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On May 7, the U.S. Department of Commerce is slated to drop the Tomato Suspension Agreement and its minimum price provision, replacing it with a 17 percent duty on all tomatoes imported from Mexico. Experts are predicting that this will result in fewer tomatoes on the market and higher prices for all tomatoes, but organics could be hit especially hard, as even a small fluctuation in supply could greatly alter the demand dynamic.
Ricardo Crisantes, Wholesum Family Farms
Ricardo Crisantes of Wholesum Family Farms Inc., Nogales, AZ, noted that there are ongoing talks to sign a new agreement in the next couple of weeks, but even if that happens organic tomatoes will be disproportionately impacted. The current agreement sets different minimums for tomatoes depending upon the time of season and the production technique, but it does not single out organics. “If there is a new agreement, we understand that the floor price for organics will be established at a specific percentage above the conventional price,” Crisantes said. “Either way (suspension agreement or tariffs) organic tomato prices will rise in May.”
With the uncertainty surrounding the suspension agreement, it is next to impossible for U.S. retailers to set up late spring or summer promotions for tomatoes: organic or conventional. “We just have to wait and see what happens,” said Joe Bernardi of Bernardi & Associates Inc., Turlock, CA, which specializes in brokering tomatoes. “It’s definitely going to have an impact. May should be a pretty good month for prices.”
Speaking specifically about organic tomatoes and anticipating that the agreement will be ended in early May as scheduled, Crisantes said Mexican growers will have to think twice about which organic tomatoes to send to the U.S. market. “I think they will still send their higher-priced larger fruit, but I think the smaller fruit, which usually is sold for lower prices, won’t be shipped up here.”
He reasoned that after adding the 17 percent tariff, the fruit just won’t be able to compete in the U.S. market against U.S. organic tomatoes---- and Mexican growers won’t incur the risk of shipping into the U.S.
Setting aside the impact of that suspension agreement decision, Crisantes said organic romas are expected to see a rising June f.o.b. price as Mexico’s production from the state of Sinaloa winds down in April and finishes up in early May. There is production coming from other areas, such as Baja California, but it is not as voluminous, on a daily basis, as the industry has seen from Sinaloa this winter. However, Crisantes said there should be a good supply of organic beefsteak tomatoes over the next couple of months with both Mexico and southeast United States having production. Again, putting aside the suspension agreement impact, he said organic beefsteak tomatoes could offer promotional opportunities.
Alex Leon, who handles organic sales for Bernardi & Associates, agreed that organic roma tomatoes are in the midst of a rising market. On Wednesday, April 24, he said the most desirable large organic romas from Mexico were selling for $20-$23 per flat but supplies were dwindling. He said the smaller fruit was in the $14 to $17 range. Leon said organic tomato production is shifting to Baja, which should mean lower supplies and higher prices through May.
Also weighing in on the supply situation with a similar account was another shipper of organic tomatoes from Mexico. “Most Mexican tomatoes finish up in Culiacan by about May 1,” said Michael DuPuis, Divine Flavor Inc., Nogales, AZ. “But we have production in Ensenada (in Baja California) and Sayula (in Jalisco) to bridge the gap during the summer months and take care of our customers.”
Each of those facilities are state-of-the-art greenhouses with strong production of their signature grape tomatoes as well as tomatoes on the vine and romas. In addition, the company has a greenhouse operation in Hermosillo, which is expected to have beefsteak organic tomatoes until the end of May. DuPuis said the company has relatively good supplies of organic tomatoes during the summer but its peak period for the category is in the December to May period when Mexico’s winter production areas are going full bore. He agreed that a rising organic tomato market seems likely over the next couple of months.
Crisantes said merchandising strategy needs to be employed when U.S. retailers are marketing organic tomatoes.
He called romas, beefsteak and tomatoes-on-the-vine (TOV), which can often have an attractive price, the consumer’s entry point to organic tomatoes. He believes the excitement and the driver of the category is the high-flavor, high-quality snacking tomatoes, which are always at a higher price point. He believes organic shoppers are predisposed to looking for great tasting options and are willing to pay it.
Wholesum Family Farms has been increasing its production of these multi-colored, smaller tomatoes. “We experimented in the winter with 200 boxes per week with great success,” he said. “We doubled production for the summer at 500 cases per week and we expect to the double that again next winter. That’s where we see the category going. The organic consumer is always looking for a better experience.”
