First Quarter 2018 the Forecast Greetings Just like every year most crops have headed south for the Winter; southern growing districts in CA, AZ, TX and FL to name a few domestically and Mexico, Central and South America for others. For the most part, light demand has kept many markets in check but with a new year bringing a fresh start hopefully we ll see some instability. Yes, that s right, as crazy as it sounds we live for instability and volatility because it s in those times we re able to deliver excellence when much of the competition falls down. As a national network of local distributors, solving problems throughout the supply chain is what we do. It s why our days start before the sun rises and in many instances don t end until long after the sun has set. Such is life in the world of fresh. And just like every year January is usually when we start to experience weather events that cause supply shortages later in the month, sometimes well into February, and even March. We ll be here anticipating the instability, ready to perform as supply chain problem-solvers and longing for the days of Spring where more chaos potentially looms as we begin the annual transition to northern growing regions. If information is missing or if there are other topics you would like covered in The Forecast, please email me (jcimino@proactusa.com). Until next time, Joe Cimino, V.P. of Procurement The Forecast - Q3 Page 1
Transitions & Temperatures Apples: Washington varietal volume will be declining in mid- March. Pennsylvania supplies will be less as we hit mid February as they get closer to the end of season Michigan expect stronger markets as the quarter begins due to a lighter storage crop. February will bring more increases, and March even more as the smaller shippers finish early and we have fruit in fewer hands. Carrots: Growing area for California carrots will transition from Bakersfield to the Imperial and Coachella Valley mid-february. Citrus (Lemons): Lemon growing area will transition from the Desert region to the Ventura region in February. Pears: Washington Bartlett pears will finish in mid-february. Chilean Bartlett pears will start to arrive towards the end of January/beginning of February. Argentinean Bartletts will start arriving between the middle and end of February. Potatoes: Idaho Storage Potato will be transitioning varieties from Norkotah s to Burbanks as we get into the middle of the first quarter. Potatoes (Colored): California whites and golds will finish at the end of February. Florida will start packing red potatoes in early February followed by golds and whites in the middle of the month. Row Crops: As we enter the end of March, the Yuma season will start to transition north to Huron for lettuce and leaf. Although this is for only a select amount of suppliers that continue to utilize this growing region. The full transition to the Salinas Valley typically will begin the second week of April. We all know that mother nature has a direct hand in this transition. We have seen our fair share of changing climates and weather patterns over the past 5 years. Tomatoes: West Mainland Mexico will begin winter programs shipping through Nogales and continue well into the second quarter. East Homestead Florida will begin January and is scheduled through March. Immokalee and Naples Florida will be into crown picks th last week of December with harvest scheduled through April. A Peek at Peak Seasons Avocados: Avocados from Mexico will be in peak season during this quarter. Bell Peppers (Eastern): Peak Seasons for green bell pepper should be early January and early March. Berries (Blackberries): Central Mexico is expected to peak in late March. California will overlap and will begin new harvest in March, but volumes will be light. Berries (Blueberries): Central Mexico will reach peak production in February and taper off come March. We will transition into primarily Chilean fruit with peak production and arrivals expected for mid to late January. Berries (Raspberries): Central Mexico is expected to peak in mid March. California will overlap and begin new harvest in March, but volumes will be light. Berries (Strawberries): California harvest will transition from Santa Maria to Oxnard with peak production expected in March. Central Mexico will peak in late February. Florida will peak mid to late January and taper off come March. Citrus (Limes): Mexico is expected to slow down during Q1. We will be past peak production and supplies will improve late March. Citrus (Oranges): Navel oranges will be in peak season during this quarter. Cucumber (Eastern): Peak Season for Eastern Cucumbers in the 1st Quarter will be the second and third week of January. Eggplant (Eastern): Peak Season should be late January and Mid-March. Grapes: Chilean grape supplies will be peaking by the end of January and should continue strong through the month of March. Onions: Onions are in peak production. Potatoes: Storage potatoes are in peak production. Squash (Eastern): Look for peak seasons the first two weeks of January and mid-march. Stone Fruit: Chilean peach, plum and nectarine supplies will gradually ramp up through the month of January and peak with good volume for the remainder of the first quarter. Tomatoes: National supply will peak mid to late February with a majority of overall volume coming from Southern Florida and mainland Mexico. The Forecast - Q4 Page 2
