Produce industry faces many challenges

Dec 4, 2009 10:12 AM, By Paul L. Hollis, Farm Press Editorial Staff

"Demands being made on the produce supply chain include quality assurance, traceability and third-party certification, with food safety being the primary factor in all of these demands."

The challenges facing the U.S. produce industry range from labor issues to the general state of the economy and everything in between, says Tim Woods, University of Kentucky.

“We continue to see the expansion of imported produce, and the supply chain situation with the consolidation of retailers continues to be a huge driving force for the produce industry,” says Woods.

Demands being made on the produce supply chain include quality assurance, traceability and third-party certification, with food safety being the primary factor in all of these demands, he says.

“Food safety is a driving force behind a lot of these things as consumers become more aware of these issues,” says Woods.

Looking back at the 2002 Ag Census, Woods says the distribution of produce acres in the United States has changed. “During that 10-year period up to the 2002 census, a lot of produce acres shifted out of the South, with the exception of Georgia. Since 2002, we continue to see a lot of movement of the really large-scale produce acreages out of the South. And a lot of the processing has moved either to other parts of the country or moved completely out of the United States,” he says.

For much of the past 20 years, the percentage of vegetables being imported into the United States market has risen, says Woods, with most of the produce coming from Mexico and also from Canada.

“This year, more than half of our bell peppers, about half of our tomatoes, more than half of our cucumbers, and about half of our squash was imported. This leads us to ask where we will be in the next 10 years,” he says. “How will this impact the opportunities for our producers?”

The markets are changing, and the sources of supply are changing, says Woods. Despite exchange rates that were going against them, Mexico continues to have a major impact on the produce market, and it’s due to the labor situation.

In Kentucky, says Woods, growers are looking at a wider variety of marketing options for their produce. “Kentucky is not a really big produce state, but we’re seeing this shift in a diversification of market channels for produce. We have a lot of emphasis on direct markets, farmer’s markets and on-farm retailing. We’ve had a fall-off in cooperatives and a resurgent interest in wholesaling.

“We’re seeing a lot of direct-to-grocery and direct-to-restaurant sales, in addition to produce auctions. Producers are looking for innovative ways to sell their produce. This is spinning out of the renewed interest in local products for local markets that we’re now seeing not just in produce, but in a lot of food products,” he says.

Many producers, he adds, are positioning their production systems and marketing programs to try and take advantage of the current opportunities to change consumers’ preferences.

“This demand for local products is certainly a major driver in our food system today. Looking at the attributes consumers assign to the preference with respect to the different types of food items, and ‘locally grown’ is at the top of their list. Those of us in Extension are working with chefs at restaurants in trying to help the industry make better connections with our growers,” says Woods.

This same trend is being seen in the grocery industry, he says, where big retailers are trying to establish a beachhead with the local producers of the products they need.

“It’s being done to an even greater extent by the smaller, independent chains that don’t have the massive supply chains. They actually have a competitive advantage in merchandizing these local products. They’re shaking up the traditional distribution system of a lot our large retailers.”

The latest surveys, he says, show a growth in direct market sales of fresh vegetables and melons. “We’ve seen growth in farmers’ markets, agrotourism and on-farm direct marketing. We Extension folks have all we can do to provide help with the marketing programs and quality assurance programs. We’ve had new legislation in Kentucky now for a few years that allows on-farm processing. Our farmers’ markets in Kentucky are expanding, and we’re seeing other products showing up in addition to fresh produce. Farmers’ markets are reverting to the old European-style markets that were popular a century ago.”

Another interesting phenomenon in the produce market, says Woods, is the emergence of produce auctions. “This is an interesting business model from the Amish Mennonite producers. They’ve done a great job. It’s like a cattle auction where relatively small-scale producers bring in their products three or four times a week and they’re auctioned off. You have restaurant buyers and on-farm retailers looking to supplement their inventory. We provide them with price reports on the products there and quality assurance information. Another business model — the CSA (Community Supported Agriculture) — is also growing in popularity.”

When producers in Kentucky and throughout the South were asked about the major challenges facing the produce industry, labor management and labor availability are at the top of the list, says Woods. “Harvest labor is a chronic problem for our produce growers. We have a lot of labor-related problems throughout the South.”