Importers opposed to a draft suspension agreement with Mexico that sets higher floor prices on tomatoes say its consequences will go beyond problems growers may face moving their crops during peak production times.
The U.S. Commerce Department took comments on the plan through Feb. 11; a final agreement is due March 4.
Among the changes, greenhouse tomato reference prices would rise from 21.6 to 41 cents per pound in winter, and from 17.2 to 32.5 cents a pound in summer. Increases for open field product would be smaller.
Criticism of plan
“This decision is short-sighted,” said Marty Mazzanti, board chairman for The Produce Exchange, a Livermore, Calif.-based distributor and shipper with facilities in Nogales, Ariz.
“If the market on romas is $8 to $10 for much of the season and the minimum we can go to is $8 or $8.30, our ability to inspire a retailer to promote in peak will be difficult,” he said. “And if promotions are 10 to 30 cents higher at retail, then movement and overall consumption are going to be less. It adds fuel to the fire.”
But the real fire, as Mazzanti sees it, lies beyond the current season. He fears gaps — not just between deals or planting cycles — but between years.
Higher minimums won’t boost growers’ average price per box, he says, because profitability also depends on total boxes sold. That average and total determine next year’s plantings.
“Low production during the first and last few weeks of a production cycle, or in weather gaps in the middle, will be lower still the next year,” Mazzanti said. “If there’s a freeze or hurricane, in past years there would have been more supply from less affected growers.
“It kept the nation supplied with expensive tomatoes, but still, we had them. That will be impacted. A retailer doesn’t want to put something on promotion and not be able to cover it, or have to cover it at twice the price.”
Input from Florida, Mexico
By contrast, the Florida Tomato Exchange and Certified Greenhouse Farmers offered “tentative support” for the draft agreement in a joint statement. The Florida industry has been pursuing regulatory action on Mexican tomatoes.
“I wish I shared their optimism, but I’m on the other end,” said Lance Jungmeyer, president of Nogales, Ariz.-based Fresh Produce Association of the Americas. “Their members are getting protected and mine are going to be restricted.”
“It’s better than tariffs or a trade war, but we’re worried that it’s going to lock a lot of Mexican tomatoes out of the market,” Jungmeyer said. “About $1 billion in tomatoes came through Nogales in 2011. If you saw even a 10% or 20% decline, that’s a lot of money.”
Across the border, Asociacion Mexicana de Horticulture Protegida A.C. (AMHPAC) found signs of progress in the commerce plan.
“It would include all Mexican exporters rather than 85% as in the last agreement, and we pursued that,” said Eric Viramontes, AMHPAC’s departing chief executive officer.
“The Mexican government will have a big role in promoting this, and I think it will make for a stronger industry.
“The agreement is about maintaining order. It’s not about filling anybody’s pocket. Best of all, it avoided a big dispute between our countries,” Viramontes said.
Need to boost greenhouses
Any relief U.S. growers gain from the agreement won’t end the need for increased investment in greenhouse technologies, Viramontes said.
“In some parts of the U.S., that’s not happening, and that’s what creates issues in maintaining profits,” he said.
Fried DeSchouwer, president of Vero Beach, Fla.-based Greenhouse Produce Co. LLC, agreed.
“Florida, for one, has made no significant changes in the last 10 years on production capacity,” he said. “They have not invested. They keep on doing what they’ve been doing.”
Greenhouse Produce Co. sources protected agriculture tomatoes, many out of central Mexico.
As DeSchouwer sees it, Mexico has the same advantage over Florida that Cuba did in the past when it was a tomato production hub — warmer weather and lower costs.
“American growers are trying to separate different production types and somehow eliminate competition from a lower-technology greenhouse,” he said.
“Mexico doesn’t need as many inputs to grow consistent, quality product.”
“Americans don’t want to accept that,” DeSchouwer said, shortly before the draft agreement was reached.
“They feel it’s not a level playing field. OK. But then you need to adjust your cost of production. Any trade limitation creating an unfair advantage for domestic producers will, in the long run, catch up with them, full stop.”
“On the low end or the high end of markets, the consumer will get the short end of the stick,” Mazzanti said.