A reduction in strawberry acreage in the Salinas-Watsonville growing region is expected to spur better grower prices this spring and summer, a new Rabobank study says.
In a report called “Price signals at work in the strawberry market,” authors David Magana and Roland Fumasi said a supply glut during the spring and summer last year created below-break-even prices for several weeks, contributing to reduced fall-planted acreage in California.
The report said industry projections show total fall-planted strawberry acreage in California is 6% lower year-over-year for the 2019 marketing season. Salinas-Watsonville acreage declined 12% year-over-year, according to the report.
“We expect a lower availability of strawberries in the U.S. market during California’s peak season,” the authors said.
The report said strawberry prices are expected to be significantly higher during spring and summer compared with a year ago, and particularly from June through August.
Carolyn O’Donnell, communications director for the Watsonville-based California Strawberry Commission, cautioned against reading too much into acreage trends alone.
“The acreage is one predictor of volume, but what really is the predictor of volume is the types of varieties planted and the weather,” she said. “We have had declines in acreage for the past couple of years and we have had record-breaking (volume) years.”
Using what the authors called a newly-developed proprietary tool, the Rabobank report estimates California strawberry shipments for 2019 will be lower than the five-year average for May, June and July. May shipments are expected to be down 10% from the five-year average, while June shipments are projected 11% lower and July shipments 13% lower.
The lower volume is expected to boost prices, according to the report.
“We expect prices to be, on average, about 14% higher in June than the five-year average and 43% higher than last season.”
With reduced planted acreage, the authors said much of the risk of extremely low prices also is taken away.
During the past two years, about 40% of the weeks in June and July had prices below $7 per flat.
“With the acreage reduction in 2019, we estimate that the probability of having minimum weekly prices below $7 per flat are reduced to about 12% and 14%,” the report said. For May, the authors said there is a 34% chance that shipping point prices would trade at $10 per tray or above, and a 66% probability prices would trade in a range of $7-10 per tray. June prices are about 85% likely to trade between $7-10 per tray, according to the report, and July’s projected prices are similar.
Magana said in an interview Feb. 21 that wet weather in California during February caused strawberry prices to trade at elevated levels, but that won’t change the projection for higher prices in the spring and summer months.
“Given the 12% reduction in fall-planted acreage in Salinas-Watsonville, we think that production will be lower in May and June,” he said.
Prices will rebound compared with exceptionally low prices the past two seasons but still trade in a fairly normal range, he said.
While some growers are using higher-yield varieties, he said the double-digit percentage decline in Salinas-Watsonville acreage is likely big enough to reduce availability and raise prices.
“For consumers it doesn’t mean strawberries will be way expensive, but something more back to normal,” he said.