Attack of the Killer Tomatoes! Part 2: The Silver Lining.

This time, it isn’t funny.

Quite unlike the 1978 B-movie spoof classic, these killer tomatoes mean business.  Salmonella bacteria contamination has been linked to fresh tomatoes sold to grocers and restaurant chains.  As of last week, the Centers for Disease Control and Prevention (CDC) added 100 new confirmed cases, bringing the total (officially) sickened to 383 in 30 states.  One person is dead.

[Specifically, this culprit strain of bacterium is Salmonella Saintpaul.  We won’t get into the phenomenally bad timing of the outbreak, the name of the strain, and the national convention coming in a couple of months.  Suffice to say, our fair city doesn’t need this right now.]

Washing tomatoes is not enough.  Salmonella is resilient, and can live for many days on the surface of the tomato.  Fortunately for most of us, the bacterium (a) is unlikely to make us sick at all or (b) will only produce mild symptoms.   But for the elderly, the young, and those with weakened immune systems, Salmonella poisoning is no laughing matter.

When we step back, however, and visualize the sheer numbers of tomatoes consumed in the United States - some 27 million tons per year - the number of persons ill (while tragic) remains a statistically acceptable risk.  You are far more likely to die from the flu virus (about 20,000 do each season) than from eating a contaminated vegetable.

But none of that matters, does it?

The crux of the perception problem is simple: The CDC does not fully understand where the outbreak has come from, adding to an acute “fear of the unknown” in the public mind.  You can hardly blame them.  Tomatoes, as a part of the total commercial food supply, exist in a complicated and interconnected supply chain web.  Grocers buy from several suppliers.   Those suppliers buy from several distributors.   Those distributors buy from several growers.   Those growers are located all over the country and all over the world.   The delay in tracking down the source of the contamination is understandable.  But that doesn’t make us feel any better.

Restaurants and grocers all over the country pulled tomatoes from the shelves, grinding the tomato supply chain to a halt across the country.  Tons of tomatoes will rot in the fields.  The estimated cost to the industry could reach well into nine figures.  Very bad.

But what will the long-term affect on the industry be?

For a clue, we can look to the spinach contamination/outbreak of 2006 for a microcosm case study.

Spinach is a comparatively tiny market, but the 2006 contamination was certainly analogous in its impact on public perception. The impact was severe and immediate.  According to USDA figures, spinach consumption dropped 18.1 percent from 2005 to 2006 (or 7.581 million tons to 6.207 million tons).

However, what’s more interesting is the change in commodity price, measured in cost per ton, which over the same period jumped from $22.7/ton to $29.3/ton.  When you do the math and look at total market value, the net effect was a growth of just over $10 million ($172 million in 2005 to $182 million in 2006).

In other words, aside from the growers directly affected by the outbreak, the total market value actually increased nearly five percent.

When we look into 2007, while the figures remain incomplete, total tonnage of spinach produced/consumed has recovered somewhat - to just over 7.002 million tons.  Better news for growers, prices seem to be holding at their higher rate.

So what can spinach tell us about tomatoes?

A couple of things.

First: Consumption will drop in the short term.  Sharply.  Because of the nature of the agricultural supply chain, that reduction in consumption will put downward pressure on crop supply.  But as the demand picks up (and crops have been ruined in the delay), supply/demand tells us the commodity price will rise, likely making up the financial difference from lost production, and possibly increasing the value of the market as it did in the aftermath of the spinach outbreak.

Second: The public mind has a short memory.  And better news for growers, people tend to crave what they cannot have.  All this talk about specific varieties of tomatoes, where they are grown, how they are grown, and how to cook them (cooking kills Salmonella), excites the public consciousness.  People had largely forgotten about spinach.  But take Spinach away, and everybody wants it!  Now we’ve taken tomatoes away.  The affect on the market could be tremendous.

In the end, will Salmonella Saintpaul hurt the tomato market?

Yes.  And no.