Apples Washington: We expect Galas to be stronger as a result of increased Canadian business due to Canada s short crop. Varietal numbers will shrink, especially toward the end of the quarter, but most have plenty of small fruit so there won t be much change on the markets. Pennsylvania: Markets will remain steady, but inventories will get spotty as we hit mid-february. Michigan: Fuji supplies are down, so expect a stronger market on them. We expect markets for most varieties to strengthen after the new year, due to increased demand and cheaper freight from Michigan. Michigan supplies are down significantly from last year, so March should bring more and bigger market increases. Asparagus Mexico, Caborca region: Growers should start to cut fern the first days in January and start harvesting the second week in January. Their season will run through the end of March / beginning of April, depending on weather. Asparagus production should peak starting during the first 10 days in February and continue through the second week in March. Peru: Production will slow down due to production in Mexico (Caborca) starting up, as the weather warms up in this growing region. Peru s production should start up again toward the middle of March for the Easter push. AvocadoS Mexico will be the dominant source during this quarter. We expect the overall supply during this quarter to be significantly higher than it was in 2017. Mexico is sitting on a good-sized crop, and they have been holding back supplies for higher prices. Going forward, they will have to move that fruit, a move that is expected to begin in January. California s new crop will begin to ramp up production as of February. However, the bulk of the harvest will peak after this quarter. This year s crop is expected to be nearly double the size of last year s light crop (pending outcomes of the fires in Ventura County). The Forecast - Q4 Page 3
Bell Peppers East: The supply of green bell peppers in the East will come from Southeast and Southwest Florida for the entirety of the first quarter. Florida s primary regions are on its east coast, from Boynton Beach south to Pompano Beach, and on the west coast of Florida in Immokalee. The bell pepper acreage in Florida appears to be 1,000 to 1,200 acres lower than last year. Growers suffered through some very cheap markets, and many have cut back on production or stopped altogether. The larger growers on the east coast are just starting (mid-december) after being delayed by Hurricane Irma; the growers on the west coast are a week ahead of schedule. At this point, the pepper that was planted after the hurricane looks good, but the early fruit will not have big size; this should change in early January Peak seasons for green bell pepper should be early January and early March. West: Green bell peppers are being harvested in fair to high volume out of Sinaloa, Mexico. The quality is mostly good. High heat in the early stages of the harvest affected volume, but the crop seems to be getting back to normal sizing and production. Supplies should be consistent from now until late April or early May. Volume may dip in March as some of the production shifts back to the state of Sonora, Mexico. Red and yellow bell pepper volume is low in all districts; Coachella should be finishing up in the next few days. Mexico will increase production as more growers will be ready to harvest in early January. Supplies should remain consistent throughout the winter, with the hothouse production from Mexico finishing in the late spring. Berries (Blackberries) We will see a small dip in blackberry supplies as we begin Quarter 1 and then production will ramp up in mid-january and continue to increase through March. We expect production to peak toward the end of Q1 and flow into Q2 with promotional opportunities during that time. The majority of production will be from Central Mexico, with a light harvest in Southern California. Quality is expected to be strong during this time if the weather does not fluctuate to one extreme or the other. Berries (Blueberries) Blueberry supplies typically level out during Quarter 1 and remain steady through March. The majority of fruit will be imported, produced in Chile and Central Mexico. California may see some limited production in late February or early March if the weather cooperates, but volumes will be small. We may also see some light production from Florida if the weather stays warm, but this wouldn t be until late March at the earliest. Since the majority of fruit for Q1 is imported, we rely on timely deliveries of fruit via either vessel or transfers from Mexico into the United States. We expect good quality and consistent production from both Chile and Mexico. As always, weather will be the determining factor in any supply gaps during this period. The Forecast - Q4 Page 4
