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November, 2008

Fresh Produce Referees

By Dennis Linden

In a world of faxes, emails and cell phones, much of the trading that goes on in the produce industry today still depends on a verbal contract between two busy professionals with the paperwork always playing catch-up to the real time buying and selling of these very perishable goods.

It is an amazing regional, interstate and international business that often depends upon honesty and trust between two individuals, who may be total strangers located hundreds or even thousands of miles apart. Eventually, all that was negotiated in a phone conversation does get confirmed with paperwork; however, many times the shipment of produce may already be on the road by that time. Successful fresh produce professionals have developed the art of speed and accuracy in a business environment that changes with every degree of field temperature.

Do not equate the use of the word “trading” in the fresh produce business with the paper chase that goes on in the speculative stock market. These transactions are of real fruits and vegetables, grown by real people and sometimes even inspected for quality by the very same individuals who purchased the produce. While the value of these goods can fluctuate daily like the stock market, the ebb and flow of fresh produce prices is always connected to weather patterns that affect both positively and negatively the very real supply of goods; not because a noted economist made an adverse projection of a market statistic that has not happened yet! The dynamics of the fresh produce business adhere to a very simple equation: supply divided by demand equals price.

In the course of feeding this country and the world, for that matter, thousands of transactions of perishable produce are conducted each day. A quick phone conversation or email starts a chain of events that eventually gets that perfect peach, for instance, from an orchard in California’s San Joaquin Valley to a supermarket display in Kansas City still looking like it was picked just yesterday.

That peach was not only grown, picked and handled with care; it was also packaged in a way that allows for long distance transport without damage, sold by a peach marketing expert, then shipped and maintained at a temperature during the transit that keeps the fruit as fresh as possible. It’s quite an amazing system that moves this country’s crops quickly from field to fork, no matter the distance, without a hitch in spite of the many logistical pitfalls that could happen along the way. Of course, this is the perfect scenario of an efficient chain of distribution. Unfortunately, not all peaches are perfect.

So, what happens when this supposedly perfect peach arrives at the chain store’s warehouse in Kansas City overripe or terribly bruised or otherwise less than what the buyer was expecting and promised? It is certainly not practical to send the fruit back to the grower some 1500 miles away, but does the seller have to simply take the buyer’s word for the condition of the fruit?

Though they do not wear striped shirts or blow whistles, the fresh produce industry does have USDA referees stationed in every region of the country poised to make the call on these kinds of arrival problems. Surprisingly, considering that we are talking about a federal agency, these inspectors actually respond with lightening speed. OK, that was a slight exaggeration; but same day service is usually the norm and includes a written report that the buyer can fax to the seller within twenty-four hours of reporting an arrival problem.

The costs of these inspections are incurred by the “loser” depending upon the results. That is, if the inspector finds that the condition of the fruit is within the acceptable standards that have been set by the industry for peaches, then the buyer who initiated the complaint must pay for the inspection and must keep the fruit. However, if the shipment is judged to be below standard, then the seller must absorb the inspection fee and is required to either renegotiate the price or sometimes even make arrangements to place the fruit elsewhere.

No matter the results of these federal inspections, business relationships rarely suffer. Professionals in this business are aware of the many stages in the distribution chain that can affect the condition of perishable produce. The industry welcomes the role that the USDA plays as an impartial witness to verify quality issues that may even have occurred during transport. In fact, the parties involved rarely take offense when an inspection is requested; they abide by the result and then move on with apologies for any inconvenience. Everyone involved usually continues to conduct business with each other, no hard feelings. If only our court systems could move as quickly and the parties involved be as civil to each other as those deliberating the perfect peach!