VEGETABLES AND SPECIALTIES November 30, 1998 November 1998, VGS-276 Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- VEGETABLES AND SPECIALTIES is published three times a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. This release contains only the text of the report -- tables and graphics are not included. See supplemental data files in Lotus 123 (.WK1) format. Subscriptions to the printed version of the report are available from the ERS-NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock # VGS, $27/year. ERS-NASS accepts MasterCard and Visa. --------------------------------------------------------------------------- Contents Page Summary Fresh Market Vegetables Processing Vegetables Potatoes Sweet Potatoes Dry Edible Beans Dry Peas and Lentils Mushrooms Special Articles Sweet Potatoes:Increasing Popularity Benefits Growers and Consumers Demand for Frozen Vegetables: A Comparison of Organic and Conventional Products Urban Influence and the U.S. Vegetable Industry List of Tables Situation Coordinator Gary Lucier Voice: (202) 694-5253 FAX: (202) 694-5820 E-mail: GLucier@econ.ag.gov Principal Contributors Gary Lucier (202) 694-5253 Charles S. Plummer (potatoes & sweet potatoes) (202) 694-5256 Doyle C. Johnson (mushrooms) (202) 694-5248 Editor Martha R. Evans Graphics, Table Design, and Layout Wynnice P. Napper Approved by the World Agricultural Outlook Board. Summary released November 19,1998. The summary of the next Vegetables and Specialties Situation and Outlook is scheduled for release April 22, 1999. Summaries and text of Situation and Outlook reports may be accessed electronically; for details, call (202)694-5050. The Vegetables and Specialties Situation and Outlook is published semi-annually (April and November) and supplemented by a yearbook (July). See back cover for subscription information. Summary The November estimate of U.S. fall-season potato production is 429 million hundredweight (cwt), up about 1.5 percent from last year. Harvested acreage was estimated to be 3 percent higher than a year ago, but overall per-acre yields fell to 352 cwt because of hot summer weather in the Pacific Northwest. Season-average potato prices could strengthen in 1998/99 due to stronger demand from processors for domestic and export sales. Retail prices for fresh-market potatoes are expected to average slightly higher than a year earlier during the first 6 months of 1999. The possibility of large Canadian production could be a mitigating factor on price increases in the United States. This fall (primarily October to December), U.S. growers are expected to harvest 2 percent fewer acres of fresh-market vegetables and melons than a year ago. California and Florida account for 82 percent of the total harvested area of fall-season vegetables and melons (excluding summer nonstorage onions and potatoes). Area in Florida is estimated down 2 percent from a year earlier, while California is about even with a year ago. Despite the small reduction in area, fresh vegetable supplies are expected to be adequate for the holiday season. Florida's fall tomato crop was delayed by unusually hot weather in September. As a result, October shipments were only about a third of year-earlier levels. With market volume down, October f.o.b. shipping point prices for tomatoes averaged about 60 percent above a year earlier. Prices began to moderate in early November as market volume increased. Fourth-quarter shipping-point prices for fresh vegetables are expected to average below the highs of the previous year. Tropical Storm Mitch brought wind and heavy rains to portions of central Florida during the first week of November. Some Palm Beach County fall-season vegetables were reported to have received moderate wind and water damage, especially in the inland Everglades production area. Snap beans and radishes were damaged, with some fields requiring replanting. Radish shipping-point prices were more than double year-earlier levels the week after the storm. Elsewhere in the State, product quality of vegetables like tomatoes and eggplant was temporarily reduced, and overall yield potential diminished. Strong winds caused some bloom loss for tomatoes and peppers, which may lead to reduced supplies and higher prices in December. Mitch also flooded cantaloup fields in Costa Rica and Honduras, which could result in higher cantaloup prices in January. With unusual weather delaying crops and reducing yields, 1998 retail prices for fresh vegetables and potatoes are forecast 10 percent above a year earlier. January to June prices averaged 15 percent above a year earlier, but July to December prices are expected to average 4 to 6 percent higher than the year before. Fourth-quarter retail prices are expected to average 2 to 4 percent above the previous year, due mostly to a record high for the month of October. Production of the four leading vegetables for processing (tomatoes, sweet corn, snap beans, and green peas) was estimated to be 1 percent lower in 1998 due largely to reduced yields. Per acre yields were below a year ago for tomatoes (down 7 percent), green peas (3 percent), and sweet corn (2 percent). Cool, wet weather in many areas slowed growth, increased disease pressure, and delayed harvest. Production for each of the two leading crops, tomatoes and sweet corn, is expected to decline 3 percent from a year ago. Snap bean (up 4 percent) and green pea (up 1 percent) output are each expected to rise. For 1998, wholesale prices for canned vegetables and juices are forecast to average 1 percent above a year ago. In the coming year, reduced supplies of tomato products and several other canned vegetables during the first 3 quarters of the year, will likely leave wholesale prices for canned vegetables and juices 2 to 4 percent above 1998. Wholesale prices for frozen vegetables are forecast slightly lower in 1998, with little change expected in 1999 due to high beginning stocks, slow exports, and lackluster domestic retail demand. Wholesale prices for dried and dehydrated vegetable products will likely average above year-earlier levels well into 1999 due in part to reduced garlic and onion crops in California. With the cool, wet spring damaging California crops, high garlic prices may attract a significant increase in garlic imports in the coming 6 months. In 1998, U.S. production of dry beans is estimated at 31.1 million cwt, up 7 percent. Most of the increase was likely due to pinto beans and black beans, based on higher acreage. Despite a larger crop this year, stronger export demand should help prevent a buildup of dry bean stocks. As a result, aggregate dry bean prices will likely remain at or above year-earlier levels. Combined with low prices for competing grains, this may signal increased dry bean area for 1999. Fresh agaricus mushroom sales continue to trend upwards, setting records in quantity sold and the total value of sales. During the 1997/98 marketing season, U.S. fresh sales totaled more than 621 million pounds, a 12-percent increase over the previous season. Fresh mushroom sales now account for 77 percent of all mushroom sales, the highest percentage on record. The value of grower fresh sales reached $670 million in the 1997/98 season, up 11 percent. The average price received by growers for fresh mushrooms was down slightly at $1.08 per pound. Fresh-Market Vegetables Fresh Acreage Down, Prices Steady This fall (primarily October to December), U.S. growers are expected to harvest 2 percent fewer acres of fresh-market vegetables and melons than a year ago. Acreage harvested during the fall season represents about 17 percent of annual U.S. fresh-market area in the major producing States. California and Florida account for 82 percent of the total harvested area of fall-season vegetables and melons (excluding summer nonstorage onions and potatoes). Area in Florida is estimated down 2 percent from a year earlier, while California is about even with a year ago. Despite the reduced area, fresh vegetable supplies are expected to be adequate through the end of the year. Acreage of cool-season crops (e.g. lettuce, carrots, broccoli) is expected to decline 1 percent, while area in warm-season crops (e.g. tomatoes, bell peppers, snap beans) drop 3 percent. Eggplant and tomatoes are the only warm-season crops to show increases this fall. Fresh-market tomato area is expected to rise 2 percent this fall--the second consecutive increase after bottoming out in 1996. With strong competition from Mexican tomatoes shipped from Baja California, area in California is expected to decline for the second consecutive year to the lowest level in several years. Buoyed by higher prices last year, Florida growers are expected to harvest 5 percent more tomato acres--the largest fall-season area since 1995. Florida accounts for 60 percent of fall-season tomato acreage. During the summer (July-September), shipping-point prices for fresh-market vegetables averaged 3 percent below year-earlier levels. This respite followed the 14-percent increase experienced during the first 6 months of the year. Grower prices fell back to average levels this past summer from the weather-impacted highs of 1997 with substantial declines for celery (down 37 percent), iceberg lettuce (down 25 percent), and carrots (down 16 percent). Higher prices were recorded for tomatoes (up 5 percent) and dry onions (up 30 percent). Onion prices reached (nominal dollar) seasonal record highs this summer due to a combination of strong exports (volume was up 16 percent through August), good domestic demand, and weather-reduced yields in the summer storage crop. F.o.b. shipping-point prices for fresh-market tomatoes were at minimum levels during late July through mid-September. Earlier, with the California crop 3 to 4 weeks behind normal development, tomato prices jumped during the last week of June and reached as high as $14 per 25-pound carton. Prices began to fall during the last week of July when shipments from California reached more normal levels. However, the cool, wet spring weather gave way to August heat, which further stressed plants and interfered with bloom and fruit set. The combined effect was a 25-percent reduction in fresh-market tomato shipment volume from California for the season through early November. Overall, U.S. fresh-market tomato shipments were down 10 percent during the first 3 quarters of the year (table 13). With Florida's fall tomato crop delayed by unusually hot weather in September, October shipments were only about a third of year-earlier levels. As a result, October f.o.b. shipping-point prices for tomatoes averaged about 60 percent above a year earlier. However, near-term prices began to moderate in early November as market volume increased. Tropical Storm Mitch brought wind and heavy rains to portions of central Florida during the first week of November. Some Palm Beach County fall-season vegetables were reported to have received moderate wind and water damage, especially in the inland Everglades production area. Snap beans and radishes were damaged, with some fields requiring replanting. Radish shipping-point prices were more than double year-earlier levels the week after the storm. Elsewhere in the State, product quality of vegetables like tomatoes and eggplant was temporarily reduced, and overall yield potential diminished. Strong winds caused some bloom loss for tomatoes and peppers, which may lead to reduced supplies and higher prices in December. Mitch also flooded cantaloup fields in Costa Rica and Honduras, which could result in higher cantaloup prices in January. With unusual weather delaying crops and reducing yields, 1998 retail prices for fresh vegetables and potatoes are forecast 10 percent above a year earlier. January to June prices averaged 15 percent above a year earlier, but July to December prices are expected to average 4 to 6 percent higher than the year before. Fourth-quarter retail prices are expected to average 2 to 4 percent above the previous year, due mostly to a record high for the month of October. Tomato Floor Prices Some in the industry credit minimum pricing as keys to returning profitability in the fall and winter tomato markets last year. The agreement suspending the 1996 tomato dumping investigation against Mexico (signed in October of 1996) originally set a floor price for Mexican tomato imports at $5.17 per 25-pound box ($0.2068 per pound). In addition, the Florida Tomato Growers Exchange subsequently established a minimum pricing structure ($5.60/box last year) for most Florida-grown tomatoes. Soon after, the California Tomato Commission also set a floor price for product from that State effective during their season. However, because of various weather-related supply problems, there were few times that fresh-market tomato prices actually reached floor levels during the last year-and-a-half. This past August, the U.S. Commerce Department and Mexican fresh-market tomato growers/exporters agreed on amendments to the tomato suspension agreement to clarify and expand coverage to include more of Mexico's growers (largely those in Baja California). Growers in Baja California were unhappy with the original floor price because it was set too high for them to effectively compete with California growers. Production costs in California are lower than in Florida. Thus, the floor price provision has been modified to split the season into two time periods--each with a separate floor price. This split basically recognizes the differences between the Florida/Sinaloa shipping season and the California/Baja season. During the season running from October 23 through June 30 (Florida/Sinaloa), the minimum price for fresh-market tomatoes from Mexico will be raised to $0.2108 per pound ($5.27 per 25-pound box). During July 1 to October 22 (California/Baja), the minimum price for Mexican imports will be $0.172 per pound or $4.30 for a 25-pound box. Cantaloup Market Strong Although down slightly in Arizona, cantaloup acreage for fall harvest is up 14 percent in California this fall. This is the highest level since 1993 and reflects continued recovery from the devastating effects of a severe whitefly infestation earlier this decade. Shipment volume was up 8 percent in October, with domestic shipments double that of a year earlier during the last week of the month. F.o.b. shipping-point prices in October were a third lower than the usual monthly average of about $23 per