Vegetable prices expected mostly higher in 2008

by Ron Sterk
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WASHINGTON — While much attention has been paid to soaring grain prices and $100-a-barrel crude oil, vegetable prices varied widely in 2007 but are expected to be mostly higher in 2008.

The value of most vegetable crops increased in 2007, but actual per unit prices (ratio of total value to total production) varied depending on crop size and weather, the U.S. Department of Agriculture said in its latest Vegetables and Melons Outlook. In contrast, most grains and oilseeds posted steadily rising prices as the year went on, currently stand at record high levels, and have become a concern for vegetable markets because of competition for planted area.

The value of U.S. grown fresh market vegetables and melons was a record high $10.9 billion last year, up 2% from 2006, but the unit value declined by a half of a per cent, the U.S.D.A. said. Processing vegetables surged 20% in value, to $1.6 billion, and unit value gained 7%. But the value of the potato crop (not included in either fresh or processing vegetable totals) declined 1% in 2007, to $3.2 billion, and the unit value was down 3%. The value of the dry edible bean crop was $677 million, up 22% in 2007, and unit value was up 19% from 2006.

For 2008, based on acreage already contracted in many cases, the U.S.D.A. projects harvested areas for fresh vegetables and melons to hold about steady with 2007, but for crop value to increase by 4% and unit value by 9%. Processing vegetable area was forecast to drop by 1%, crop value drop by 2% but unit value increase by 4%. Potato area also was expected to hold even with 2007, but crop value improve by 3% and unit value by 5%. Dry edible bean harvested area was projected to decline by 10%, crop value increase by 2% and unit value jump 17%.

California tomato processors indicated they have contracted for 11.8 million tons, down 2% from 2007, which was the second largest crop ever. The base contract price for processing tomatoes is expected to be a record high $70 a ton in 2008, up from $63 in 2007 "to entice growers to battle a projected water shortage, cover higher costs and reduce the lure of high-priced alternative grain crops," the U.S.D.A. said.

U.S. potato production in 2007 totaled 449 million cwts, up 2% from a year earlier, the U.S.D.A. reported. Processing potato prices in January averaged $7.11 a cwt, up 5c from a year ago. For 2007 prices averaged $8.86, up 65c from 2006. Frozen french fry demand has been strong, driven by a 12% increase in export value in 2007, which included increases of 9% for Japan (the largest buyer), 33% for China and 21% for Canada.

But the market for processing potatoes is "uncertain" for 2008-09, according to the U.S.D.A., as contracting has been slower than normal.

"With the price of potato chips being relatively inelastic, the industry has reportedly been moving toward decreasing package sizes, while maintaining prices, resulting in fewer potatoes demanded for chipping," the U.S.D.A. said. And planted area will compete with other crops, especially wheat. "With record high wheat prices, producers may be tempted to decrease acreage planted to potatoes and increase acreage planted to wheat to maximize profit and endure less risk in production."

Spring season onion plantings are forecast at 32,000 acres, down 5% from 2007, with declines in Texas "as some growers decided to take advantage of higher prices for most grain crops," the U.S.D.A. said.

The threat of lost acreage is especially acute for dry edible beans, many types of which are grown in the same part of the country (Upper Midwest) as spring wheat, durum and rye, three grains that have seen the largest increase in value in the past year and are at record high prices. Dry beans also must compete with corn and soybeans for area, which also are record high. Even though dry bean prices on average are up 25% from a year ago, corn prices are up about 30%, soybeans nearly 100%, hard red spring wheat 300% and durum more than 400%.

"U.S. dry bean seeded area is expected to drop 5% to 9% from a year earlier," the U.S.D.A. said, resulting in a smaller crop and the potential for dry bean prices to exceed 1988 record highs in 2008-09.

This article can also be found in the digital edition of Food Business News, March 4, 2008, starting on Page 28. Click here to search that archive.

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