Berries (Raspberries) Raspberry supplies will be coming primarily from Central Mexico, with a light harvest in Baja and Southern California. Production trends are expected to be normal for this time of year. We will see a small drop in availability at the front part of Q1, and then supplies will gradually increase in late January and remain light but steady through the beginning of March. In middle to late March, we expect to see a peak in production that will carry into Q2. Promotional opportunities will be available at that time. Quality is expected to be good as long as no major weather events occur. Berries (Strawberries) We expect to see lighter but consistent supplies of strawberries through Quarter 1, with production coming from Oxnard, Santa Maria, Central Mexico, Baja, and Florida. In California we will see a shift in production as we transition from fall crop berries (Santa Maria) into new winter crop harvest in Oxnard. This transition will have started as we begin the new year, but volumes will gradually increase in Oxnard as we move toward February and March. Central Mexico and Baja are expected to continue with consistent production and gradually increase as we get closer to March. Florida will continue to increase its production as we start Q1 and will gradually taper off toward the end of March. Of course, weather and Valentine s Day are always the biggest factors to consider during this time period. Rain and or unseasonably hot / cold weather could affect production volume, depending on severity and growing region. Valentine s Day is the busiest strawberry holiday of the year. Demand will increase drastically at the beginning of February, and we expect supplies to be limited until the holiday pull subsides by the middle of the month. Barring any major weather disruptions, we expect quality to improve through Q1 as the weather cools down and berries firm up. Carrots To start the quarter, we will still be harvesting in the Bakersfield crop until the Imperial and Coachella Valley crop is harvested, beginning around the second week of February. Jumbo-size carrots will remain tight and markets strong while we continue harvesting the Bakersfield crop and we expect better size and availability on Jumbos when we transition to the Imperial / Coachella crop. Value-added product will be in good supply and quality through the quarter. Chili Peppers Chili pepper production from Mexico is up on most varieties. Good growing conditions for the crop have maximized yields. Some chili markets have suffered because too much product hit the market at once. This will have an effect on pricing, moving forward, as growers will scale back the harvest to ease the pressure on the supply end. The poblano peppers could command a high price due to less acreage being planted, overall, for the winter crop. All other chili peppers will spike and dip in production as we transition to Sonora for the spring crop in mid to late March. The Forecast - Q4 Page 5
Broccoli Brussels Sprouts Cauliflower Celery Cilantro Lettuce Iceberg Lettuce Leaf Lettuce Tender Leaf Green Onions Kale Santa Maria/Oxnard: Planting in the Southern California region is steady. Due to the desert region s predominance of the business during January through March, shippers are not overplanting in the first quarter. This region had a fair amount of rainfall for the year 2017, but keep in mind the fact that California needs another four to five years of rainfall like it had in 2017 in order to fill reservoirs and enable farmers to plant on a regular basis. Water will continue to play a huge role in how plantings will occur throughout the year. Currently, California is behind the eight ball since the winter thus far has been warm and rainfall has been minimal. The warm weather has caused harvesting teams to be active in the fields 7 14 days ahead of schedule. In January, expect gaps in production, which are inevitable. Santa Maria and Oxnard will again be a strong area for production of celery, kale, cilantro parsleys, and cabbage, just to name a few items. All forecasts show steady production with potential gaps, as well as good quality for the quarter. Shippers will have some relief in labor costs as many of the workers move to the desert region. Local labor will come into play, which means housing of workers will not be a major factor in the cost of production. Suppliers will still be challenged, however, with issues such as new regulations for growing practices, increased hourly labor