Market Condition Alert: Produce From Mexico
What We Know vs. Rhetoric We're Hearing
In recent days, there has been much discussion about our relationship with Mexico in terms of trade and labor. Those conversations have been of concern to all of us in the fresh produce industry as we have signiﬁcant import / export relationships with growers in Mexico, and know that produce operations in the states rely heavily on migrant workers and a steady ﬂow of fresh produce from Mexico throughout the year. The produce business is often rife with uncertainty, and we are no stranger to cost increases and decreases stemming from issues related to weather, labor, supply & demand, and more.
But, we have seen industry leaders (championed by industry organizations such as United Fresh & PMA) clearly articulate the importance of free, and fair trade with Mexico in communication with the current Presidential Administration and Congress.
There has been a media frenzy revolving around the possibility of a U.S. / Mexico border shut down. Although a lot of what is being published is political rhetoric, the reality of the situation is it could have a severe impact on our industry as a whole. Delays, supply shortages, and higher prices will be the immediate results, followed by prolonged price increases for American and Canadian consumers and a possible loss of business across the supply chain. As of now, this is all speculation. There is a lot of discussion and uncertainty amongst the shippers utilizing Mexican produce. Precautionary measures are being taken where possible, but in large part, the closure is out of their control. Below are the commodities that may be affected if a closure were to occur, and the steps we are taking to mitigate any possible issues. For now, we know we will undoubtedly see some delays at the border as a result of the protests, increased Customs and Border Protection, ports of entry potentially being closed to commercial trafﬁc on Sundays, and the bottleneck effect of trafﬁc through ports of entry into the U.S. Here is a look at the current supply situation if a shutdown of the U.S. / Mexico border does occur:
Supplies will become immediately tight and markets will become very active. Currently, shippers are trying to get as far ahead as possible in preparation for a shutdown and the Easter pull. All asparagus is presently sourced from Mexico, so this could severely impact supplies. Taking into consideration the already limited production because of Holy Week, a border shutdown could affect supplies for the foreseeable future.
Fruit is limited as we speak. The industry will run out of Mexican fruit in just a matter of weeks. Mexico is our primary source for avocados, as California is just getting underway and overall is expected to produce 50% less fruit this year. Peruvian fruit will not be an option until May and will peak in July. Prices continue to increase daily and will continue to grow for the next few weeks. Mexico Supplies the US with avocados year round. Peru and California combined could not supply the volume demanded. Chilean fruit will start up in September.
Unfortunately, due to the already limited supplies of mixed berries, trying to plan for a possible shutdown is not feasible. As we stand today, the volume of Mexican berries crossing the border daily is not adequate to cover current demand. Trying to stockpile fruit in preparation is not possible. Furthermore, domestic harvest on mixed berries is still three weeks away from starting. If we do see a border shut down, we will see an immediate supply gap in raspberries, blackberries, and blueberries. Strawberries will not be affected as domestic production is increasing daily.
Supplies will become immediately tight, and markets will become very active. Currently, shippers are trying to cross as much fruit as possible in preparation for a shutdown and the Easter pull. All limes are sourced from Mexico, so this could severely impact supplies. While markets have ﬁnally started to come off, most suppliers are expecting to see increased activity by the weekend. Taking into consideration the already limited production because of Holy Week, a border shutdown could affect supplies for the next 3-4 weeks.
Row Crop / Value-Added
Value-added and commodity suppliers are preparing for a closure on Sunday. To be proactive they are harvesting ahead as much as possible without compromising quality and shelf life. That said, nearly all of these items that are currently being harvested in Mexico are also being harvested domestically. Although we may see some further supply gaps, should a closure occur, we should be able to navigate through the situation with domestic production.
Soft Veg Shippers in the Nogales area remain optimistic and conﬁdent that the hype around a border shut down will not have any long term effect on supplies or market prices. Although they are well aware of the information being shared, they feel the current quality and supply situation is such that we should not see any signiﬁcant interruption in order fulﬁllment. All veg items are being traded at normal market value today without any panic of an immediate supply gap. We are being assured that supplies should remain consistent, even with a temporary shutdown.
Even though we have domestic production in Florida through June and moving north into other domestic growing regions through the Fall, Mexico currently represents 60-70% of supplies in North America. California’s start is expected to be delayed because of consistent rains throughout the last two quarters (planting season), the border closing would tighten supplies, and fruit would remain scarcely available.
In closing, we feel it is unwise to speculate on policy that has been proposed in speeches, on social media, and via passing conversation, but we know that this causes the kind of anxiety that can affect companies and people, which is why we are choosing to issue this statement. At this point, we don’t foresee the current political climate adversely affecting supply but are working with our supply community to ensure that we will have access to all commodities currently being sourced from Mexico, through alternate channels. We are keeping a close watch on this conversation and will keep you posted in the future.