WEBVTT - Why Tomatoes Are the Most Expensive They've Been in Four Decades 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.520 --> 0:00:21.280 Hello and welcome to another episode of the All Thoughts Podcast. 0:00:21.360 --> 0:00:22.680 I'm Tracy Alloway. 0:00:22.360 --> 0:00:24.279 And I'm Jill Wasn't thal Joe. 0:00:24.680 --> 0:00:25.680 I know you love tomatoes. 0:00:25.720 --> 0:00:29.920 I love tomatoes. Oh my god, I love tomatoes. I 0:00:29.960 --> 0:00:31.200 love tomatoes so much. 0:00:31.320 --> 0:00:33.600 This is the episode just Joe talking about how he 0:00:33.600 --> 0:00:34.199 loves tomatoes. 0:00:34.200 --> 0:00:36.040 Well, there's a funny one because like this is a 0:00:36.120 --> 0:00:38.360 new episode. You know, you like book. You're like, oh, 0:00:38.440 --> 0:00:41.240 let's do a tomato episode, which I'm glad you did 0:00:41.440 --> 0:00:42.400 because I love tomato. 0:00:42.400 --> 0:00:43.120 You're gonna make it more. 0:00:43.280 --> 0:00:45.400 I'm gonna make it my But it's not like but 0:00:45.400 --> 0:00:47.960 I don't know anything about tomatoes. I just love eating them. 0:00:48.320 --> 0:00:50.479 Like when I was a kid, like growing up in 0:00:50.520 --> 0:00:54.200 like exurban Illinois. You know, I had terrible tomatoes growing up, 0:00:54.200 --> 0:00:57.760 so I hated tomatoes from the super I thought tomatoes 0:00:57.760 --> 0:01:00.480 are like the worst vegetable on the planet. But they're well, 0:01:00.800 --> 0:01:01.120 are you. 0:01:01.040 --> 0:01:03.280 Going to correct yourself and say they're not a vegetable fruit? 0:01:03.760 --> 0:01:04.000 You know? 0:01:04.240 --> 0:01:06.560 So I'm just going to go on because I'm gonna 0:01:06.560 --> 0:01:09.280 take this episode over. But like, you know, I've once 0:01:09.319 --> 0:01:13.280 heard someone say that like knowledge is knowing that tomato 0:01:13.520 --> 0:01:15.960 is a vegetable, and wisdom is knowing not to put 0:01:15.959 --> 0:01:18.800 tomato in a fruit salad. But I've like come to 0:01:18.880 --> 0:01:22.200 like like tomatoes are so delicious. There are some varietales 0:01:22.200 --> 0:01:24.160 that I absolutely would put in a fruit salad. 0:01:24.240 --> 0:01:25.720 No, no, I know this is wrong. 0:01:25.800 --> 0:01:27.959 And so these tomatoes that we no, no, no, like when 0:01:28.000 --> 0:01:29.119 you if you tried one of the. 0:01:29.000 --> 0:01:31.039 Tomatoes I have, I still would not put it in 0:01:31.040 --> 0:01:31.440 a fruit. 0:01:31.480 --> 0:01:35.160 I absolutely would. I love tomatoes anyway, Sorry. 0:01:34.880 --> 0:01:37.920 So we got to talk about tomatoes, perhaps not in 0:01:37.959 --> 0:01:39.720 the way you have been so far, but we'll. 0:01:39.600 --> 0:01:42.680 Spend one minute talking about how tomato prices are really high, yes, 0:01:42.720 --> 0:01:44.440 and then the other forty five minutes we're going to 0:01:44.480 --> 0:01:46.200 talk about how delicious tomatoes. 0:01:46.360 --> 0:01:49.320 That's right, Okay, So the genesis of this entire episode 0:01:49.400 --> 0:01:51.760 is that, as you will have heard, tomato prices are 0:01:51.760 --> 0:01:53.680 really high right now. So I think we're looking at 0:01:53.720 --> 0:01:56.560 something like a forty percent increase year over year. Yeah, 0:01:56.680 --> 0:01:58.880 and I just saw some new data that's out this morning. 0:01:58.920 --> 0:02:00.960 So there are a lot, a lot of tomato headlines 0:02:00.960 --> 0:02:04.520 floating around saying that tomato prices are at a record 0:02:04.640 --> 0:02:08.600 two dollars sixty nine cents a pound. So tomatoes are 0:02:08.600 --> 0:02:10.960 getting kind of expensive, which is bad news for you. 0:02:11.160 --> 0:02:14.079 It's really bad news for me because I'm addicted to them. 0:02:14.480 --> 0:02:17.280 I am priced and sensitive, so it doesn't matter how 0:02:17.400 --> 0:02:19.760 high the price of tomatoes get, will not affect my 0:02:19.880 --> 0:02:22.520 volume at Also, that's just straight like, that's just straight 0:02:22.560 --> 0:02:23.520 money out of my pocket. 