Mexican imports continue to hurt U.S. tomato prices, new report shows

LAKELAND – A food researcher has published a report showing tomato imports from Mexico could cost American growers as much as $252 million per year – a 27% drop in revenue – if they increase by 50% in coming years.  

Zhengfei Guan, the associate professor of food and resource economics at the University of Florida Institute of Food and Agricultural Sciences, based his figures on historical trends. 

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“The findings from our study will provide tomato producers and policy makers with important insights on the challenges and the sustainability of the U.S. tomato industry,” Guan said. 

He looked at imports of fresh-market tomatoes from Mexico.Thanks in part to the North American Free Trade Agreement, which was ratified by Canada, Mexico and the United States in 1993, the volume of Mexican tomatoes entering the U.S. market went from 883 million pounds to 3,740 million pounds between 1993 and 2019. That amounts to a 424% increase.

NAFTA, which was replaced with the US-Mexico-Canada Agreement in 2020, was considered beneficial to all three countries' economies, but it has harmed some industries in certain regions of the US, including specially produce farms in Florida. Not all crops in the U.S. were harmed by the trade agreement as some crops are major exporters to Mexico, Guan said.

In Florida, the USMCA did improve trade for some food markets, especially for Florida dairy farmers and poultry producers selling to Canadian buyers, according to the Office of The United States Trade Representative. 

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Florida is the largest producer of fresh tomatoes in the United States and the state’s crop supplies grocery stores and restaurants domestically and abroad. California is the largest producer of processed tomatoes.  

While USMCA is now the overarching agreement covering trade of all products with Mexico, tomato imports from Mexico are subject to a Suspension Agreement between the U.S. Department of Commerce and fresh tomato growers in Mexico. 

The agreement ensures Mexican exporters to the United State sell tomatoes at or above a reference price. That agreement was last updated Sept. 19, 2019, and applies to all fresh and chilled tomatoes except tomatoes for processing. 

Michael Schadler, executive vice president of the Florida Tomato Exchange, meanwhile says the agreement is not working as well as it should.  

“We don’t think the suspension agreement has proven to be as effective as it needs to be to protect U.S. tomato farmers,” Schadler said.

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 There are thousands of Mexican growers and numerous ways to get around the trade regulations, Schadler said, including bundled pricing of tomatoes with other specialty crops such as berries and peppers. This makes it too difficult and complex for government agencies to enforce the pricing in the suspension agreement, he explained. 

“We are an industry under siege,” he said. 

Unfairly traded imports with other countries could threaten US control of the food production if the country becomes more reliant on imported food. Agriculture drives rural economies and closing down farms leads to increased urban sprawl.

“I believe the American people fundamentally want to be in control of our own food production,” Schadler said. 

Florida farmers continue to suffer a disproportionate economic injury, according to Florida Department of Agriculture and Consumer Services. Overall, the annual losses of between $1.31 billion to $2.63 billion in agriculture in Florida equates to up to 35,741 job losses and up to $88.5 million in lost tax revenues for the state, according to an August 2021 report by the FDACS.

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Guan's new research further supports the industry report.

“Growers are sustaining losses, while importers and some other commodity groups (corn and soybeans) are benefiting from the trade deal,” Guan wrote. “These groups were fighting against the fruit and vegetable industry in the process of NAFTA renegotiation (and in recent trade hearings),” he added.

The trade deficit complicates matters for farmers in several commodities – not just tomatoes. Specifically, fruit and vegetables – such as tomatoes, strawberries, peppers, cucumbers and melons – accounted for 50% of the total U.S. agricultural imports from Mexico in 2020, according to the U.S. Department of Agriculture. 

Labor is the biggest cost

Florida grower Todd McClure at West Coast Tomato is well aware of the challenges of bringing tomatoes to market. His family has farmed tomatoes since the 1920s and the family-owned farming enterprise stretches 3,000 acres throughout Manatee and Hendry counties. 

As minimum wage rises on Friday in Florida to $10 per hour, McClure said labor is the largest overhead item for growers. However, his family of famers has a culture and approach to the industry that keeps the business profitable. Migrant workers and other employees return during the growing season, and some have stayed more than 35 years, he said.  

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The current rate he expects for a 25-pound box of tomatoes is $8, which he characterized as “stagnant” in terms of prices over recent years. But hurricanes and freezes can reduce supply and bring better prices some years.  

Regarding imports from Mexico, he added, “Free trade is not necessarily fair trade.” 

His company looks for ways to improve profit margins through compensation to workers  by hourly wage plus an incentive of 70 cents per basket. That way pickers do not harvest crops too early during the growing season to cash in on incentive-heavy earnings programs. If pickers were only paid per amount they pick, late season harvests can suffer because tomatoes may be picked too soon and that impacts the quality and volumes and ultimately sales. .  

“We pick at the height of maturity, firmness and the right fiber so the tomatoes can withstand shipping,” he said.  

Other ways to improve profitability include spraying the crops with just the right amount of fungicides and not over spraying so growing-related expenses can be reduced, which helps in years when prices are low. 

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Florida's tomato industry has about $400 million in sales and has the same harvest seasons as Mexico. West-central, southwest and southeast Florida are the biggest tomato-producing areas in the Sunshine State. 

In addition to extremely low labor cost in Mexico, Guan said the Mexican government has spent 45 billion U.S. dollars from 2006 to 2016 subsidizing growers of its major crops, including tomatoes, blueberries and strawberries. 

He said the Mexican program offers up to 50% of the costs up to $200,000 for growers to purchase greenhouses and shade structures for “protected agriculture,” which improves production and the quality of crops.  

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Although still in development, technology in the next decade or so could further reduce costs associated with harvesting tomatoes.

Samuel Hutton leads the UF/FIFAS research into breeding tomatoes, and he is working on tomato varieties that would be more amenable to machine harvesting.    

“If we could mechanically harvest, this would have a huge impact on the industry,” Hutton said.

The processed tomato market went completely machine harvested over the course of a decade in the 1960s, he explained.  

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Fresh tomatoes, however, present unique challenges. The crop grows on a stem with a joint that is retained after picking and they can puncture surrounding tomatoes making the machine picked crop unsaleable.   

The machines themselves need to be developed to avoid banged or bruised tomatoes. That would be for machines harvesting the entire plant, which would have to have enough fruit on them to make a single harvest economical.  

If varieties with more than a single harvest were mechanically picked, the machine would have to clear stakes and possess enough artificial intelligence to choose only ripened crops during the first harvest, saving still growing tomatoes for the next picking.  

According to agricultural robotics startup, Future Acres, the global agricultural technology market could reach nearly $87.9 billion by 2025. The company website stated several orders for the Carry companion robot for crop transportation for delivery starting this year, and by 2025 wants to have precision solar powered spraying and crop picking farm equipment using robotics and artificial intelligence.