Specialty Crops and Weather Woes

Posted on 07/17/2012 at 12:00 AM by Christa Hartsook

Blog article written by Dr. Michael Boland, University of Minnesota, boland@umn.edu

Every year we read about a specialty crop in short supply due to weather issues. In recent years, we have seen shortages in canning pumpkins (most of U.S. canned pumpkin are made in west central Illinois), domestic orange juice (mostly in Florida), and in 2012, it is the tart cherry crop. Shortages in supply create changes in price just as an increase in demand causes a change in price. Producers or producer-owned organizations react similarly when supply is scarce. The quickest response is to locate additional supply (i.e., different geography; imports from other countries, etc.). However, many U.S. specialty crops are grown in a similar geographic region, so this may not be possible.

Another response is to identify substitutes. This may or may not be possible for some specialty crops. For example, blueberries and cranberries may have some similar nutritional benefits as tart cherries but substitution in various juices and beverages is not easy relative to use in processed foods such as pastries or cakes. And, consumers may not be aware of similar nutritional characteristics so additional costs are incurred in education.

Purchasing previous year inventories and carryover is another response. However, many of these markets are thin and inventory may be relatively small. One does not carry an entire year of inventory of tart cherries or pumpkins for canning.

A supply shortage is especially problematic if a firm or commodity group has invested in industry check-off programs or invested in advertising, marketing, promotion or similar activities to stimulate consumer demand. A supply shortage can result in consumers asking for a product that is not on the shelf. Of course, a supply shortage also can increase prices if demand does not change immediately. While there is a short-run increase in price, in the long-run, if consumers shift to other substitutes it may be difficult to attract them back to your product.

Is there anything a producer can do in their farming operation to account for a supply shortage of a specialty crop?  Hopefully, a producer has diversified their farming operation. Some specialty crops have crop insurance available which can help offset some of the revenue loss.  If a grower has integrated his or her farming operation through a cooperative or their own processing activities, perhaps they can switch to other substitutes. But this is unlikely for most typical growers.

The introduction of ancient grains, various specialty fruits and vegetables, and other crops not native to North America have unique supply and demand risks associated with them. Disruption in supply caused by weather is something that has major impacts on industry participant profitability in the short- and long-run. It is likely that we will hear about more supply issues in the future in some of these specialty crops given the inventory tightness, concentrated geographic production, limited availability of supply outside the United States, and lack of close substitutes.