Tomato growers, distributors and brokers in Santa Cruz County are bracing for price increases and possible layoffs in the wake of a new pricing agreement.
In response to complaints from Florida tomato growers that Mexican tomatoes were being undersold, the U.S. Commerce Department announced price increases earlier this week and the uncertainty of the impact has many worried.
Come March, when the new prices take effect, buyers could be looking at increases of up to 50 percent for the vine-ripened produce, which is used in everything from sauces and salads to ketchup and salsa.
"Fruits and vegetables are not medicine and consumers will simply not buy them if they're too expensive," said Jaime Chamberlain, president of Nogales, Ariz.-based J-C Distributing Inc.
He predicts the first impact will be on consumers of fast food, where the thickness or number of tomato slices could be reduced to make up for price increase.
The hit to shoppers in the produce aisles will depend on how much retailers are willing to reduce their profit margins, Chamberlain said.
The agreement with Mexico's tomato industry suspended an investigation that started when Florida tomato growers complained that Mexican producers were selling fresh tomatoes for less than the production cost. Some claimed that Mexican growers were bringing tomatoes across the border without a fixed price and taking any offer to sell them.
The Fresh Produce Association of the Americas, based in Nogales, led the fight for the suspension agreement, but its president said he was shocked by the amount of the increase - up to 10 cents per pound for wholesale.
Already some growers are talking about moving away from tomatoes to other produce.
"There is a feeling around Nogales that we're going to lose some market share and that's going to take some time to recover from," said Lance Jungmeyer, the produce association's president. "The industry is not going anywhere, but there will be a contraction."
He said it's "not as bad as it could have been" and avoiding a trade war with Mexico was critical to prevent tariffs on southbound goods.
Some believe the move was an attempt to close the U.S. market to tomato imports from Mexico and Jungmeyer said, "It will be a thorn in the side of U.S.-Mexican relations for years to come."
He said a bright spot in the agreement is the change in compliance requirements. Under the old rules, 85 percent of companies had to be in compliance or the whole industry was cited. The new agreement calls for 100 percent compliance but offending companies will be cited individually.
"That's a positive change because companies that are members of my association are in compliance and will not face punishment," he said.
Tom Karst, national editor of produce magazine The Packer, said U.S. growers are still expressing concern that Mexican growers and distributors will try to circumvent the new pricing schedule and sell their produce cheaper.
"If there are safeguards in place to make sure sales are done in the way they want, well then, prices will go up," he said. "How that affects the market going forward is the big question. At this point it's really speculation."
Nogales Mayor Arturo Garino planned to meet with distributors and brokers today to discuss the potential impacts. "As the leader of the community, I have to do what I can to support this industry," he said. "A lot of people in the community depend on it."
About $1.8 billion worth of tomatoes are processed through Nogales each year.
Contact reporter Gabriela Rico at email@example.com or 573-4232.