wages, and costs of materials. Suppliers are expecting to have stronger markets sporadically throughout the market but obviously, demand will dictate the final results. Mexico will be a big producer of commodities mentioned earlier, but a bad quarter of weather in the growing regions of Mexico could place a heavier demand on Southern California s growers. Only time will tell us this. Salinas Valley/Yuma: As we look toward the first quarter of the row crop season out of Yuma, we typically get much colder temperatures than normal. We will have lettuce ice delays, which in turn will reduce overall supplies and will take its toll on quality of palletized lettuce, romaine hearts, green leaf, red leaf, butter lettuce, and romaine. We also will see blister and epidermal peel, which is attributed to the effect of the freezing temperatures in the growing regions. Also, with the current acreage in Yuma being two to three weeks ahead of harvesting schedule, there seems to be a significant chance of a supply gap on lettuce and leaf as we finish this first quarter in March. Broccoli and cauliflower supplies will continue the typical trend of highs and lows and the resulting volatile markets. Celery production will start in Yuma at the end of December and be in full harvest for specific suppliers by January. Then we will have three growing districts out West, with Florida celery starting in January as well. On the value-added front, raw product supplies are a necessity for all processors. Their responsibility to keep the processing plants running with raw product 365 days a year is an absolute must. So, when we feel the crunch as a result of freezing temperatures, they will also be under tremendous pressure to keep raw product supplies flowing. That includes lettuce, romaine, cabbage, and especially tender leaf items such as the spring mix components, arugula, cello spinach, and baby spinach. Freezing temperatures can last through mid-march not during the entire time frame of 2½ months but off and on during those months. Processors will have to deal with the challenge of erratic growing cycles as well because of the resulting delays in processing, which then leads to long loading hours. The E log with transportation will play a major role in improving the timeliness of deliveries to distributors. Bottom line: Mother Nature will dictate if these scenarios come to fruition. The Forecast - Q4 Page 6
Citrus (Lemons) Lemons will be coming from three growing regions: D3 (Desert region), D1 (Central Valley region), and D2 (Ventura region). The quarter starts off with D3 still the main area of production. The D3 region was down in production by 25 30% this season, and production is already dropping off as they look at an early finish to the crop sometime in January. D1 crop (the smallest growing region for lemons) has started and will be in mid-season for this quarter. This region typically produces a higher percentage of fancy grade fruit in the mid-sizes of 140s / 115s / 165s. D2 production will begin with some light harvest by early February but will not really ramp up production until the end of February. Size structure during this quarter is expected to peak on 140s / 115s / 95s, and the smaller sizes on 165s / 200s / 235s look to be very limited and markets very firm. Citrus (Limes) Lime supplies are expected to lighten during the span of Quarter 1. Availability will taper off as we move through January and will become increasingly lighter as we look toward February and March. This is typically the most challenging time of the year due to unfavorable weather in the growing regions. Oaxaca, Jalisco, and Veracruz, Mexico, will be the primary production areas. Growers are expecting a cold and rainy winter, which could lead to smaller sizes and some quality issues. We expect markets to increase as we move into Quarter 1 and then to remain firm, all depending on the severity of the winter weather. Citrus (Oranges) The California Navel crop is the smallest crop since 2008 / 2009. Fruit set is light, and fruit size is already larger than normal, peaking on the larger sizes of 72s / 56s. Size projections for small-size fruit show a 30% reduction of 113s and a 50% reduction of 138s. The supply for the smaller sizes of fruit will not come close to meeting the demand for these sizes. Pricing is expected to remain stronger than historical pricing as a result of the lighter overall crop. Cucumbers East: The primary supplier of eastern cucumbers during the first quarter will be Honduras. Honduran imports have started, but most shipments will not occur until late December. By the time January rolls around, the Honduran deal will be in full swing and continue through March. The Honduran crop appears to be in good shape, with no large planting skips. South Florida will wind up on cucumbers on the first of January and then will start the spring crop in late March. Peak season for eastern cucumbers in the first quarter will be the second and third weeks of January. West: Cucumbers from Sinaloa, Mexico, are showing a range of quality, mostly good. Growing conditions have been very good; volume should remain fair to high through the winter and into spring. We will see a transition to the state of Sonora, Mexico, in mid to late March. The late production from Sonora will supply markets in April and May. The Forecast - Q4 Page 7
