Low tomato pricing hurts 2012 results for Village Farms

04/03/2013 11:46:00 AM
Tom Karst

Heavy supply of competing Mexican tomatoes weighed on prices and resulted in a substantial decrease in 2012 sales for Vancouver, British Columbia-based Village Farms International.

Releasing 2012 results on April 1, Michael DeGiglio, chief executive officer for Village Farms, called the year “difficult and demanding” for the greenhouse vegetable grower. The company has greenhouse facilities in British Columbia and Texas and has marketing agreements with growers in the U.S., Mexico, Canada and the Dominican Republic, according to the company’s website.

The company reported 2012 net sales decreased 19% to $133.9 million, compared with $164.4 million for 2011, according to a news release from the company. The decrease in net sales was primarily because of a 9% drop in the 2012 net selling price for tomatoes. Comparing 2012 to 2011, the average selling price for peppers was 14% lower and the selling price for cucumbers was 18% lower, according to the release.

Total tomato production from the company and supply partners decreased 13% over the comparable period in 2011. Pepper volume for the year declined 1% compared with 2011, and cucumber volume was up 6%. According to the release, the tomato decline was related to a 38% drop in pounds from supply partners, caused by reduced contract supplies and a hailstorm that suspended production at the company’s three Marfa, Texas facilities.

Despite the dip in sales, the company reported net income increased 36% to $7.9 million for 2012, up from $5.8 million in 2011. Cost of sales declined 10% related to lower prices to purchase tomatoes from supply partners and reduced transportation costs.

DeGiglio said excess supply of tomatoes from Mexico during the last quarter of 2011 and the first quarter of 2012 was “dumped” onto U.S. and Canadian markets.

“This had a negative impact on pricing in the entire fresh tomato industry in the U.S. and Canada, aiding in the demise of some long-standing growers,” he said in a news release.

In addition, DeGiglio said the company also experienced 2012 complications with the start up of its Monahans, Texas, facility. Those problems included a hail storm, labor challenges and a shortage of housing.

So far in 2013, he said Village Farms is experiencing improved pricing compared with 2012. DeGiglio said the new U.S. Department of Commerce tomato suspension agreement signed by Mexican growers should provide enhanced minimum pricing in the U.S.

“The general terms of the agreement should return the U.S. industry closer to fair trade with Mexico and not just feral trade,” DeGiglio said in a news release.



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