Is the averted “Tomato Cliff” our new mountain to climb?
While the produce industry averted the so called Tomato Cliff, the resulting agreement is tantamount to a mountain and all parties in the supply chain will have an uphill battle thanks to the law of unintended consequences.
Picture the Arab oil embargo in the 1970’s which put undue and unexpected stress on the energy markets leading to a devastating economic situation called stagflation. The similar price stress caused in the tomato market could lead to the same cutbacks in consumption, in both the short- and long-term.
A recent Nielson study reported that fresh purchases were 60% of Asian and 53% of European household food expenditures. In US households, however, fresh purchases were merely 30% of total food dollars, with high commodity prices to blame. The new tomato agreement artificially raises one commodity’s price, potentially sending those customers away from tomatoes and away from fresh.
Hybrid automobiles, wind turbines and LED light bulbs all took aim at rising oil prices starting in the 1970’s and continuing today. Could carrots, kale and kumquats all take aim at tomatoes for market share? Diminishing demand could be an unintended consequence of artificially high commodity prices. The mountain keeps getting taller…