cwt. Although consumer interest in all melons has been on the rise, per capita use of cantaloup has risen 27 percent since 1990. Cantaloup has enjoyed increasing popularity for many years. Consumption of this popular breakfast and dessert melon has doubled since 1980 to a record 11.7 pounds per person in 1997. New varieties featuring higher average sugar content, thinner rinds, and smaller seed clusters (which means more flesh per melon) have reinforced grower efforts to improve product quality. In addition, the emergence of year-round demand and availability and increased awareness of cantaloup's strong nutritional aspects have likely added to the upward consumption trend. Asparagus Crop Up The 1998 asparagus crop is estimated to have risen 3 percent to 2 million cwt as harvested area and yields increased slightly. All of the gain came in the fresh market where production rose 11 percent to 1.3 million cwt. Demand was strong and f.o.b. shipping point prices averaged 16 percent higher than a year earlier. Production in California, which sells almost entirely in the fresh market, jumped 11 percent, with the State accounting for 44 percent of the U.S. crop. In Washington, the second largest producing State, acreage was reduced, leading to a 4-percent drop in output. Although export volume was about the same, imports, which account for about half of domestic fresh-market consumption, were up 26 percent through the first 8 months of 1998. Fresh-market asparagus is imported year-round, but about half of all imports enter during January-March. Although domestic production is modest early in the year, imports do compete directly with expanding domestic volume in March. The majority of domestic production is marketed during the spring, with smaller amounts available in the fall. Fresh-market consumption has been increasing recently and now accounts for 70 percent of the 1-pound-per-capita of asparagus consumed in the United States annually. Onion Crop Down, Prices Up All season U.S. dry bulb onion production is expected to decline 5 percent from the record high of a year ago. With strong exports earlier this year and weather-related damage and planting delays in some States, shipping-point prices for onions have continuously averaged well above the low levels of a year earlier. Prices this fall were averaging about a third above a year earlier, with a price pattern similar to that of 1981. This year, the U.S. spring/summer nonstorage crop was up about 9 percent from a year earlier as higher output in New Mexico, Texas, and Arizona offset weather-induced reductions in California and Georgia. However, the fall storage onion crop is expected to be 5 percent below a year ago due to reduced acreage and lower yields. Hail and rain damage in New York earlier this summer resulted in a 43-percent cut in output for that State. For the United States as a whole, the smaller overall onion crop and continued strong domestic and export demand should keep prices above year-earlier levels until the spring onion crop begins next March. The United States is a net exporter of fresh and processed onions. In 1997, exports totaled $169 million, while imports were $131 million. Imports accounted for 12 percent of the fresh-market onions consumed in the United States in 1997, while exports took 8 percent of available supplies. Most imports are fresh-market onions, while both fresh and dried onion products are major components of exports. Three-fourths of all fresh-market onion imports enter the U.S. market during the winter months, when fresh-market onion exports reach a seasonal lull. Over 80 percent of fresh-market onion imports come from Mexico, while Canada and Japan are major markets for U.S. exports. Exports of fresh-market onions are sensitive to weather in major onion-consuming nations (especially in Asia), and exports tend to show the largest gains in years of poor weather. West-coast shippers, given their proximity to ports that can easily serve Asian markets, tend to dominate the onion export market. Pumpkins There are no official USDA production statistics for pumpkins. However, based on 1992 Census acreage, state-level yields, and current Market News prices, the following profile emerges: o Acreage harvested (in 1992) is 63,260, up 56 percent from 1987, and 143 percent higher than 1982; o Estimated U.S. yield is 10 short tons per acre; o Estimated U.S. production is 632,600 short tons; o Estimated value per short ton is $200, with an overall farm value of $127 million. Using the above production estimate would place per capita pumpkin use (includes ornamental and food use) at about 4.5 pounds. In 1992, 9,530 farms reported pumpkin acreage in the United States, with the leading States in terms of harvested acreage being Illinois (8,267 acres), California (5,552), New York (4,574), Pennsylvania (4,023), and Texas (3,465). In mid-October, the wholesale price in Chicago for pie-type pumpkins was $9 per 50 lb carton--the same as a year earlier. Chicago wholesale prices for jack-o-lantern style pumpkins ranged from 11 to 12 cents per pound (in 1,000 pound bins)--up from 8 to 11 cents in 1997 but the same as in 1996. Goodbye El Nino, Hello La Nina? Now that the El Nino weather pattern has come and gone, some forecasters are predicting a weak La Nina event this fall with some strengthening this winter and early spring. La Nina weather patterns tend to bring warmer and drier conditions than average to some parts of the country. While El Nino did bring the promised (and troublesome) cool, wet weather to vegetable producing areas (especially California), past history suggests La Nina could prove to be much less problematic for the industry this winter and spring. If a La Nina weather pattern does develop this winter, historical observations suggest the major domestic vegetable producing areas in southern portions of California, Arizona, and Florida should see little difference from average weather patterns. Processing Vegetables Weather Trims Output Production of the four leading vegetables for processing (tomatoes, sweet corn, snap beans, and green peas) was estimated to be 2 percent lower in 1998 due largely to reduced yields. Per acre yields were below a year ago for tomatoes (down 7 percent), green peas (3 percent), and sweet corn (2 percent). Yields were higher for snap beans (up 3 percent). Cool, wet weather in many areas slowed growth, increased disease pressure, and delayed harvest. Production for each of the two leading crops, tomatoes and sweet corn, is expected to decline 3 percent from a year ago. Snap bean (up 4 percent) and green pea (up 1 percent) output are each expected to rise. For 1998, wholesale prices for canned vegetables and juices are forecast to average 1 percent above a year ago. In the coming year, reduced supplies of tomato products and several other canned vegetables during the first 3 quarters of the year will likely leave wholesale prices for canned vegetables and juices 2 to 4 percent above 1998. Wholesale prices for frozen vegetables are forecast slightly lower in 1998, with little change expected in 1999 due to high beginning stocks, slow exports, and lackluster domestic retail demand. Wholesale prices for dried and dehydrated vegetable products will likely average above year-earlier levels well into 1999 due in part to reduced garlic and onion crops in California. With the cool, wet spring damaging California crops, high garlic prices may attract a significant increase in garlic imports in the coming 6 months. Sweet Corn Down Contract production for sweet corn is expected to decline to 459,860 short tons. Harvested area is down 1 percent and per-acre yields are off 2 percent. Canning acreage rose 3 percent despite low wholesale prices, while processors cut area for freezing 3 percent to trim record-high stocks. Wholesale prices for whole kernel sweet corn are 1 to 3 percent above year-earlier levels and will likely remain in this range into early 1999. Reflecting sluggish retail demand (as indicated by supermarket scanner data), wholesale prices for retail packs of frozen whole kernel sweet corn (which have changed little since the fall of 1994), will likely remain near year-earlier levels in 1999. In 1998, prices for foodservice packs of frozen sweet corn averaged an estimated 8 percent below year-earlier levels, but are expected to remain stable through the first half of 1999. Despite sluggish retail sales, total domestic demand has been rising for frozen corn while dropping for canned. Domestic disappearance data indicate that frozen sweet corn utilization has jumped by a third since 1989 and now stands at 2.8 billion pounds (fresh basis). Since 1980, utilization has nearly doubled. At the same time, canned sweet corn utilization has not shown any growth, failing to keep pace with population growth. Utilization in 1997 was an estimated 2.7 billion pounds--the same as the average of the 1980's. On a per capita use basis, sweet corn use for freezing exceeded that of canning for the first time in 1997. Per capita use of sweet corn for freezing has risen 33 percent during the past 10 years while canning use has dropped 6 percent. These trends in the sweet corn disappearance data are not well represented in supermarket sales information. Supermarket sales of canned whole kernel corn have only risen 4 percent since 1989, which seems to support trends in disappearance. However, frozen whole kernel corn has not fared much better, showing just an 11-percent increase since 1989. This seems to imply that most of the gain in domestic frozen sweet corn disappearance is taking place in the food manufacturing and foodservice industries. The export market has been a positive factor in both the canned and frozen sweet corn industries. Increasing exports have partly compensated for the decline in domestic canning use. Exports of canned sweet corn have risen 113 percent since 1987, with most of the additional volume moving to South Korea, Taiwan, and Japan. The increasing popularity of pizza in these countries has likely been a driving force since canned sweet corn is said to be a popular pizza topping in Asia. Exports of frozen sweet corn have risen 79 percent since 1987, with Japan accounting for most of the increase. Green Pea Output Up Slightly The first estimate of 1998 contract production for green peas indicates a 1-percent increase from 1997 to 481,600 short tons. Overall harvested area is up 4 percent, but per-acre yields are off 3 percent. The decline is indicated in the canning sector, where low wholesale prices discouraged processors from increasing contract area. Freezers contracted 2 percent more green pea acres to continue rebuilding stocks, which a year ago were down to the lowest levels since 1989. Green pea production increased in States such as Oregon (up 18 percent) and Washington (up 5 percent) where the majority of vegetable processors produce frozen products. Wholesale prices for canned and frozen green peas are expected to decline during the fourth quarter of 1998. Snap Bean Output Up A 19-percent increase in Wisconsin's crop helped push U.S. output of snap beans for processing up 4 percent this year. Favorable weather during the growing season allowed per-acre yields in Wisconsin, which produces 30 percent of the crop, to rise 13 percent--recovering last season's decline and nearly equaling the 1996 record high. Snap bean yields in the State have exceeded trend 2 of the past 3 years. Wholesale prices have remained about equal with a year ago for frozen snap beans (table 23). Prices for canned snap beans were running about a tenth higher than a year ago through the third quarter. With higher supplies, wholesale snap bean prices are expected to average closer to year-earlier levels into early 1999. Tomato Yields Down, Prices Up California vegetable growers had a rough season thanks to the cool, wet weather brought in by El Nino. The first tomatoes were delivered to processors in mid-July--3 weeks later than normal. California processing tomato growers likely experienced the largest drop in contract yields (7 percent) since 1988 when yields fell 8 percent. Final data may indicate that yields fell even more. Early in the year, California processors were expecting a larger pack of tomato products but ended up with a smaller crop despite an 8-percent increase in contract area. According to data from the California Processing Tomato Advisory Board, about 8.9 million short tons of raw tomatoes were delivered to processing plants through October 29. This is about 5 percent less than a year earlier. Production in other States also fell below year-earlier levels, with poor weather in Michigan and Ohio cutting yields. With relatively low prices during the past year, tomato product movement had been above year-earlier levels. The combination of good movement and last year's smaller crop effectively eliminated the burdensome stocks carried over the past few years. On June 1, inventories of processed tomato products were reported to be 30 percent below a year earlier and 8 percent below 2 years ago. This year's smaller crop will not be adequate to cover demand, which will further deplete inventories and raise tomato product prices. In early November, a 300-gallon bin of industrial tomato paste was selling for around $0.43 cents per pound--up 43 percent from the low levels of a year earlier. With noncommitted paste supplies already tight, a wide range of price quotes (mostly higher than $0.43 per pound) has been heard. For products like sauces, catsup, and juice, relatively low prices during the past year were a positive influence on exports and also discouraged imports. In the coming season, the reverse may be true as higher prices draw product into the U.S. market and discourage foreign buyers of U.S. tomato products. Imports of tomato products totaled $58 million during January to August 1998, down 10 percent from a year earlier. From January through August 1998, the value of processed tomato product exports totaled $157 million, down 1 percent from the same period a year earlier. Much of this decline came in whole/peeled product (down 24 percent) and paste (down 10 percent). The decline in paste came during the first 2 months of the year (which were unusually strong in 1997) and in July and August when rising prices began to discourage buyers. Although paste exports were lower than in 1997, they were well above levels in 1996. Tomato sauce