What does FOB mean in produce?

FOB in produce means free on board at the shipping point, the price of the onions once they are graded, packed and loaded on the truck at the origin. The buyer owns them from the shed door and pays the freight from there. When a shipper quotes an onion price and a broker repeats it, FOB is almost always what they mean, because it is the clean origin price with no trucking baked in.

Free on board, at the origin

Break the term down. "Free on board" is old freight language for the point where the seller's job ends and the goods are loaded and handed off. In produce that point is the shipping point, the packing shed or district. An FOB onion price covers the onions, the pack and loading them on the truck. It does not cover getting them anywhere. The moment the pallets are on the trailer, they belong to the buyer, and every mile after that is on the buyer's freight bill.

FOB versus delivered

A delivered price is FOB plus the freight to the buyer's dock. That is the whole difference, and it matters because freight is not a constant. The same 50-lb sack of jumbo yellows carries a different delivered price into Dallas than into Atlanta, because the lanes are different lengths and the truck market is different on each. Two buyers can pay the identical FOB and land the onions at different costs. When someone quotes an onion price with no location attached, ask whether it is FOB or delivered, because the two answer different questions.

Why the trade prices in FOB

FOB is the comparable number. Strip out freight and you can line up Idaho-Eastern Oregon against Georgia against south Texas on the same basis, the price of the onions themselves at the origin. Delivered prices tangle that comparison up with lane costs that have nothing to do with the onion. That is why USDA shipping-point reports and this site lead with FOB: it isolates the market for the crop from the market for a truck. Freight is real money and it decides plenty of deals, but it is a separate variable, handled separately.

Worked example: one FOB, two destinations

Take the Idaho-Eastern Oregon table above. The FOB range on it is the price at the Treasure Valley shed, before a single mile of freight. To turn that into a delivered price, a buyer adds the truck. Say freight runs one figure to Dallas and a higher figure to Atlanta, because Atlanta is the longer haul. Same onions, same FOB off the same table, two different delivered costs. The FOB is the fixed point both buyers start from. For how the freight leg actually moves the delivered number, see how freight changes the delivered price.

Know Your Onions reports FOB shipping-point prices as USDA publishes them. Freight figures used in examples are illustrative, because this site tracks the FOB market, not truck rates.