U.S.: Tomato prices could nearly double in case of Mexico duties, says FPAA

April 23 , 2019

U.S. consumers could end up paying 40-85% more for tomatoes if the country implements punitive duties on Mexican tomatoes, according to new economic analysis by Arizona State University (ASU).

It found that the price spike could be experienced if the U.S. withdraws from the Tomato Suspension Agreement with Mexico, as it announced in early February, giving the required 90-day notice.

According to a release by the Fresh Produce Association of the Americas (FPAA) – which opposes withdrawal and commissioned the analysis –  if the U.S. Department of Commerce withdraws from the agreement on May 7 and applies duties on Mexican tomatoes, consumer prices could rise up to 40% in the period from May to December.

During other periods, such as the winter, prices for certain varieties like vine-ripened tomatoes, tomatoes on the vine and Romas could rise more than 85%, according to the analysis, which relies on data from AC Nielsen.

“This makes no sense. Most Americans crave certain kinds of vine-ripened tomatoes, and now they are going to have to pay more, significantly more,” said Lance Jungmeyer, president of the FPAA.

Led by Dr. Timothy J. Richards, Morrison Chair of Agribusiness at ASU, the analysis evaluated the impact the withdrawal will have on prices consumers pay for four varieties of tomatoes – Tomato-on-Vine (TOV), vine ripe, Roma, and Field/Beefsteak – under several market scenarios.

Terminating the suspension agreement, the analyst found, will reduce the supply of tomatoes in the U.S. market, and raise prices paid by U.S. consumers, particularly during the winter tomato season (October through June).

“In general, tariffs levied on imports of fresh produce from Mexico are borne disproportionately by U.S. consumers,” said Dr. Richards. “In this analysis, we show that retail tomato prices in the U.S. may rise by an average of approximately 40% if tariffs remove a substantial proportion of the Mexican supply during the critical winter-tomato supply period.”

If something were to happen to the remaining supply of U.S. tomatoes during this period, Dr. Richards said, the potential impact on retail tomato prices would be even more substantial.

“In this regard, imports serve a critical shock-absorber function for U.S. retail markets, given the frequency and severity of supply shocks from weather, disease, or even labor-related events,” he said.

Assuming that the imposition of duties reduces the supply of Mexican tomatoes by 50%, consumers in the May to December time frame could be paying up to 47% more for TO, for instance. 

In January, in addition to disease loss, domestic supplies also are prone to reductions due to freeze or frost. In a more extreme case in which a 50% reduction in January imports from Mexico and an 80% reduction in U.S. production occur simultaneously, price increases for vine ripe tomatoes are expected to be up over 86%, according to the analysis.

“The unmistakable conclusion of the study is that withdrawing from the Tomato Suspension Agreement will cost American consumers substantially more for a product that has become a major part of their daily diets,” said Jungmeyer. “Americans can’t afford this kind of sticker shock.”

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