exports rose 16 percent to $60 million during the first 8 months of 1998 and was the leading tomato product export. Canada accounted for 68 percent of U.S. tomato sauce exports with sales there rising 23 percent to $41 million. Exports to Japan accounted for 6 percent, with sales down 2 percent from a year ago. Potatoes Fall Potato Crop Up Slightly The November estimate of U.S. fall-season potato production is 429 million hundredweight (cwt), up about 1.5 percent from 1997. Harvested acreage was estimated to be 3 percent higher than a year ago, but overall per-acre yields fell to 352 cwt because of hot summer weather in the Pacific Northwest. Season-average potato prices could strengthen in 1998/99 due to stronger demand from processors for domestic and export sales. Retail prices for fresh-market potatoes are expected to average slightly higher than a year earlier during the first 6 months of 1999. Large production in Canada could be a mitigating factor on price increases in the United States. In the Western States, fall potato production was estimated to be 292 million cwt, 1 percent less than last fall, and 7 percent less than 1996. An unusually wet spring delayed planting in several major growing areas. Perhaps more significantly, a hot, dry summer led to slow potato growth. In order to allow the crop to gain as much size as possible, some growers delayed harvests this fall--risking freeze damage to unharvested potatoes. Extending the growing season did help to improve yields somewhat, but there are still concerns about various quality characteristics of the crop. Rough exteriors have been reported in many areas, and reduced specific gravities (solids content) are creating some problems in the major frozen-processing areas of Washington and Oregon. Rough exteriors can reduce the percentage of potatoes destined for the fresh market. Also, lower solids content mean more raw potatoes are required to manufacture a given weight of finished processed product. Because domestic and export demand for frozen potato products continues to be strong, processors will likely utilize a larger proportion of the western crop this year. In the eight Central States, production was 107 million cwt, up 10 percent from last year. The crop in the Red River Valley of Minnesota and North Dakota is much improved from a year ago when floods destroyed many fields. The crop in Wisconsin may have some specific gravity and long-term storage problems, possibly affecting some processing supply as well as reducing late-season shipments to fresh market. Shipments of fresh potatoes from Michigan may also be lower this season, but increased shipments from Nebraska may offset the Michigan decline somewhat. Production in the five Eastern States was 30 million cwt, 2 percent below a year earlier, and down 11 percent from 1996. Maine, the largest potato-producing State in the East, produced 19 million cwt of potatoes this fall due to a 9-percent decrease in harvested acreage from a year ago (16 percent below 1996). Higher yields helped to limit the decline in production, which may result in more potatoes from Maine being destined for the fresh market than was anticipated earlier in the year. Quality for the most part is good. Prices Likely Higher in 1998/99 Despite the slight increase in production this fall, several factors are expected to push prices higher than a year ago as the marketing season progresses. The first factor is the reduced carryover stocks of fresh potatoes from last fall's harvest. May 1, 1998, stocks of fresh potatoes (the most recent stock information available) were 10 percent below year-earlier levels. Lower stock levels, combined with a smaller spring 1998 potato crop (compared with a year earlier), resulted in reduced total domestic supply of fresh potatoes coming into this fall's harvest. Additional supply pressure is also coming from the frozen french fry sector, where September 31 stocks were down 2 percent from a year earlier. Although this level is still above average for this time of year, continued strong processor demand and concerns about recovery rates in this year's crop will likely keep stocks of fresh and french-fried potatoes at or below year-earlier levels throughout the season. With these factors, combined with the possibility of a reduced pack to fresh market in some areas due to exterior roughness, a rise in prices for both fresh and processing potatoes is likely. In addition to strong domestic demand for potatoes this year, reduced output in Europe and continuing strong international demand for french fries will also help put upward pressure on prices. In several European countries, particularly the Netherlands, extremely wet weather during harvest caused severe problems. Yields were reduced in many areas, some acreage was lost entirely, and the storability of much of the crop is in question. The overall European crop is certainly going to be smaller than a year ago, but just how much is still in question. Prices in European potato futures markets have risen significantly since the start of harvest in September. Because the Netherlands is the largest exporter of french fries in the world (with most of their exports going to other European Union (EU) countries), a supply shortage there could mean increased exports for U.S. and Canadian processed potato products to the EU. In addition, U.S. potato product exports could increase to South American countries like Brazil, which are largely served by the Netherlands. Eastern Canadian provinces, particularly Prince Edward Island, may also benefit through increased exports of fresh-market potatoes to traditional Dutch customers in the Caribbean and South America. The one major factor that may limit the increased potato prices in the United States this year is record Canadian potato production. This is the fifth consecutive year of record potato production in Canada, and the 1998 crop is estimated at 93.4 million cwt. Combined with U.S. production, this puts total fall-season North American output for 1998 at 522 million cwt, up 2 percent from a year ago, but 4 percent below the North American record of 543 million cwt in the fall of 1996. U.S. imports of frozen french fries from Canada will likely continue to increase as record raw potato production is coupled with increased processor capacity. Given these factors, the 1998/99 season-average price for all potatoes will likely be in the range of $5.45 to $6.55 per cwt, compared with $5.62 in 1997/98 and $4.93 in 1996/97. The scope of the increase is likely to be most influenced by actual processor recovery rates throughout the season. Lower specific gravities would create increased processor demand for raw product and would put more upward pressure on prices. Utilization of the 1997/98 Crop The 7 percent decrease in potato production last year (all seasons) from the record 1996 crop led to a 5-percent decline in the total quantity of potatoes sold in the marketing year. Fresh use remained virtually unchanged from 1996 levels, while processor use declined by 5 percent to 268 million cwt in 1997. Most of the decreased use in the processing sector was realized in the manufacture of frozen french fries, which declined 10 percent from 1996's record. Dehydration use also declined (11 percent), while use for chips, shoestrings, and canned products realized little change from 1996. Interestingly, utilization for the production of other frozen products such as hash browns and potato rounds, rose by 15 percent to a record high of 33 million cwt. Despite the overall decrease in potato utilization, increased grower prices caused total grower sales of the 1997 crop to rise 8 percent from 1996 to $2.4 billion. Considering current market conditions and an expected increase in prices in the coming year, total sales value of the 1998 crop may exceed the $2.4 billion of the 1997 crop. A higher percentage of the 1998 crop is likely to be used for processing, and nonsales use may increase as well due to the possibility of greater shrinkage and loss in this year's crop. Per Capita Use Is Steady The longtime rise in domestic potato utilization, led primarily by the growth in frozen potato products since the late 1950's, appears to be leveling at around 144 pounds per person (up from 106 pounds in 1960). Per capita use for calendar 1998 is forecast to total 143.9 pounds, and little change is anticipated for 1999 (table 7). Processing use dominates consumption, accounting for two-thirds of domestic use. The long and rapid rise in domestic per capita use of frozen potato products (particularly french fries) appears to have leveled at around 60 pounds. Per capita use of frozen product is now nearly 8 times what it was in 1960. Conversely, use of fresh potatoes is nearly 40 percent less than it was in 1960, and it too seems to have leveled off in recent years at around 49 pounds per person. Sweet Potatoes Acreage Down Slightly U.S. sweet potato growers are expected to harvest 83,200 acres this fall--down less than 1 percent from a year ago. North Carolina, the leading producing State, had a slight increase in harvested area this year (up 3 percent), while Louisiana and Mississippi remained the same as a year ago. In California, which has increased its share of national sweet potato production this decade, harvested acreage was down 6 percent. Although there has been little change in overall harvested acreage of sweet potatoes, 1998 production is likely to be down from a year ago. Yields are likely to be lower at the national level this year, but by how much is in question. For the previous 4 years (1994-97), yields have been well above the long-term trend, but weather conditions for much of the 1998-growing season were less than ideal in many sweet potato growing areas. Until late August, much of North Carolina's crop suffered from hot, dry conditions. However, late August and early September hurricanes (Bonnie and Earl) brought much needed rain without damaging winds--allowing much of the crop to size nicely. Overall, crop output and quality appear favorable in North Carolina. In Louisiana the circumstances were similar, but the outcome may be more of a mixed bag. Southern Louisiana suffered from summer drought, and then was hit by heavy rains in September. The rain did help some sweet potatoes to size, but excessive moisture in other fields contributed to sweet potato deterioration and the formation of soft spots. The crop in northern Louisiana also suffered from summer drought, but some farmers were able to irrigate crops, and some areas did get some timely rain at the end of the growing season. Overall, harvest ran behind schedule throughout the season, and the overall output for the State is likely to be down from last year. Quality is expected to be good. If overall U.S. sweet potato yields decline 10 percent from last year to 146 cwt/acre, production will be approximately 12.1 million cwt. At that level, grower prices could rise from last year's season average of $15.80 to as high as the $16.00-$17.00 range. However, a more moderate 2 to 5 percent decrease in production (12.8-13.2 million cwt) would likely peg season-average prices in the $15.50-$16.50 range. Year-earlier comparisons of fall shipping-point prices show them virtually unchanged from a year ago in both North Carolina and Louisiana. Markets showed steady demand, with product volume about 10 percent lower in Louisiana and 15 percent higher in North Carolina compared with a year earlier. Dry Edible Beans Production Up, Prices Mixed In 1998, U.S. production of dry beans was estimated in October to have increased 7 percent to 31.1 million cwt. Although data on production by class were not available at this writing, acreage changes and crop conditions suggested stronger output for pinto and black beans, with reduced production likely for baby limas, navy, small reds, and red kidney beans. Black bean acreage rose 84 percent, reflecting higher prices caused by strong exports and exhausted stocks. North Dakota harvested a record large crop, continuing the expansion of the dry bean industry in that State. Production jumped 42 percent to 9.8 million cwt--the largest dry bean crop ever produced in a single State. Pinto and navy beans dominate production in North Dakota, with lesser amounts of other classes like black and kidney. Meanwhile, overall production in Michigan declined (down 14 percent) with production continuing to shift away from white beans (largely navy) toward colored beans like black and cranberry. The California dry bean harvest was about a month later than normal. California produces a wide variety of beans such as lima, garbanzo, blackeye, and kidney, with most production in the San Joaquin Valley. The California dry bean crop was estimated to be down 26 percent this year, reflecting lower yields and sharply reduced acreage for lima and garbanzo beans. Baby lima bean acreage was cut back severely (down 65 percent), reflecting low prices caused by stocks swollen by last year's large crop. Looking ahead, despite a larger crop this year, stronger export demand should help prevent a buildup of dry bean stocks. As a result, aggregate dry bean prices will likely remain close to year-earlier levels. In turn, this may signal only small changes in total area and production in 1999. The United States is expected to remain the fourth leading producer of dry edible beans (includes chickpeas) in the world (behind India, China, and Brazil). U.S. dry bean harvested area has been slowly trending upward over the past 15 years. In 1998, acreage was above the long-run trend level. In 1998, area for harvest was up 11 percent from last year's 1.72 million acres due largely to higher prices for some bean classes, increased exports, less attractive prices for competing grains, and a return to normal acreage abandonment levels. Harvested acreage was up or unchanged in 9 of the 17 dry bean States this year. Much of the increase was in the major pinto bean-producing States of North Dakota (up 32 percent), Minnesota (up 13 percent), and Colorado (up 33 percent). This season there were fewer weather disruptions to imperil acreage like those experienced last year in the Red River Valley. Export Potential Still Strong Although production is up this year, much of the additional supply is expected to eventually enter the export market. During the first 9 months of 1998, exports of most bean classes were up, with overall sales