Recent trends in the U.S. fruit and vegetable industry are creating opportunities for U.S. growers, says Tim Woods, University of Kentucky Extension economist. Among these trends, he says, is the continuing increase in the consumption of fruits and vegetables in the United States.
“Fruit consumption has been increasing somewhat in the past 15 years, but it's not as dramatic as the increase in vegetable consumption, particularly fresh vegetables,” says Woods.
The total value of U.S. fruit production for this past year was $12.4 billion, he says, and this includes citrus and non-citrus fruits. About 84 percent of this value is concentrated in three states, he adds.
“The concentration of fruit production in the United States has been increasing over time,” says Woods. “Smaller states, such as Kentucky, are playing a smaller and smaller role in large-scale fruit production in this country.”
Turning to selected commodities in fruit production, Woods says many farmers in Kentucky are getting into the grape business. “Most of these growers are starting vineyards, but some folks are taking a look at fresh table grapes. All of this concerns me because vineyards are going in throughout the country.
“I would encourage growers to keep a close eye on this situation. Just this past year, table grape imports from Chile reached a record high. In Kentucky, we have a cost-share program for establishing vineyards that encourages growers to make an investment in this area. But we haven't been able to follow that up with the appropriate technical support, much less marketing programs to support these farms,” says the economist.
U.S. strawberry acres appear to be moving up slightly, but concerns over the methyl bromide issue could have an impact in this area of fruit production.
“One of the largest strawberry producers in Florida has said that when methyl bromide is phased out, they will be out of the strawberry business. This will have a profound impact on where strawberries are produced, especially in terms of storing and distributing these products. This situation could open up more opportunities for locally produced strawberries and local markets.”
Looking at the citrus situation, Woods says orange and grapefruit production in the United States is down slightly. “Reports indicate smaller fruit size for this year despite more production. Growers will be looking at lower-than-normal prices due to the quality issue.”
The total value of U.S. vegetable production stands at more than $14 billion, says Woods, with the majority of these products being sold in the fresh market.
“Per capita consumption will be down slightly this year. Still, however, it will be near the all-time record level of just under 463 pounds per capita. These figures include products such as french fries and potato chips.”
One of the most rapidly growing areas of the fresh vegetable market is salad bars, says Woods.
The United States imported about $4.3 billion of vegetables this past year, he says, with $2.4 billion of these imports coming from fresh vegetables. This, he adds, is a record-high number.
“Many people involved in growing fresh vegetables are closely watching the international trade situation. Even though the United States is a net importer of vegetables, we're still exporting at record levels.”
The U.S. acreage for the fresh vegetable market has been increasing while the acreage devoted to processed vegetables continues to decline, notes Woods.
Tomatoes, he says, continue to be an important crop. “The value of tomato production in the United States over the past decade or so has stayed at about $1 billion. Even more interesting is what has occurred on the import side. Even though our total imports are less than total production, we've had a huge expansion of tomato imports in the past five to six years.
“There's a lot of anxiety out there about NAFTA, and U.S. growers are being hammered by low-priced tomato products coming in from Mexico.”
A new, much more important player coming into the tomato import market is Canada, says Woods. “Even though Canadian imports aren't quite at the level yet as those coming in from Mexico, they have grown steadily in the past few years.
“Canadian tomatoes are greenhouse, hydroponic, high-value tomatoes — it's a superior product to the field tomato. And, consumers are willing to pay more for it.
“It can be sold as an organic product, with some modification. They can do things in marketing these tomatoes that producers who grow field tomatoes can't do. I expect, over the next five years, that Canada will become a more important player in tomato imports than even Mexico.”
Fresh-cut processing, says Woods, is an area of U.S. vegetable production that is growing rapidly. Much of the cabbage production in Georgia, he adds, has gone into fresh-cut processing.
“To give an idea of how rapidly this segment is growing, in 1993, 55 firms had about $197 million in sales in this area. By 1999, about the same number of firms had more than $1.3 billion in sales — mostly in fresh-cut salad items.
“This category is replacing the old-style processed-in-the-can products or the bags of frozen peas. Consumers increasingly are looking for processed products that still allow them to consume fresh vegetables.”
Fresh-cut, pre-packaged salads now account for about 8 percent of the sales from supermarket produce departments, says Woods. And, he adds, it's a very concentrated segment of the vegetable production industry, with 87 percent of sales coming from the top five suppliers of these packaged products. Most of these products come from California and Arizona, he says.
“Three of the larger fresh-cut processors are located in the Southeast. But most of these products are coming from suppliers.”
Turning to organic produce, Woods says national standards now have been adopted for this segment of U.S. vegetable production. “Big retailers and wholesalers were behind this push to get national standards. Organic produce still is moving into the mainstream and remains a very small segment - about 1 1/2 percent of total produce sales in supermarkets. That should continue to grow over the next few years.”
Retail executives, says Woods, are forecasting a gain for produce relative to total supermarket sales. “Within the next few years, produce will continue to grow in importance as a category. In terms of the number of square feet dedicated to produce in a store, this will continue to grow.
“Retailers want year-round availability whenever possible, and they want more products in the produce section. They're looking at substantial growth in the sales of produce items. This means more opportunities for specialty producers and more opportunities for special-branded products. This also could mean more promotions for products that are produced for local markets.”
Year-round availability puts a “squeeze” on small-volume producers who can't be year-round suppliers, says Woods.
“But alliances are being formed among major producers in the Deep South. An example of this is the Pioneer Growers Cooperative. This is a sweet corn cooperative, with growers in north Florida, south Georgia and all the way up to Kentucky. The cooperative contracts with growers in Kentucky for an eight to 10-week period so they can deliver corn to buyers throughout the year.”
Retailers, says Woods, are looking for a higher level of technology to support their businesses. “An interesting development is that Safeway — a major retailer on the West Coast — recently moved to electronic sourcing. All of their buying is done on the Internet. Our farms in Kentucky are a long ways from being able to plug into that type of sophistication.
“And price isn't a high priority for Safeway. They are looking primarily for a high reliability of supply.”
Looking ahead to the next two to four years, the broker or the produce wholesaler - in the minds of retailers - will play much less of a role in the handling of products, says Woods.
“Retailers want more of a direct-from-the-grower shipper. This might sound exciting to some of our growers, but these retailers are looking for sophisticated producers who can plug into their distribution systems. They also want year-round suppliers.”
In the future, says Woods, producers will have the opportunity to get more value in their marketing margins. “In Kentucky, we're seeing a number of new produce cooperatives being formed. For awhile, co-ops had a bad name, but new opportunities have arisen.
“These new-generation cooperatives — where farmers have an equity position — are doing more than just packing and shipping. They're the platforms on which some of these alliances are being built. Some cooperatives also are moving into fresh-cut processing.”