Talking The Psych-Talk Of Tomatoes

So the rains have come but not gone in California, and we begin to stir the what-seems-to-be-annual cauldron of decreased supply, marginal product & the smell of rampant speculation in the morning. One habitually wishes the opposite of course, for a stable, moving mature green tomato market, but where did that get us during this past season out west?

The growers will tell you that they’ve been beaten into submission by distributors that have, at times, paid less on the FOB price for a load of tomatoes than they did hiring the trucks that hauled that very product. Conversely, the buyers complain that a stable market is a dead market because there’s so much competition, that it’s rarely HIGH and stable but always low & slow, that they need the price movement--the mojo--to increase a oft-skinny margin & make more than overhead on a shipment.

One thing that each side of the fence will agree on, however, is that whatever’s happening is not working. Last year the tomato industry encountered the double-whammy of a misguided, almost criminal handling of a salmonella outbreak by the FDA & CDC, coupled with a tanking economy that forced consumers to price-shop every single expenditure. And I don't think we're out of those doldrums just yet either. In that climate, is it any wonder that field tomatoes on chain store shelves at $2.49 a pound are moving like lead? I don’t think even Subway’s massive consumption can offset those retail numbers.

Like berries & leafy greens, tomatoes are and have been by nature a highly volatile commodity. But I believe a systemic change has taken place in tomato marketing. Unless there is a complete & utter crop failure of ALL fresh tomato products for an extended period of time, the FOB price for mature green tomatoes during a given season can only be raised to a certain level, because once it exceeds that nebulous figure, then it will inevitably, dramatically, collapse onto itself.

It’s basically a Catch-22 of psychology. Take today as an example—heavy rain in California, no picking for maybe a week, thus the supply flow is disrupted. FOB price jumps 50% overnight, but there’s still plenty of product in the pipeline at prices that, remember, weren’t moving so great to begin with. By the time it really gets short at destination, the probable price is up another 20-30%, and the die is cast.

By that time, California will be fini and we’ll be past Quincy (FL) into the early Palmetto/Ruskin deal. If volume there doesn’t ramp up sharply, there’s a slim chance that a high but stable market will maintain for a little while at least. This rare situation, of course, would be the utopia of tomato growers and--to be perfectly honest--tomato handlers also, because they make better margins at higher prices as well, despite the companion of the increased accounts payable bottom line.

But the moment that price is perceived by customers to be ‘too high’ in relation to upcoming supply in the field, it’s ‘Katie-bar-the-door’. (Who IS Katie, anyway?). Buying virtually stops, and the free-fall eventually becomes a self-fulfilling prophecy. In my 30 years observing these happenings, only once or twice has the price been eased down in advance of supply. More often than not, salespeople at shipping point are forced to hold high prices much longer than their rational minds are telling them to, because of grower pressure & ‘that’s the way the business works these days’, as one guy told me last year. And then they adjust best they can with their customers on the downslope, always a ticklish part of the shipper/buyer relationship.

The key, of course, is to not let the dang thing get so high in the first place. Here’s hoping.

Later,

Jay