volume 45 percent above a year earlier. Prospects are encouraging for continued sales to Latin America and Iraq (among others) during this marketing year. Through September, export volume was up strongly for most bean classes (table 45). With prices low for many classes, substantial increases were noted for pink, cranberry, blackeye, black, garbanzo, lima, and pinto beans. Increases were also noted for Great Northern, navy, and light red kidney beans. Volume was lower for small red, dark red kidney, and fava beans. Import volume (including seed) dropped 5 percent through the first 9 months of 1998, with most classes (including garbanzo) declining. Black beans were notable exceptions, nearly doubling as domestic supplies were exhausted and prices soared. The United States will add to its solid positive trade balance in dry edible beans this year after seeing the majority of growth on the import side the past 2 years. In 1997, exports rose 1 percent to $206 million while imports rose to $31 million. During calendar year 1997, the value of exports did not change much from a year earlier because lower dry bean prices nearly offset a 5-percent increase in export volume. On the other side of the ledger, dry bean imports continued to creep upward with 1997 import value rising 10 percent. Mung bean volume rose 29 percent to 31 million pounds. Together with garbanzo beans, these two classes account for about half of U.S. dry bean imports. A substantial volume of U.S. dry bean exports is concentrated among relatively few countries. The top U.S. markets in 1997 included the United Kingdom (U.K.), Mexico, Iraq, and Japan. According to United Nations trade data, the United States holds 52 percent of the U.K. import market for dry beans (63 percent of the U.K. navy market), 95 percent of the Mexican market, and 15 percent of the Japanese market. In 1997, the U.K. accounted for 77 percent of U.S. navy bean and 15 percent of dark red kidney exports. Mexico took 76 percent of U.S. black bean and 35 percent of U.S. pinto bean exports. Iraq accounted for 69 percent of U.S. Great Northern exports, while Japan bought 77 percent of baby lima export volume. Black Bean Market Active Spurred by increased export opportunities, black bean production is expected to rise strongly this year--easily surpassing the 1995 record. During the first 9 months of 1998, export volume was up 149 percent. With strong export market interest this year, the season-average dealer price for 1997/98 rose about a fifth to $32.50 per cwt. Dealer prices have remained above those of a year ago, with the third quarter of 1998 averaging 26 percent above a year earlier. Prices continued to show considerable strength into November, as demand remained active. During 1998, export interest has been strong from Mexico (up 121 percent) and several Central and South American countries such as Costa Rica and Venezuela (the latter two countries did not purchase U.S. black beans in 1997). Mexico has accounted for 77 percent of U.S. black bean export volume in 1998. The domestic black bean market has also remained a bright spot for the dry bean industry in the 1990's, with per capita use estimated at 0.4 pounds in 1998--double the level of just 5 years ago. Dry Peas and Lentils Production Up, Prices Down Production of dry peas and lentils (excluding chickpeas) declined 6 percent to 7.8 million cwt in 1998. Dry pea (green and yellow) production increased 1 percent as a 12-percent increase in acres harvested was nearly offset by reduced yields. All of the production gain originated from outside the traditional growing region in the Palouse (an area encompassing portions of Idaho, Washington, and Oregon) which experienced reduced production this year. Similar to the trend in the dry edible bean industry, North Dakota is rapidly becoming a leading producer of dry peas and lentils. Most of the acreage gain in North Dakota (and in Montana), likely reflects the addition of leguminous crops like beans and peas into traditional crop rotations. Legumes work well in rotation with crops like wheat and barley, helping to condition the soil and control common cereal crop diseases and some types of weeds. Dry pea acreage has increased rapidly outside of the two traditional States of Washington and Idaho (most of the gain has been in North Dakota). Harvested area in the four "other States" (MT, NV, ND, OR) has risen from 15,000 acres in 1995 to 134,000 in 1998. Given the growth potential in North Dakota, further acreage increases are possible in the next few years. Reportedly, the majority of these dry peas are being used for animal feed. However, if shipments of dry peas for human consumption begin to rise appreciably from these areas, dry pea prices could come under considerable pressure. Lentil output (all types) is expected to drop 21 percent as acreage (down 10 percent) and yields (down 13 percent) each decline. Washington, the top producing State, is expected to produce 26 percent fewer lentils due mainly to a 19-percent cut in area. Production in Idaho is estimated to be 35 percent lo lower due largely to weather-reduced yields. But, lentil production in other States (North Dakota and Montana) is estimated to be up 25 percent, with acreage and yields both above 1997 levels. For reasons similar to dry peas, lentil acreage has expanded in Montana and North Dakota, rising from 18,100 acres in 1995 to 40,500 in 1998. Lentil stocks at the end of June were the largest since 1988. As a result, monthly grower prices have continued to trend downward, with prices in October reaching a low of $10.70 per cwt. This is the lowest monthly price recorded since 1987. As in dry peas, increased production of food-grade lentils during the next few years could mean lentil growers face further downward price pressure. A substantial portion of U.S. dry pea and lentil supplies are exported each year (a portion of this volume moves through U.S. aid programs). During the 1997/98 season, about 50 percent of dry pea and lentil supplies were shipped to other countries, compared with an average of 59 percent during the first 7 years of the decade. Major destinations in 1998 have included Peru, Spain, and the Philippines. Dry peas and lentils are also imported into the United States, with imports (primarily from Canada and India) accounting for about a third of domestic use. Domestic use is likely relatively stable but could have future growth potential given the high fiber and protein content of these legumes and the rising interest in vegetable-based diets. Despite increased output, domestic use in 1997/98 was estimated to be around 140 million pounds. This compares with about 130 million pounds during the previous 5 years. Mushrooms U.S. Mushroom Crop and Value Reach Record Levels U.S. mushroom production rose 4 percent to a record 818 million pounds and also reached a record value of sales at $800 million in 1997/98. Pennsylvania accounted for one-half of the U.S. output, while California, the second leading producer, accounted for about 17 percent of the total. The season average price for growers of all mushrooms was 97.9 cents per pound, compared with 97.3 in the prior season. While the growing area is holding steady at nearly 35 million square feet, growers are able to push yield and production higher by increasing the total number of fillings. With steady prices and higher production, growers are able to increase the total value of sales and the average value of sales per square foot of growing area. Fresh Sales Set Records Fresh mushroom sales continue to trend upward, setting records in quantity sold and the total value of sales. During the 1997/98 marketing season, U.S. fresh sales totaled more than 621 million pounds, a 12-percent increase over the previous season. Fresh mushroom sales now account for 77 percent of all mushroom sales, the highest percentage on record. The value of grower fresh sales reached $670 million in the 1997/98 season, up 11 percent. The average price received by growers for fresh mushrooms was down slightly at $1.08 per pound. These statistics are for Agaricus mushrooms, which account for nearly all mushrooms sold through commercial fresh and processing outlets. Specialty mushrooms, including Shiitake, Oyster, and other exotics, account for about 1 percent of all mushroom sales. Agaricus are typically white mushrooms, but included in the Agaricus statistics are brown mushrooms such as Portobello and Crimini. The brown mushrooms accounted for 47 million pounds, 6 percent of the total, and $60 million in sales in the 1997/98 season. The lifestyles and preferences of consumers continue to change and impact the mushroom industry. Consumers are eating away from home more frequently and/or purchasing ready-to-serve meals from supermarkets. This trend is reflected in an increasing share of the food dollar being spent on away-from-home meals. There is increasing preference for salad bars where there is a prevalence of mushrooms and continued consumer interest in the newer specialty mushrooms like Shiitake, Oyster, and brown Agaricus. Recently, several pizza chains decided to switch from topping pizza with canned mushrooms to using fresh mushrooms. This has lowered demand for canned mushrooms and increased demand for fresh mushrooms. The consumer trend toward increasing use of specialty mushrooms, excluding brown Agaricus mushrooms, appears to have ended, at least temporarily. Total sales of specialty mushrooms decreased 16 percent to 9.5 million pounds in 1997/98, with most types registering declines. The value of specialty mushroom sales fell to $27 million as output declined and the average price dropped to $2.99 per pound. Imports of mushrooms continue to play a major role in the total supply, demand, and prices for domestic mushrooms. From January through August 1998, mushroom imports totaled 51.8 million kilograms and had a total value reported at $97.6 million, according to the U.S. Department of Commerce. For comparison, mushroom imports totaling 53.6 million kilograms and a value of $106.2 million were reported for the first 8 months of 1997. The U.S. International Trade Commission is in its final phase of the antidumping investigation of certain canned mushrooms from China (PRC), Chile, and India. This investigation is underway and is expected to be completed by the end of the year. Earlier this year, the Commerce Department's International Trade Administration made a preliminary ruling stating that certain canned mushrooms from China, Chile, and India were being dumped (sold at less than fair market value) on the U.S. market. Special article Sweet Potatoes: Increasing Popularity Benefits Growers and Consumers Charles Plummer 1/ -------------- 1/ Agricultural economist with ERS, MTED. -------------- Abstract: Although the holidays are still the most significant time of year for sweet potato sales, consumers appear to be showing an increased interest in sweet potatoes throughout the year. Since 1994, per capita utilization has averaged 4.6 pounds--up nearly 10 percent from the previous 5 years. A combination of rising nutritional awareness among consumers, improved storage facilities, new sweet potato products, and increasing use of sweet potatoes in the foodservice industry have likely helped boost interest. Keywords: Sweet potatoes, per capita consumption, production, prices. Many Americans traditionally associate sweet potatoes with Thanksgiving, and shipments rise predictably every November as the holiday approaches. November alone typically accounts for about 20-25 percent of domestic U.S. shipments of this highly nutritious root vegetable (sweet potatoes are low in fat and calories, have no cholesterol, and are rich in vitamins and minerals). Shipments also increase somewhat around the Christmas, Hanukkah, and New Year season, as well as around Easter. Combined, these major winter and spring holiday seasons account for about 40 to 45 percent of domestic sweet potato shipments. Although the holidays are still the most significant time for sweet potato sales, consumers appear to be showing an increased interest in sweet potatoes throughout the year. Traditionally, sweet potato shipments and consumption were heaviest in the fall through spring, and then declined sharply during the summer months. In recent years, however, summer consumption of sweet potatoes has increased significantly compared with what it was as recently as the early 1980's. Summer (June through August) sweet potato shipments averaged nearly 15 percent of the annual total from 1995-1997. During the 3-years from 1980 to 1982, summer shipments averaged only 7 percent of the annual total. The recent increase in popularity of sweet potatoes with consumers on a year-round basis also seems to be having a positive effect on overall per capita consumption of sweet potatoes. Per capita utilization since 1994 has averaged 4.6 pounds. This is up nearly 10 percent from the previous 5 years, during which per capita use reached an all-time low of 3.9 pounds in 1993. The low was achieved after a slow and fairly steady decline that began in the 1920's, when sweet potato consumption was 29 pounds per person. The turn-around in consumption may be attributed to several factors: rising nutritional awareness among consumers, improved storage facilities, new sweet potato products, and increasing use of sweet potatoes in the food service industry. Over the past 20 years, many growers have invested in improved storage facilities that have helped to make quality sweet potatoes available on a year-round basis. After a curing process (where the sweet potatoes are placed in a heated, humid environment for several days and then cooled), sweet potatoes (depending on product condition) can be stored for nearly a year in the controlled-atmosphere sheds. In addition to improved storability, many consumers seem to prefer cured sweet potatoes to uncured product--often referred to as fresh or green sweet potatoes. The curing process not only helps increase the storability of sweet potatoes; it also can help smooth exterior imperfections and causes some of the natural starches in the sweet potatoes to convert to sugar--an improvement in taste for many consumers. Green (uncured) product is typically shipped towards the end of the summer into the early fall, as cured product from the previous crop begins to dwindle and "fresh" product from the new crop is being