0:02:23.639 --> 0:02:25.800 It is not bad news for me because I just 0:02:25.840 --> 0:02:30.520 installed five raised beds, big raised beds dedicated all to tomatoes, 0:02:30.520 --> 0:02:33.119 and I just planted them out yesterday, and I'm very excited. 0:02:33.320 --> 0:02:35.720 You should be excited too, because you know you'll get some. 0:02:35.960 --> 0:02:38.560 Tracy always brings me tomatoes at some point in this summer, 0:02:38.600 --> 0:02:39.800 and they're always delicious. 0:02:39.960 --> 0:02:43.440 I've got a really big selection this year, Cherokee, nice 0:02:43.480 --> 0:02:46.720 brandy wine, all the classics, and some new things fourth 0:02:46.720 --> 0:02:49.040 of July I've never tried before. I don't mean to 0:02:49.080 --> 0:02:52.280 get all like Bubba Gump and just start listing tomato 0:02:52.360 --> 0:02:55.079 varieties here, but tomatoes are on my mind, and I 0:02:55.120 --> 0:02:57.160 think they're on a lot of other people's minds just 0:02:57.200 --> 0:02:59.280 by nature of the price increase. So we should figure 0:02:59.320 --> 0:03:01.000 out what's actually going on here. 0:03:01.160 --> 0:03:04.079 I cannot wait to just talk tomatoes for the next hour. 0:03:04.960 --> 0:03:06.320 You're not just going to say how good they are 0:03:06.400 --> 0:03:08.600 over and over, right, I'm right, Okay, Well, I am 0:03:08.760 --> 0:03:10.560 very happy to say that we do, in fact have 0:03:10.639 --> 0:03:13.120 the perfect guest. We're going to be speaking with Jacob Kremple. 0:03:13.360 --> 0:03:16.600 He is the SVP of Procurement and Merchandising over at 0:03:16.639 --> 0:03:19.040 Baldoor Specialty. So, thank you so much for coming on 0:03:19.080 --> 0:03:19.519 all thoughts. 0:03:19.600 --> 0:03:22.200 Yeah, absolutely, very excited to be here. I have quite 0:03:22.240 --> 0:03:24.320 a few friends that are flabbergasted that I get to 0:03:24.320 --> 0:03:26.040 be on odd lots of all things. So I know 0:03:26.400 --> 0:03:27.520 I'm excited to talk tomato. 0:03:27.680 --> 0:03:30.000 This is the perfect guest for the perfect moment. Can 0:03:30.040 --> 0:03:31.800 you tell us what Baldoor actually does? 0:03:32.000 --> 0:03:35.400 Yeah? So. Bowdor is a thirty year old food service 0:03:35.440 --> 0:03:39.000 distribution company based up in the Hunts Point Market area 0:03:39.240 --> 0:03:42.080 of Bronx here in New York City. We distribute food 0:03:42.080 --> 0:03:45.480 from Maine to Northern Virginia, send out about five hundred 0:03:45.520 --> 0:03:48.920 trucks a day with food, mostly to food service restaurants, 0:03:49.000 --> 0:03:52.840 right so, about seventy percent restaurants, thirty percent independent retail 0:03:52.920 --> 0:03:56.120 or other wholesalers. We got our start actually, you know 0:03:56.160 --> 0:04:00.120 Balducci's in Greenwich, Villa yeah, sure, so Andy Balducci and 0:04:00.240 --> 0:04:04.040 Joe Doria. Joe Doria was their produce sourcing guy, and 0:04:04.040 --> 0:04:05.600 he was always out there looking for the best and 0:04:05.640 --> 0:04:08.440 most unique varieties that he could possibly find. And so 0:04:08.640 --> 0:04:10.760 suddenly they saw a lot of chefs that they knew 0:04:10.800 --> 0:04:12.880 in the area shopping at their store. Had a great 0:04:12.920 --> 0:04:15.440 idea of starting a wholesale distribution company. So they took 0:04:15.600 --> 0:04:19.360 Balducci and Doria combining together. That's actually how you get 0:04:19.360 --> 0:04:22.800 bald Or, which is a fun story. So that was 0:04:22.800 --> 0:04:25.880 in the seventies eighties that business crew expanded, it started 0:04:25.880 --> 0:04:27.960 to blow up. They spun it off as a separate 0:04:27.960 --> 0:04:33.040 company in ninety one when Andy Balducci's son in law, 0:04:33.120 --> 0:04:35.560 Kevin Murphy, took over the