TERMINAL MARKET PRICE STRUCTURE
I have said it hundreds of times demand makes a market not supplies or a lack thereof. Last week was a perfect example of this, supplies were extremely short due to the cold in Mexico, but demand was lethargic and prices in the Terminal markets moderated and didn’t reach their desired levels. The major reason factor which made last week as well as the whole month of February terrible is there were no government checks in February. I have mentioned this before, because of the government shutdown the checks which should have come in February came at the end of January. This is also the reason the end of January was very good and the first to the last week in February became progressively worse. Well the good news is that March is here, and I expect there to be lots of hungry people waiting to buy fresh produce and I do expect all of the market to react accordingly.
One reader of my blog made the following statement “So. True. The New York Market is a beast on its own. It always amazes me how disconnected that terminal can be, from a price stand point, compared to the rest of the country.”
The answer is simple, well if you have studied it for many years.:). The terminal markets are the release valve of the supply and demand mechanism that rule the produce industry. If you have an item that you are selling every day and you are selling out at a fixed price, the fob and terminal market prices usually reflect one another. If you are selling at a fixed price but do not sell out every day or have to discount a few loads or go to the terminals with a few loads, this is when terminal will probably be cheaper because the FOB was not a true price. To explain further 12.95 was the price but a few loads had to go out for $10 and another one rolled to a terminal. 12.95 was never the real price but when the terminal returned you $8.95 fob you jumped up and down saying the market was 12.95, which never was the case. The last scenario is when product can easily be sold out for 12.95 then 14.95 and up and you say "who needs the terminals" those are the times you will do better, well if they are like me and share in the winners and the losers. I always say if you are going to the funerals you need to get invited to a few weddings as well. When supplies are short the terminals usually get well above the fob prices because release valves work both ways. I believe you have to be in it to win it so I stay in every week as long as you have a partner that's inviting you to the weddings as well as the funerals.