harvested. Harvest varies by the production area, but generally begins with small quantities harvested in mid-to-late June, and runs into November. Cured sweet potatoes are typically shipped beginning in late October or early November, and can last into the next crop-season's harvest (August or September). Year-round availability and improved product quality has also helped sweet potatoes make inroads to the foodservice industries. Many restaurants, particularly several national steakhouse chains, have begun to include sweet potatoes on their menus. Sweet potatoes can be served in numerous ways, and in many cases can be offered as a compliment or an alternative to traditional white potatoes. Sweet potatoes can be boiled, baked, mashed, and used in casseroles, breads, and pies. Sweet potatoes can even be french fried and chipped much like a regular white potato. And unlike a white potato, sweet potatoes can even be served raw similar to a carrot (sticks, shavings, etc). Sweet potatoes are produced in about 25 to 30 States. However, commercial production is concentrated primarily in 11 States, mostly in the South. The leading producers are North Carolina (36 percent), Louisiana (25 percent), California (15 percent), and Mississippi (8 percent). On average, about 87 percent of the U.S. sweet potato crop is sold for food uses. Nonfood uses include seed and animal feed, shrink, and loss. Most of the U.S. supply of sweet potatoes (about 95 percent) is domestically produced, but imports (of sweet potatoes and yams) have increased over the last 20 years. Imports currently account for about 5 percent of supply (up from 1 percent in 1978), but much of this volume goes directly to Puerto Rico from Costa Rica, the Dominican Republic, and Jamaica, and does not reach the continental United States. U.S. exports of sweet potatoes are also fairly small, with only about 2 percent of annual production being marketed outside of the country. In 1997, the United States exported 30 million pounds of sweet potatoes at a value of $8.9 million. The vast majority of these exports (97 percent) went to Canada, with over 5 million pounds of product shipped in October--when Canadians celebrate Thanksgiving. The second largest export market is the United Kingdom (0.5 million pounds in 1997). With a renewed consumer interest in sweet potatoes and consistent production and prices the past several years (1994-97), sweet potato growers have realized a 34-percent increase in cash receipts from the early 1990s (1990-93). Grower cash receipts for sweet potatoes were estimated to be $208 million in 1997. As growers benefit from improved sweet potato revenues and consumers gain from year-round availability of a nutritious product, the sweet potato industry faces the challenges of expansion and further market penetration. Increasing promotional efforts by sweet potato industry groups, rising public interest in health and nutrition, and the expanding use of sweet potatoes in the foodservice industry are all likely to play major roles in expanding sweet potato consumption in the American diet. Special Article Demand for Frozen Vegetables: A Comparison of Organic and Conventional Products Lewrene Glaser, Barry Krissoff, Angela Lengyel, and Kristen Sheeran 1/ ----------- Glaser, (202)-694-5246/lkglaser@econ.ag.gov, and Krissoff, (202)-694- 5250/barryk@econ.ag.gov, are economists with ERS. Lengyel, a student at Mary Washington College, Fredericksburg, VA, was a summer intern at ERS. Sheeran is a doctoral candidate at American University, Washington, DC, and an intern at ERS. ----------- Abstract: Supermarket sales of conventional frozen broccoli, sweet corn, green beans, and green peas stayed roughly the same or declined slightly from 1991 to 1996, while prices of these products generally stagnated. In contrast, sales of their organic counterparts rose an average 68 percent per year in value during 1991-96. Supermarket sales of both organic and conventional frozen french fries increased during 1994-96, but organic sales grew at a much faster rate. However, organic frozen vegetables, for the most part, accounted for less than 1 percent of supermarket sales in 1996. During 1991-96, the average annual price premia ranged from a low of 96 percent for sweet corn to a high of 231 percent for green peas. Keywords: Organic, conventional, frozen vegetables, sales, price premia. The availability of organic foods expanded in the 1990's, partially spurred by the growth of high-quality, natural-product supermarkets, such as Whole Foods and Wild Oats. Mainstream supermarkets also introduced or increased organic product lines in response to retail competition and consumer demand. It is no longer unusual for large-scale supermarkets in metropolitan areas to carry some fresh and/or processed organic products. Industry sources estimate that distributor sales of organic products grew from $1 billion in 1990 to $3.5 billion in 1996 (Raterman). Recent studies have gathered more details on the market in 1997 (Scott). One study indicates that organic food sales in natural-product stores totaled $1.96 billion in 1997, with organic produce and frozen foods accounting for $317.8 million and $198.5 million, respectively. Another study reports survey results showing organic produce sales at natural and mainstream grocery stores topped $670 million. Industry experts predict that the organic foods industry will grow to $6 billion by the year 2000 (Brandt). The increase in demand for organic foods reflects a general trend in consumers' desire for quality products that are perceived to be healthful, nutritious, and safe. Food grown under organic production systems (little or no chemical use) is preferred by some consumers. Surveys indicate that consumers prefer organically produced food because of taste, appearance, absence of pesticide residues, and personal health reasons (Fresh Trends). Some consumers also are concerned about farm labor and environmental issues: farm worker safety, soil and water quality, and wildlife habitat (Bruhn et al., Goldman and Clancy, and Weaver et al.). Almost all analyses of consumer demand for organic foods have focused on surveys and questionnaires. The studies have attempted to discern geographic, demographic, and socioeconomic characteristics of consumers by eliciting information from those who expressed an interest in purchasing organic foods. Thompson provides a useful overview of these studies. A range of regional and national studies (which often focused on different products, geographic regions, and retail outlets) show that consumers in Western States, in some urban centers, in younger age groups, with higher levels of education (college), and with families with a larger number of children are more likely to buy organics, but there is often mixed evidence. There has been virtually no analysis of sales data and the responsiveness of consumers to changes in organic food prices. In this special article, we examine and compare the demand for organic and conventional frozen vegetables using actual sales data. *************** BOX ITEM *************** This special article is part of an occasional series that examines the expansion of organic agriculture. In the April 1997 Vegetables and Specialties Situation and Outlook Report, Greene and Calvin evaluated U.S. acreage and market expansion of organically grown vegetables in the 1990s. Future articles will appear in either the Fruit and Tree Nuts or Vegetables and Specialties Situation and Outlook Reports. This research is supported in part by the Fund for Rural America, grant 97-36200-5227. *************** END BOX ITEM **************** Frozen Vegetable Use, Imports, and Supermarket Sales Frozen vegetables, other than potatoes, account for a small portion of the vegetables Americans consume. During the last decade, vegetables used for freezing (excluding potatoes) have accounted for about 8 percent of per capita use on a farm-weight basis. Vegetables for canning, mostly tomatoes, had a much larger share at 38 percent. More potatoes are used for freezing, particularly for frozen french fries. From 1988-97, 39 percent of potatoes were used for freezing on a per capita basis. Most vegetables used for freezing (including potatoes) are produced in the United States. Imports, however, have been growing over the decade, from 6 percent of domestic use in 1990 to 11 percent in 1997. Frozen broccoli is a notable exception to the homegrown trend. From 1990-97, broccoli imports accounted for 73 percent of domestic use, on average, and the share has been growing, from around 60 percent earlier in the decade to almost 80 percent in 1997. Mexico is the main supplier. Vegetable processors prepare and pack frozen vegetables for three major markets: retail grocery stores, restaurants and other foodservice establishments, and institutional buyers such as hospitals and prisons. On a volume basis (and excluding repacked bulk frozen products), retail stores received only about one-third of frozen vegetables (excluding potatoes) packed over the last few years (1997 Frozen Food Pack Statistics). The foodservice industry is the main buyer of frozen french fries. Retail deliveries accounted for 8 to 10 percent of total volume during the last 3 years. To examine the retail market for frozen vegetables, we analyzed U.S. monthly supermarket scanner data from Nielsen Marketing Research from September 1990 to December 1996. The data are from approximately 3,000 supermarkets with annual sales of $2 million or more and represent about 83 percent of the U.S. retail food market, excluding fresh meat and produce. The industry defines a supermarket as a grocery store with dairy, produce, fresh meat, packaged food, and nonfood departments and annual sales of $2 million or more. On a weekly basis, supermarkets have sales of $38,462 or more. Sales from health food stores and food cooperatives are not in the data nor are sales from eating and drinking establishments and institutions such as employee cafeterias, prisons, and military bases. According to the data, Americans purchased $2.2 billion of frozen vegetables in supermarkets in 1996, a 12.3-percent increase from 1990. Frozen mixed vegetables and potatoes account for much of the sales growth. Supermarket sales of frozen mixed vegetables, potatoes, and sweet corn rose 40.7, 13.2, and 8.2 percent, respectively, from 1990 to 1996. The mixed vegetable category contains a wide variety of products, including combinations of vegetables and rice, pasta, and potatoes, and its sales growth may reflect consumer desire for new and diverse vegetable-containing combinations. On the other hand, supermarket sales of frozen carrots, green beans, broccoli, and peas decreased 19.1, 12.3, 11.3, and 3.9 percent, respectively. Frozen potatoes accounted for 41.1 percent of supermarket sales over the period, while mixed vegetables held a 24.3-percent share. Frozen peas were next at 10.1 percent; followed by broccoli, 9.1 percent; sweet corn, 8.8 percent; green beans, 5.2 percent; and carrots, 1.4 percent. Data Comparability: Organic and Conventional Products The analysis focuses on five categories of processed frozen vegetables: broccoli, sweet corn (excluding corn on the cob), green beans, peas, and potatoes. Mixed vegetables were excluded based on the problems matching organic and conventional products. Frozen vegetables used in soups and other prepared foods are not included. In examining supermarket sales of organic frozen vegetables, we contacted manufacturers listed in the dataset who identified their products as organic or conventional. Not all known organic manufactures are in the data, possibly because of their limited size and/or regional scope of operation. Generic and store brands were excluded from the analysis because we could not determine whether they were organic or conventional. We also organized the data into similar types of frozen vegetables. We chose the following designations: cut broccoli, regular and golden sweet corn, regular cut green beans, regular green peas, and regular frozen french fries (table B-1). By following this procedure, we were better able to compare market share and retail prices of like products. Of the identified products, regular green peas had the lowest market share, 21.4 percent by volume and 17.4 percent by value, of total frozen pea sales during September 1990 to December 1996. In contrast, regular cut green beans accounted for 55.3 percent of volume and 47.6 percent of value of total frozen green bean sales. Some of the differences are based on how the data are classified. The category of frozen peas includes not only green peas, but also black-eyed, pigeon, snap, snow, and seven other types of peas. Likewise, frozen potatoes include french fries, hashbrowns, tater tots, stuffed potatoes, and 51 other subcategories. In comparison, frozen broccoli is divided into only eight forms (broccolettes, chopped, cut, floret, floret petite, spear, spear baby, and spear cut). Supermarket Sales of Frozen Organic Vegetables The first organic brands to appear in the data were introduced in September 1990. For the most part, sales of organic frozen broccoli, sweet corn, green beans, and green peas stayed below 1,000 pounds per month until the end of 1994 (figure B-1). The growth rate increased during 1994-96, particularly for green peas and corn. In December 1996, 2,536 pounds of organic frozen broccoli were sold, as were 2,556 pounds of organic green beans, 5,727 pounds of organic corn, and 6,237 pounds of organic peas. Organic frozen french fries were first introduced to the market in April 1994. Sales increased rapidly in 1995 and 1996 and reached 5,589 pounds in December 1996. When viewed on an annual basis, supermarket sales of organic frozen broccoli, sweet corn, green beans, and green peas dropped 32.2 percent in volume and 23.4 percent in value from 1991 to 1992, but then grew during the remaining 4 years (table B-2). On average, during 1991-96, sales of the four organic frozen vegetables increased 58.4 percent per year in volume and 67.8 percent in value. Supermarket sales of conventional frozen vegetables also declined from 1991 to 1992, which may have reflected the recession of the early 1990s. In the past, sales of frozen vegetables were found to be sensitive to economic conditions. From 1993-96, sales growth for conventional vegetables, unlike their organic counterparts, was either negative or in the single