Lettuce Prices Plunge After Cyclospora Outbreak Deters Consumers

Lettuce prices cratered in July as the multistate cyclospora outbreak pushed diners to shun the leafy green.

Prices for the vegetable tumbled 16.4% from June, the largest one-month decline on record, according to seasonally adjusted data released Wednesday by the Bureau of Labor Statistics. Lettuce also posted the sharpest month-over-month deflation within the consumer price index's food category in July, which saw overall prices tick up 0.1% in the period.

"It's very likely due to the cyclospora outbreak and consumers just not wanting to buy lettuce right now," said Jeremy Horpedahl, an associate economics professor at the University of Central Arkansas. The "consumer is just wanting to stay away from this product."

July's declines pulled lettuce prices off all-time highs posted this summer. But lettuce prices are still up around 7.5% in July compared with a year ago, more than double the pace of price growth seen across the closely followed CPI basket.

Lettuce's run-up before this month was driven by the Iran war boosting fertilizer prices and President Donald Trump's mass deportations resulting in increased labor costs for U.S. farms.

This recent boom-and-bust price cycle may remind consumers of the cost fluctuations in eggs over recent years, Horpedahl said. While prices initially surged as the bird flu drove down supply, costs have since fallen drastically this year.

The Food and Drug Administration called out iceberg lettuce processed at a Taylor Farms facility in central Mexico as the likely ground zero for the waterborne parasite's recent spread. Taylor Farms voluntarily recalled products coming from that location.

Several chains with lettuce in menu items reported a drop in traffic due to consumer concerns about the outbreak, even if they didn't have contaminated supplies.

Cava CEO Brett Schulman told CNBC on Wednesday that there were "broader consumer concerns" around leafy greens and fresh produce that affected near-term sales around the end of its second quarter. But the Mediterranean fast-casual chain's executive said sales trends have begun to rebound.

Sweetgreen said last week that it saw reduced demand as a result of the outbreak and that it was not sure when a recovery would take place. The salad chain lowered its full-year outlook, leading investors to sell shares following the report.

Chipotle said that cyclospora created a sales impact of around 2 percentage points in the back half of July. On a call late last month, executives reassured analysts that its lettuce supply wasn't affected and that the burrito chain had a "very robust" program for food safety.

Yum Brands CEO Chris Turner said in late July that the outbreak — which the Food and Drug Administration first connected to lettuce served at Yum's Taco Bell chain — resulted in a "meaningful near-term sales impact." But Turner said sales had been "steadily improving."

Dollar sales of prepackaged salads plunged 14% during the four weeks ended July 25 compared with the year-ago period, according to NielsenIQ.

On the surface, Horpedahl said sharp price declines in lettuce would be viewed as good news for shoppers grappling with years of higher-than-preferred inflation levels. But he said that consumers likely won't be taking advantage of the cost reductions to the fullest extent given continued worries around food safety amid the outbreak, which has sickened thousands.

"Consumers are not going to rush out and buy this now just because it's cheaper," Horpedahl said. "It's fallen because nobody wants it."