Several variables play on complex tomato market

03/18/2014 09:39:00 AM
Vicky Boyd

discussion on tomato trendsVicky BoydJim DiMenna (from left), president and chief executive officer of Jem D Farms, University of California agricultural economist Roberta Cook, and Martin Ley, president of Fresh Evolution, chat before the start of a panel discussion on tomato trends.TUBAC, Ariz. — With the tomato suspension agreement in place for about only a year, a University of California agricultural economist warned about jumping to conclusions about its effect on Mexican tomato imports.

“It’s too soon to draw conclusions about the impact of the higher prices of the new suspension agreement because it’s only been in effect since March 2013,” said Roberta Cook, a Davis-based Extension specialist who has studied tomatoes since 1985. “Just because we observe something went up and something went down, it doesn’t mean there’s any type of causality.”

Cook led a panel discussion on North American tomato trends at the America Trades Produce conference, March 13.

The tomato market is complex, with several variables coming into play, Cook said.

Even if the suspension agreement — which sets floor prices for four categories of imported Mexican tomatoes during the winter — does increase grower prices, she wondered what the supply response would be.

“With higher prices, the question arises, will growers plant more, eroding any type of price advantage they had?” Cook said.

The suspension agreement also covers only Mexican imports, not Canadian greenhouse or U.S. tomatoes.

Since the North American Free Trade Agreement was implemented 25 years ago, per-capita tomato consumption has risen to about 20 pounds from 15 pounds, Cook said.

A dramatic change has been the source of those tomatoes. No longer is Florida the dominant producer, its share having been displaced by Mexican imports.

For the three-year period 2011-13, Mexican imports averaged 1.36 million metric tons per year, up from an average of 312,000 metric tons annually between 1991-93.

Another major shift has been the make-up of the tomato category, Cook said.

“Recently we haven’t seen so much growth in total tomato consumption,” she said. “Really, what we’ve we’ve observed is cannibalism within the tomato category. Certainly, the specialties are playing a really important role.”

Foodservice still uses more than half of all mature greens. But that type has fallen out of favor with retailers and consumers, Cook said, citing retail scanner data (not including Costco and a few other warehouse stores).

Based on 2013 information, Cook said romas comprised 27% of the retail category by volume, followed by tomatoes on the vine (TOV) at 22%; grape with 14%; field-grown vine-ripe at 12%; and greenhouse round tomatoes with 9%. Field-grown round, excluding vine-ripe had only 7% of retail sales.

Broken down by value, TOV led with 23%; grape, 22%; roma, 16%; vine-ripe, 11%; minis excluding grape, 10%; and greenhouse-grown, 9%.

Martin Ley, president of Fresh Evolution, Nogales, said the migration toward protected culture — a term that includes greenhouses and shade houses — and specialty tomatoes has been market driven. Expansion into regions that were not traditional tomato production areas also is being driven by the market and its desire for year-round supplies.

“If you go into specialties, it’s very hard for a restaurant chain to have a very good tomato that’s going to drive sales, drive loyalty from the consumer, if you don’t operate year-round,” Ley said.

Canadian producer JemD Farms, which struggles to put out a quality greenhouse product in the winter, has started operations in Mexico to provide year-round supplies, said Jim DiMenna, president and chief executive officer.

Mexico’s domestic market also has changed. Tomatoes that couldn’t meet U.S. standards used to go to the domestic market, Ley said.

But Mexican consumers are becoming more discerning and demand a quality product. Those changes also provide opportunities to progressive Mexican grower-shippers, he said.

“If you can’t export to the U.S. profitably or above the suspension price, you need to move the product domestically,” Ley said. “Some of the Sinaloa exporters who have already developed that infrastructure have a better opportunity to move product into the market when they can’t meet the suspension price rather than importers who are entirely U.S. dependent.”



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Gary    
Florence  |  March, 21, 2014 at 02:25 PM

The Mexican tomato market has been at near allowable minimum prices for a few weeks but demand has not been there. I just heard, today, of horror stories of Mexican shippers dumping hundreds of thousands of pounds of tomatoes. Florida growers, at the same time, have had light supplies and light demand throughout the winter. Who are the winners this year?

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