business. He ran it until 0:04:35.560 --> 0:04:37.680 about twenty thirteen when he passed away from cancer, and 0:04:37.680 --> 0:04:40.240 his son tj as our owner now and CEO, and 0:04:40.320 --> 0:04:42.159 he's been running the company since then. 0:04:42.600 --> 0:04:46.160 Within the realm of food distribution, if someone asked me 0:04:46.279 --> 0:04:49.040 to name all the food distributors, I would be able 0:04:49.080 --> 0:04:52.160 to name Cisco. We've done at least one episode on them. 0:04:52.600 --> 0:04:56.240 I might be able to name United Natural Foods, and 0:04:56.279 --> 0:04:59.120 then I would be able to name Bell Door and 0:04:59.400 --> 0:05:01.240 Bell Door would be the only one that I would 0:05:01.279 --> 0:05:03.720 associate in my mind, maybe because you've done a good 0:05:03.800 --> 0:05:05.960 job with branding, etc. As like, Okay, these are high 0:05:06.080 --> 0:05:10.479 quality ingredients rather than just food distribution. Who are your clients? 0:05:10.480 --> 0:05:12.320 Who do you sell into at beldor. 0:05:12.200 --> 0:05:15.240 Yeah, we sell just about anybody, right, but I think 0:05:15.240 --> 0:05:19.000 we've made our bread and butter as this. I listened 0:05:19.000 --> 0:05:22.120 to your Cisco episode right in Broadliners that you were 0:05:22.120 --> 0:05:25.760 talking about on that podcast. We view ourselves as a highliner, 0:05:26.200 --> 0:05:27.960 so we're going to carry a wide assortment. We carry 0:05:27.960 --> 0:05:30.920 everything from meat and dairy to produce, which is what 0:05:31.040 --> 0:05:33.600 we had our start in and that's our wheelhouse for sure. 0:05:34.000 --> 0:05:35.960 But we have experts in all of those areas and 0:05:36.240 --> 0:05:39.840 our job is to build a curated assortment of maybe 0:05:39.880 --> 0:05:43.480 seventy five hundred skews versus the Cisco carrying twenty thousand plus. 0:05:44.520 --> 0:05:46.520 So the merchants on my team, they just have this 0:05:46.640 --> 0:05:49.719 insatiable appetite to go out and find the best produce, 0:05:50.080 --> 0:05:53.080 the best meat that they possibly can to fit whatever 0:05:53.120 --> 0:05:55.160 that customer's need is, whether it is something that's more 0:05:55.160 --> 0:05:59.400 commodity based, like a basic romaine, too high specialty variety tomatoes, 0:05:59.440 --> 0:06:00.240 like some of the ones that brought. 0:06:00.400 --> 0:06:03.159 And what's the mix in terms of restaurants versus grocery 0:06:03.160 --> 0:06:04.960 stores or restaurants versus whatever else. 0:06:05.000 --> 0:06:06.960 Yeah, so we're about seventy percent, maybe a little bit 0:06:06.960 --> 0:06:11.440 more in restaurants, okay, and there we service everything from 0:06:11.640 --> 0:06:14.520 the Michelin Star partners that we have that we have 0:06:14.560 --> 0:06:16.680 a lot of long existing relationships with some of the 0:06:16.680 --> 0:06:19.640 top chefs in the areas that we serve to your 0:06:19.640 --> 0:06:21.479 local bodegas or bagel shops as well. 0:06:21.640 --> 0:06:25.520 So how does the relationship with supermarkets or restaurants typically work. 0:06:25.560 --> 0:06:28.120 Would it be I'm a restaurant and I don't know, 0:06:28.160 --> 0:06:30.599 I want to do a cprazy salad, and so I 0:06:30.640 --> 0:06:33.560 need some really good tomatoes. Do I call you up 0:06:33.600 --> 0:06:36.799 and I ask you specifically to source tomatoes for the salad, 0:06:36.920 --> 0:06:39.599 or do you have like a catalog that I start 0:06:39.600 --> 0:06:41.159 flipping through or Yeah. 0:06:41.200 --> 0:06:43.279 So you go to bout orfood dot com right, and 0:06:43.320 --> 0:06:45.680 you go on to our website and from there you 0:06:45.720 --> 0:06:48.039 can see our full assortment and then once you sign 0:06:48.080 --> 0:06:50.520 up as a customer, then you're able to see pricing 0:06:50.520 --> 0:06:52.200 and availability and some of those things to make the 0:06:52.240 --> 0:06:54.520 decisions of what you possibly want to buy. We also 0:06:54.520 --> 0:06:57.680 have our sales reps that are partnering with a specific 0:06:57.680 --> 0:07:00.640 set amount of accounts that bring that white glove service. 