Fresh fruits and vegetables have dodged the brunt of food price inflation in 2012, but diminished local production in Midwest and East growing areas slammed by drought is boosting demand and prices for West Coast vegetable marketers.
“With this whole local marketing issue being used, a lot of retailers have been encouraging these small farmers to increase acreage so they will be able to handle the local programs,” said Dick Spezzano, president of Spezzano Consulting Service, Monrovia, Calif. If yields are below average, Spezzano said that retailers are forced to lean more heavily on West Coast suppliers.
Spezzano said he has talked to many shippers in California who have told him that they are getting a lot of demand from the Midwest and East this summer that they normally do not get.
Reports indicate storms in Quebec plus high heat in the Ohio Valley and across the U.S. took a toll on local leafy greens and helped spike the California romaine market in mid-July. Adding insult to injury, East Coast buyers have to pay as much as $9 per carton for transportation costs alone for California lettuce, Spezzano said.
In a food price outlook report July 25, the U.S. Department of Economic Research Service said U.S. retail food prices increase a modest 0.1% from January to June, primarily because of deflationary pressure from low fruit and vegetable prices in the first half of the year. Overall fresh vegetable prices through June were off 3.6% from a year ago, with potatoes, lettuce and tomatoes all down from 3% to 6%.
Even so, reflecting early speculation about the effect of the drought, the agency predicted that retail prices for all food would increase 2.5% to 3.5% for 2012, and then climb 3% to 4% in 2013.
Price gains for fruits and vegetables will be modest in comparison according to the USDA.
In a July 25 report, the USDA forecast that retail fresh fruit prices are expected to increase 2% to 3% for 2012, with fresh fruit retail prices forecast to rise 2.5% to 3.5% in 2013.