Uncle Matt’s in the Wall Street Journal
Florida Freeze Cuts Produce Supply, Sends Prices Higher
By Tom Sellen and Holly Henschen
Of DOW JONES NEWSWIRES
Every winter, Matt McLean, a fourth-generation citrus grower near Orlando, is reminded that Florida farming is just legalized gambling. Livelihoods are made and lost based on the whims of Mother Nature, his father tells him.
The risky nature of farming in the Sunshine State, which is periodically battered by hurricanes and crop diseases, was brought into sharp relief in recent weeks as freezing temperatures caused catastrophic losses for some crops. The implications of the bet gone wrong are wide-reaching.
The latest cold snap has not only stung farmers but will take a big economic toll on a state that has suffered more than most from the housing market downturn and relies heavily on agriculture. For consumers, particularly on the East Coast, some products will be in short supply and prices will be higher, as crops such as citrus, tomatoes, sweet corn, bell peppers, snap beans, strawberries and squash were hurt. Businesses that rely on Florida produce may have to scramble to get their products elsewhere.
“We had a lot of damage; we just got devastated,” said Paul Allen, co-owner of R.C. Hatton Farms near Pahokee, Fla., who grows green beans and sweet corn on 6,000 acres.
Preliminary data from the Florida Department of Agriculture & Consumer Services suggest Florida agriculture – including everything from fruits and vegetables to nursery plants and shrubs to tropical fish – will sustain at least 30% loss due to the freeze. Tomatoes were particularly hard hit, with about 70% of the crop in Southwest Florida, a main growing region, likely wiped out, according to Reggie Brown, executive vice president of the Florida Tomato Growers Exchange.
Growers continue to survey their fields and the full extent of the damage won’t be known for days or weeks. But the damage -the worst cold weather-related event the state has faced in at least two decades – has already started pushing prices higher.
Wholesale prices for tomatoes, orange juice and lettuce have climbed nearly 40% on the East Coast, said Nelson Eusebio, executive director of the National Supermarket Association. The group represents 400 independent supermarket owners in the New York metropolitan area.
For example, a 25-pound box of South Florida “mature green” tomatoes, or “slicers,” as they are known in the industry, on Jan. 4 ranged from $15.95 to $17.95. On Jan. 12, that same box shot up to $23.95, data from the USDA’s Agricultural Marketing Service showed.
Eusebio said the higher prices at supermarkets could last for three or four weeks.
Consumers in the eastern U.S. and eastern Canada will feel the effects more than consumers in the western U.S., but there will be ripples across the country as growers in California and Mexico step up to fill the gap.
“The name of the game in the produce business these days is year-round supply. That has helped provide some diversity in how many suppliers (that retailers) have,” said Ray Gilmer, vice president of communications at the United Fresh Produce Association, which represents U.S. growers, processors and retailers.
McDonald’s Corp. (MCD), for instance, sources tomatoes from Florida during certain times of the year, but the company’s restaurants won’t suffer a supply shortage owing to the Florida damage, spokeswoman Danya Proud said.
“We count on our suppliers to have contingencies in place. Where there might be a lack of supply, our suppliers have alternative sourcing,” Proud said.
While imported tomatoes will undoubtedly fill some of the void for some buyers, imports can be difficult to obtain at the last minute as much food is grown under contract to buyers.
Grocers might try to point consumers to other options if supplies of their favorite fresh items aren’t available. Libba Letton, spokeswoman for Whole Foods Market Inc. (WFMI), said stores are recommending frozen berries or produce that is in season in the regions. They are expecting strawberries and tomatoes will be in short supply for the next six weeks.
Fruit and vegetable processors and marketers are trying to stay nimble. Marty Ordman, spokesman for Dole Food Co. (DOLE), the world’s largest marketer of fresh fruit and vegetables, doesn’t anticipate any problems because of the freeze. Dole, based in Westlake Village, Calif., buys some strawberries and romaine lettuce from Florida, but any shortfalls can be made up from product out of California, Mexico or Yuma, Ariz., where much of the winter lettuce is grown.
Spokespersons from HJ Heinz Co. (HNZ) and Campbell Soup Co. (CPB), big users of tomatoes, said they wouldn’t be affected by the Florida freeze since they get their tomatoes from California.
Coca-Cola Co. (KO), which makes Minute Maid drinks, is “watching the situation,” said spokesman Ray Crockett. The firm gets most of its orange juice from Florida oranges but declined to comment on specific financial or other fallouts to the company from the Florida freeze.
Orange juice prices at the supermarket have held relatively steady even as some industry participants estimate that freeze damage could reduce this year’s Florida orange crop by 5% or more. Frozen concentrated orange juice futures soared last week, but moderated this week as initial damage reports weren’t as bad as many feared. Also, orange juice nventories are high by historical standards.
McLean, the Florida orange grower, said that crop losses for the 1,000-acre operation at Clermont-based Uncle Matt’s Organic, the oldest organic citrus company in the U.S. and biggest in Florida, were likely about 5% to 10%. At least one farmer nearby lost about 30%, said McLean, founder and chief executive of Uncle Matt’s.
“God smiled on us,” he said.
(Debbie Carlson, Paul Ziobro and Anjali Cordeiro contributed to this article)
Copyright (c) 2010 Dow Jones & Company, Inc.