0:07:00.720 --> 0:07:00.800 Right. 0:07:00.880 --> 0:07:02.080 We want to make sure that you have somebody that 0:07:02.120 --> 0:07:03.720 you can call and pick up the phone and say, hey, 0:07:04.040 --> 0:07:05.400 I want to do a c prazy salad. What do 0:07:05.440 --> 0:07:09.479 you yeah? Yes, yes, exactly. We get mostly those calls, 0:07:09.520 --> 0:07:11.440 but also some of the innovation calls as well of 0:07:11.520 --> 0:07:13.600 like I'm looking to do a apraisey, what would you suggest? 0:07:13.840 --> 0:07:14.000 Right? 0:07:14.480 --> 0:07:18.040 And so between that high touch white glove service that 0:07:18.080 --> 0:07:21.600 our sales teams provides, as well as our merchandising expertise 0:07:21.640 --> 0:07:24.240 and storytelling on the website that we love to do, 0:07:24.640 --> 0:07:27.320 we're really able to maybe bring that picture full circle 0:07:27.760 --> 0:07:30.320 a little bit better than maybe some others out there, 0:07:30.440 --> 0:07:33.000 to really allow you to tell that story on your menu. 0:07:33.200 --> 0:07:33.280 So. 0:07:33.360 --> 0:07:35.640 I don't really know that much about the restaurant industry, 0:07:35.840 --> 0:07:40.000 but Red Kitchen Confidential, and they're in that book. Anthony 0:07:40.080 --> 0:07:42.640 Bourdain talks a lot about like, you know, who'll play 0:07:42.640 --> 0:07:45.120 off the suppliers. He's like, oh, this guy could get 0:07:45.120 --> 0:07:47.000 me this fish at this price. What can you do? 0:07:47.360 --> 0:07:49.360 But this strikes me as very relevant in the time 0:07:49.400 --> 0:07:52.120 of high price volatility, which we've particularly seen over the 0:07:52.160 --> 0:07:57.480 last several years. Talk about the duration of contracts and 0:07:57.520 --> 0:08:00.760 how long they can last. I never seem to be 0:08:00.800 --> 0:08:03.280 able to get clear answers on this. Can a restaurant 0:08:03.320 --> 0:08:05.320 say lock in a price for six months? Is it 0:08:05.400 --> 0:08:08.400 week by week? What are these relationships and how stable 0:08:08.440 --> 0:08:08.720 are they? 0:08:08.840 --> 0:08:11.960 Yeah, that's a trade secret shoe Okay, not caring. No, 0:08:12.080 --> 0:08:13.440 I think we want to meet the chef where they 0:08:13.440 --> 0:08:15.680 are right, and so we offer a wide variety of 0:08:15.680 --> 0:08:18.280 opportunities of how they might want a price with us right, 0:08:18.360 --> 0:08:21.680 anything from daily pricing to weekly pricing to depending on 0:08:21.720 --> 0:08:25.080 the size of the restaurant chain, we will offer longer 0:08:25.160 --> 0:08:27.600 term contracts as well. But I do think there is 0:08:27.680 --> 0:08:30.880 some push and play left in this industry of you know, 0:08:31.640 --> 0:08:33.760 a chef wants to be able to price shop a 0:08:33.800 --> 0:08:37.000 little bit right, and so a lot of our customers. 0:08:37.160 --> 0:08:39.600 You know, our view is that we provide that value, 0:08:39.920 --> 0:08:41.440 not just to making sure that you have a good 0:08:41.520 --> 0:08:44.679 value on the price, but that our service is way 0:08:44.720 --> 0:08:47.000 above par. Right, We're going to deliver on time. Our 0:08:47.040 --> 0:08:49.640 cutoffs are the latest that you can get from any distributor. 0:08:49.960 --> 0:08:52.000 So if you're a chef in New York City at 0:08:52.000 --> 0:08:53.760 eleven o'clock at night, you can go on our website 0:08:53.760 --> 0:08:56.200 and still order product where most other competitors. 0:08:55.760 --> 0:08:57.280 And one time when you get there the next morning 0:08:57.320 --> 0:08:57.640 of there. 