VEGETABLES AND SPECIALTIES--SUMMARY April 25, 1996 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. The complete text of VEGETABLES AND SPECIALTIES is available 2-3 working days following release of this summary. ----------------------------------------------------------------------------- Increases in Fresh Vegetable Retail Prices To Moderate in 1996 After last year's 12-percent increase, retail prices for fresh vegetables (including potatoes) are likely to increase slightly in 1996. Strong prices for potatoes will continue seasonally through midsummer, before easing with the new 1996 fall crop. Lettuce prices during April-June are likely to average 50 percent below April-June 1995, countering higher retail prices for potatoes. The spring lettuce supply comes mainly from California, where last year's flooding sent lettuce prices to record highs. The anticipated lower prices during spring 1996 are contingent on favorable growing weather. Spring-season 1996 harvested area for lettuce in California is estimated down 1 percent from spring 1995, and weather-related shortages would send prices higher again. For fresh vegetables, changes in grower prices generally are passed on to consumers--even though there is a 1- or 2-month lag, retailers eventually pass on the difference. Consumers have seen wide fluctuations in fresh tomato retail prices in 1996, as supplies from Florida were reduced by a winter cold snap that damaged fields in the Immokalee-Naples area. Heavy rains in early March also contributed to higher prices. Spring-season tomato prices are typically volatile because the major source of supply is shifting from Mexico to Florida and poor weather can interrupt the continuity of supply. Spring-season 1996 harvested area for tomatoes in Florida is estimated down 6 percent from a year earlier. During January-March 1996, U.S. imports of six winter fresh vegetables from Mexico increased 20 percent from a year earlier. The vegetables are tomatoes, bell peppers, cucumbers, eggplant, snap beans, and squash. During October 1995-March 1996, winter fresh vegetable imports totaled 23 million cwt, 32 percent higher than a year earlier. Florida, the major U.S. supplier of winter fresh vegetables during the October-June season, accounted for 23 percent of the U.S. market supply through March. In comparison, Florida's share during October-March 1994/95 was 29 percent. Mexico, the main import supplier, accounted for 62 percent of the U.S. market through March of the 1995/96 season, compared with 53 percent a year earlier. The other suppliers (principally California) accounted for 15 percent, compared with 18 percent a year earlier. The U.S. farm-level value of vegetable production in 1996 is likely to decrease as much as $500 million from the $13.3 billion in 1995. Expected lower prices for fresh-market vegetables during first-half 1996 are behind the value decrease, even as output increases. Strong prices for the 1995 fall potato crop signal a possible expansion in 1996 acreage, but an increase in production could put downward pressure on market prices. However, strong domestic and foreign demand for frozen potatoes is expected to keep 1996-crop value about even with the 1995 crop. The farm value of processing vegetables is likely to rise slightly this year as output remains close to that of a year earlier and farm prices of green beans, green peas, and sweet corn rise. Expected larger output and higher contract prices in the processed tomato market are also boosting projected value. During the first quarter of 1996, wholesale prices for canned vegetables averaged 5 percent higher than a year ago while dried and dehydrated vegetables averaged 3 percent higher. However, abundant supplies have kept a lid on frozen vegetable prices, which remained flat during the first quarter. Frozen vegetable stocks were up 5 percent from a year earlier on April 1. Because of relatively large frozen vegetable output last year, stocks were higher for sweet corn, green peas, broccoli, and carrots. Freezer stocks were lower for squash, cauliflower, brussels sprouts, and okra. Processors of five selected vegetables (tomatoes, sweet corn, snap beans, green peas, and cucumbers) expect to contract for 1.47 million acres in 1996--down 4 percent from a year earlier. The decline is due to stagnant frozen vegetable prices, growers opting to plant alternative commodities such as field corn and soybeans, and the closing of several vegetable processing plants. Canners are expected to reduce contract area 2 percent while freezing firms pare acreage 9 percent due partly to lackluster prices and large stocks. Except for processing tomatoes, all the major vegetables for processing (both canning and freezing) are expected to register reduced acreage. Despite the reduced area, with average acreage losses and trend yields this coming season, output of the five leading processing vegetables could equal or exceed that of last year. Preliminary data indicate that per capita use of all vegetables and melons (on a fresh-equivalent basis) rose 1 percent to 433 pounds in 1995. Processing vegetables (excluding potatoes) accounted for 129 pounds per person in 1995, up 3 percent from a year earlier, while fresh vegetables (excluding potatoes) remained flat at 146 pounds. Strong grower prices and good demand will continue to characterize the potato situation this spring and early summer. As a result, U.S. fall potato acreage is likely to increase slightly this year as higher potato prices in many States outweigh the lure of higher field crop prices. Acreage will likely expand in the Pacific Northwest and in the Upper Midwest, where processor demand continues to underpin the potato markets. During the first quarter of 1996, reduced supplies and higher grower prices left the retail price for all types of fresh (tablestock) potatoes 14 percent above a year ago. In 1996, U.S. sweet potato growers intend to plant 90,000 acres, up nearly 2 percent from a year ago, and nearly 5 percent above 1994. Increases are expected in Alabama, California, Louisiana, and Mississippi. North Carolina and Louisiana will remain the largest planters of sweet potatoes, accounting for 39 and 26 percent of the U.S. total. Dry edible bean producers intend to plant 12 percent less acreage than in 1995. Declines in planted acreage will occur in all the major dry bean producing States, including North Dakota and Michigan (down 10 percent each), Nebraska (down 7 percent), Colorado (down 16 percent), and California (down 10 percent). The large reductions follow 2 years of strong yields and production, which led to rising stocks and falling prices. If growers plant the intended 1.8 million acres, acreage abandonment is average, and yields return to the recent 5- or 10-year average (decline 4 to 7 percent) in 1996, production for most major bean classes could fall as much as one-fifth. U.S. mushroom imports were record large in 1995, rising 15 percent from a year earlier to over 173 million pounds, product weight. Imports from China exceeded 75 million pounds, nearly double 1994. Most other major mushroom exporters, such as Indonesia, Chile, Taiwan, and India, increased their 1995 shipments to the United States. Last year's imports were valued at $196.4 million, compared with $162.7 million in 1994. China was the top mushroom supplier, with $50.4 million, followed by Indonesia with $44.5 million. This issue of Vegetables and Specialties Situation and Outlook contains two special articles on Mexico's heightened competitiveness in the U.S. fresh vegetable market. The first article documents the long-standing competition between Mexico and Florida for the winter fresh vegetable market and how weather and the peso devaluation have benefited Mexico's market share. The second article details how improved production technology has boosted sales of Mexican tomatoes. Printed copies of Vegetables and Specialties Situation and Outlook will be available in about a week. For more information, contact Gary Lucier (202) 219-0117 or John Love (202) 219-1268. Text of the full report also will be available electronically. For details on electronic access, call ERS Customer Service (202) 219-0515. END-END-END