See related comments: Future of Nogales still bright.

South Texas produce shipments surge With the recent completion of major Mexican highway improvements from Mazatlon in the west to Matamoros in the east, South Texas ports are gaining momentum for fresh produce shipments from Mexico.

While Nogales still leads the pack in Mexican imports, Pharr, Texas, is gaining fast.

“If you look at the last five years, we’ve seen double-digit growth year over year,” said Bret Erickson, president and chief executive officer of the Texas International Produce Association, Mission.

Federal Highway 40D is providing savings to the supply chain, said Jimmy Garza, director of operations for Bebo Distributing, Pharr. The multibillion project for the north central Mexico project started about 15 years ago and was largely completed last year, Mexican government websites report, with 115 bridges and 61 tunnels helping to cut driving time from Durango to Mazatlan from six hours to less than three hours.

The 3,600-foot long Baluarte Bridge, completed in 2013, soars 1,300 feet over the Baluarte River between Sinaloa and Durango.

Though the north central Mexican highway has tolls, cost savings in crossing West Mexican fresh produce through Pharr compared with Nogales range from $500 to $750 for loads headed Dallas, while savings to Boston can range up to $1,500 per truckload, Garza said. The transcontinental east-west Federal Highway 40D highway connects with the Federal Highway 15 — which connects west Mexico vegetable exporters with the port of Nogales — near Villa Union, Sinaloa.

Though the improved highway is drawing some west Mexican produce — particularly tomatoes — Alberto Maldonado, general manager of Apache Produce Imports LLC, Nogales, said growth may not match expectations.

“Some will try, but it is hard and whoever has tried to go setting up a warehouse (in south Texas), up till now it hasn’t worked as well as they expected,” he said.  In particular, some have said warehouses in McAllen aren’t as accessible to the main highway as operators would prefer, he said.

Chris Ciruli, chief operating officer of Ciruli Brothers LLC, Nogales, Ariz., said the transportation infrastructure is not yet in place to send a great percentage of Culiacan vegetables to south Texas.

“Right now we are able to send 10% of our stuff to south Texas, and that’s about it,” he said.
Maldonado said South Texas import volume is also benefitting from expansion of greenhouse vegetable production on the east coast of Mexico.

The USDA reports that shipments of produce imported through Texas ports grew from 101,400 (40,000-pound) truckloads in 2007 to 159,482 truckloads in 2012, a gain of 58%. Produce shipments through Arizona ports grew 16%, from 112,328 truckloads in 2007 to 130,022 truckloads in 2012. Mexican fresh produce shipments through California ports rose 42%, from 43,336 truckloads in 2008 to 61,716 truckloads in 2012.

Erickson believes the pace of growth for Texas imports of Mexican produce will pick up in coming years as more trucks use the highway.

Of the nearly 160,000 truckloads of produce crossing through Texas in 2012, Erickson, said about 100,000 truckloads came across the Pharr-Reynosa International Bridge bridge. Pharr was followed in volume by Laredo, Progreso and Rio Grande City, Erickson said.
If trends hold — and those trends will be reinforced by greater use of the Mazatlon-Matamoros highway — then Pharr is likely to overtake Nogales as the leading port of entry for Mexican produce, Erickson said.
“Any product that is destined for the Midwest or for the East Coast markets, that highway is like a pipeline that leads straight into South Texas,” Erickson said.
Vegetable shippers in Sinaloa will save time and money if they go through South Texas, he said.  
Erickson said more produce distributors and customs brokers are setting up shop in south Texas, and cold storages are expanding.

Del Campo Supreme Inc., Nogales, opened a facility in Pharr in September.

“It’s a valuable tool having a facility there and it enables to be competitive in the eastern markets with shorter delivery times and freight savings for the end user,” said Jimmy Munguia, sales manager for Del Campo Supreme.

The Nogales office manages sales for the Texas program — mostly tomatoes for Del Campo.
Long-term outlook

A study released in September by the Center for North American Studies at Texas A&M University estimates produce crossing trends through 2020 will continue to increase for South Texas. According to the study, “Economic Impacts of Increased U.S. Imports of Fresh Produce from Mexico by 2020,” fresh produce imports from Mexico totaled $7.65 billion in 2012, with 45% ($3.44 billion) entering through all Texas land ports.

In the next five to seven years, produce imports from Mexico will grow, with the majority of the growth coming through Texas, according to the study.

Based on trends in the last five years, the study projects U.S. produce imports from Mexico via truck will increase to 470,000 truckloads by 2020, or nearly 32% above 2012 levels. Texas ports are expected to grow by 62% (to about 260,000 truckloads), according to the study.

When incorporating industry interviews, U.S. economic conditions and the potential effect of the improvement in the Mexican Federal Highway 40 between Mazatlan and Reynosa, the study issued an alternate projection which forecast that overall fruit and vegetable imports from Mexico could grow to 615,672 truckloads by 2020, or a 73% increase over 2012.

The second forecast said Texas ports could handle 59% of total Mexican fresh produce shipments, or about 360,000 truckloads. That is more than double 2012 import numbers for Texas ports.

Infrastructure improvements in Mexico and south Texas will attract produce that was previously shipped through Western U.S. destinations, but also may bring some imports from Central America, South America, and possibly Asia.

“Even if we don’t hit 360,000 truckloads, there is no question we will see a significant influx of product through south Texas,” Erickson said.

Because of the coming surge, Erickson said the Texas International Produce Association is working to increase staffing at Pharr and other ports.

“We’re up to eight or nine FDA inspectors and starting in February we will have an APHIS insect identifier who will be based at the Pharr bridge,” he said.

Previously, the insect identifier was an hour away in Brownsville, sometimes causing delays in shipments when insects could not be identified through digital pictures.

The Pharr port of entry consists of a 3-mile elevated bridge across the Rio Grande River, with four northbound lanes and two southbound lanes, Garza said. A second span is being considered, he said.

“Obviously we are competing for traffic (with Nogales) and I think we have a big advantage with this new highway,” he said.

With three or four new warehouses being constructed, Pharr’s infrastructure will continue to grow to accommodate the bigger volumes of fresh produce, Garza said. The county is working on a loop around the city to ease traffic issues, he said.

“This is the tip of the iceberg in terms of increasing our crossings,” he said.

Ciruli, whose company has operated in south Texas since 1999, said growth in imports for Texas and Arizona won’t be an either/or proposition. Long term growth in Mexican produce exports to the U.S. will allow both south Texas and Arizona to prosper, he said.

“The (highway) is making freight more accessible and quicker going to south Texas than it used to be, but you are still seeing product come through Nogales and Texas,” he said. “This is not zero sum, where someone wins and someone loses,” he said.