Lettuce Means Moola

When you and I walk into a grocery store and see that one kind of lettuce is selling for three to four times as much as another, we usually pick the cheaper one and don’t think any more about it. Things aren’t so easy for food processors, and therein lies the interesting story of another spike in the price of iceberg lettuce.

For the past several weeks, iceberg lettuce has been selling at several times the wholesale price of romaine and other lettuces. Last Wednesday, for example, a 24-head case of iceberg was going for $24 to $25, while the same quantity of romaine was $7.50 to $9.

What drove the price up? And why didn’t people simply switch to romaine? The answer is another lesson in the complexities of modern agricultural economics.

The price rise started when hot weather in the Salinas Valley resulted in several weeks of light harvests. This coincided with the hot weather-induced early ending of the lettuce harvest throughout much of the rest of the country.

Economists tell us that when there is a shortage, prices go up until demand eases. But in this case, the demand stayed strong, exaggerated by the many “industrial” claims made on the iceberg market. In addition to standing fast-food and chain restaurant contracts--which have for a long time made iceberg lettuce the crude oil of the food industry--there is a new player in the iceberg market--the makers of fresh-cut bagged salad mixes.

These salad makers, which account for a growing percentage of the lettuce market, base many of their products on iceberg lettuce. Typically, they buy on long-term contracts that guarantee them a certain amount of lettuce at a certain price. But with the recent shortages, they were forced into the commodity lettuce market.

“This whole thing was compounded by people who have salad plants,” says Mark Crossgrove, sales manager of Nunes Co., a major lettuce shipper. “There was a lot of extra demand.”

Making matters worse is that although commodity lettuce is sold by the head, the salad makers usually buy by weight. With hot weather resulting in faster lettuce growth, which in turn resulted in lighter, looser heads, there was even more pressure on the market.

Further aggravating the problem was the lingering effect of last spring’s floods, which interrupted the planting cycles of many farmers.

By the end of last week, prices were already heading back down, as the harvest increased.