Organics
In addition to individual commodity trends, organics have been on the rise. Part of the increase is due to consumer demand; another factor is a reduction of the price spread between organic and conventional items, making organics more affordable.
“We’re expanding our organic lines after experiencing a 20 percent increase in demand last year,” says Arizona Sky’s Franzone. “Most of the demand is at the retail level, some in wholesale, and a little in foodservice. I think overall health consciousness is driving the trend—people are more aware of what they’re putting into their bodies.”
Five years ago, organics at the wholesale level were about 50 percent more expensive than conventional, Franzone explains. Today, this gap is down to about 20 percent for most commodities. He also said retailers might be further discounting organics to move them quickly, as they may not have the same shelf life as conventional fruits and vegetables, which can also make price points attractive to consumers. Additionally, over the past several years, more growers have been getting into organics, thereby increasing yields and lowering prices.
Weather and The Winter Deal
Reports of heavy rain during the growing season in the Sonora region of Mexico and Baja California continued to fuel speculation about possible shortages during the Winter Deal.
Some of the effects were evident as the Deal began. Fresh Farms’ Havel reported production issues with soft squash, including yellow and gray varieties, as well as
zucchini and watermelon too, resulting in a ‘tight’ market. “If you were a grower that wasn’t affected by the rain, it’s a great market,” he notes. If the reverse is true, however, Havel figures f.o.b. (free-on-board) pricing would be inadequate to cover production costs.
Like Havel, Suarez from MAS Melons already knew the rain had affected melon crops. “The rain is definitely going to have an impact on us, particularly our melons,” he says. In response, he exlpained, “We are separating our No. 1 and No. 2 melons to keep the quality more consistent. I would say we’ll end up with 15 to 20 percent of our crop as No. 2s this year.”
For Mike Righetti, managing member at Righetti Farms, LLC in Rio Rico, the effects were unclear as the winter harvests got underway. He believed the “rain will affect everyone”—the question was how much. It was, however, just like every other year of growing and shipping fresh produce, dealing with the unpredictability of the weather, freight rates, driver shortages, a roller coaster market, and continually shifting consumer demand.
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After years of research, development, planning, and construction, the newly renovated and expanded Mariposa Land Port of Entry is finally open for business. Nogales, home to the Mariposa Port, handles more than a third of all Mexican produce coming into the United States, and the improvement are vital to the increasing flow of trade with Mexico and Central America.
Mariposa: Past, Present, and Future
Nogales has a rich history of border crossing and trade. Originally a trade route for indigenous societies, the crossing was later used by gold-seeking Conquistadors. The first Mexican-American border in the region was built in 1918.
In 1973, the port of entry was built to divert commercial traffic away from Nogales’ heavily constricted Grand Avenue crossing. Over the decades, as more and more produce and other goods crossed the border from Mexico to the United States, the original port became too small to handle the traffic and volume.
The Rebuild Project
To alleviate lengthy delays and increase border-crossing efficiency, the Mariposa Land Port of Entry underwent a $244 million remodel that began in 2009 and was completed in August 2014. The Port officially reopened on October 15, 2014.
The recent remodel project included the acquisition of 13 additional acres around the port, and installation of solar power panels and other energy efficiencies that contribute to heat and light, as well as rainwater harvesting.
According to the Greater Nogales – Santa Cruz County Port Authority, the facility will now be able to process more than 4,000 trucks per day, ranking among the largest in the nation in throughput capacity. This will certainly help with produce imports—over the past decade, fresh and processed fruit and vegetable imports from Mexico have steadily increased from 8 billion pounds to 15.5 billion pounds, and the number of trucks crossing the border from 212,000 to 386,000.
In addition, the Arizona Department of Transportation added more lanes to the interstate artery and access road from Nogales (I-19) on the U.S. side of the border. Geographically, Nogales is ideally located where the I-10 and I-19 corridor intersects with Mexico’s highway 15, the main northbound route for products from Mexico’s western coast.
Another positive is the recent extension of the Nogales Foreign Trade Zone to include all of Santa Cruz County. This means receivers and distributors who qualify could receive significant tax benefits and duty deferral or relief. And with one of the nation’s largest collection of repacking and distributions hubs near Nogales, this is good news indeed.
Two Steps Forward, One Step Back?
Of primary concern with the new port of entry has been staffing. The new facility is still understaffed, which leads to some delays during peak periods. Yet the Fresh Produce Association of the Americas (FPAA) and other proponents have addressed the problem over the past several years, resulting in an additional 120 U.S. Customs and Border Protection officers allocated to the Mariposa Port as part of the 2014 Omnibus Spending Bill.
