Mexican tomato industry experiencing vast changes

NOGALES, AZ— For Mexico’s tomato industry, the 2019-20 season will always be remembered for a new set of rules, imposed against the trade by the U.S. Department of Commerce.

This saw an end to temporary tariffs and kept floor prices to prevent dumping. This winter, due to a short supply, Mexican tomato prices have been so high that floor pricing has not been an issue

There are new DOC rules requiring 92 percent of the Mexican tomatoes entering the U.S. be inspected by the USDA. To give Mexican tomato handlers time to prepare for the massive inspection, those new rules won’t be effective until April 1.

Furthermore, on Nov. 15, 2019, USDA’s Animal and Plant Health Inspection Service acted “to prevent the introduction of tomato brown rugose fruit virus into the United States and protect U.S. tomato and pepper production worth more than $2.3 billion annually.”

A November APHIS notice also indicated, effective Nov. 22, “restrictions on imports of tomato and pepper seed lots and transplants from all countries where the virus exists as well as restrictions on tomato and pepper fruit imported from Mexico, Israel, and the Netherlands. Because Canada imports tomato and pepper fruit from Mexico that may be re-exported to this country, USDA will also require Canada to inspect tomato and pepper fruit to ensure it is free of disease symptoms prior to export to the United States.”

APHIS and U.S. Customs and Border Protection inspectors were to increase inspections of tomato and pepper seed, plant, and fruit imports entering from countries where the virus is known to occur and Canada and will take action to keep any infected products out of the country.”

Chris Ciruli, a partner in Ciruli Bros. LLC, notes of the new rules, driven by Florida tomato interests, “if the intent was to have more restraint on trade, they got it.”

Ciruli Bros. is a large shipper of Mexican Round and Roma tomatoes.

Ciruli noted that tomatoes are the largest-volume Mexican item shipped through Nogales.

As happened with the original Tomato Suspension Agreement, “we will get used to it. It will take a while to get back up” to normal operations, Ciruli said.

Ciruli and other Mexican tomato interests debate the merits of the virus policy, questioning if it’s a scientific decision or a trade barrier.

Steve Yubeta, the vice president of sales and marketing for Farmers Best International LLC, said his firm will adapt to these new restrictions placed on the Mexican tomato industry.

He notes that Mexico’s tomato industry is much larger than it was when the TSA was first positioned.

Of the USDA inspections, he noted that inspection volumes in the peak shipping period “will be a big challenge.”

Thanasi Panousopoulos, the managing member of Delta Fresh Sales Inc., said the DOC-required USDA inspections of Mexican tomatoes will impact prices at destination because of the costs to distributors.

Delta Fresh operates a cavernous new cold storage in Nogales that has the space to accommodate the many tomato inspectors needed for the firm’s 120 truckloads a day.

Yubeta noted that the Mexican table grape industry, which ships many millions of boxes in a few short weeks in the spring, had challenges with the inspection service at the beginning, “but they really stepped that up and became more productive. Before harvest, they asked about our volume and get ahead of the game before the peak production of grapes.” These lessons are being applied to oncoming tomato inspections.

Yubeta said in this first season of new arrangements, “the rules of the game” need to be clarified.

Because of weather-induced supply problems in the 2019-20 season, “initially we have to make sure our product availability is timely to the commitments we have.”

Yubeta added that, given low supplies and high tomato prices this winter, “we’ve not been close to the minimum price since it went into place.”

Panousopoulos also said the Tomato Suspension Agreement will have no impact on tomato minimum prices this year, because persistently angry weather has disrupted Mexican supplies to a great degree. Thus, Mexican tomato prices have been far above minimums established by the U.S. Department of Commerce.

So, those minimums “I don’t think will be an issue this year,” Panousopoulos concluded.

Yubeta said he could not think of any positives about the new Tomato Suspension Agreement. The near-term need is to work through the first season. “This really has teeth to it. You’ve got to be conservative as you get to know the rules.”

Matt Mandel, COO of SunFed, said his firm expects to receive tomatoes this March from Obregon, Sonora.

Mandel said the industry was waiting to see the impact of greatly expanded USDA inspections of Mexican tomatoes.

“While I lobbied hard for common sense to prevail, only the Mexican tomato producers were involved in the actual negotiation of the agreement with Commerce.

“We tried to explain to the U.S. Department of commerce that they had bad data” on Mexican tomato imports, Mandel continued. “This led to bad decisions” by the DOC.

Specifically, Commerce officials believed the new requirement for USDA inspections would involve about two-thirds of the Mexican tomato imports. Correct data would have shown that 92 percent would have to be inspected to comply with new rules.

“This is the hand we were dealt, and we will make the best of it,” Mandel said. “Every barrier they put in place, while painful in the short-term, will only be better for the industry.”

Craig Slate, the president of SunFed, added, “All the barriers, including the upcoming tomato inspections only push imports to up their game to an even higher level. Whether it is food safety, quality, or consistency of supply, the results are already top notch and getting higher. For SunFed, importing or domestic, will always be ‘Best in Class’, no matter the obstacles we face.”

Slate continued that the barriers placed against Mexican tomatoes “just make good competitors stronger.” He said, “I would prefer domestic tomato industry work closer with importers to increase consumer demand and not focus on putting up import barriers to restrict supply.”

Panousopoulos noted that 17.5 percent tariffs that were placed on the import of Mexican tomatoes early in 2019 were withdrawn with the final round of Tomato Suspension Agreement discussions. Although tariffs will be refunded, for large shippers that tariff outlay took a significant toll on cash flow.