The macro picture for fresh produce appears challenged by two opposing forces: heat and the Fed. During one of the hottest summers on record, Fed Chairman Powell delivered a chilling speech commencing the start of the annual Jackson Hole Central Banking Conference.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”
The fresh produce industry, and the entire economy, will likely flag under the Fed’s high interest rates for the foreseeable future as the organization battles unprecedented inflation. But, hopefully, the economic tranquilizer will effectively calm 2022’s runaway prices sooner than later.
Demand for fresh produce softens during a recession as consumers substitute for cheaper calories. However, record heat is causing supply challenges, allowing prices to remain elevated. At an average minimum of 63.57 degrees, July 2022 had the hottest nights in U.S. history or at least since record-keeping began in 1880.
ProduceIQ Index: $1.00/pound, flat over the prior week
Week #34, ending August 26th
Blue Book has teamed with ProduceIQ BB #:368175 to bring the ProduceIQ Index to its readers. The index provides a produce industry price benchmark using 40 top commodities to provide data for decision making.
This week, overall produce prices held steady over the previous week as key high-value commodities continued to soften, balancing increases in lower-value commodities such as tomato, broccoli, cauliflower, lettuce, squash and cucumber markets.
Round tomato prices are up +18 percent over the previous week. On the East Coast and in Mexico, rain and heat are curbing tomato harvests. Grape type and Roma prices are steady despite lower yields in California. Round prices are forecasted to stabilize over the next three weeks.
Round tomato (green) prices rise on challenging supply
Broccoli yields are down, and prices are up due to heat-related quality issues. Growers in Central Mexico are reporting abnormally high temperatures. As a result, increased insect presence, shading, pin rot and other heat-related problems should be expected with product from Central Mexico.
High temperatures in Mexico aren’t just affecting Broccoli markets. Cauliflower prices are up +33 percent over the previous week. California’s supply is strong; however, like broccoli, cauliflower markets are surging due to heat-related quality issues.
Lettuce markets are incredibly active. Fusarium and INSV are strangling available supply and forcing prices upwards; iceberg and romaine prices are both at a ten-year high. Expect markets to remain volatile for at least the next three weeks.
Iceberg prices reach historical highs for week #34
Due to very limited supply on the East Coast, squash prices are up an astounding +37 percent this week. Rain in the East and drought in the West are tightening an already fragile supply.
Though, squash prices are typically volatile (higher) this time of year as grower volume drops with late summer heat and rain. Squash prices don’t tend to stay high for long and typically decline when the Georgia fall harvest begins and further when Mexico ramps up production.
Straightneck squash (medium) surpasses $16; typically declines when Georgia restarts
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The ProduceIQ Index is the fresh produce industry’s only shipping point price index. It represents the industry-wide price per pound at the location of packing for domestic produce, and at the port of U.S. entry for imported produce.
ProduceIQ uses 40 top commodities to represent the industry. The Index weights each commodity dynamically, by season, as a function of the weekly 5-year rolling average Sales. Sales are calculated using the USDA’s Agricultural Marketing Service for movement and price data. The Index serves as a fair benchmark for industry price performance.