MARKET REPORT – MAR. 18TH, 2016 – HELP OUT FARMERS AND BE A REBEL!
Help out farmers and BE A REBEL!
As many of you know, there are two major growing regions in California – one for summer production and one for winter. Many large farm operations that go year-round (Lakeside for example, and Earthbound salad mix)) have farms in both places, while others (Sue Heger for example) just runs in the winter time out in the desert. Obviously it is too cold along the California coast to grow large amounts of produce in the winter, and it is way too bloody hot to grow anything in the desert regions in the summer-time. So what happens is “transition – time”, and it’s different for every grower, depending on what crops they grow. Also awkward – some crops take way longer to grow (e.g. celery) and others are lickety-split, and many operations run both simultaneously for a few weeks, until the desert is too hot and they are done, while they have new plantings ready in areas around Salinas where summer production is. Either way, the transition is never seamless – growers walk away from crops in the field in the desert, and may not be ready in their coastal fields. Some years it runs pretty smooth, other years it sucks. This year is a real anomaly because the transition is happening, for most larger producers, 2-3 weeks earlier than normal.
So, thinking back, prices were through the roof in January – we were all the butt of jokes about million dollar cauliflower and celery. Well that was weather related – it was just too cold in the desert and production slowed, creating a sellers’ market and very high prices. Then, a few weeks ago, it heated up, rather substantially, in fact way above normal, and not only did all the plantings that were delayed catch up with each other, stuff that was in the ground for sales later in March sped up and were ready 2 weeks early. So we ended up with a huge surplus of product in the market over the last few weeks, and grower’s daily sheets included a lot of stupid low pricing and comments like “HELP” etc. The desert (being Imperial, Huron, Mexicali and Yuma) is still hot – high temperatures, except for a few days last week, have consistently been between 4 and 8C higher than whatever normal is for 5 weeks, after a frigid December and January. Bottom line is that the glut of product in the market hasn’t ended on everything, but certainly on some items and prices are starting to climb. With desert growers ‘cleaning up’ there will be some cheap product out there – because they are either winding down, or closing for the year, and it’s better to clean the field up of things like parsley and kale and get it into the market at any price, rather than wait to keep crews around and coolers on for the last harvests – so those prices will not climb quickly – yet. It is the volatiles where prices will climb – those are crops that can’t sit in the field for more than a few days when ready (lettuce, broccoli, cauliflower, celery).
Now, a few weeks ago I warned that this was coming, just so you knew that the cheap pricing was going to end. And I said that over and over, until last week I said something to the effect that I was going to give up predicting anything, and then of course, as soon as I said that, prices started to drift up quickly. The fact that it rained 7 out of 14 days along the coast didn’t help either.
Most of you have seen our listings for “Rebel” on lower grade potatoes over the year. This was our initial reaction to the huge amount of media buzz around imperfect produce. We’ve always listed a reasonable range of “C” grade local apples, choice grade lemons etc., but not packaged or branded.
This “uglifruit” thing really got going in Europe, but spread quickly to Canada and the U.S., with chains like Loblaw’s introducing their own branded ugly vegetables, and local potato growers jumping in – Fraserland’s Puglies for instance. We really intended on jumping on this, but it takes time to get all the balls rolling in the right direction, so we did a very soft launch of just a few potato varieties packed in our “Rebel” brand of imperfects this year. However, the media just won’t stop the conversation about this, and we ended up with a story in today’s Province (crappy picture of Damien) but an article never-the-less, so we aren’t’ going to jump out there with 30 products, but expect to see a couple more in the next week or so, and we will slowly add more to the line as opportunities arise. And we’ll back this up over the next couple of months with POS material as well.
I’ve had a few conversations with retailers about the impacts of rolling out this program, and have some comments.
Some of your customers who buy organic, local, Fair Trade etc, and you know this, fall into the ‘foodie’ category – and that may include some of you as well. Those are the people who are going to pick up packaged imperfect fruit and veg first– the media has paved a pathway to a new category. It won’t just be the hard-core who are all over this campaign (which they see as a way to help farmers,) it’s also going to be the budget-conscious moms who see an opportunity to feed their family with healthier food at better prices. But this all raises a few questions that only you can answer,
Do you only sell organic produce? Is a $5.99 bag of potatoes going to take away sales of the $8.99 bag – which equates to maybe $1.50 of coin out of your margin? Is this going to affect your sales per sq. ft.?
So maybe look at it this way. If you only sell organic, you are more than aware that when a big head of cabbage is going to sell for $15 or celery for $9.99, your shoppers may be going to the chain store down the street to buy conventional fruit and veg because they just can’t justify or afford the prices. Maybe having imperfect fruit and veg, and more than a few items, will keep them in your store. So that’s one thing – and remember these comments are my concerns having been an organic retailer a couple of decades ago then weighed against opinions I’ve received from many of you. Now if you sell both organic and conventional in your store, here is the real opportunity, because there is likely not going to be a big price difference between imperfect organics and conventional pricing – which may have the happy impact of moving consumers over to organics on a wider range of product, which could be really cool.
It’s kind of ludicrous in a way – we just spent 15 years convincing consumers that organic is just as pretty as conventional, and not full of worm holes and chew marks – but we aren’t going backwards here I don’t think.
But still, looking at the bottom line impact of selling cheaper produce, we have talked to the growers about this extensively. Our expectation is that clever retailers, seeing the actual amount of coin in the till drop, are going to take a higher margin. Producers are aware of this, so they don’t have any expectation of getting rich off this – no matter what the price, everyone has to pay the rent, and trucking companies delivering to us, and us to you are charging the same freight rates, no matter what the invoice amount is. For producers, this is a huge opportunity to get much better money for product that would go over the fence, or at best go to a processor for pennies on the dollar. And large processors don’t take those 400 pounds of ugly pears – they run big batches and want 20,000 pounds.
Luckily there is a wonderful explosion in the small-batch juice sector (just as we’ve seen with craft beer and craft cider over the years) and there is a growing market for small batches of culls from local growers, but we see this as a boon for all growers, a sales opportunity for you that, cleverly marketed and priced, shouldn’t affect your bottom line, could attract new sales, and for our juicing customers, give them an opening to more process grade product as well. Stay tuned.
Sorry, ran out of room to tell you any specific produce news!