What to do about inflation in pallet and packaging costs?
The newest poll in the LinkedIn Fresh Produce Industry Discussion Group asks the question this way:
How should grower-shippers seek to recoup significantly higher pallet and packaging costs?
With 92 votes so far and five days left in the voting, here are the results to date:
Surcharge added to fob price: 38%
Higher fob price: 21%
Negotiate with buyers: 30%
No good option: 11%
A few excerpts from industry operators about the issues:
> I think the stories you will be writing in 2022 will be about how the industry handled inflation of all kinds in 2021. It is not uniform in all things. With sticky pricing there has been margin reductions - retail, wholesale or both. There are a lot of operation working at a loss, some in food service but in probably in the e-commerce sector and certainly farm gate FOBs. “
> “If the costs is just due to ‘across the board’ packaging rate increases, then sure, negotiating with the buyer is the best way.”
> “I just hope we don’t go back to pallet exchange. It’s a pain in the butt, and unsanitary.”
For context, here is coverage from Amy Sowder on the issue.
Harold Hill in The Music Man said, “Ladies and gentlemen, either you are closing your eyes to a situation you do not wish to acknowledge, or you are not aware of the caliber of disaster indicated by the presence of a pool table in your community!”
In the case of the produce industry in May 2021, industry leaders are sounding the alarm over something much more real than the corrupting influence of a pool hall.
From the letter to the industry from United Fresh Produce Association, Western Growers and Produce Marketing Association and others:
“…we believe that many do not yet realize the factors impacting the situation and the potential scope of the issue, including the availability of produce to consumers.”
Particularly, the letter pointed out:
- The shortage of lumber and wood products has increased the cost of raw lumber 200% to 350% and is making the cost of wood pallets increase incrementally;
- In one example, in the past few weeks, pallet costs have increased more than 400%, if the pallets are even available, and often they are not.
In other words, we got trouble.