Allison Moore, director of legislative and regulatory affairs at the FPAA, says it’s not just the port or lack of staff causing delays. “You have to look at the whole process,” she explains. “Some of the delays we’re seeing are caused by Federal Motor Carrier Safety Administration (FMCSA) inspections and U.S. Food and Drug Administration (FDA) inspections.
“We’re working on making the whole process more efficient, even after having solved the infrastructure problems,” emphasizes Moore. “The new port of entry is significantly more efficient already, and we will continue pushing Congress to get the additional staff we need, which is not a unique need for Nogales, but at every port of entry.”
One development, according to Moore, is a federal initiative to improve the Automated Commercial Environment, or ACE, a system that connects all U.S. agencies with oversight of imported goods. For example, it will enable customs agents and the FDA to communicate electronically, and Arizona Department of Transportation and U.S. Department of Transportation FMCSA personnel to work together more efficiently on truck inspections.
Additionally, new methods of delivering produce from Mexico to the United States are being explored. “Long term, we are potentially looking at rail or intermodal as a solution to transporting needs,” Moore says. “We’re on the main route for rail tracks going from Sonora to Arizona, and rail is already carrying cars, coal, and grain. Rail and intermodal are possibilities for making produce delivery more efficient.”
Ongoing Rivalry: Arizona and Texas
Given the ever-increasing demand for produce from Mexico and Central America, there are more than enough fruit and vegetable imports to go around—but this hasn’t stopped the rivalry and rhetoric between receivers in Arizona and Texas.
Certain reports showed an increase in border volume at Texas ports, leading some to conclude Nogales is losing ground. This is despite the fact that 37 percent of all Mexican produce delivered to the United States crosses at Nogales, according to the U.S. General Services Administration.
“People keep thinking it’s a win-lose thing; that Texas will win and Arizona will lose, or vice versa,” comments Chris Ciruli, COO at Ciruli Brothers, LLC in Nogales. “That is not the case—if you look at the past couple years, you see growth at both borders and this is because there’s more produce coming out of Mexico overall.”
More importantly, Ciruli points out is the “reality that both Texas and Nogales are viable options, and for distributors, it’s not either/or, but they can use both, depending on where the crops are coming from. With the new infrastructure, though, Nogales will be more competitive for the next couple decades. In fact, the wait times over the last few months have been longer in Texas than Nogales.”
The Best of Both Worlds
A growing number of suppliers deal with both Arizona and Texas, shipping from whichever port will have the shortest distance to their customers. “Some of the big players are building warehouses and starting to ship through McAllen,” confirms Tony Garcia, president of Border Transport, Inc., in Nogales. “It’s more cost-effective for their customers in the Midwest and north.”
“There’s truly a ‘rising tide lifts all boats’ dynamic in produce today,” observes Robert Bennen Jr., president of Ta-De Distributing Company in Nogales. “Having the two major ports of entry is a boon to our retail chain customers and their customers alike. With the reopening of the expanded port in Nogales, we’re planning on greater volume through Nogales, while McAllen continues to serve the needs of distributors specifically shipping to the Eastern states.”
“We have seen an uptick in all shipments from Mexico,” agrees Moore, who believes part of the jump in volume can be attributed to increased production from Mexico’s central growing regions.
Freight Costs
Choosing the right port and getting across with minimal delays is only half the battle. Freight rates, especially from Nogales to California, continue to climb.
“Last year, the rates from Nogales to Los Angeles soared, while trucks became increasingly scarce,” recalls Miguel Suarez, sales manager at MAS Melons & Grapes, LLC. “California’s stricter regulations on trucks further limited supply. We ended up buying our own trucks; part of the reason is we ship a lot of product to Japan on future pricing with freight factored in, and the wild rate fluctuations weren’t working well for us.”
Most all distributors have been adjusting to new regulations in California and the nationwide rollout of FMCSA’s more restrictive hours of service rules. “It will be interesting to see how the Department of Transportation rules play out,” says Border Transport’s Garcia.
“We can’t make as many runs, and we have to be more careful with hours and driver time, especially when loading can take half a day,” Garcia explains, adding, “We haven’t tried putting two drivers in a truck for longer routes yet, but to do that the freight rates would have to come up even more, and I’m not sure how many customers could bear it.”
“We tend to get truck teams with two guys,” comments Roberto Franzone, director of Arizona Sky Produce, Inc. in Nogales, who delivers up to its other location in Brampton, Toronto. “Nogales to Toronto is a fourth-morning delivery, or two days with two guys. The laws are there for a reason.”
