October 16, 2021
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UF researcher: Rising Mexican imports could cost U.S. tomato growers $252 million a year

New research puts an exclamation point on the economic harm American growers could face if Mexico continues to increase its tomato exports to the United States at the same pace.

In a recent study, researcher Zhengfei Guan found U.S. growers of fresh tomatoes stand to lose as much as $252 million a year — or 27% of their combined revenue — if imports from Mexico increase by 50% over the coming years, following historical trends.

He also looked at a scenario where exports increased by 25%, finding it would similarly result in losses of $122 million a year, or 13% of total revenue.

Those multimillion-dollar losses are sure to be felt in Florida, where tomatoes are still big business, despite a shrinking industry.

“I do not have a Florida-only estimate. I only have an estimate for the winter window, which is $188 million. The majority of this winter estimate is related to Florida growers,” said Guan, an associate professor of food and resource economics at the University of Florida’s Institute of Food and Agricultural Sciences (IFAS).

The small rural town of Immokalee — 40 miles east of Naples — has long been known as America’s tomato capital in the winter. It’s where tens of millions of pounds of the fruit are produced every year.

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The five-county region that includes Immokalee remains the largest tomato-producing area in the state, accounting for nearly half of the state’s total production, said Gene McAvoy, an associate director for stakeholder relations at the UF/IFAS Research and Education Center in Immokalee. 

Tomato acreage in the state, he said, has declined from more than 40,000 about 25 years ago to roughly 24,000 last year. Currently, Southwest Florida has about 10,000 acres.

“Decline in acreage does not tell the whole story, as yields have greatly increased over the past 25 years from around 35,000 pounds per acre to well over 50,000 pounds. The decline in acreage is, of course, the result of foreign competition taking an increasing market share. Mexico, followed by Canada,” McAvoy said.

Crop production going down

In 2020, U.S. farmers produced about 1.3 billion pounds of fresh tomatoes, less than one-third of their harvest in 2000. While the decline can be blamed on several factors — competition from Mexican growers is definitely a primary one, Guan said. 

Indeed, complaints from Florida’s tomato growers about intensifying competition from Mexico drove Guan to undertake his study.

“We want to have free trade, but also fair trade. That is what growers have been saying,” he said.

When it comes to tomato production, the United States and Mexico aren’t on an even playing field. That’s because in Mexico labor is so much cheaper and growers have the benefit of generous government subsidies. 

“The two countries had a series of trade disputes over fruit and vegetables recently,” Guan said. “One reason is that surging imports from Mexico boosted by subsidies have depressed prices, and American growers are quickly losing market shares.”

From 2001 to 2018, his study shows the Mexican government subsidized more than half a billion dollars in protected agriculture, primarily fruits and vegetables.

“The tomato is the No. 1 commodity subsidized under this protected agriculture program,” Guan said.

U.S. tomato growers don’t receive that kind of government support.

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Even if the subsidies suddenly stopped in Mexico, the capacity in Mexico has already been built up, including high-tech greenhouses, which can last for 20 years, or more, Guan said.

“The capacity is very real there,” he said. “Very large.” 

A deal that’s not working

The tomato suspension agreement — the outcome of a petition that accused Mexican growers of selling their tomatoes at unfairly low prices in the U.S. — set a floor price, or minimum selling price, for the fruit they ship into this country.

The on-again, off-again agreement between the U.S. Department of Commerce and Mexican tomato growers was last renegotiated and renewed in 2019, with improvements designed to “eliminate completely the injurious effect of exports” from Mexico to the United States.

However, Florida growers continue to complain the agreement isn’t working as it should, mostly due to a lack of enforcement in the U.S.

“I’m going to study the new suspension agreement and the impact,” Guan said. “That is the next plan.”

The agreement suspended an investigation into reports of Mexican growers dumping their tomatoes in the U.S. at prices below the cost of production. If the foreign growers didn’t sign the suspension agreement, they would have faced steep duties under the Trump administration.

The first suspension agreement was signed in 1996. There have been multiple iterations since then.

While Guan didn’t look into the effectiveness of the latest agreement yet, he points out the driving forces behind the surge in cheap exports from Mexico are still there — government subsidies and low labor costs, which aren’t likely to change anytime soon.

“Obviously, if this trend continues the industry in the U.S. is not going to be sustainable,” he said. “Something has to be done, either through trade policies or technologies.”

The competition from Mexico has more U.S. growers looking at using mechanical harvesting, or robotics and automation to save time and money in the field, Guan said.