0:08:58.040 --> 0:09:00.000 Depending on their account, and their delivery time is early 0:09:00.120 --> 0:09:00.600 six am. 0:09:01.040 --> 0:09:03.600 Yeah, So are you seeing a lot of customers at 0:09:03.640 --> 0:09:07.199 the moment trying to lock in tomato prices given where 0:09:07.320 --> 0:09:09.160 they seem to have gone to recently. 0:09:09.440 --> 0:09:12.760 This tomato pricing thing is unique as far as like 0:09:12.800 --> 0:09:15.480 how expensive it got. But I'd say in general and produce, 0:09:15.559 --> 0:09:18.840 this is like a very much a normal working environment 0:09:18.920 --> 0:09:21.920 for my team of just prices spiking and going crazy 0:09:21.960 --> 0:09:23.240 here and there. And I think a lot of that 0:09:23.400 --> 0:09:26.559 is produce demand, especially in the US, is rather inelastic 0:09:26.679 --> 0:09:31.400 in the short term, and it's so reliant on weather 0:09:32.160 --> 0:09:35.400 and acreage grown and the production out of that acreage 0:09:35.880 --> 0:09:39.240 that you see very wild swings and markets all the time. Right, 0:09:39.280 --> 0:09:41.439 Like tomatoes was the last thing to pop. Yeah, I 0:09:41.480 --> 0:09:43.280 guarantee this summer you're going to be hearing about romaine 0:09:43.320 --> 0:09:46.360 again because that's already almost one hundred dollars a case 0:09:46.480 --> 0:09:49.840 right now, which is insane for Romain because of bad 0:09:49.840 --> 0:09:53.600 weather in California and avocados as well. Avocados went from 0:09:53.679 --> 0:09:56.959 thirty dollars a case to eighty dollars a case in 0:09:57.040 --> 0:10:00.200 literally the span of a week. In the last week, Joe, 0:10:00.240 --> 0:10:00.480 did I. 0:10:00.480 --> 0:10:02.480 Ever tell you? For some reason, I'm on the has 0:10:02.600 --> 0:10:07.320 Avocado Board email distribution list and they sent out really 0:10:07.320 --> 0:10:10.080 good updates about what's going on in the avocado market. 0:10:10.320 --> 0:10:12.720 I think it's because I was writing about bitcoin price 0:10:13.400 --> 0:10:17.040 avocado correlations. Yeah, and like somehow I got automatically signed 0:10:17.080 --> 0:10:17.720 up to this thing. 0:10:18.880 --> 0:10:22.000 Prices of tomatoes. There was actually a Bloomberg piece just yesterday. 0:10:22.080 --> 0:10:25.480 Price is a forty percent from a year ago. Let's 0:10:25.520 --> 0:10:28.880 decompose the price of a tomato. So I'm buy a 0:10:28.880 --> 0:10:32.559 tomato and it's forty percent more, Like, you know, how 0:10:32.640 --> 0:10:35.600 much of that is transport, how much of that is 0:10:35.679 --> 0:10:37.880 for Ledger, how much of that is land, et cetera. 0:10:38.120 --> 0:10:40.440 Like what goes into the price of a tomato? And 0:10:40.440 --> 0:10:43.400 what is the main driver of swings year over year. 0:10:43.720 --> 0:10:45.880 Yeah, so let's let's maybe break this down a couple 0:10:45.920 --> 0:10:48.600 different ways. You have your retail price point at a 0:10:48.600 --> 0:10:50.640 customer sees. Let's say that for a second. Let's talk 0:10:50.640 --> 0:10:53.360 about the wholesale price of like what a going price 0:10:53.360 --> 0:10:54.800 of a tomato should be. If you're going to go 0:10:54.920 --> 0:10:57.839 directly to a farmer and buy half a truck at tomatoes, yea, 0:10:57.880 --> 0:11:00.640 right for that piece. There's all the the costs they 0:11:00.640 --> 0:11:05.959 have to grow, right, So you're talking fertilizer, seed, labor, water, 0:11:06.440 --> 0:11:09.559 the production costs, run their facility, the energy, and the trucking. 0:11:10.400 --> 0:11:13.160 Those are the base things that go into growing a tomato, 0:11:14.000 --> 0:11:16.000 So they have a base cost that they have to 0:11:16.240 --> 0:11:19.480 hit every year to just break even. Right. The way 0:11:19.520 --> 0:11:21.920 that market works is then usually typically they're going to 0:11:21.920 --> 0:11:24.000 contract a certain portion of it to try to make 0:11:24.000 --> 0:11:26.000 sure they get a guaranteed return to make some profit, 0:11:26.440 --> 0:11:29.120 and then they're going to call that sixty seventy percent. 