Bulls and Bears Eat Lettuce

The wholesale price of lettuce is roughly twice what it normally is at this time of year. On the surface, the reason is nothing more than simple supply and demand because less lettuce is being harvested. But a closer look also gives a glimpse into an industry that one observer calls “as close to riverboat gambling as you can get on a farm.”

The story really starts in March 1995, when disastrous spring floods swamped the Salinas Valley, home to about 70,000 acres of head lettuce. Prices went through the roof, doubling and even, for brief periods, tripling previous records.

Although others, fainter of heart, might have been frightened off by the potential for disaster, the head lettuce industry reacted with enthusiasm. Those growers who weren’t flooded out were making money at a rate they’d never imagined.

The boom in the market led to a boom in plantings, and before you knew it, there was more lettuce available than anyone could sell.

“It’s been almost two years since we’ve had an extended good market,” says Bill Munger, who manages lettuce sales for Misionero Vegetables, a Salinas distributor. “In fact, it’s been horrible. And you only need to hit your head against the wall so many times before you realize not to do that any more.”

Dick Nutter, the agricultural commissioner for Monterey County (which includes the Salinas Valley), says this year’s head lettuce harvest is 10% to 15% smaller than last year’s.

“The thing is, when you have a depressed market for a couple of years in a row,” says Nutter, “most of these growers depend on banks to finance their deals, and if they’re not getting returns, there could be some reluctance on the part of the lenders to help out.”

Another factor pushing prices upward is the gambling nature of the middlemen who buy from farmers and sell to retail. Most of them work on long-term contracts for both selling their lettuce and purchasing it. But after an extended period of low prices, many have been forgoing the purchasing contracts, gambling that prices will only get cheaper.

Now, when prices have started moving up, they are committed to delivering lettuce they haven’t bought yet. Predictably, they are scrambling for product.

In some ways, the higher market is simply a matter of the growers getting their due. “Lettuce farmers are probably selling at a loss 70% of the time,” says Ken Adams, vice resident for marketing at Growers Vegetable Express, a Salinas distributor. “Obviously, they have to be making money to stay in business, so that other 30% has to be really good.”

Though this trend of higher prices will almost certainly last through the fall, people in agriculture say it can’t last forever.

“Historically, one sure thing about the lettuce market is that you almost never see high prices for any prolonged period of time,” says Nutter. “When prices go up, people plant more. It’s agriculture’s version of Wall Street.”

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Carolyn Olney of the Southland Farmers Market Assn. reports that John Tenerelli of Littlerock will have the last of the O’Henry peaches this week, to be followed by Ryan’s Sun peaches. He’s at the Santa Monica market on Wednesday, Westwood on Thursday, Torrance on Tuesday and Saturday, Hollywood and Beverly Hills on Sunday, West Hollywood on Monday and Culver City on Tuesday.