Franzone said when he started in the business 20 years ago, a truck to Toronto was $2,000, and today the average is around $6,000 for the trip.
Fluctuating Fuel Rates
On the other hand, recent drops in fuel pricing may offset some of the increased freight rates and truck shortages that distributors and growers have experienced in recent years.
“Freight will probably stay the same or even go down a little due to the dropping price of fuel,” suggests Jerry Havel, director of sales and marketing at Fresh Farms, in Rio Rico. “I think we’re looking at a more stable year, and a lower fuel cost would be helpful.”
“Freight was rough last winter,” admits Ciruli. “Rates were very high. It’s hard to gauge ahead of time what the rates will be each year. But, in our favor this year,” he notes, echoing Havel’s remarks, “are weaker gas and diesel prices.”
Ciruli also mentions that extreme temperatures can impact fuel pricing and usage, and given last year’s Polar Vortex episodes in the Midwest and Eastern Seaboard, this year could have much of the same. If Buffalo, NY’s experience—seven feet of snow in some regions in mid-November—was any indication, it could be another wildly unpredictable winter.
Trending Commodities
Last year, nearly 5.5 billion pounds of produce crossed the border from Mexico into Nogales. Responding to increased demand, a number of growers expanded acreage of key commodities. Among the fruits and vegetables riding the surge in demand are oranges, up 295 percent to 51 million pounds; melons, up 78 percent to 657 million pounds; cantaloupe, up 52 percent to 39 million pounds; squash, up 23 percent to 447 million pounds; and cucumbers, up 14 percent to 587 million pounds. Exotic fruits and ethnic vegetables have also enjoyed climbing popularity, as well as a perennial favorite, tomatoes.
Ethnic and Specialty Items
“We have definitely seen increased interest in ethnic products, such as Asian eggplant, and specialty items such as bitter melon,” says Bennen. “With an increase in the immigrant population in the United States, we see future growth in this sector and have expanded our production of ethnic produce.”
Franzone, too, commented on the rising demand for ethnic produce. “Over the past five years, we’ve increased sales of Asian produce,” he confirms. “Kabocha squash, Japanese and Indian eggplant, bitter melon, Fairytale pumpkin, and Don Qua squash—some of these used to be decorations on shelves, now they’re regular items, particularly in the mom-and-pop stores that cater to ethnic consumers.”
FRESH FORUM
Have traffic flow and inspection times improved since completion of the Mariposa Port reconfiguration?
Miguel Suarez
MAS Melons & Grapes, LLC
I hear about delays, but for us it hasn’t been a hindrance. We don’t experience many delays because of the port.
Chris Ciruli
Ciruli Brothers, LLC
Wait times are down, and there’s a lot more space… Nogales is a role model for future port of entries as far as the depth of the docks and the available space. The spatial layout is fantastic, and now we just need some more staff. Once the positions are filled, we’ll see faster turnaround times.
Jerry Havel
Fresh Farms
The port is much better; it’s a huge improvement. Like anything new, there are some issues, but overall it is great.
Allison Moore
Fresh Produce Association of the Americas
There are still delays at the border; that will always be an issue. The bright spots with Mariposa are the new technology and that we’re getting some new staff. We no longer have the worst border wait times; things look good and are improving.
Robert Bennen Jr.
Ta-De Distributing Company
As for our company, traffic flow and inspections have proceeded as usual, and we expect even greater efficiencies with the new port expansion—since there will be more lanes and personnel devoted to inspections.
Roberto Franzone
Arizona Sky Produce, Inc.
What we’re hearing from the drivers is that in years past, there have been significant delays—but this year hasn’t been as bad.
Augmenting selection with the introduction of new varieties is good for business, Franzone says, and certainly good for consumers. He hopes box stores like Costco might start sampling new varieties of produce versus processed food to introduce these items to the mainstream. “Very rarely do you see a supermarket cutting up baked squash and letting people try it,” he comments.
While high-end retailers or specialty stores may provide samples of lesser known fruits and vegetables to shoppers, Franzone wishes all retailers would do the same. Not only are these often-exotic commodities interesting additions to meals, but delicious too. “Maybe it’s time the retailers introduce new fruits and vegetables to people; it expands their horizons and it’s good for them.”
Staples and Hispanic Vegetables
As grower-shippers and suppliers transitioned to the Winter Deal in Nogales, many of what are generally referred to as the staples—such as cucumbers, squash, and honeydew melons—were available. These items filled warehouses as receivers waited for the next round of product, finishing the year with tomatoes, including the ever-popular Roma and other varieties.