Eggplants East: The primary supply region for eastern eggplant in the first quarter will be South Florida, from Pompano south to Homestead and Immokalee. Acreage in South Florida is about the same as it has been for the last two or three years, but that acreage is below the 10-year average because of the pressure from Mexico. The winter eggplant crop was planted late because of Hurricane Irma, so volume for early January will be lighter than normal, but production will be on an upward swing. No gaps or quality issues are expected during the first quarter. Peak season should be late January and mid-march. West: Eggplant supplies from Mexico are up. Quality is good, and a high volume of plants is being produced. Growing conditions have gotten back to normal, with high temperatures in the mid to high 80s and lows in the high 50s and low 60s. Production should remain normal through March / April. Production will then transition to Sonora, Mexico, in late spring. Grapes The imported grape season appears to be transitioning smoothly. Domestic grapes will be available well into January, with supplies of Peruvian and Chilean grapes increasing weekly. We expect to be enjoying excellent supplies of imported fruit by the first week of February. Growing conditions have been ideal, and supplies are expected to be consistent, with no signs of any supply gaps. Barring any unforeseen weather events, we should see good supplies and excellent quality throughout the first quarter of the year. Melon (Cantaloupe) Melon (Honeydew) Offshore supplies will be lighter in January as we transition to other areas in Guatemala and Honduras, so expect stronger markets. Volume will improve in February and even more so in March, so expect lower markets as that volume comes on. We expect cantaloupes to peak on 9s / Jumbos 9s with some 12s and 15s, while honeydews will peak on 5s / Jumbo 5s with some 6s and a few 8s. Melon (Watermelon) Watermelons from Mexico have transitioned to the southern states of Jalisco and Colima. Volume will be light to fair for the next few weeks. Supplies from the south have proved to be inconsistent in the past as the market in Mexico City is in close proximity to the region. Supplies will increase in late March as we transition back to the state of Sonora for spring production. The Forecast - Q4 Page 8
Onions Northwest storage onions are currently shipping out of Idaho / Oregon, Washington, Utah, and Colorado. Quality out of the storages is being reported as very nice. The only issue is sizing, which is peaking on Jumbos and smaller. Super Colossal and Colossal Yellow will be limited throughout the Northwest storage season. Markets will start out active, with the larger onions getting an even bigger premium. Idaho / Oregon storage supplies will continue into the middle of April, with a few of the larger growers going into May. Utah and Colorado will start to finish up with their storage supplies at the front part of March, and Washington will finish up at the front part of May. (This will all depend on demand and quality.) The Mexican crop will begin shipping at the end of January out of McAllen, Texas. Growing conditions have been ideal, and acreage is reported as being up by 10%. Texas Valley will begin to ship in early March. Growing conditions have also been very nice there, with acreage being reported as the same as last year. The New Mexico and Southern California growing areas have all been planted; acreage in both areas is close to the same as last season. Central California growing areas have the early crop planted, with the late crop to be finished by the middle of February. Acreage is steady from last year. Pears Washington: Bartlett numbers are down from last year, so expect a slightly earlier finish, with packing going through early February and supplies finishing up a week to two weeks later. Expect stronger markets on both the Bosc and D Anjous when the Bartletts get close to finishing. Small Boscs and D Anjous will be stronger since both varieties are peaking on large fruit. Pineapples As has been the case traditionally, production during the first two to three weeks of January will be lower in volume. Harvest is planned strategically in order to allow farm workers some time off during the Christmas holiday. Toward the end of January, good volume will start arriving in the States and is expected to remain strong through the balance of the quarter. Potatoes Potatoes will be shipping out of storage from