Saturday, February 12, 2011

"Mexico loses 80-100% of crops to freeze, US prices to skyrocket"

With Egypt dominating the news, were you aware that a severe price spike in produce for the United States is very likely?

The headline above from this article appeared as the headline in the Digital Journal on Friday

In a February 6th article on record global prices for food I had presented the Food Price Index that was prepared by the FAO of the United Nations (see chart here). The point of that article was that nothing creates the potential for civil unrest and rioting in the streets quite like the lack of available or affordable food.

The frost at the beginning of February that plunged the U.S. into the freezer made its way into Mexico and has reportedly caused 80-100% crop damage. As a result there exists the very real potential for a spike in U.S. food prices and shortages of inventory.

The problem illustrated through a real-time response from a U.S. food distributor

Food distributor Sysco sent out the following notice regarding a phrase known as Force Majeure:

ALL OF OUR GROWERS HAVE INVOKED THE ACT OF GOD CLAUSE ON OUR CONTRACTS DUE TO THE FOLLOWING RELEASE. WE WILL BE CONTACTING YOU PERSONALLY TO REVIEW HOW THIS WILL AFFECT OUR CONTRACTED ITEMS WITH YOU GOING FORWARD. THE DEVASTATING FREEZE IN MEXICO IS WORST FREEZE IN OVER 50 YEARS...


THE EXTREME FREEZING TEMPERATURES HIT A VERY BROAD SECTION OF MAJOR GROWING REGIONS IN MEXICO, FROM HERMOSILLO IN THE NORTH ALL THE WAY SOUTH TO LOS MOCHIS AND EVEN SOUTH OF CULIACAN. THE EARLY REPORTS ARE STILL COMING IN BUT MOST ARE SHOWING LOSSES OF CROPS IN THE RANGE OF 80 TO 100%. EVEN SHADE HOUSE PRODUCT WAS HIT BY THE EXTREMELY COLD TEMPS. IT WILL TAKE 7-10 DAYS TO HAVE A CLEARER PICTURE FROM GROWERS AND FIELD SUPERVISORS, BUT THESE GROWING REGIONS HAVEN’T HAD COLD LIKE THISIN OVER A HALF CENTURY. THIS TIME OF YEAR, MEXICO SUPPLIES A SIGNIFICANT PERCENT OF NORTH AMERICA’S ROW CROP VEGETABLES SUCH AS:

GREEN BEANS, EGGPLANT, CUCUMBERS, SQUASH, PEPPERS, ASPARAGUS, AND ROUND AND ROMA TOMATOES. FLORIDA NORMALLY IS A MAJOR SUPPLIER FOR THESE ITEMS AS WELL BUT THEY HAVE ALREADY BEEN STRUCK WITH SEVERE FREEZE DAMAGE INDECEMBER AND JANUARY AND UP UNTIL NOW HAVE HAD TO PURCHASE PRODUCT OUT OF MEXICO TO FILL THEIR COMMITMENTS, THAT IS NO LONGER AN OPTION. WITH THE SERIES OF WEATHER DISASTERS THAT HAS OCCURRED IN BOTH OF THESE MAJOR GROWING AREAS WE WILL EXPERIENCE IMMEDIATE VOLATILE PRICES, EXPECTED LIMITED AVAILABLITITY, AND MEDIOCRE QUALITY AT BEST. THIS WILL NOT ONLY HAVE AN IMMEDIATE IMPACT ON SUPPLIES, BUT BECAUSE OF VERY STRONG BLOSSOM DROPS, THIS WILL ALSO IMPACT SUPPLIES 30 – 60 DAYS FROM NOW. SOME GROWERS ARE MEETING WITH THEIR BOARDS RIGHT NOW TO DETERMINE WHETHER THEY SHOULD IMMEDIATELY RE-PLANT, HOPING FOR A HARVEST BY LATE-MARCH-TO-EARLY-APRIL, OR WHETHER THEY SHOULD DISC THE FIELDS UNDER AND WAIT FOR ANOTHER SEASON.

What will I do if I have to give up salad? Eat some extra meat and potatoes I suppose.


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