News From the Field: Winter Crop Update

February 21st 2014 Comments

Given that it is winter in most of our growing areas, activity is now limited. This is, however, a good time for our quality and raw material procurement departments to work with our raw material partners on any changes or updates needed for this portion of the supply chain.

We are currently on the last stretch of the main harvest with dehydration of carrots in China. Following hot weather in late summer, we are experiencing poor yields and limited availability of fresh material. The hot weather damaged the young carrots and although fall and early winter weather has been favorable, there has not been a full recovery. Fresh carrot prices have increased 50-100% from the 2012-13 crop year. A number of dehydration facilities feel prices are so high, in fact, that they dare not enter into production. As a result, we have seen reduced availability and rising costs on dehydrated carrot raw material. We expect carrot raw material costs to remain firm though, at least until spring crop becomes available in May. And, while the spring crop is traditionally much smaller than the winter harvest, we expect costs to remain at levels higher than last year through this summer.

As mentioned in our early fall crop update, the red bell pepper harvest was satisfactory while the raw material costs have been on the decline. The Chinese are just returning from their New Year celebrations, welcoming the year of the horse. We are seeing very similar pricing on red bell pepper after this return from their holidays, which reinforces our belief that the market should remain stable until May when the plantings for 2014 harvest will begin. Any significant change in the acreage planted compared to last year, however, can have dramatic effects on raw material costs. We believe there will be a reduction in the planting area for 2014, but also believe that carryover quantities from 2013 will allow the market to absorb the reduction in planting with a modest increase in overall costs.

As we have previously reported, dehydration of both tomato and green bell pepper was greatly reduced in 2013. We are starting to see the effects now that the Chinese New Year is over, with raw material costs firming up further and availability declining. It is our belief that the market will become very tight prior to new season production next fall. We recommend contracting all your finished product quantities needed for the calendar year now to not only secure the necessary product but also avoid further price increases as the year progresses.

Our international staff will continue to monitor crop conditions around the world, focusing next on the harvest of spinach in both China and Europe, as well as the fruit crops originating from South America. At that time we will be able to report on actual results of spinach dehydration as well as plantings of tomato and bell peppers.