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Pundit’s Mailbag —
The Role Of Produce Traders

Jim Prevor’s Perishable Pundit, January 26, 2007

Our article Cheaper Produce In Chinatown got a lot of attention, including this letter:

I just finished reading your piece on produce being cheaper in Chinatown. Like you, my family has been in the business of distributing and trading produce for several generations.

My father and uncle used to ride with my grandfather on his horse-drawn wagon to Chicago’s South Water Market, where they watched him buy produce and then peddle it to his neighbors.

They went on to become one of the largest carlot distributors in Chicago during the time when nearly all produce moved by rail, and retailers big and small bought off track in the “16 cities.”

I went on to broker produce in Salinas and start an internet company, ProducePoint, that reported real time price indices. So you can see our family has spanned produce distribution from “Old Grey Mare” to the “speed of light.”

The article on Chinatown reminded me what of the “roots” of produce distribution are all about. Hard work, smart trading and filling the needs of a perishable market. In this day and age of contract pricing and large infrastructures, inventive small operators have an opportunity to shorten the time between distributor and consumer. They are providing a needed outlet for product that needs to be sold now or lost, while giving the consumer a bargain on ripe and more flavorful product.

Outlets such as this are becoming more scarce, and more product is being thrown out as a result. This is not particularly efficient. Tom Peters in his seminal book “Thriving on Chaos” pointed to the fact that bigger is not always, in fact, is rarely better. This particularly holds true for the distribution of perishables.

Bagged product, while filling the needs of time-challenged consumers, has brought a whole new set of problems for our industry. Food Safety, which you have well documented in the Pundit, is one. Waste is another. The desire for standardization from larger retailers and food service operators has created its own inefficiencies. It is also not serving the consumer particularly well. The rise in popularity of community farmers markets is evidence of this.

Speculation has become a dirty word in our industry. Spot market buyers have been marginalized on all levels. Yet all free trading markets need these types of traders to supply liquidity. This is true of stock trading and futures trading to name but two examples. It is especially true with perishable commodities. I wrote an article in a trade publication making this very point several years ago that touched off a debate which lasted several weeks. To this day, I am not sure why such a basic economic principal is so controversial.

The Chinatown vendors exemplify the importance of spot market buyers.

Through their cleverness and industriousness, they supply an important outlet for wholesale distributors while giving the consumer more choices.

Our ancestors did the same. It is time we honor these virtues and pay more attention to the smaller, innovative vendors and buyers who are still a vital part of our distribution chain.

— Richard Kaiser
The Richard Kaiser Company

Indeed, all the talk of food safety leads to substantive questions about the role of the trader in the years to come.

In most cases, up till now, we have found the claims by retailers that they wanted to buy direct and only direct as much a soapbox speech as a reality. It was almost as if they were asking to be tricked. They seemed to be saying:

“Show us a Potemkin Village farm so we can see you are a farmer, but we really want a trader who will buy and sell, import and manipulate so that we are never, ever short product regardless of fires, floods, crop disease, hurricanes, freezes, tornadoes, earthquakes, etc.”

Now, however, the food safety focus moves us to a focus on an aligned supply chain. Indeed it could be argued that the whole purpose of an industrywide initiative is to help the little guy. If they want it, Wal-Mart, Safeway, Kroger, Supervalu, Sysco, McDonald’s, etc. can always get produce grown to the safest standards. They just order it and audit it.

It is to save the freewheeling nature of the business, to allow anyone to walk on a terminal market and know that everything meets established parameters that we need national food safety programs.

Our correspondent points out the inefficiencies that result when speculation is reduced or prohibited. His point is well taken.

In the Pundit’s sister publication, PRODUCE BUSINESS, we wrote a piece entitled Broker is not a Dirty Word that detailed the ridiculous and expensive things people did to avoid being labeled a broker.

And Richard’s point about the need for liquidity is sharp. One of the main differences between retailers and terminal market wholesalers when it comes to procurement is that, while retailers buy what they want, many wholesalers specialize in helping growers find outlets for what the growers need to sell.

We suppose that in the end, efficiency will prevail, and that if the world finds it better to kill off the speculators, then it will do so.

Yet the Pundit remembers going to visit the old Washington Street market with his father just before it was torn down for some more homogenized city buildings. We discussed the hope that the new market would be more efficient, yet the Poppa Pundit, even then, said that it might be more efficient but the city was also going to lose character, the floral market, the fish market, the meat market, the produce market, the hustle and the bustle, sights and smells, and the nighttime life — these were all things that added distinctiveness to city life.

If you take these markets away in exchange for more glass office buildings, you might build a more efficient city, but maybe not a better one.

So, if the speculator is banished and everything is sterile-packaged and goes seamlessly in an aligned supply chain from farm to fork, we may well have built a more efficient produce industry. But some of us, this Pundit included, will always wonder if we really built a better one.

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