Fresh Del Monte Wilts

Between poultry producers like Pilgrim's Pride (NYSE: PPC), protein producers like Tyson (NYSE: TSN), and produce specialists like Fresh Del Monte (NYSE: FDP) and ChiquitaBrands (NYSE: CQB), I hope investors have finally learned something. It's a lesson that any farmer could teach you: Making money from agriculture is not a predictable year-in, year-out sort of proposition, and there really isn't much in the way of sustainable competitive advantage.

In the case of Fresh Del Monte, a long slide on the banana peel seems to be continuing. Sales were essentially flat this quarter, but operating costs continued to rise. Whether it's fuel, packaging, or freight, Fresh Del Monte has to pay more to get its goods to market, and that caused margins to splatter like a watermelon at a Gallagher show.

Things are so bad, in fact, that after the earnings release, the company slashed its dividend by 75%. Given that a nice income stream was part of the hook here, that's obviously bad news.

Looking across the business, you can't help but see the soft spots in the basic business model. Banana sales were up 2% in the first quarter, but pricing was down about 6%, and the company is having a tough time securing profitable contracts. And let's be honest: Nobody really cares about the sticker on their bananas, so I doubt produce buyers like Wal-Mart or Kroger (NYSE: KR) need to worry about alienating customers in finding the cheapest banana they can for their store bins.

So, too, in the pineapple business, where the company continues to experience price erosion. And as volumes continue to drop in the fresh-cut business (at least in part because of the absence of sales to Wendy's (NYSE: WEN)), there's minimal leverage there, too.

Fresh Del Monte isn't giving up without a fight. There will be a co-promotion effort with Danone (NYSE: DA) this year, but this is still fundamentally a commodity company that cannot control its costs. On a somewhat perversely positive note, I do note that analysts are bailing and seemingly no one wants to have anything to do with this company.

The question, then, is whether or not skepticism is outracing profit deterioration. There will have to be a point where cost pressures and pricing balances out, or all the major produce companies will eventually go out of business. So there might be a time to go bottom-fishing here. That said, I think we've all seen that there is no real sustainable competitive advantage in the agriculture sector, so don't confuse a cheap asset-based turnaround story with a real long-term winner.

For more Foolish food for thought:

• Rotten Banana News
• Can't Go Bananas Over Chiquita
• Playing Chicken With Chickens

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).