Tomato Markets Brace for U.S. Withdrawal of Fresh Tomato Suspension Agreement

July 2019 -


Overview

Back in early February, the US Department of Commerce announced plans to withdraw on May 7th from the 2013 Suspension agreement on Fresh Tomatoes from Mexico. While renegotiation efforts are in the works, there does not appear to be a compromise reached at this time.

It is expected that if the US withdraws, a 17 and half percent tariff will be placed on Mexican tomato imports and the department will resume its antidumping investigations. US fresh tomato producers have contended that the agreement has not been working and has been harming domestic growers; leading to suppressed US prices, declining US production and increased imports.

So what does withdrawing from the agreement mean?

While the exact ramifications are unknown at this time,

  1. Fresh tomato prices would certainly increase for consumers and U.S. fresh tomato producers. Recent analysis from Arizona State University estimates that consumer fresh tomato prices could rise 40 to 80 percent.
  2. There is likely going to be some consolidation in the fresh market, and
  3. On the processed tomato side - While short-term acreage impacts are expected to be minimal, as acreage has already been contracted and planted for this year, there could be marginal ramifications for next year
  4. and while typically delinked, upward pressure on processed tomato prices is expected.

This will certainly be something to keep an eye on as things unfold.