0:11:29.400 --> 0:11:30.640 The rest are going to try to play on the 0:11:30.640 --> 0:11:34.360 open market, which means whatever the USDA price is going 0:11:34.400 --> 0:11:36.720 right for what a wholesale tomato should be, that's what 0:11:36.760 --> 0:11:38.560 we're going to sell the rest of the thirty percent 0:11:38.559 --> 0:11:41.839 at to try to catch some of these upswings and 0:11:41.840 --> 0:11:42.880 actually make some profit. 0:11:43.040 --> 0:11:43.199 Right. 0:11:43.240 --> 0:11:45.360 Like a lot of these growers that we deal with, 0:11:45.679 --> 0:11:48.280 this is a razor thin margin business, just like ours 0:11:48.360 --> 0:11:51.360 is as well. In groceries, as well. Right, Like your 0:11:51.520 --> 0:11:54.640 food cost is such a huge part of the cost 0:11:54.760 --> 0:11:57.839 for whether it's a grower, a retailer, a food service 0:11:57.840 --> 0:12:01.280 distribution company, you're playing in margins of single digits. 0:12:01.400 --> 0:12:01.600 Right. 0:12:02.080 --> 0:12:05.320 What happened specifically this time was if you look at 0:12:05.520 --> 0:12:09.120 winter growing of tomatoes, you can't grow a tomato in 0:12:09.360 --> 0:12:11.560 New Jersey in the winter. You can't grow it in 0:12:11.600 --> 0:12:14.040 Illinois in the winter. Right, You're going to be growing 0:12:14.080 --> 0:12:15.079 tomatoes in Florida. 0:12:15.120 --> 0:12:18.000 Into the greenhouse conversation a little bit, yeah, okay. 0:12:18.320 --> 0:12:20.320 But your traditional field tomatoes are going to be grown 0:12:20.360 --> 0:12:23.240 in Florida and in Mexico. And you think of okay 0:12:23.280 --> 0:12:27.560 for December until the spring starts, right, so called around 0:12:27.559 --> 0:12:29.360 this time when some of the more local programs start 0:12:29.360 --> 0:12:32.240 going further south. If you needed one hundred tomatoes for 0:12:32.280 --> 0:12:34.640 the US market, thirty of them are going to come 0:12:34.679 --> 0:12:37.440 from Florida, seventy of them are going to come from Mexico. 0:12:37.520 --> 0:12:39.640 It's about seventy percent of our tomato production in the 0:12:39.640 --> 0:12:42.640 winter is done in Mexico, now thirty percent in the US. 0:12:42.840 --> 0:12:44.640 If you go back pre and after, right around when 0:12:44.679 --> 0:12:46.840 NAFTA started, that was completely reversed. It was about eighty 0:12:46.880 --> 0:12:50.320 percent domestic, twenty percent Mexico, which we can also dive into, 0:12:50.320 --> 0:12:53.320 which is a fascinating story, the globalization of produce, and 0:12:53.400 --> 0:12:56.600 we talk about flavor and quality. It's a very interesting 0:12:56.640 --> 0:12:59.000 story as well. When this freeze, So there are two 0:12:59.000 --> 0:13:02.439 freezes that happened in flor this winter that took eighty 0:13:02.480 --> 0:13:06.520 percent of the crop in Florida out completely. Blooms fell off, 0:13:06.960 --> 0:13:10.080 fines died. Was not a great situation, right over one 0:13:10.120 --> 0:13:14.160 hundred and fifty million dollars worth of tomatoes lost. Again, 0:13:14.440 --> 0:13:18.320 produce demand is rather inelastic, So you took a market 0:13:18.320 --> 0:13:21.000 that needed one hundred tomatoes and you took twenty six 0:13:21.040 --> 0:13:23.800 out of the equation, and you're left with you the 0:13:23.840 --> 0:13:27.120 seventy four tomatoes that are left for one hundred, right, 0:13:27.160 --> 0:13:29.720 And anytime that happens, that's where you see these spikes. 