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Horn of plenty puts US vegetable industry on the horns of uncomfortable dilemma.

Production: excellent. Weather: excellent. Imports: rising. Exports: rising, but not in key Japanese market. Solution: cut production of commodities, look to value-added products...and wait for Mexico to open up.

"One of the problems we have, to put it mildly, is oversupply." So said Herb Wiltsek of Den-Bere International, on the eve of a growing season that started with a great abundance of water and a great reluctance to take advantage of it.

After a winter marked by heavy rains and an abundant snow pack that ended a drought in California and the Pacific Northwest, growers are cutting back acreage in staples such as peas and beans to try to bring some stability back to supply and pricing.

As of Jan. 31, U.S. inventories of peas totaled 283,547,000 pounds, 19% greater than a year earlier. Broccoli inventories had increased 91% to 113,727,000 pounds, diced carrots 54% to 115,572,000, cut corn 11% to 307,727,000 and miscellaneous vegetables 14% to 290,622,000. Overall count of frozen vegetables in storage was up four percent to 2.162 billion pounds.

Meanwhile, imported vegetables were pouring into the country at record rates. Broccoli imports, for example, jumped 41%, from 267,521,000 to 376,665,000 pounds, last year -- the Mexican component alone was up 44% from 239,035,000 to 344,046,000. Imports of french fries grew by 15%, from 163,743,000 to 188,607,000 pounds, virtually all of which came from Canada.

It wasn't a complete tidal wave: frozen cauliflower imports, for example, actually fell 11% from 47,791,000 to 42,587,000 pounds, with the Mexican component decreasing by 12% from 46,080,000 to 40,370,000. And some imports are hardly a threat: shipments of bamboo shoots to the U.S. were up 53% from 9,865,000 to 15,095,000 pounds (Chinese segment 58% from 7,038,000 to 11,103,000), but how many U.S. companies are in the bamboo shoot business? Moreover, despite the Japanese recession, increased export sales brought some relief to American processors.

Sweet corn exports last year were up 13% to 104,533,000 pounds. But in a signal of a softening of the market, sweet corn exports to Japan, traditionally the largest market, grew by only 3.6% to 58,284,000 pounds. And the shape of the market may be changing: Japan increased its imports of American prepared sweet corn (as with butter sauce) by 25.3%, to 20,770,000 pounds, even though overall exports in that item were down 6.9%. Still, there was also a slowdown in the growth of french fry exports to Japan: overall exports were up 13.6% to 429,162,000 tons, but those to Japan only 3.9%, to $266,647,000. And whereas overall pea exports increased 43.6%, to 18,850,000 pounds, those to Japan were up only 3.1% to 9,372,000. Prepared pea exports fell, both generally and to Japan, as did exports of spinach and potato products other than fries.

American processors can't count on Japan this year to absorb their surplus production, warned both Wiltsek and Lilly Noon of Noon International, another trading house. "Japan's economy is still soft, and the inventories are still very high there," Wiltsek said. When they buy at all, the Japanese are ordering small consignments of 10 or 20 cases rather than the container loads they used to order. The stronger yen, Noon observed, makes it cheaper for them to buy American vegetables now, but they can't -- not until they move the inventories they bought at higher prices when the dollar was stronger. Noon added that, since the fiscal year in Japan ends Mar. 31, importers there were reluctant to place any more orders until then anyway.

And after Mar. 31? "I wish I knew," Noon confessed in mid-March. "Sales might pick up, for customers that need to make corn soup or croquettes." But then again, maybe these customers will shift production to other products. And when they do start importing vegetables again, they won't necessarily be buying them from the U.S., Wiltsek cautioned. "Australia has been quoting some really low prices on both peas and corn," he told Quick Frozen Foods International, and while the quality of the Australian product may not be up to U.S. standards, that may not matter any more. "They're not as quality conscious as they used to be," he said. "They can turn their heads for half a cent a pound."

Noon doesn't believe that. "It's not true that they're compromising quality," she insisted. Still, there are long-term as well as short-term reasons that U.S. exporters can't count on a growing Japanese market. Japan is looking to new sources in Southeast Asia, especially in China and Thailand, and making long-term investments to develop them. "That's nine years down the road," she said, because it will take that long to both establish production and get plants up and running -- but it's coming. China already exports frozen vegetables to Japan, Wiltsek noted, but they are Oriental specialty vegetables and whole green beans. "You need very expensive equipment to harvest and pack peas," he said, and he expects China to stick to what it's already doing. Thailand, on the other hand, could become a competitive source for products like small-sieve young beans.

Sales to Japan have "been flat for almost a year," Noon said; the increases indicated in U.S. Bureau of the Census reports must have all been for the very beginning of 1992, and the larger gains for exports to countries other than Japan represented sales to Korea, Hong Kong, Taiwan and Australia. But none of those countries is as populous as Japan, she said, and they can't be counted on for long-term growth. But one country that offers a potential market is right next door. "I look for Mexico to become a major importer," she ventured -- especially on corn. "Corn doesn't grow very well down there," she explained. "It's like feed corn." Frozen fruits could also find a market in Mexico, she added. "But I'm working there mostly in canned goods," she said. "It's a very early stage for frozens." In other words, that will be then; this is now.

So what can frozen vegetable processors do now to get out of the bind of commodity vegetables at commodity prices? "We want to convert 50% of our business to value-added products," said Peter Biehl of Agripac, Inc., Salem, Ore. Huh? You mean like vegetables in sauce? Those have been dying in the freezer cabinet lately! Not at all, says Biehl; he means products like stir-fry vegetables and vegetable side dishes, some of which may be marketed through vending machines at workplaces. Frozen vegetable vending machines? You got it, he said -- "Vending technology is really progressing." Hungry employees of the near future will be able to put their money in the slot and get servings of pasta-rice dishes, soups, etc., all heated up on the spot. "It can definitely have a significant impact on our business -- not this year, but next year," Biehl predicted.

