Romaine Is Back, With High Price And Liability Issues
BY TIM LINDEN | NOVEMBER 28, 2018
With the Nov. 26 Food & Drug Administration advisory recommending consumers can feel safe eating Romaine lettuce grown from districts where there was no production when a spate of E. coli illnesses arose in October, grower-shippers were again in their fields this week harvesting the crop, labeling its point of origin and sending it to market.
The return of Romaine in the marketplace after a week-long, FDA-advised hiatus was met with high prices and liability issues surrounding the destruction of hundreds of thousands of pounds of the lettuce variety during that week.
Along with the FDA advisory recommending specific labeling actions be taken throughout the supply chain, the U.S. Department of Agriculture’s Perishable Agricultural Committees Act division circulated information outlining what party is liable when product is “unmerchantable” because of a consumer advisory.
With regard to the return to production, Mark McBride of Coastline Family Farm, headquartered in Salinas, CA, told The Produce News Nov. 27 that his firm began harvesting new Romaine lettuce fields in the Imperial Valley of California that morning. He emphasized that they were new fields and the first production of the season from that district. Like many grower-shippers, McBride said Coastline typically has very light production during Thanksgiving week, so it had no need to disc any fields during the halt of harvest. He said production from Salinas had ended prior to the initial FDA advisory on Nov. 20 and production had not yet begun in the Imperial Valley.
McBride said the Romaine market price was in flux this week as production was starting to deliberately move toward its destination. He indicated that there was a wide range in pricing with the expectation that the price would be adjusted after the marketplace has an opportunity to react.
McBride did say that even prior to the Nov. 20 advisory, it appeared that Romaine -- and many of the other lettuces and leafy greens -- would fetch a strong market price this winter as many growers reported a reduction in winter plantings because of the poor markets that have prevailed for most of the last 12 months.
On the other side of the country, Florida growers were also getting ready to harvest their Romaine after sitting out the last week because of the advisory. Robby Carter of Hugh H. Branch Inc. in South Bay, FL, also spoke with The Produce News Nov. 27 and said by Thursday (Nov. 29) the company would begin filling Romaine orders.
“By late in the weekend or early next week, there should be Romaine lettuce up Boston, New York and Philly,” he said.
Carter said it was especially bothersome to Florida farmers that they were lumped in with others when the initial FDA advisory recommended that consumers not eat Romaine regardless of its point of origin.
“It was a tough situation for Florida growers,” said Carter. “All Romaine growers were collectively grouped together even though none of us [in Florida] had any product during the time in question. That’s a shame. It is important now that they figure out the source of concern and announce that. I understand they are pretty close to doing so.”
He agreed that the market price was unsettled but anticipated a very strong market once the romaine begins to flow. “I heard some California shippers were quoting $35-$40 this morning,” he said.
He also noted that all the lettuces were receving a bump as retailers and foodservice operators look for alternatives. “I heard some Iceberg lettuce up in the Northeast sold for $60 to $70 [per carton] last week. That’s amazing.”
McBride of Coastline said that on Nov. 27, Iceberg lettuce from California and Arizona had a price tag of $44 to $48 f.o.b., while the leafy greens were in the low $40s and spinach was in the high $20s. But the veteran California vegetable salesman said he was unwilling to predict where the market will go.
“We are in unchartered territory given the advisory, the new labeling requirements and the fact that we are in transition,” said McBride. “This is an unprecedented situation for the lettuce industry.”
Liability questions
As grower-shippers tried to fill the pipeline, there was also many questions about who was liable for the Romaine that was destroyed because of the FDA advisory that effectively saw virtually all product pulled from the shelves two days before Thanksgiving.
Western Growers Association, based in Irvine, CA, reported that it had received “many calls from shipper on sales contract implications, rights, responsibilities and payment of fulfilled shipments.”
WGA Senior Executive Vice President Matt McInerney said several fundamental areas need to be reviewed and assessed as the parties of a contract work through their own agreement and determine a just outcome.
The PACA has weighed in on this in the past and does have guidelines to follow. Basically, the question of liability depends on terms of sale and the disposition of the load when the advisory was issued making the product “unmerchantable.”
Though each situation can have its own nuances, the most important element is when risk of financial loss shifts from the seller to the buyer. If the product is sold but still has not left the shipper’s warehouse, the liability belongs to the shipper. If it has arrived at the buyer’s location and been accepted, the buyer assumes the risk. If it is in transit, the situation turns on the terms of sale. A “delivered” sale is still in the control of the seller, who still has the risk. An f.o.b. sale is in the control of the buyer, who consequently assumes the risk.
WGA relayed this information to its members, but McInerney cautioned that these simplified set of facts do not articulate every imaginable circumstance and noted that “outcomes will depend on your individual set of facts.”
Western Growers Insurance Services, which is the insurance division of the association, offers so-called “recall insurance” from outside insurance companies to its members. WGIS Senior Vice President Jeff Gullickson said each policy is customized so it is impossible to deliver a blanket statement as to the scope of any shipper’s coverage and how it may work in this situation.
However, Gullickson said that while the policies being written recently are much better than previous iterations and offer broader coverage than those in the past, “what’s available [from insurance companies] is still not where we want it to be. They are better than they were a year and half ago [when WGIS launched the new program], but we expect them to continue to evolve.”
In general, he said these lost product policies do not exist that will make everyone whole. He called this situation “a devastating event for the industry” but hoped it would lead to solutions and better offerings by insurance companies who learn by these situations and can better assess risk and develop policies to cover those risks.