS _____________________________________decreased
FL, NC, SC, TN, VA _______________________same
Grower interest in postharvest grading and precooling has:
AL, GA, KY, MS, NC, TN______________ increased
____________________________________ decreased
AR, FL, SC, VA_______________________ same
Interest in fruits & vegetables as an alternative crop has:
AL, AR, GA, KY, TN __________________________increased
MS, NC _____________________________________decreased
GA, SC, VA __________________________________same
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Nonprice considerations have (are)
AR, AL, FL, KY, MS, NC, TN______________ increased
_______________________________________ decreased
GA, SC, VA _____________________________same in produce sales.
Individuals were asked to order rank the most important 8 issues / trends that reflect
trends in the state’s fruit and vegetable industry. The most important issue / trend was
assigned a value of 1, the second most important issue / trend was assigned a value of 2,
etc. To determine rank, I assigned a value of 20 to the No. 1 ranked item listed by an
individual, a value of 18 for the second ranked, 16 for third, 14 for fourth, 12 for
fifth, 10 for sixth, 8 for seventh, and 6 for eighth. The aggregate point value was
divide by eight to obtain the summary rank value. Thus, for the summary table
below, a higher value indicates a more important trend or issue to the group.
Respondents used the “Other” category if an issue or trend was not listed. The term
‘unranked’ indicates that no respondent ranked it in the top 8.
RANK (value)
ISSUE / TREND
10 (6.0)
NAFTA (North American Free Trade Agreement)
2 (12.5)
inattention to marketing factors prior to planting
1 (17.5)
risk and price management
7 (12.5)
consumer concerns about food safety
12 (5.25)
increased sensitivity to environmental issues
6 (11)
access & management of hired / migrant labor
8 (8.25)
decreased availability / higher price for methyl bromide
5 (11.25)
lack of local infrastructure to pack / sell fresh produce
unranked
grower use of the Internet to obtain production information
18 (0.75)
grower use of the Internet to buy / sell fruits and vegetables
unranked
grower use of the Internet to obtain price information
13( 4.0)
anti-competitive regulations & behavior by regulators
3 (11.5)
poor postharvest maintenance practices
4 (11.25)
consolidation & concentration in food distribution system
9
11 (5.75)
branding & promotion to obtain price premiums
unranked
use of green / ecolabels
9 (7.75)
increased demand for value added service by buyers
Other items listed by respondents:
14 (2.25)
anticompetitive behavior
15 (2.0)
loss of pesticides such as methyl bromide
17 (1.75)
consumer interest in local produce
16 (1.75
insurance and product liability requirements
Thus, the ten most important trends (highest ranked) or issues based on respondents
ranking using a weighted point ranking scheme were:
1. risk and price management
2. inattention to marketing factors prior to planting.
3. poor postharvest maintenance practices
4. consolidation and concentration in food distribution system
5. lack of local infrastructure to pack / sell fresh produce
6. access and management of hired/ migrant labor
7. consumer concerns about food safety
8. decreased availability /higher price for methyl bromide
9. increased demand for value added services by buyers
10. NAFTA enactment
10