Facing The ‘Tomato Cliff’ If Trade Pact Scraped
A new pricing study finds that American consumers are facing a “tomato cliff” that will result in huge premiums for fresh tomatoes at the supermarket, or else they will be forced to go without fresh tomatoes, if the U.S. terminates a trade agreement with Mexico at the request of a group of Florida growers.
If Mexican tomatoes are forced to withdraw from the U.S. market, prices for popular varieties such as hothouse tomatoes on the vine would double from the national average of about $2.50 a pound to nearly $5 a pound, and grape tomatoes would rise to nearly $5.50 a pound, according to an economic impact analysis by the Nielsen Perishables Group for the Fresh Produce Association of the Americas (FPAA).
“A ‘tomato cliff’ is fast approaching,” said FPAA President Lance Jungmeyer. “For all practical purposes, time is running out for the U.S. Department of Commerce to reach an agreement with Mexican growers on the floor price for imported fresh tomatoes.” (Click here for more information on the challenges facing the Florida tomato industry.)
“If we don’t see a deal soon to continue the tomato suspension agreement, U.S. consumers will face markedly higher tomato prices,” Jungmeyer added. “It’s a supply and demand market and Florida growers are trying to keep Mexican supply out of the market, which will mean higher prices at the grocery store.”
Consumers already will see expendable income for food drop this year, due to the continuing drought in the Midwest that has the Federal government predicting food prices to be 3% to 4% higher this summer, according to the USDA’s Economic Research Service.
The study team, led by Dr. Tim Richards, Morrison Chair professor of Agribusiness at Arizona State University, included in their analysis the historical impact of a prolonged freeze in February 2011 that greatly reduced volumes of Mexican tomatoes. “We found that if Mexican imports are excluded from the U.S. market, retail prices during the December-May timeframe can be expected to rise by 97.9% for hothouse round, 96.9% for hothouse vine, 61.3% for snacking, 217.2% for Roma, and 52.1% for field tomatoes,” Richards said in his report.
The result is likely to be an overall decrease in U.S. consumer demand for fresh tomatoes during the winter season, and quite possibly on into the spring-summer growing season, Richards added.
“If Mexican tomatoes are kept from the market, retailers will be forced to raise prices to consumers,” Jungmeyer said. “If the price doubles, demand will surely drop, and there may be permanent damage to American consumers’ love affair with tomatoes,” he said.
“This is like playing Russian roulette with America’s pocketbook,” Jungmeyer added.
Tomatoes Are Number One
Tomatoes recently became the No. 1 purchased fresh vegetable in the U.S., according to Fresh Trends consumer data. Mexican growers supply more than 3 billion pounds of popular tomato varieties annually to U.S. distributors and wholesalers that in turn supply supermarkets and restaurants. The greenhouse and field-grown Mexican varieties account for more than half of the U.S. winter supply of fresh tomatoes. Mexican tomatoes make up nearly 43% of fresh tomatoes available from June through November.
More extreme winter weather, as many parts of the U.S. have experienced in recent years including Florida agricultural areas, only adds to the risks associated with limiting imports. “There is a very real possibility that a weather calamity could leave shelves nearly bare of tomatoes,” Jungmeyer said.
“In three of the last five winter growing seasons, Florida has been hit by hurricanes or freezes that seriously hurt tomato supply,” Jungmeyer said. “Aside from Mexico, Florida is the only viable option for winter tomatoes. With Hurricane Sandy, we have seen that weather patterns have become more erratic. We can only assume that Florida will continue to have its tomato fields hurt by weather at the most inopportune times.”
In September 2012, the Commerce Department announced plans to terminate a suspension agreement that has been in place since 1996 after receiving complaints from a group of Florida growers.
More than 350 letters have been sent to Commerce from a variety of U.S. business, retail, and food-producing organizations, including the U.S. Chamber of Commerce, Walmart, National Restaurant Association, Food Marketing Institute, and numerous U.S. agricultural producer groups, expressing support for retaining the U.S.-Mexico tomato trade pact.
Study Highlights From U.S. Regions
In a scenario where 100% of Mexican tomatoes are excluded from the market, and 50% of U.S. supplies are damaged from a freeze or hurricane, there would be more acute impacts to local markets. Here are some examples:
Pacific (including California, Oregon, and Washington): hothouse tomatoes on vine latest year average retail price of $2.72 per pound would increase 100% to $5.46 per pound; snacking tomatoes that now are $4.28 per pound would rise 73% to $7.41 per pound; and Roma tomatoes that are $1.18 per pound would jump 401% to $5.93 per pound.
New England (Maine, Vermont, New Hampshire, Rhode Island, Massachusetts, Connecticut): hothouse tomatoes on vine latest year average retail price of $2.64 per pound would increase 185% to $7.36 per pound; snacking tomatoes that now are $4.28 per pound would rise 246% to $11.26 per pound; and field tomatoes that are $2.06 per pound would go up 147% to $5.08 per pound.