digits. Sales of organic and conventional frozen french fries increased during 1994-96, but organic sales grew at a much faster rate. Although these increases have been quite dramatic, supermarket sales of these organic products are dwarfed by sales of their conventional counterparts. In most cases, organic frozen vegetables accounted for less than 1 percent of sales value during the study period. The one exception was green peas, which reached a 1.1-percent share of sales value in 1996 (figure B-2). All of the other organic vegetables held less than 0.4 percent of the market when measured in terms of dollar value. When compared on a volume basis, organic products accounted for an even smaller part of supermarket sales (figure B-3). In 1996, green peas had the highest volume share at 0.33 percent, while the rest of the organic vegetables had less than 0.1 percent each. Part of the explanation for these small market shares may lie in the fact that most supermarkets did not carry the organic brands. According to the data, these frozen organic vegetables were available in only a small percentage of stores. Just like sales though, the percentage increased over the years. Organic green peas were sold in the highest percentage of stores, reaching 4 percent in December 1996. Organic sweet corn increased from 1 percent or less in 1991-94 to 3 percent in the fall of 1996. Organic broccoli and green beans were sold in 2 percent of stores during the last few months of 1996. The percentage of stores selling organic frozen french fries rose from 1 percent during the later part of 1995 to 4 percent in December 1996. There also were differences among the vegetables when comparing market share among the organic products and their conventional counterparts. Within the organics group, green peas accounted for a higher percentage of sales volume in 1996 than did conventional peas among the conventional vegetables (figures B-4 and B-5). This is not surprising given that organic pea sales have risen faster than organic corn, green bean, or broccoli sales and organic peas are sold in a higher percentage of stores. Within their respective groups, organic and conventional sweet corn accounted for about the same percentage of sales volume in 1996. Organic green beans and broccoli had less market share among the organic vegetables than their counterparts had in the conventional group. One possible explanation is that organic frozen broccoli and green beans were more frequently out of stock (manufacturers had limited supplies to provide to supermarkets). Another possibility is that consumers who buy organic products are more likely to buy fresh broccoli and green beans. In comparison, kernel sweet corn and green peas are not readily available on a fresh basis. Organic Price Premia Organic frozen vegetables are more expensive than their conventional counterparts. It is generally believed that organic foods tend to have higher prices than conventional foods because of higher production, processing, and distribution costs. For some commodities, lower yields and limited production also may play a role. When first introduced in September 1990, supermarket prices of organic frozen broccoli, sweet corn, green beans, and green peas ranged between $1.50 and $2.25 per pound. Prices then generally increased to the end of 1993, leveled off in 1994, declined in 1995, and leveled off again in 1996 (figure B-6). Prices of organic frozen french fries ranged between $2.00 and $2.70 per pound in mid-1994 before jumping to $3.41 per pound in November 1994. Prices declined from that high to between $2.10 and $2.40 per pound in 1996. In comparison, prices of their conventional counterparts stayed relatively stable over the time period (table B-3). Conventional broccoli, sweet corn, green bean, and green pea prices were between roughly $1.00 and $1.40 per pound, while those for french fries were in the $0.70 range. For the most part, the price premia for the organic frozen vegetables have equaled or been higher than the corresponding conventional prices. In several years, the price premia ranged between 100 and 250 percent of the conventional prices. As with the organic prices, the premia increased until 1993 or 1994 and declined slightly in 1995 and 1996. Since all organic manufacturers are not represented in the data, it is unclear how much of the recent decline is due to increased competition. Lower prices might also reflect lower per-unit production and distribution costs resulting from greater organic output. Limited data also exist on the price premia for organic fresh produce. One source, the Organic Food Business News, publishes a series of organic prices and premia for selected fresh fruits and vegetables. One of the vegetables in their database is broccoli. For 1992-95, the monthly average organic fresh broccoli premium, as a percent of conventional price, rose from 77 to 145 percent (Crutchfield et al.). In comparison, the premium for organic frozen broccoli increased from 163 percent of the conventional frozen broccoli price in 1992 to 208 percent in 1994 and then declined to 188 percent in 1995. The larger premia on frozen relative to fresh broccoli may reflect the additional costs incurred for procuring, processing, and handling organic products; different fresh and frozen marketing channels and margins; and/or the different type of retail outlets where the products are sold. Factors Influencing Demand for Frozen Vegetables In addition to evaluating market shares and price premia, we also investigated the factors influencing the demand for organic and conventional frozen vegetables between September 1990 and December 1996 through regression analysis. Economic theory suggests that consumers base the quantity they purchase on factors such as the vegetables' own price; the prices of other fresh, frozen, or canned vegetables; income; and other determinants. In the case of organic frozen vegetables, consumers may be concerned about the relative prices of organic and conventional products. The smaller the difference in price, the more likely consumers may want to purchase organic products. Our empirical results lend some support to this premise. The coefficients for organic corn, green beans, and green peas associated with the log of the price premium do have a negative sign, but they are, at best, very weakly significant (table B-4). The coefficients on organic broccoli and french fries are positive. The regression results for conventional frozen vegetables were somewhat more consistent with theory. The own-price coefficients were negative for conventional broccoli, green beans, and green peas, but only the one for green beans was statistically significant. Conventional sweet corn and french fries had positive, although insignificant coefficients. Such poor results likely reflect the lack of price variability over the period. The prices of conventional frozen vegetables, in particular, demonstrated minimal deviations from their mean values. A second factor that is usually important in consumer decisions to purchase goods and services is their level of income. However, given the relatively small proportion of income spent on food consumed at home, the demand for frozen vegetables is not likely to be sensitive to changes in consumer income. Indeed, the study reveals a negative correlation between the quantity demanded of conventional and organic frozen vegetables and real per capita income (results not shown). However, the coefficient was significant only for conventional vegetables. Rather than income, expenditures for food consumed at home may more consistently affect the demand for frozen foods. The analysis revealed a positive correlation between the quantities of frozen vegetables purchased and real per capita at-home food expenditures. This relationship is significant for all conventional and organic frozen vegetables, with the exception of organic broccoli. The magnitude of the coefficients in the organic regressions are quite high and may reflect consumer interest in these newly available products. Given that the percentage share of disposable income attributed to at-home food expenditures declined from 1990 to 1996 (Putnam and Allshouse), there might be a constraint on the market for organic frozen vegetables in the future. The empirical analysis does indicate evidence of strong seasonal variability in the demand for frozen vegetables. During the period, sales of frozen vegetables fell sharply during the summer months of July and August when fresh vegetable supplies were more readily available. In addition, holiday food shopping accounted for a significant increase in sales during December. This variation was significant for both organic and conventional frozen vegetables, with the exception of frozen french fries. Sales of organic french fries were not significantly higher in the summer, while sales of their conventional counterparts were not significantly different during the December holidays. A trend variable was included in the organic regressions to reflect increasing availability of organic processed foods as well as greater consumer awareness of organic products and their perceived health and environmental benefits. The regression results do indicate a significant upward trend in organic frozen vegetable purchases from September 1990 to December 1996. Conclusions Supermarket sales of conventional frozen broccoli, sweet corn, green beans, and green peas stayed roughly the same or declined slightly from 1991 to 1996, while prices of these products generally stagnated. In contrast, sales of their organic counterparts rose an average 68 percent per year in value during 1991-96. Supermarket sales of both organic and conventional frozen french fries increased during 1994-96, but organic sales grew at a much faster rate. Despite these impressive gains, for the most part, organic frozen vegetables accounted or less than 1 percent of supermarket sales in 1996. During 1991-96, the average annual price premia ranged from a low of 95.7 percent for sweet corn to a high of 230.6 percent for green peas. A trend variable was used in our empirical analysis as a proxy for the increased availability of organic frozen vegetables and greater consumer awareness of organic products. It appears to be a more important factor in determining consumer purchases of organic frozen vegetables than the price premia or income. There are several limitations to our analysis. Because we only have access to national-level scanner data, we are unable to examine the role of socioeconomic (income strata), geographic (east versus west, urban versus rural), and demographic factors in influencing the demand for frozen vegetables. In addition, the influence of fresh organic vegetables on the demand for their frozen counterparts was not investigated. Sales information on organic fresh produce is very limited because it is sold in a variety of venues, including farmers' markets and direct sales, and, as a variable weight product, is not scanned in the same way as processed foods. However, as supermarkets increase the use of price-lookup codes for fresh produce, further analysis may be possible. Also, further investigation might examine other processed-product categories. Are organic frozen vegetables representative of other organic processed foods, such as soups and juices, is a question that remains. References 1997 Frozen Food Pack Statistics. 1998. McLean, VA: American Frozen Food Institute. Brandt, Laura A. 1998."Natural Products Expo East: Organic Food Sector Grows as Quality Improves." Food Quality (October): 6. Bruhn, Christine M., K. Diaz-Knauf, N. Feldman, J. Harwood, G. Ho, E. Ivans, L. Kubin, C. Lamp, M. Marshall, S. Osaki, G. Stanford, Y. Steinbring, I. Valdez, E. Williamson, and E. Wunderlich. 1992. "Consumer Food Safety Concerns and Interest in Pesticide-Related Information." Journal of Food Safety 12 (3): 253-262. Crutchfield, Steve, Fred Kutchler, Katherine Ralston, Ann Vandeman, and Phil Brent. Consumer Demand for Food Safety Risk Reduction. Washington, DC: USDA, ERS, forthcoming. Fresh Trends. 1996. Vance Publishing Corporation. Goldman, Barbara J. and Katherine L. Clancy. "A Survey of Organic Produce Purchases and Related Attitudes of Food Cooperative Shoppers." 1991. American Journal of Alternative Agriculture 6 (2): 89-95. Greene, Catherine and Linda Calvin. 1997. "Organically Grown Vegetables: U.S. Acreage and Markets Expanded During the 1990's." Vegetables and Specialties Situation and Outlook Report (April): 19-23. Lucier, Gary, coordinator. 1998. Vegetables and Specialties Situation and Outlook Yearbook (July). Organic Food Business News. Orlando, FL: Hotline Printing and Publishing. Putnam, Judith Jones and Jane E. Allshouse. 1997. Food Consumption, Prices, and Expenditures, 1970-95, SB 939. Washington, DC: USDA, ERS. Raterman, Karen. 1997. "NFM's 16th Annual Market Overview '96." Natural Foods Merchandiser (June): 1, 26. Scott, Mary. 1998. "Natural Food Sales Grow in Expanded Channels." Natural Foods Merchandiser (June): 46-50. Thompson, Gary. "Consumer Demand for Organic Foods: What We Know and What We Need To Know." American Journal of Agricultural Economics 80 (5), forthcoming. Weaver, Robert D., David J. Evans, and A.E. Luloff. 1992. "Pesticide Use in Tomato Production: Consumer Concerns and Willingness-to-Pay." Agribusiness 8 (2): 131-142. Special article Urban Influence and the U.S. Vegetable Industry Charles Barnard and Gary Lucier 1/ ---------- 1/ 1/ Agricultural economists with ERS, RED and ERS, MTED, respectively. --------- Abstract: As the United States continues to urbanize, the conflict between agricultural and nonagricultural uses of land may intensify. Although the issues surrounding this conflict may be best exemplified in the U.S. vegetable industry, it is not clear that urban expansion poses an immediate threat to the industry. Analysis of Census population and acreage data indicates that overall vegetable area has not diminished in metropolitan counties over the past several decades. Urbanization causes shifts in land use, but given its high production intensity/high net return characteristics, vegetable production may be one of the last agricultural enterprises to disappear from urbanizing areas. Keywords: Vegetables, urbanization, economics, urban sprawl, farmland. As the United States continues to urbanize in the coming century, the conflict between agricultural and nonagricultural uses of land may intensify. Today, the issues surrounding this conflict are exemplified in the U.S. vegetable industry. Many of the major national production centers for vegetables and melons are located in areas subject to intense pressure from urban development. Thus, a significant percentage of U.S. vegetable acreage (61 percent) is located in metropolitan areas. 