What's up with that

The producer price index for fruits and vegetables was down 60% between Feb. 2011 and Feb. 2012. To put it in English, if you received $10.00 for a box of lettuce at the farm gate in January of last year, the same box netted you about $4.00 this past Jan.  If you extrapolate this loss across the entire industry, you are looking at an unmitigated disaster.  It is hard to believe the demand could drop so much during the course of the year, and I'm quite sure it did not.  What I believe happened is a huge increase in supply as growers responded to good returns by planting more acres.  Unfortunately, the reason for the higher prices was shortages in many crops due to weather conditions in 2010.  Mother Nature was much more clement in 2011, so storages were swelled to bursting with bumper crops.  The other factor is the increasing disconnect between the crop producers and the marketers.   Although the growers took a 60% reduction in income, consumers saw a relatively modest 15-20%  discount in year over year prices.  The other 40% can be found in chain store botttom lines.  Instead of promoting bumper crops, the chains sold whatever they could at inflated prices and let the growers send the rest to market houses and food banks.  This fundamental change will be more evident next year if decreased plantings and weather events reduce supply again.  Prices will skyrocket and the vicious cycle will lead to less consumption by the public and a quick return to lower producer prices.