Last week, Guadalajara was the venue for the 5th Annual Conference of the Mexican Association for Protected Horticulture (AMHPAC). An impressive two-and-a-half-day event took place, attended by some 400 growers and exporters and a good representation of US shippers and brokers — as well as a vibrant trade show running alongside. I was lucky enough to have been asked to make a presentation on the opportunities in international markets. On the way home – an 18-hour haul – I had time to reflect on what I had heard and learnt on my short, but exhilarating stay in Western Mexico.
The Mexican tomato sector has grown significantly in the past 20 years and is now in the top 10 producing countries in the world. In this context, however, it is still some way behind the real industry giants, such as China (40 million tonnes), the US, India and Turkey (between 10 – 12 million tonnes) and the main EU-based producers such as Italy and Spain, with around 5 – 6 million tonnes per annum.
Mexican production is still large, at around 3 million tonnes per annum, but the protected sector has seen massive growth in the last 5 years – some 250% – and has been driven largely by exports to the US market. Modest exports to Canada, and even more so to Japan, make up the balance, but it is the US that has been the key to success for the Mexican sector to date. Exports have carried on increasing over the past 5 years, and have gone from around 1 million tonnes to almost 1.5 million tonnes. So far, so good.
The Mexican industry appeared to me as being initially one full of confidence and opportunity. During the first day of the conference, a long term agreement was signed with the Netherlands Embassy in Mexico for shared work on R&D, varietal developments, technology transfer and joint trade missions. This struck me as being both innovative and different from what we see in many countries, where attitudes to sharing information can be more cautious.
But are Mexican protected horticultural producers any different from farmers around the rest of the world? Every sector, every country, has of course its own set of issues and challenges – but in my mind, some of the things we hear from farmers around the world are often much the same – and can be summarized as believing the following:
• “We are the best”
• “The competition is subsidized and/or disorganized”
• “We do not get paid enough for our product”
• “It’s not our fault … processors, exporters, importers, retailers and consumers – and even governments – do not understand”
• “We have a unique micro climate”
• “Last year was a bad year”
• “The answer is to produce more”
• “People will always want our products”
It is our experience at Promar that sometimes these statements are true – and sometimes, actually often, they are not. It took me about half an hour to hear all of these things repeated to me in Mexico.
And there are potentially a series of problems ahead too. The most pressing of these is the fact that the Mexican industry is faced with the accusation of dumping onto the US market. This will be tested by the US Department of Commerce.
During the conference, a vote was passed to raise almost US$1 million to fund a legal defence of this case. Impressive – but the stakes are, of course, high. It struck me that every last cent of this might be needed. The dispute has been rumbling on for some dozen or so years already, and despite what the Mexicans see as a strong case, there are invariably two sides to every story.
Time will tell, of course, as to the final outcome, but higher import tariffs for Mexican imports would be a blow to the sector, not least when most other Central American suppliers to the US enter the market duty-free. There appears to still be doubts too on issues of food safety and the commercial discipline needed to supply the US market on a consistent basis in trends of both price and quality. While labor costs in Mexico are lower than in the U.S., there were concerns expressed over productivity levels. These issues still clearly need attention.
All this pointed to an industry that had enjoyed terrific success in the North American market, but which at the same time had ignored calls for a more diversified approach to other international markets — in the EU and Asia in particular, not just for tomatoes, peppers, eggplant and cucumbers, but for the wider range of the “Mexican basket”. And while there have been noises to diversify both products and markets in the past – while “the good times rolled” in the U.S. – these have been, for whatever reason, largely ignored.
What has happened as a result is that, with a potential headache in their only real export market, this industry has, at the moment, no real Plan B. This is always a dangerous position to be in. One is needed and needed quickly. As I concluded in my own presentation, the strategic options for the Mexican industry are actually, thankfully maybe, relatively limited – but still need careful analysis. As always, doing something about it is more challenging. This industry has enjoyed significant success in the past 10 years, but the saying “when the going gets tough, the tough get going” never seemed more appropriate.
The immediate future market environment for this sector looks challenging, but show me a country or sector that doesn’t see it that way. With the increased demand for fresh produce globally over the mid to long term, the relatively low Mexican reliance on energy for heating greenhouses, ongoing investment in the physical infrastructure, the development of a new and supportive framework from government for support to the agri food sector, per se, and the other advantages that Mexico enjoys — all led by a progressive trade association in AMHPAC – points to an industry that will continue to grow.
An agreement with the Dutch on R&D seems a further smart move. Further consolidation of the supply and export base is required, however, as has been seen in other Latin American countries, to avoid the danger of throat-cutting intra-industry competition and to give the Mexican sector more critical mass to invest and develop international markets. Most of all, that “Plan B” is surely needed now, more than ever.
John Giles is a Divisional Director with the leading UK-based agri food consulting firm, Promar International, which is a subsidiary of Genus plc. He is also the current Chair of the Food, Drink & Agriculture Group of the UK Chartered Institute of Marketing. He can be contacted at john.giles@genusplc.com
Source: John Giles, Promar International