Idaho, Washington, Colorado, and Wisconsin. The quality is good, and the only issue that typically starts to show up near the end of the first quarter will be the occasional peeper (sprout). Cold temperatures dropping into the single digits is something else to watch for during the first quarter as this could limit the ability of our shippers to haul bulk potatoes, thereby limiting production. The main variety shipping out of all growing areas this quarter is the Russet Norkotah. Most shippers in Idaho will run Russet Burbanks a couple of times a week. Sizing is peaking on 70-count and larger. Demand has started out strong as companies are replenishing their inventories following the holiday weeks. Look for markets to be fairly steady with a slight uptick as we get into the second quarter. The Forecast - Q4 Page 9
Potatoes (colored) West: Washington whites are finishing now, but Bakersfield production is ramping up. The California whites will last through February, but Florida s production will start in the middle of the month, and we should have a smooth transition from one market to the other. Western whites will be strong during March because they must buy from Florida and ship back out here. Washington storage reds and golds typically go into late March and sometimes as late as April. We expect both reds and golds to strengthen a little in late February / early March as supplies drop. East: North Dakota has a big storage crop of reds and golds that is expected to last into May. Southern Florida will start reds in early February and whites and golds in mid-february. Florida will command a premium over North Dakota s storage potatoes, but the large storage crop will keep the eastern market lower than normal. Squash East: The green squash supply in the East will be coming from South Florida during the first three months of the year. Homestead will be the primary growing area, and there do not appear to be any gaps in supply. However, acreage as a whole is down about 15%. Scarring on yellow squash is the main issue to look for. South Florida is very windy in the wintertime, and the sandy soil in that region can scar yellow squash if it has not been planted properly. The other main growing area is Immokalee, which is at normal planted acreage, and are no indications of gaps in production. This region of Florida received a lot of rain after Hurricane Irma, and consequently there have been some early quality issues, but we expect to grow out of that before the first quarter starts. Toward the very end of the first quarter, production will start to transition to Central Florida. Look for peak seasons during the first two weeks of January and in mid-march. West: Squash is being harvested in light supply from Sinaloa, Mexico. Currently, there is a small production gap as we have transitioned from Sonora to Sinaloa for squash. Volume should increase in early January as we move into peak production from Sinaloa, and supplies should remain steady until mid to late March. We will then transition back to Sonora to supply the Nogales deal until mid to late May. Stone Fruit Quarter 1 is the peak production period for imported stone fruit. Weather has been favorable this year, and shippers expect a strong fruit set for the season. As we enter January, we can expect to see steady arrivals and availability of all fruit varieties, including apricots, peaches, nectarines, and plums. Supplies will gradually improve as we move into February and slowly taper off by the end of March, with some plums and pluots lasting into Q2. A good range of sizes will be available, with markets remaining steady throughout the period. Promotional opportunities will be available. The Forecast - Q4 Page 10
Tomatoes We ll begin 2018 with new growing areas bringing fresh crops into the supply channel where buyers have endured weeks of very short supply. Following a continental shortage of tomatoes since California finished production in late October, Florida is now expected to show recovery from delayed harvests that were originally scheduled for the onset of December. During the first week of January, we should have a good supply of all varieties, which will increase as the quarter progresses. Mainland Mexico will also be starting winter crops, sending heavy volumes of tomatoes through Nogales. Initially, the overall quality will be less than excellent, as the first crops from both regions have been subject to snow and / or near freezing weather in recent weeks. Should cold weather persist throughout Mexico, we may see markets similar to last year s, in which eastern tomatoes become widely available below import suspension agreement minimums. East: Homestead, Florida, will begin production in January and is scheduled to yield through March. Immokalee and Naples, Florida, will be into crown picks during the last week of December, with harvest scheduled through April. The Forecast - Q4 Page 11