Agripac is building a $16.5 million frozen repack and cold storage facility, in order to take advantage of opportunities for such value-added foodservice products. The new plant will improve the efficiency of Agripac's whole operation, he noted -- the processor is going to be able to use pieces of beans and Grade B beans that are now wasted, for example. Meanwhile, Biehl said, Agripac has taken note of the soft market for commodities that is expected to continue through this year and next. "We have planned production from the ground up to reflect that situation," he said. "We are trying to assert some leadership here and adjust production for a level year on the commodity side."

But Agripac may be a piker when it comes to thinking up new uses for vegetables. Take Amy's Kitchen, Inc., Petaluma, Calif. (That's a real town, but it's also the imaginary home of Charlie Brown and friends in the comic strip Peanuts). It's actually developed a vegetarian Salisbury steak dinner, made entirely from fruits and vegetables, most of them organically-grown. To judge from a serving shot on the front of the package, it looks just like kind of stuff Americans have been munching in front of their TV sets since the 1950's. Back panel copy even reads like something Swanson might have run way back when: "It's dinnertime! Time to relax after a busy day, time to nourish yourself and your loved ones and to enjoy the satisfaction of a good meal." Good enough for even Amy, who, as another panel explains is the daughter (born in 1987) of the nice folks who "use only the finest natural and organic ingredients and prepare them with the same careful attention in our bakery as you would in your own home."

Okay, so you've never heard of Amy; you've at least heard of McDonald's. Possibly in hopes that a growing number of vegetarians will ask, "Where's the un-beef?" the fast food giant is test-marketing a vegetarian burger at 84 outlets in the Netherlands. It doesn't mean McDonald's plans to try the same thing in the United States, cautioned Richard Starmann, senior vice president of the chain at its Oak Brook, IL, headquarters. After all, he pointed out, you can get fried egg sandwiches at any McDonald's in Malaysia, but they never made it onto the McDonald's menu anywhere else. But as a commercial for the New York State lottery goes, "Hey, you never know." Those veggie burgers were tried out in just five Dutch McDonald's before being taken nationwide in January.

In California (where else?), some McDonald's actually want veggieburgers. "I think this would be a good site for that product," Serafin Rodriguez, manager of an outlet in Malibu, told The New York Times. "We get a lot of requests for hamburgers with no meat." And it wouldn't be entirely a new idea: thirty years ago, McDonald's founder Ray Kroc attempted to market a cheese-covered pineapple ring on a bun as a "Hula Burger." That didn't fly; in more recent years, McDonald's reportedly hasn't gotten very far with the McLean Deluxe, a low-fat burger that was, alas, also rated low in taste by food critics. Some other fast food chains, such as Hardees, tried similar products and gave up on them.

Meanwhile, National Frozen Foods Corp., Seattle, Wash., is trying to broaden the market for frozen vegetables with a line of pureed vegetables and fruits in IQF portions that, while they are made without thickeners, still have a thick and appealing consistency. Targeted at hospitals, nursing homes and other health care facilities, the line includes peas, corn, green beans, carrots, broccoli, squash and strawberries. National is a very small exporter, noted the firm's Steve McCaffrey. "We're entirely a private label and foodservice packer, and the foodservice market is flat," he told QFFI. "We don't have any magic solution to the surplus problem. Only nature can correct that." The only way his company can give nature a hand is by reducing plantings and finding new domestic markets.

Moving right along, what can the frozen vegetable industry as a whole do about the soft market? Well, it can make frozen vegetables part of the Five-a-Day promotion, aimed at improving the health of all Americans by getting them to eat more vegetables. Sponsored by the Produce for Better Health Foundation, the campaign has stressed fresh vegetables, as if they were the only kind with any nutritional value. But at a meeting last October, the American Frozen Food Institute began raising $80,000 to persuade the Foundation to put frozen vegetables on an equal footing with fresh. The campaign takes its name from a goal of getting Americans to increase their consumption of vegetables from 2.5 to five servings a day by the year 2000. Well, that's only seven years -- maybe they'll even convince Bart Simpson by then that mud isn't one of the four basic food groups!

Green Giant, meanwhile, has another kind of public relations problem: it has been sued by Santa Cruz County, California, for labeling its vegetable blends "American Mixtures" -- when they are actually produced in Mexico. District Attorney Arthur Danner, who filed the suit, noted that the blends are identified as Mexican products only in "difficult to read small type" on the back of the packaging. "It's perfectly all right to market foreign produce here, but you should tell people that," he complained. Danner's office put out a press release that noted Green Giant has relocated a lot of its processing operations to Irapuato, Mexico -- from Watsonville, Calif., which happens to be in Santa Cruz County. American Mixtures, by the way, had just been featured in a Green Giant trade ad tied in with the Five-a-Day campaign. Oh, well...

Quite apart from the Five-a-Day campaign, the Frozen Vegetable Council (FVC) has been pushing its own promotion. This campaign generated more than 129 million positive media impressions for frozen vegetables last year, the FVC boasted.
COPYRIGHT 1993 E.W. Williams Publications, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:News from Europe
Author:Pierce, J.J.
Publication:Quick Frozen Foods International
Article Type:Industry Overview
Date:Apr 1, 1993
Previous Article:Frozen vegetable trade is stable as Europe goes free for 1993.
Next Article:Germany's new packaging regulations and implications for QFF industry.

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