At Ciruli Bros., these commodities and more were filling the warehouse in the last quarter. “We’re also seeing a growing trend in Hispanic items,” Ciruli added. “In fact, many of these have transitioned from strictly Hispanic items to mainstream items, including tomatillos, serranos, jalapenos, and, of course, avocados.”
Helping maintain demand is the increased use of protected agriculture. “Mexico has strong greenhouse, shade house, and other protected agriculture,” says Moore. “This allows growers to manage Mother Nature and growing seasons better. In Canada, you have to turn on the heat to grow in a greenhouse; in Mexico, you just have to keep pests, wind, and rain out, so it’s more efficient.”
According to the U.S. Department of Agriculture (USDA), Mexico accounts for nearly three-quarters of the U.S. import market for greenhouse tomatoes, with Canada’s share taking up the rest. This may change in the ensuing years, however, as more U.S. growers are turning to greenhouses for steady supply unaffected by the weather and water shortages. Though the initial costs can be significant, more greenhouses are popping up across the nation, including urban greenhouses on rooftops, which often supply local farmers’ markets, retailers, and restaurants.
While the purpose of greenhouses is largely to manage weather, control pests, and grow consistent, high-quality crops, shadehouses are a much less expensive option and help can control these factors as well. A number of growers were transitioning some crops into shadehouses; even so, the bulk of Mexico’s harvest remains field-grown fruits and vegetables.
This is true for MAS Melons & Grapes, LLC, which continues to grow most of its produce in the field. “Right now, 99 percent of our crops are grown in open field,” says Suarez. “That includes honeydew, watermelon, table grapes, and cantaloupe. Our cantaloupe goes to the Japanese and Mexican markets, and our grapes go all over the world—New Zealand, Eastern Asia, England, and Central America. We’ve also jumped into avocado and broccoli to meet demand in Japan—which has worked very well for us.”
Organics
In addition to individual commodity trends, organics have been on the rise. Part of the increase is due to consumer demand; another factor is a reduction of the price spread between organic and conventional items, making organics more affordable.
“We’re expanding our organic lines after experiencing a 20 percent increase in demand last year,” says Arizona Sky’s Franzone. “Most of the demand is at the retail level, some in wholesale, and a little in foodservice. I think overall health consciousness is driving the trend—people are more aware of what they’re putting into their bodies.”
Five years ago, organics at the wholesale level were about 50 percent more expensive than conventional, Franzone explains. Today, this gap is down to about 20 percent for most commodities. He also said retailers might be further discounting organics to move them quickly, as they may not have the same shelf life as conventional fruits and vegetables, which can also make price points attractive to consumers. Additionally, over the past several years, more growers have been getting into organics, thereby increasing yields and lowering prices.
Weather and The Winter Deal
Reports of heavy rain during the growing season in the Sonora region of Mexico and Baja California continued to fuel speculation about possible shortages during the Winter Deal.
Some of the effects were evident as the Deal began. Fresh Farms’ Havel reported production issues with soft squash, including yellow and gray varieties, as well as
zucchini and watermelon too, resulting in a ‘tight’ market. “If you were a grower that wasn’t affected by the rain, it’s a great market,” he notes. If the reverse is true, however, Havel figures f.o.b. (free-on-board) pricing would be inadequate to cover production costs.
Like Havel, Suarez from MAS Melons already knew the rain had affected melon crops. “The rain is definitely going to have an impact on us, particularly our melons,” he says. In response, he exlpained, “We are separating our No. 1 and No. 2 melons to keep the quality more consistent. I would say we’ll end up with 15 to 20 percent of our crop as No. 2s this year.”
For Mike Righetti, managing member at Righetti Farms, LLC in Rio Rico, the effects were unclear as the winter harvests got underway. He believed the “rain will affect everyone”—the question was how much. It was, however, just like every other year of growing and shipping fresh produce, dealing with the unpredictability of the weather, freight rates, driver shortages, a roller coaster market, and continually shifting consumer demand.
Yet even with some fickle weather, production in Mexico and exports to the U.S. continue to rise year after year. Nogales, through the virtue of its very location, along with its concentration of produce professionals, has always been uniquely qualified to handle the influx of fresh fruit and vegetable imports from Mexico.
Now, with the long-awaited renovations and expansion of the Mariposa Port complete, the city and surrounding county are especially well equipped to handle the flow of U.S.-bound produce with more space, more qualified personnel, and greater efficiency.
Image: Shutterstock
