Continued inflation industrywide, coupled with an unfavorable exchange for growers, is making life difficult for growers and distributors of fresh fruits and vegetables from West Mexico.
“Although its grip is softening, inflation has made an impact on the industry,” said Joanna Jaramillo, marketing manager for Amado, Ariz.-based Wholesum organic produce.
“We felt the pressure on profitability due to the high cost of inputs, transportation and labor,” she said.
Jaramillo said Wholesum has noticed a new dynamic that has evolved out of inflation: how consumers perceive value. That’s especially the case in the tomato category, which has a wide range of SKUs.
“The growing trend of high-flavor snacking within the tomato category reflects a broader shift in consumer preferences towards obtaining maximum value from their purchases that is not merely measured by quantity, but is rooted in the eating experience,” Jaramillo said.
Many consumers will pay a little more for the guarantee of a good, high-quality product, she said.
Nogales, Ariz.-based Delta Fresh also is feeling the effects of inflation, said Frank Camera, vice president of sales, marketing and business development.
“We feel it in the cost of production as packaging supplies, fertilizer, labor, transportation are all up, yet the sell-for prices and return to the ranch do not reflect all these upcharges,” he said, adding that this means the company must look for efficiencies everywhere it can.
As with most industries, produce distributors have seen direct and indirect effects of inflation in the supply chain, said Miguel Suarez Jr., sales manager for MAS Melons & Grapes, Rio Rico, Ariz.
“Everything from freight, seed, boxes, fertilizers and all growing supplies in general has experienced an incremental price increase compared to past years,” he said.
The company tries to serve the best interests of its customers and its grower partners, he said.
“We always want to give our customers the most competitive price and growers the best returns possible,” Suarez said. “This season we project a steady supply of high-quality watermelons and hope the market is favorable for most, if not all the season.”
Inflation is definitely hurting growers, said Steve Spence, director of sales for Nogales-based Earth Blend LLC.
“Labor is more expensive; materials are more expensive,” he said. “I definitely feel for the growers. There’s a lot of risk involved.”
Earth Blend does what it can to help its growers, he said.
Sometimes, suppliers rely on their retail partners to help them out, he added, “but it’s a challenge at times.”
“I think everyone realizes we need to work together if we’re going to keep growing,” Spence said.
Inflation also has increased the cost of production for Nogales-based Covilli Brand Organics, said Iris Montaño-Madrigal, marketing manager.
That includes the company’s most valuable resource — labor.
But the weakening dollar against the Mexican peso has been a major challenge as well, she said.
Jose Luis Obregon, president of Rio Rico-based IPR Fresh, agreed.
“The peso has been very strong against the U.S. dollar,” he said. In fact, it’s the strongest it’s been in six or seven years.
“That affects the growers because they sell in U.S. dollars, but still have to make payments in Mexican pesos,” he said.
But he said that could change after Mexico’s presidential election June 2.
Growers are losing 20% because of the unfavorable exchange rate, said Edgar Duarte, sales manager and partner with his wife, Karina, at Rich River Produce, Rio Rico.
A lot of product is staying in Mexico rather than being exported because of strong domestic sales, he said.
Almost all costs except labor must be paid in dollars, so growers are negatively affected by the exchange rate, Duarte said.
Montaño-Madrigal said she hopes that growers will be able to raise prices a bit this season.
“That would mean they are finally reflecting the ever-increasing cost of production that was significantly impacted by inflation after COVID, but has only put more stress on the farmers since markets continue to remain the same,” she said.
Jaramillo said she expects pricing to mirror last year’s trends in most of Wholesum’s commodity items, such as organic tomatoes-on-the-vine, squash and cucumbers.
“We expect higher pricing on specialty tomatoes this year,” she said. “This is a result of changes in certain production practices and packaging updates.”
