Agri Leader

Tomato prices issue again

JOHN BUCHANAN
Published: November 7, 2012

The battle between U.S. tomato producers and their Mexican competitors has taken an unexpected — and unwelcome — turn.

On Oct. 18, the New York Times reported that as part of current — and supposedly confidential — negotiations with the U.S. Commerce Department, the Mexican industry has proposed a new minimum reference price, which is the minimum price at which these tomatoes can enter the U.S. market.

This new price has been proposed in order to prevent domestic tomato producers from terminating an existing suspension agreement, which was negotiated between the two countries after a 1996 dumping case, where U.S. producers accused Mexican producers of selling at prices below their cost of production.

The current agreement sets a minimum price of 21.69 cents per pound for winter tomatoes. Under the new proposal, the price would increase to a range of 25.68 to 27.02 cents per pound, depending on the variety.

However, said Tony DiMare, vice president of Homestead-based DiMare Co., a major grower and shipper of Florida tomatoes, reference price is no longer the most relevant issue.

That's because Mexican producers have dramatically increased their volume of shipments into the U.S. in recent years, while also selling at prices below their cost of production — which is the very definition of dumping.

As a result, U.S. growers have sought to vacate the existing suspension agreement, which could allow them to bring a new dumping action.

On Sept. 27, the U.S. Department of Commerce issued a preliminary decision in a so-called change-of-circumstance review that, if it stands, will allow U.S. producers to terminate the current agreement.

But a larger issue is more critical, DiMare said.

"The crux of the matter is that the Mexicans, or any competing country shipping product into the U.S., cannot sell at a price below their cost of production," he said. "And to this day, the Mexicans have never provided information that reflects their actual current cost of production. So, the numbers they propose are meaningless until they can provide hard data on their production costs."

Reginald Brown, executive vice president of the trade group Florida Tomato Exchange in Maitland, agreed, noting that U.S. producers have no interest in sustaining the current agreement, even with an increased reference price.

"The only people clamoring to sustain it are the people it is supposed to be policing," Brown said.

The overarching issue, DiMare said, is the increased volume being shipped by Mexican growers.

"Mexico has a different industry today from the days when the existing suspension agreement was established," he said.

"They had no greenhouse production back then. So the numbers that have been established relative to the minimum reference price were directly correlated to only to open-field production. Now you have in excess of 40 percent of their exports coming from greenhouse production, which has higher investment costs. So the numbers being proposed now are meaningless until we know what their current costs of production are."

Meanwhile, DiMare said, his costs of production are such that he must be able to sell a 25-pound box of tomatoes for $10 — or for about 40 cents per pound — just to break even.

"The only way to resolve this problem is to determine what the real Mexican cost of production is and then establish a reference price that correlates to those costs," DiMare said. "That's what the U.S. Commerce Department is supposed to be doing."

The key questions DiMare and Brown want addressed by the Commerce Department are whether it has ever required the Mexicans to provide current data on their production costs and then tied a fair minimum reference price to those costs.

A spokesperson for the Commerce Department declined to comment, citing the confidentiality of current negotiations with the Mexican industry.

Based on the facts of the case and preliminary ruling from Commerce, both Brown and DiMare remain guardedly optimistic that domestic producers will ultimately be victorious.