Agri Leader

Tomato prices could rise

JOHN BUCHANAN
Published: February 13, 2013

A major decision announced Feb. 2 by the U.S. Department of Commerce could sharply increase the cost of tomatoes for U.S. consumers.

After a hard-fought seven-month battle between U.S. tomato growers and their Mexican competitors, led by Maitland-based trade organization Florida Tomato Exchange, USDOC granted a request from U.S. producers that the reference prices — or the lowest prices at which Mexicans can sell different varieties of exported tomatoes — be increased significantly.

The decision raises reference prices for four product categories between 43 and 179 percent, which in turn reduces the ability of Mexican growers to dump product at prices deemed unfair. The new prices, which vary seasonally between July 1 through Oct. 22 and Oct. 23 through June 30, take effect March 4.

Not only do the higher reference prices discriminate against Mexican producers, but also they will mean higher prices for U.S. consumers, said Lance Jungmeyer, president of the Nogales, Ariz.-based Fresh Produce Association of the Americas, which represents the interests of the Mexican industry.

"As a result of the new reference prices, Mexican tomato volumes are going to be limited significantly," Jungmeyer said. "No one knows yet exactly what the market impact of that is going to be. But I do expect that U.S. consumers will see higher prices."

Between December 2011 and last May, Jungmeyer said, a 25 percent reduction in Mexican exports led to a 26 percent increase in U.S. tomato prices.

"Now we are in a situation that is going to have negative impact on the ability of Mexican growers to sell in the U.S.," Jungmeyer said.

That's because only Mexican producers are required to abide by the new pricing.

"No other growers, from the U.S. or Canada or anywhere else in the world, have to sell at those prices," Jungmeyer said. "They can sell at whatever price the market dictates. And there has not been a situation in recent years, taken for the whole year, that comes anywhere close to these new floor prices."

In effect, Jungmeyer said, the new decision gives U.S. growers an unfair market advantage.

"At this point, Florida growers have an unfair advantage," Jungmeyer said. "And that will serve no one but the self-interests of an inefficient Florida industry."

Florida growers, he added, face challenges such as disease pressures and pests that led to higher production costs. By comparison, Mexican growers are not impacted by the same problems. In addition, he said, Mexican growers have been more innovative in modern practices such as greenhouse production that yields a high-quality product much more efficiently.

"Some Mexican growers produce at four times the amount per square foot of their U.S. counterparts," he said. "And they should be rewarded for that, not penalized."

Reginald Brown, executive vice president of Florida Tomato Exchange, dismissed Jungmeyer's characterization of the situation.

"Only about 20 percent of the product coming out of Mexico is from greenhouses," he said. The real issue all along has been about an unfair advantage enjoyed by Mexican growers because of their ability to sell at artificially low prices.

"And we are still concerned that the current reference prices have not been based on Mexico's real costs of production, as they should be, according to existing statutes," Brown said.

As a result of that concern, the new agreement announced by USDOC includes a provision that Mexican production costs be investigated and verified one year after the agreement takes effect.

And that action could increase or decrease the newly announced reference prices.

"If their costs are lower, as they claim they are, the reference price will go down," Brown said.

Tony DiMare, vice president of major tomato grower DiMare Company in Homestead, said, "The real outcome of this new decision remains to be seen. The whole crux of it is going to be enforcement by the Commerce Department. And based on past history, I think they are going to have their hands full when it comes to enforcement."