Economic Factors
Over at M & R Tomato Distributors, Inc., Denise Goodman says, “Everything is going well this year. I think the surrounding areas are finally recovering from the hurricane and the economy is improving.” In addition, she notes, “we’ve had some fairly high markets—the big drought in California has put higher prices on tomatoes and vegetables.”
Outsiders often believe the produce industry is recession-proof, but a good economy doesn’t necessarily mean consumers will buy more fruit and vegetables. “I have always thought the produce business is counterintuitive,” commented Matthew D’Arrigo, vice president of D’Arrigo Bros. Company of New York, Inc. “We do better in a bad economy. People shop retail when they’re pinching their pennies and go out to restaurants when they are doing well, which moves less produce. Individuals tend to overbuy and one of the biggest consumers is the kitchen garbage can, whereas restaurants are more efficient. The produce business doesn’t have a lot to do with the economy,” he asserts, “it’s in its own world and on its own clock.”
Better weather and a stronger economy don’t necessarily translate into a profitable year. For A. Gurda Produce Company, Inc., “Business is a little slower so far,” says Andrew Gurda, president of the Pine Island, NY-based grower-shipper of mostly onions and lettuce. “People aren’t buying vegetables like they used to,” he explains, “and our costs have gone up. Further, wholesale prices are stuck at 1970s and 1980s levels; everything is cost-driven and with good growing conditions up and down the East Coast, commodities are plentiful, and everyone’s competing for the same business.”
“When things are good, the weather is good, and crops are good, you can have over-supply in every commodity,” D’Arrigo confirms. “The domestic market provides enough to meet typical demand, but [growers] don’t always count on a bumper crop, and every so often people grow a beautiful crop and have a hard time moving it.”
But bumper crops don’t automatically mean flooded markets and low prices; there are some benefits. “When you have a bumper crop like last year, you can keep your customers happy by having a consistent supply for a longer duration,” Hudson River Fruit’s Albinder says. “When supplies are low, even though prices are higher, you have to manage inventory more tightly and decide who gets what—those are the hardest years.”
Paul Kazan, CEO at Target Interstate Systems, Inc., says the freight-brokering business is improving as produce sales increase. “When the economy is tight,” he finds, some “people shy away from fresh and shop more frozen and canned.”