He admits mechanical harvesting works much better for processed tomatoes than for fresh ones, which must be handled with a lot more care to safeguard their appearance in the grocery aisle — and when they ultimately make it onto the plate.

Fresh tomatoes are also harvested multiple times in a season, so it’s critical not to damage the plants with machinery when the fruit is picked, Guan said. 

Research is underway at UF/IFAS to develop a fresh tomato variety in the U.S. that only needs to be harvested once, he said, so the entire plant can be dug out of the ground, then separated from the fruit. 

“That is something that will take time. To get a new variety,” Guan said.

Help needed

If the federal government could direct more money toward research and innovation in the tomato industry, it could be a “game-changer,” he said.

“Growers can’t do a lot about this,” Guan said. “They rely on public research or private companies to come up with solutions.”  

He hopes to see growers and other industry leaders share his economic study with the country’s political movers and shakers to drive change. 

The North American Free Trade Agreement took effect in 1994 to encourage more trade between the United States, Mexico and Canada, but Florida tomato growers have long complained that they’re at the losing end of it.

In 1993, Mexico exported about 883 million pounds of tomatoes to the U.S. By 2019, that number had surged to more than 3.7 billion, Guan said. 

“I can see the local industry has been suffering and the national statistics show that,” he said. 

Michael Schadler, manager of the Florida Tomato Committee, said Mexico had a “big year” in 2020, despite having the new suspension agreement in place. 

While the agreement seemed to work “pretty well” the first year, he said, problems with enforcement surfaced in the second year. 

“There was just a lot of cheap tomatoes in the market last winter, basically from February to April,” Schadler said. The market was real cheap.” 

The committee is a marketer and regulator of the state’s fresh round tomatoes, which account for about 70% of Florida’s total production.

“If that volume wasn’t as high as it is from Mexico, there would obviously be a higher market and more demand for Florida tomatoes,” Schadler said.

Last season, Florida produced roughly 22 million boxes of round tomatoes, down 1.3% from the previous season — and 15% from two seasons ago.

Growers faced myriad challenges last year, including disruptions in supply and demand caused by the coronavirus pandemic.

The flood of Mexican exports into the United States doesn’t just impact Florida growers. Mexico is a year-round producer of tomatoes, so it hurts growers in other states, including California and South Carolina, Schadler said.

No surprise

The results of Guan’s study didn’t come as a surprise to Schadler or Florida growers. 

“We kind of know it because we live it every day in the marketplace,” Schadler said. “Whenever there is a surge of imports that come into the marketplace, we see what that does to prices.”

However, he said, it’s helpful to have an estimate of the lost economic opportunity for Florida and other U.S. growers by an independent researcher, as they continue to fight for greater protections, including more enforcement of the current suspension agreement.

“An agreement is worth as much as it can be enforced,” Schadler said. “Sometimes, they look good on paper, but they don’t necessarily work as well as you hoped.”

The growers who have stood the test of time in Florida are heavily invested in the “future availability of the Florida tomato,” he said.

“We still grow about 800 million pounds, almost a billion pounds, of tomatoes a year,” Schadler said. “We have some very strong companies, but it’s a struggle.” 

“Mexico accounts for over 60% of the volume of tomatoes that are consumed in the United States,” he added. “So they are the big player.”

In Florida, agriculture is important for many reasons, not just for the food it puts on the table and the jobs it provides, but the land it preserves, Schadler said.

“We just can’t continue to spread out and fill the land up with houses,” he said. “We can, but I don’t think that’s the best path to take.”

As tomato plantings get underway in Southwest Florida for the 2021-22 season, Schadler said the outcome will once again depend heavily on what happens in Mexico. Harvesting won’t kick into full gear in the region until late November, in time for Thanksgiving.

In the meantime, Schadler makes this plea to state residents: “Look for local, buy Florida tomatoes.”

“Hopefully, COVID continues to decrease in its impact and the state stays opened up and people get out and live life normally and eat out,” Schadler said. “That will certainly help our industry.” 

Florida grower Tony DiMare, a vice president for DiMare in Homestead and Ruskin, said Mexico’s continued growth and expansion in agriculture has encroached on most of his company’s crops, not just tomatoes, and the gluts and saturation in the U.S. markets has extended beyond winter, into the spring season, causing greater losses.

“Unfortunately, I haven’t seen any legislative changes and I don’t foresee any in the foreseeable future,” he said in an email. “My sense going forward is you will see an acceleration of the demise of our fruit and vegetable industry in Florida and other states across the country as this trend continues. There are too many inequities to overcome.”