Mexican tomato distributors continue to urge the government to reduce proposed import prices, and some are preparing for declines in business as March 4 — the day that those prices are scheduled to rise — approaches.
Ending months of speculation whether the fresh tomato suspension agreement would be dropped and perhaps replaced by an anti-dumping investigation, the Commerce Department announced the new draft suspension agreement on Feb. 2. The agreement sets different floor prices for Mexican fresh tomatoes during the summer and winter and also specifies prices for open field/adapted-environment and controlled-environment production. Compared with current prices of 21.69 cents per pound in the winter and 17.2 cents per pound in the summer, the new reference prices climb to 31 cents per pound in the winter and 24.58 cents per pound in the summer. The agreement also calls for winter reference prices as high as 59 cents per pound for specialty tomato varieties.
“We don’t know what is going to happen,” said Raul Castillo, customs broker with Raul Castillo Customs Broker, Hidalgo, Texas.
“There are going to be problems,” said R.A. Lizarraga, part owner of the Associate Brokerage, Nogales, Ariz. “The consumer is the one who is going to be hurt,” he said.
By mid-March, Lizarraga predicts unemployment in Nogales could rise to near 30%.
“Tomatoes is the name of the game and if there are no tomatoes, it is going to be rough for the entire city,” he said. “It is going to be a Mexican mess.”
Lizarraga said Mexican government officials should go to Washington, D.C., to meet with President Obama to resolve the dispute.
Robert Bennen, president of Ta-De Distributing Co., Nogales, said he doesn’t have much hope that importer objections to the higher prices will make a difference.
“They might be able to change small details about it, but I think it is a done deal.”
Bennen said he has already been approached by a salesman for a job, after he was laid off because of the proposed price increases.
Bennen said he believed Florida tomato interests were able to put Mexican growers back against the wall with the threat of antidumping duties. “(Growers) were forced to take a deal that will, I think, make it very very hard to do business in the U.S.,” he said. “I think it will hurt or even halt tomato business out of Mexico.”
Compared with the current minimum prices, the new agreement would impose a minimum price of about $2.50 per carton higher on a 25-pound carton of romas, he said. The prior agreement was workable, Bennen said, because the minimum price was below the season price average. While a distributor might average $8.50 per carton for romas during the year, the current minimum of $5.85 per carton allows for the natural peaks and valleys of the market. He said the new minimum price is set at the level of historical price averages, leaving no room for a slack market.
Asking growers to plant tomatoes for the U.S. market only when prices are high is difficult, he said.
“It is not a faucet you can turn on and off,” he said.
The new minimum price of $8.30 per carton of open-field tomato romas compares with $6.85 per carton roma price in mid-February.
“If you were looking at an $8.30 (minimum), I wouldn’t be able to ship them right now,” Bennen said.
He said he hopes the March 4 market is above $8.30 per carton.
“If it is not anywhere near that or below that, tomatoes are going to stay in Mexico and won’t cross,” he said.
That could create upward pressure on Florida prices and soon increase the appeal of growing tomatoes in countries like Honduras and the Dominican Republic.
Bennen said a new component of the agreement is the possibility of Perishable Agricultutral Commodities Act sanctions with prices below the minimum.
“I could be put out of business with any sales that are below the minimum,” he said.
That will make distributors reluctant to risk losing their whole business on tomatoes, he said.
Asked for comment on the USDA’s role in enforcing the suspension agreement, a statement from the Agricultural Marketing Service said “the proposed agreement currently includes language stating that violations of the suspension agreement could also be found to be violations of the PACA.”
In addition, the proposed agreement might mandate that the selling agent should be a PACA licensee.
“PACA will not have a specific role in monitoring of prices, nor record keeping, but will, as it does in normal course, accept, analyze, and investigate legitimate complaints of violations under PACA provisions,” the USDA said in the statement.
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