0:13:30.320 --> 0:13:33.240 So it is less about the input costs themselves got it. 0:13:33.280 --> 0:13:36.200 At this point, I would say majority of it was 0:13:36.400 --> 0:13:39.800 weather related. Now, the other thing is they're always going 0:13:39.840 --> 0:13:41.160 to grow a little bit more than what we need 0:13:41.200 --> 0:13:42.640 for the market or their best guess. But it's a 0:13:42.720 --> 0:13:44.959 very segment in industry, so nobody knows exactly how much 0:13:44.960 --> 0:13:48.240 acreage everybody's putting in. The USDA does some projections, but 0:13:48.280 --> 0:13:51.199 in general, we did see Mexico decline their production a 0:13:51.200 --> 0:13:54.200 little bit this year, probably three to four percent. Doesn't 0:13:54.240 --> 0:13:56.640 sound like a lot, but when they're supplying seventy percent 0:13:56.640 --> 0:13:58.400 of the US market in the winter, that was actually 0:13:58.440 --> 0:14:01.280 quite a bit. While that was because the anti dumping 0:14:01.360 --> 0:14:04.199 tariff that was put in place of seventeen percent and 0:14:04.280 --> 0:14:08.040 change that was implemented back in July of last year. 0:14:08.200 --> 0:14:13.000 So a long history between Florida growers and Mexico growers 0:14:13.320 --> 0:14:15.319 about the price of tomatoes and what a fair cost 0:14:15.360 --> 0:14:18.240 to grow actually is, and a lot of accusations of 0:14:18.280 --> 0:14:22.800 dumping by Mexican growers into the US. So again you think, 0:14:23.120 --> 0:14:25.400 you know NAFTA in the mid nineties and the start 0:14:25.560 --> 0:14:31.000 of more free trade, that's when Mexico you think of Siniloa, Sonora, Jalisco. 0:14:31.520 --> 0:14:33.840 Those are amazing growing regions with a ton of land 0:14:33.840 --> 0:14:37.720 that they had available that had a lot less chance 0:14:37.800 --> 0:14:41.280 of a freeze like Florida does, right, And so once 0:14:41.280 --> 0:14:43.760 that they were already growing tomatoes for the US market 0:14:44.000 --> 0:14:47.040 or about twenty percent then, but they started to really 0:14:47.080 --> 0:14:50.480 invest in growing much more down there. For the US 0:14:50.520 --> 0:14:53.760 market once trade became a lot more predictable. When that happened, 0:14:54.200 --> 0:14:57.880 they also started getting into shade house or greenhouse right sore. 0:14:58.360 --> 0:15:00.480 Shade house is basically like netting that you would put 0:15:00.520 --> 0:15:02.640 over a massive tomato field. Do you think of these 0:15:02.680 --> 0:15:05.520 like vines of tomatoes, acres of fields that are covered 0:15:05.560 --> 0:15:08.360 by netting, and that sort of helps protect from the 0:15:08.400 --> 0:15:11.600 sun but also from bugs as well. And you see 0:15:11.600 --> 0:15:13.960 that with a shade house in Mexico you get almost 0:15:13.960 --> 0:15:16.840 three to four x the return per acre on the 0:15:16.880 --> 0:15:18.960 amount of tomatoes that you can produce versus if you 0:15:19.000 --> 0:15:21.440 just left it out in the sun. So they evolved 0:15:21.440 --> 0:15:23.920 into shadehouse, and then you got into greenhouse, which was 0:15:24.000 --> 0:15:27.080 like perfect growing conditions. They took the technology they were 0:15:27.120 --> 0:15:29.640 using in Canada in the Leamington area to do all 0:15:29.680 --> 0:15:31.840 the snacking tomatoes and things that were starting to grow 0:15:31.880 --> 0:15:34.880 and be a bigger thing, took that down south into Mexico, 0:15:35.200 --> 0:15:37.840 started building these big greenhouses so they could get year 0:15:37.880 --> 0:15:40.680 round production down there as well. And between those two 0:15:41.240 --> 0:15:44.280 they're producing a significant amount more per acre than maybe 0:15:44.320 --> 0:15:48.280 a traditional field grown tomato would be. So in the 0:15:48.360 --> 0:15:51.360 nineties and into the two thousands, there were accusations by 0:15:51.680 --> 0:15:55.840 Florida growers of dumping by Mexico growers. There was the 0:15:55.880 --> 0:15:58.680 Mexico defense was our cost of produces lower, we have 0:15:58.760 --> 0:16:03.240 lower labor costs, We're getting better yields, so this isn't 0:16:03.280 --> 0:16:06.840 actually something that we're economically selling lower in our home 0:16:06.840 --> 0:16:09.360 country versus