2/ ---------- 2/ Metropolitan status is that announced by OMB in 1993, based on results of the 1990 Census. ---------- Furthermore, strong economic growth, in combination with numerous other factors that influence land use, has pushed urban sprawl even further from city centers, consuming agricultural land in traditionally rural areas. The bulk of vegetable and melon production tends to be geographically concentrated. A substantial portion (43 percent) of U.S. vegetable and melon production (excluding potatoes) is located in California, Florida, Texas, and Arizona. 3/ ---------- 3/ This regionalization of production is even more acute during the winter months, with domestic production largely confined to a relatively few counties within these four States. ---------- But these States also rank high in population and projected population growth (table C-1). The level terrain, availability of water for irrigation, and extended periods of warm weather that make these areas advantageous for vegetable production also make these States attractive for population expansion. The Bureau of the Census projects a 55-percent increase in California's population between 1995 and 2025. Projected population growth in Florida, Texas, and Arizona is not far behind: for each State, population growth by 2025 is projected to exceed 45 percent. As product prices, technology, consumer demand, and land prices change, the location of specific agricultural production also changes. These changes are particularly important for the vegetable industry, with its special soil and climatic requirements, which often interface with population growth and urbanization. With the accelerated shift of agricultural land to urban land that accompanies population growth, the vegetable industry may be especially impacted given the economic incentives for this industry to locate near cities. In light of the complex relationship between population growth and vegetable production, does impending population growth pose a risk to domestic vegetable and melon production? This article attempts to address that issue by examining the impact of urban influence on vegetable acreage. Vegetable and Melon Production Vegetables and melons (excluding potatoes and pulses) are important components of the U.S. crop production sector. In 1997, these crops accounted for 14 percent of all crop farm cash receipts. According to USDA, in 1997, the top five producing States accounted for 57 percent of all vegetable and melon harvested acreage, but had 71 percent of production. In terms of total production, the top five vegetable and melon States are California (53 percent of U.S. output), Florida (6 percent), Arizona (4 percent), Washington (4 percent), and Wisconsin (4 percent). Fresh-market vegetables and melons are primarily produced in western and southern States, while the West (primarily California, Oregon, and Washington) and the upper Midwest account for most of the output of processing vegetables. Vegetable and melon production has become more concentrated in western States (particularly California) over the past 60 years. California now produces about 60 percent of vegetables for processing and 49 percent of the fresh-market crop. This compares with 17 and 24 percent, respectively, in 1940. The relative contributions of eastern States to national vegetable production have declined during this time. Part of this decline is loss of market share to western States and a portion is due to increased winter vegetable output in warmer States like California and Arizona. The majority of U.S. vegetable and melon production is clustered in areas which primarily enjoy climatic advantages (largely sunlight, temperature, and humidity) specific to the commodity being produced. For example, iceberg lettuce is a cool-season crop requiring moderate temperatures featuring cool nights. Cool nights and a dry climate where moisture can be controlled result in the highest quality heads. These conditions are found in the Salinas Valley of California from late spring through the fall and in the southern desert are as of California and western Arizona during the winter. As a result of this comparative advantage, more than 95 percent of the iceberg lettuce produced in the United States comes from these two States. Given the increasing concentration of vegetable and melon production in California, it is not surprising that 7 of the top 10 vegetable-producing counties are in California. Also, the importance of winter vegetable production is manifest in the fact that the other three top counties are in Florida, Texas, and Arizona--States that produce primarily during the cooler months of the year. California's Monterey County is the nation's top vegetable area, with 6 percent of the harvested area (table C-2). The fertile Salinas Valley, which has been called the world's salad bowl because of the heavy production of green vegetables, is located in Monterey County. Box Item*********************************************** The Top Three Vegetable Counties--A Short Profile Monterey County, CA-- is the leading vegetable-producing county in the nation, with a bit more than 6 percent of the harvested area (includes double-cropped land) in 1992. Approximately 11 percent of the county's total land area of 2.1 million acres is planted to vegetables during the year. Vegetable production, which peaks during the summer but occurs year round, was valued at $1.6 billion in 1996--72 percent of the county's agricultural receipts. Monterey County is the nation's top producer of several vegetables, led by lettuce with more than one-fifth of the county's vegetable receipts. About 72 percent of the population resides inside urbanized areas but, according to the Census Bureau, the population declined 5 percent between 1990 and 1996. Despite this drop, substantial urban development appears to have occurred around the city of Salinas during the past 10 years. Fresno County, CA-- is the leading agricultural county in the State and is the second largest source of vegetables in the country, with almost 4 percent of the harvested area. Despite being a rapidly growing metropolitan area, about 46 percent of the county's area is in farms, with 12 percent of the county's cropland devoted to vegetable production. Vegetable production occurs from the spring through the fall and peaks during the summer with a crop value of $681 million--20 percent of the county's gross agricultural receipts in 1996. Tomatoes (largely for processing) account for about one-third of the county's vegetable receipts. About 68 percent of the population resides inside urbanized areas. According to the Census Bureau, the county's population increased 13 percent between 1990 and 1996. Palm Beach County, FL-- is the third leading source of vegetables in the United States, with a little more than 2 percent of the harvested area in 1992. A popular tourist spot as well as major agricultural county, Palm Beach vegetable acreage accounts for about 7 percent of the county's total land area of 1.3 million acres. Land in farms account for 49 percent of the county's area. Most vegetable production in the county occurs in two major areas--along a coastal strip called the Pompano area and in an inland area in the Everglades agricultural area. Vegetables are shipped primarily during the late fall through late spring, with little production during the hot summer months. Because of warm ocean breezes, hard freezes are rare in this area of Florida, which makes it ideal for warm-season vegetable crops like tomatoes and bell peppers. Population grew moderately from 1990 to 1996, with a 15-percent increase reported by the Census Bureau. About 92 percent of the population is clustered in urbanized areas. Development pressure is intense in this area of Florida, with some land currently protected from development in an agricultural reserve. *******************************************End Box Item The Impact of Urbanization on Land Used for Vegetable Production Conversion of land from one use to another has been occurring since the beginning of civilization (USDA). Until about a century ago, the United States was largely an agrarian nation with the majority of people engaged in full-time agriculture. As the country grew and agricultural technology advanced this century, fewer farmers and less acreage were required to feed an increasingly urban population. Today, 836 of the 3,141 counties in the United States are classified as metropolitan. There are a large number of factors that influence current land use and changes in land use. Among these are agronomic (climatic, soil requirements, and source of moisture), economic (including comparative advantage, changing prices, changing consumer demands, and competition for land from nonagricultural uses), technological (including such things as the development of refrigerated trucks), and infrastructure (such as the completion of the U.S. interstate highway system.) Technology such as refrigerated transportation, interstate highways, better communications, and large-scale irrigation projects made the production of vegetables and melons far from urban consumption points economically feasible. As a result, vegetable production began to decline in places like New England and New York and increase in western States like California and Arizona. With the longer growing seasons in these latter areas, plus the importation of items, a wider variety of vegetables became available to consumers over a longer part of the year. Many of these trends continue today. Ever improving technology, such as hybrid seeds and the adoption of drip irrigation, continue to raise yields and limit the acreage expansion required to keep up with demand. With a large land base in places like California, the first choice is not always vegetables or houses, it is vegetables or alfalfa or some other alternative field crop. Land used for other crops dwarfs that needed for vegetables and melons: all vegetable production in the United States occurs on less than 1 percent of the total cropland. In 1992, the United States harvested 3,782,358 acres of vegetables, which is about 0.9 percent of total cropland. One economic factor that is hypothesized to have significant influence on agricultural uses of land is competition from residential, commercial, industrial, and other nonagricultural uses associated with urban population growth. Vegetable production is hypothesized to be especially influenced by urbanization for two reasons. First, fresh vegetables are relatively perishable commodities, meaning that there may be an economic advantage to producing them close to concentrations of consumers. Although this is important to local supplies, given the transportation and handling technologies used today, it has become less of a factor in terms of national supply. More important are the many characteristics of land that are key for vegetable production (warm temperatures, especially in the winter; an adequate supply of water; and level, well-drained soils) which are also highly valued by consumers for residential and commercial sites. Urbanization creates countervailing effects that influence the use of land for vegetable production. Urbanization is usually associated with the conversion of agricultural land to nonagricultural uses. Urban uses generate much higher returns per acre than do agricultural uses, with the consequence that, as urbanization proceeds, urban uses (and even anticipated urban uses) outbid agricultural uses and the land is converted. But, as urbanization proceeds, countervailing effects act to increase the suitability of urban-influenced land for vegetable production. First, population growth in nearby urban areas creates increased demand for locally grown fresh vegetables. Second (and more important), relative to other agricultural products, many vegetables produce high returns per acre, creating a comparative advantage for vegetable production in urbanizing areas. Thus, vegetable production may be some of the last agricultural production remaining before actual conversion to urban use takes place. The counter-intuitive result is that as urbanization proceeds, acres devoted to vegetable production may actually increase. 4/ This phenomenon has also been documented by Hart and by Vesterby and Krupa. ----------------- 4/ Note, however, that the type of vegetables grown, and perhaps even the production and marketing techniques used, will likely change. This is not to say, however, that urbanization does not have negative impacts upon agricultural production, including vegetable production (Heimlich and Barnard; Forero, Huntsinger, and Clawson; Handel). Continued strong economic growth during the past 10 to 20 years has pushed urban sprawl out into prime vegetable and melon producing lands in several areas. Along the urban/agricultural fringes, conflicts between growers and new suburban neighbors occur with respect to issues such as farm odors, early morning noise, and pesticide applications. Growers also face increased pressure from water and land use restrictions. Some farms on the urban fringe face crop-yield deterioration from urban smog, theft, and vandalism. Data Available for Analysis The many, and sometimes countervailing, forces that determine land use make it difficult to empirically isolate the effects of urbanization from changing consumer demands, technological change, and other economic factors that influence the use of land for vegetable production. The paucity of sub-county data also complicates the analysis. For instance, some counties classified as metropolitan are large enough physically to also contain large acreage devoted to agricultural production. In general, empirical analysis is limited to the examination of county-level data from the Census of Agriculture, which is available in 5-year intervals. In an attempt to compensate for data limitations, change in vegetable acreage is examined over an extended time period and for large aggregates of the data. Hart used similar data to examine the population and farmland changes that occurred as New York City developed from 1860 through 1987. Vesterby and Krupa also used county census data to examine the effects of urbanization on agricultural sales in 29 counties that they classified as fast-growth in each consecutive decade from 1950 to 1990. Empirical Analysis of Change in Acreage Between 1959 and 1992 For this study, vegetable acreage from the Census of Agriculture for 1959 and 1992 were analyzed. 