you or not. I think there's truth on 0:16:09.400 --> 0:16:11.560 both sides to that, for sure. But we had these 0:16:11.560 --> 0:16:14.560 suspension agreements in place that had floors on tomato pricing 0:16:14.600 --> 0:16:16.920 that was allowed to be charged in the US from 0:16:16.960 --> 0:16:20.600 Mexico growers. That changed last year in July when they 0:16:21.040 --> 0:16:23.320 the US government reopened the case and put the anti 0:16:23.400 --> 0:16:27.440 dumping tariff on Mexico, and that change created more uncertainty 0:16:27.440 --> 0:16:30.240 than maybe the floor would have under the old suspension 0:16:30.280 --> 0:16:33.200 agreements that were in place. So between those two things, 0:16:33.200 --> 0:16:34.440 I think it was a little bit of a perfect 0:16:34.480 --> 0:16:38.520 storm of you decimated the floor to crop, Mexico didn't 0:16:38.520 --> 0:16:41.000 have a ton of extra production left available, and you 0:16:41.040 --> 0:16:43.720 see this crazy spike where a case of tomatoes on 0:16:43.800 --> 0:16:46.960 average went from in April much closer to the five 0:16:47.000 --> 0:16:50.680 year average to May was sixty five bucks a case 0:16:50.920 --> 0:16:52.080 on average for the whole month. 0:16:52.720 --> 0:17:09.200 In very high. 0:17:09.240 --> 0:17:12.000 Would you expect prices to actually go up even more 0:17:12.080 --> 0:17:12.520 from here? 0:17:12.760 --> 0:17:15.240 So in June we're back to the five year average. 0:17:15.280 --> 0:17:18.480 Already good, it's yeah, towards the end of MA into 0:17:18.560 --> 0:17:21.160 June it started to drop again. But this is where 0:17:21.200 --> 0:17:23.919 you get into the retail component. Everybody says retailers they 0:17:23.920 --> 0:17:25.919 go they take their prices up like a rocket and 0:17:25.920 --> 0:17:29.679 down like a feather, And so retailers will use this 0:17:29.720 --> 0:17:32.520 as an opportunity. Is there a new price floor that 0:17:32.560 --> 0:17:34.879 they're happy with, where maybe I'm going to charge the 0:17:34.880 --> 0:17:36.960 consumer a little bit more than I traditionally used to 0:17:37.000 --> 0:17:39.480 when these markets are this cheap, because the customer is 0:17:39.480 --> 0:17:41.800 still going to pay. It might not be too sixty 0:17:41.880 --> 0:17:43.600 nine a tomato, but maybe a dollar ninety nine a 0:17:43.640 --> 0:17:44.960 tomato when I used to be able to have to 0:17:44.960 --> 0:17:47.680 go to one forty nine. Right, if you think of grocery, 0:17:47.720 --> 0:17:50.840 retail economics has changed significantly over the last fifteen years. 0:17:51.280 --> 0:17:53.600 So if you think of like how much home delivery 0:17:53.720 --> 0:17:55.560 or click and collect like pick up at the store, 0:17:55.880 --> 0:17:59.360 they're much more advertising and marketing companies now where they're 0:17:59.520 --> 0:18:02.560 selling customer data to their suppliers about what are customers 0:18:02.600 --> 0:18:05.679 actually purchasing or not. All these things cost money for 0:18:05.760 --> 0:18:08.159 them to stand up and run, right, And so I 0:18:08.200 --> 0:18:12.480 think what you're seeing is while grocery ebadah is about 0:18:12.480 --> 0:18:15.120 the same, they're also that you know, traditionally was four 0:18:15.119 --> 0:18:17.720 to six. Now you might see the larger retailers and 0:18:17.760 --> 0:18:19.560 that's still maybe four to six five to seven rates 0:18:19.720 --> 0:18:22.359 margin as margin yep. At the end of the day, 0:18:22.359 --> 0:18:25.040 when you take all their costs into account, right, they 0:18:25.080 --> 0:18:26.960 have a lot more expense on the books and in 0:18:27.000 --> 0:18:28.840 ways that they didn't have before because they're having to 0:18:28.880 --> 0:18:32.520 pay for the additional labor and techivefrastructure and warehouses to 0:18:32.560 --> 0:18:35.399 be able to do the direct delivery the more like 0:18:35.560 --> 0:18:38.000