5/ --------- 5/ Data from the 1997 Census of Agriculture should be available in August 1999. --------- The census definition of vegetables is used, meaning that the data exclude potatoes, sweet potatoes, mushrooms, and pulses. The analysis focused on the top 100 counties as ranked by acres harvested in each of those 2 years. For 1992, the top-100 vegetable counties accounted for 2,367,125 acres, or 63 percent of total U.S. vegetable acres. The resulting analysis covered 143 counties. Fifty-seven counties were listed in the top 100 for both 1959 and 1992. Another 43 counties were listed in the top 100 for 1959, but not for 1992. The remaining 43 counties were not among the top 100 listed for 1959, but had increases in harvested acreage large enough to place them on the list for 1992. In 1959, the top 100 counties constituted 54 percent of harvested vegetable acres, which compares with 62 percent in 1992. For 1959 and 1992, counties in the top 100 rankings were from at least 19 individual States. As a matter of interest, 12 of the 143 were counties that Vesterby and Krupa identified as fast-growth for four consecutive decades. Table C-3 shows the distribution of vegetable acres between metropolitan and nonmetropolitan counties, as well as acres of land in farms, 1997 population, and value per acre of cropland (average for 1994-1996). For this set of 143 counties, 61 percent of the vegetable acres were harvested in metro counties, which also contained 49 percent of the land in farms. Average value per acre for cropland in these metro counties was 135 percent higher than for nonmetro counties. In addition, these metro counties contained over 53 million people (1997, estimated), which is 92 percent of the total population for the full set of 143 counties. An indication of the change in land used for vegetable production can be obtained by examining the change in vegetable acreage between 1959 and 1992 for three mutually exclusive subsets of the 143 that were in the top 100 for either 1959 or 1992. Each of those three groups can be further divided into metro and nonmetro categories in order to highlight the relationship between population growth and change in vegetable acreage. The relationship between population, population growth, vegetable acreage, and land in farms for each of these groups is summarized in table C-4. Corresponding statistics for individual counties in each group are provided in table C-5. The first set contains the 57 counties that were in the top 100 list for 1959 and were still in the top-100 list in 1992. A large number of the top-ranked vegetable counties are in this group, which we have labeled CONTINUOUS TOP 100. Vegetable acreage increased in 38 of these counties, amounting to a 29 percent increase. Of the top 25 counties in 1959, all but one remained ranked within the top 100 in 1992. Vegetable acres in Cameron County, Texas fell from 33,000 acres in 1959 (ranked 12th) to 6,100 acres in 1992, dropping it from the list of the 100 top-ranked counties. In 1992, the 25 counties that ranked highest in 1959 accounted for 31 percent of the total U.S. vegetable acres harvested in 1992 (compared with 29 percent in 1959) and 50 percent of the 1992 top 100 acres harvested. The second group, which we have labeled DECLINING, are those that were on the top-100 list for 1959, but did not appear among the top-ranked counties in 1992. Vegetable acreage decreased by 65 percent for this set of counties, and the set now only accounts for 7 percent of the acreage in the full set of 143 counties. The INCREASING group consists of those counties in the top-100 list for 1992, but not for 1959. This group experienced increased vegetable acreage of 265 percent and now accounts for 23 percent of the acreage in the 143 counties. The percentage change in acreage for these three groups, and for their metro/nonmetro subgroups, can be seen in table C-4, which also displays the percentage change in land in farms, and population, plus the value per acre of cropland in each category. Table C-4 appears to indicate that increasing urbanization over the 33-year period has not reduced vegetable production. For the full set of 143 counties examined, vegetable acres increased 25 percent from 1959 to 1992. This increase in vegetable acreage occurred even while land in farms decreased 35 percent overall and 48 percent in metro counties. Further, the increased vegetable acres occurred despite an overall population increase of 83 percent. The rate of change in vegetable acres harvested was much greater in nonmetro counties (61 percent), but metro counties did increase acreage by 8 percent. Much of the increased acreage occurred in counties that were not in the top 100 for 1959 (INCREASING), with the largest rate (308 percent versus 111 percent) occurring in nonmetro counties. For the INCREASING group, the absolute increase in acreage was largest for nonmetro counties also, given that nonmetro counties account for 87 percent of the group acres. But, metro county vegetable acreage increased 111 percent, while land in farms decreased 15 percent and population increased 172 percent. Counties in the CONTINUOUS TOP-100 group experienced a 29-percent increase in vegetable acreage over the period, even while land in farms declined 22 percent and population increased 57 percent. The metro rate of increase in vegetable acres was slightly greater than the nonmetro rate (30 versus 25 percent). For the CONTINUOUS group, the rate of decrease in land in farms was larger for metro counties, and the rate of population growth in the metro counties was nearly three times larger. The DECLINING group accounts for only about 7 percent of vegetable acres, with the rate of decrease in vegetable acres about even for metro and nonmetro counties. For the DECLINING group, land in farms decreased at a more rapid rate than for the other two groups. Further, the rate of decrease in land in farms was higher for the nonmetro counties than for the metro counties. Population growth was actually less for this group than for the CONTINUOUS or INCREASING group. These facts may indicate that the counties in the DECLINING group are part of mature urban areas. Many of the counties in this group had fewer than 100,000 acres of land in farms remaining and many had fewer than 5,000 acres of harvested vegetables. In general, vegetable acres increased in the CONTINUOUS TOP-100 group and the INCREASING group, which together account for 93 percent of the 1992 vegetable acreage for the 143 counties. This increase occurred despite population increases of 57 to 101 percent. Given the increased vegetable acreage, it does not appear that the additional land needed to accommodate substantial increases in population came at the expense of vegetable production. Given that land in farms in the CONTINUOUS and INCREASING groups actually decreased substantially, it appears that vegetable production replaced production of less intensive crops, both in metro and nonmetro counties. Conclusion Based on the 1959 to 1992 trends, it does not appear that urbanization poses an immediate threat to the overall U.S. vegetable industry. Urbanization causes shifts in land use, but given its high production intensity/high net return characteristics, vegetable production may be one of the last remaining agricultural enterprises in urbanizing areas. Substitution of vegetable production for other less intensive enterprises may cause vegetable production to (at least temporarily) increase in many urbanizing areas. This finding is consistent with research reported elsewhere (see Lopez, Adelaja, and Andrews; Heimlich and Barnard; Hart; Vesterby and Krupa). In any case, it does not appear that urbanization is poised to cause a wholesale geographic dislocation of vegetable production in a manner analogous to shifts seen previously in the citrus and dairy industries. There is a wide geographic dispersion of the top vegetable counties, indicating that many areas of the United States can produce vegetables on a commercial scale--although only a select few can do so year-round. The top 100 counties, which are dispersed across 20 States, account for only 62 percent of vegetable acres. In addition, since 1959, more than 40 counties have moved into the top- 100 list. References Forero, L., L. Huntsinger, and W.J. Clawson. "Land Use Change in Three San Franciso Bay Area Counties: Implications for Ranching at the Urban Fring." Journal of Soil and Water Conservation 47(1992):475-480. Ghelfi, Linda M. and Timothy S. Parker. A County-Level Measure of Urban Influence. ERS Staff Paper Number 9702. February 1997. Handel, Mary E. "Conflicts Arise on the Urban Fringe." California Agriculture 52(May-June 1998): 11-13. Hart, J.F. "The Perimetropolitan Bow Wave." Geographical Review. 81(1991): 37-51. Heimlich, Ralph E. and Charles H. Barnard. Agricultural Adaptation to Urbanization: Farm Types and Agricultural Sustainability in U.S. Metropolitan Areas in Audriac, I. (Ed.), Rural Sustainable Development in America. John Wiley and Sons, 1997. Lopez, Rigoberto A., Adesoji O. Adelaja, and Margaret S. Andrews. "The Effects of Suburbanization on Agriculture." American Journal of Agricultural Economics. 70(1988): 346-358. U.S. Department of Agriculture, Soil Conservation Service. Conquest of the Land Through 7,000 years. AIB No. 99, 1953. Vesterby, Marlow and Kenneth S. Krupa. "Effects of Urban Land Conversion on Agriculture, in Thunberg," Eric M. And John E. Reynolds (eds.). Urbanization and Development Effects on the Use of Natural Resources: Proceedings of a Regional Workshop. Southern Regional Development Center. SRDC No. 169. July 1993. List of Tables 1. U.S. vegetable industry: Area, production, value, unit value, and trade, 1994-99 2. Fresh vegetables: Percent of U.S. consumption accounted for by trade, 1975, 1980, 1985, 1990-98 3. Selected fresh vegetables: U.S. trade, 1996-98 4. Value of U.S. processed vegetable trade, 1996-98 5. Potatoes: State acreage and production of fall crop, 1996, 1997, and indicated 1998 6. U.S. potatoes: Utilization by crop year, 1992-97 7. Potatoes: U.S. per capita utilization, by category, 1985-99 8. U.S. fresh vegetables: Harvested area, by seasons, for selected crops, 1995-97 9. Representative wholesale prices for selected fresh-market vegetables and melons in Chicago, 1998 10. Fresh vegetables, including potatoes: Monthly retail price index, 1987-98 11. Fresh vegetables: U.S. monthly and season-average f.o.b. shipping prices, 1994-98 12. Commercial vegetables, potatoes, and dry edible beans: Monthly average index of prices received by U.S. growers, 1985-98 13. Selected fresh vegetables: U.S. shipments, by quarters, 1997 and 1998 14. Fresh vegetables: Quarterly trade volume, 1996-98 15. Selected fresh vegetables: U.S. export volume and value, by selected country, January-September, 1996-1998 16. Mexican vegetable production: Selected commodities, 1990-97 17. U.S. onions: Harvested area and production, 1995-98 18. Frozen vegetables: Percent of U.S. supply accounted for by trade, 1980, 1985, 1990-98 19. Processing vegetables: Contract acreage, yield, and production, 1993-95 average, 1996, 1997, and indicated 1998 20. Selected frozen vegetables: Carryover, pack, seasonal supply, and shipments, 1993/94-1998/99 21. Processed vegetables: Monthly index of wholesale and retail prices, 1988-98 22. Canned vegetables: Quarterly wholesale price trends, 1990-98 23. Frozen vegetables: Quarterly wholesale price trends, 1993-98 24. Frozen vegetables: October 1 cold storage holdings, 1991-98 25. U.S. vegetables for canning: Calendar year supply and utilization, farm weight, 1980, 1985, and 1990-99 26. Selected processed vegetables: Monthly index of wholesale prices, 1994-98 27. Canned vegetables: U.S. quarterly trade volume, 1996-98 28. Frozen vegetables: U.S. quarterly trade volume, 1996-98 29. Vegetable cash receipts: Leading States, 1991-97 30. Potato cash receipts: Leading States, 1991-97 31. Dry bean cash receipts: Leading States, 1991-97 32. Potatoes: Seasonal acreage, yield, and production, 1996, 1997, and indicated 1998 33. Potatoes and pulses: Monthly average prices received by U.S. growers, 1992-98 34. Fresh potatoes: Monthly and annual average retail price index, 1986-98 35. Retail potato prices: Fresh, frozen, and chips, 1985-98 36. Frozen French fries: Monthly and annual average producer price index, 1985-98 37. Potatoes: U.S. quarterly trade volume in fresh-weight equivalent, 1997-98 38. Frozen French fries: Monthly and annual U.S. exports, 1987-98 39. U.S. potatoes: Value of trade by product, January-September, 1994-98 40. Sweet potatoes: Acreage harvested, 1991-95 average; 1996, 1997, and indicated 1998 41. Dry edible beans: Planted acres by class, 1992-95 average, 1996-97, and indicated 1998 42. Dry edible beans: Acreage harvested, 1991-95 average, 1996-1997, and indicated 1998 43. Dry edible beans: Production, 1991-95 average, 1996, 1997, and indicated 1998 44. Dry edible beans: Quarterly wholesale prices by class, 1997-98 45. Dry edible beans: U.S. quarterly trade volume, 1997-98 46. Selected dry peas and lentils: Planted acreage, 1992-98 47. Dry peas and lentils: Production, 1992-98 48. All mushrooms combined: Number of growers, volume, and value of sales, 1987/88-1997/98 49. Mushrooms: U.S. quarterly trade volume, 1997-98 50. U.S. agaricus mushrooms: Production, price, and value, selected States, 1995/96-1997/98 Special Articles A-1. Sweet potatoes: Supply, use and season average price, 1990-99 B-1. Types of frozen vegetables used in this analysis B-2. Supermarket sales of organic and conventional frozen vegetables, volume and value, 1991-96 B-3. Average annual retail prices for organic and conventional frozen vegetables and the resulting price premia, 1990-96 B-4. Results of the regression analysis on monthly frozen vegetable purchases, September 1990-December 1996 C-1. Urbanization table 1 C-2. Urbanization table 2 C-3. Urbanization table 3 C-4 Urban C-5 Urban END_OF_FILE