Mexico’s North American Lineup

What it takes to keep exports flowing north

September 5, 2018 - Produce Blueprints, By Amy Bell

Blueprints Edition Date: July 2018

Although Growers Union supplies berries to the United States to fill winter gaps, López says there is some overlap with domestic production. “We only deal with Mexican berries from October through May,” he explains, “when there’s an overlap of Mexican and U.S. blueberries, it drives down prices.” Nevertheless, he hopes American consumers will recognize the quality of Mexican blueberries, and demand for the berries will continue to rise in the future.

Mango Madness
Mexico is the top exporter of mangos worldwide, and the sweet stone fruit is produced commercially in growing regions across the country. Production hovers around 2 million tons of mangos each year, with a large portion of this bounty exported to countries across the globe.

Last year, Mexico set a new record for exports of fresh and dehydrated mangos to the United States, with a combined total value of $334 million. Fresh mango exports reached $278 million—the highest in history. Each year, the state of Michoacán alone ships more than 42,000 tons of mangos to the United States and 6,000 tons to Canada.

According to the Ministry of Agriculture, the unprecedented increase in Mexico’s mango exports are the result of high-quality, flavorful fruit and top-notch food safety and phytosanitary standards. The Ministry reports that Mexico’s top three mango exporters, the states of Sinaloa, Michoacán, and Nayarit, have been deemed free of the fruit fly—a major mango pest.

Other Commodities on the Move
Despite the immense popularity of avocados, berries, and mangos, Mexico has many other produce exports filling trucks each day—as evidenced by the millions of tons of fruit and vegetables shipped north to the United States and Canada.

Mexican fruit and vegetable exports are soaring to record levels to meet demand from American and Canadian receivers. As the top supplier of fresh produce to the United States and the second largest source for Canada, we take a look at how and why this flow of shipments continues to climb as millions of tons stream across the border each year.

Deconstructing Supply and Demand
While the United States and Canada source a significant amount of Mexican fruit and vegetables to fill seasonal gaps, this is not the sole reason behind the ongoing surge in imports. Several other factors are driving this upward trend, from favorable exchange rates and improved packaging to faster shipping and growing demand for Hispanic cuisine among American and Canadian consumers.

Bumps in trade between the United States and Mexico are often tied to the peso-to-dollar exchange rate. After rising for several months, the peso fell sharply in mid-April, losing more than 5 percent against the dollar, then began climbing again. When the dollar is strong and Mexican produce imports are less expensive, U.S. suppliers always want to take advantage of these favorable economic conditions.

Cultural Exchange
Two other factors, the growth of the Hispanic population in the United States and Canada, and the surge of interest in Hispanic cuisine, are also propelling demand for imports. As more consumers enjoy the extensive flavors found in Hispanic cuisine, they seek out the fruits, vegetables, and spices used to create these dishes.

This coincides with growing interest from “foodies” as well, who enjoy exploring new cuisines and ethnic dining experiences. Hispanic staples like salsa, tortillas, tacos, hot peppers, beans, and of course, avocados, continue to gain popularity across the board.

In 2017, more than 233 million Americans purchased Mexican food and ingredients to create their own meals, according to a Simmons National Consumer Survey. Further, for those who wanted to dine out, there were nearly 60,000 Mexican restaurants across the United States as of last year. Both were good news for wholesalers and importers.

Mounting demand is also attributed to the growing Hispanic population in the United States and Canada. Hispanics continue to represent the largest minority in the United States, and the only country with a larger Hispanic population is Mexico.

According to U.S. Census estimates, there are currently 55 million Hispanics residing in the United States, accounting for more than 17 percent of the American population. The Bureau forecasts this number will rise to 119 million Hispanics living in U.S. states by 2060. Hispanics are also one of the faster growing ethnic groups in Canada, with an estimated 1 million Latin Americans living in the nation.

Shipping & Transportation
The uptick in Mexican produce imports can also be ascribed to faster, more efficient shipping routes. According to the Center for North American Studies (CNAS), nearly 90 percent of all Mexican fruit and vegetable imports reach the United States via land ports in Texas and Arizona—and on a smaller scale, New Mexico and California.

As Texas and Arizona compete for market share, both states continue to offer improved transportation through technology and road remedies, from faster and more direct routes to better efficiency at ports of entry. This remains crucial as CNAS predicts produce imports from Mexico itself and other countries coming through Mexico will continue to rise over the next five years.

As Texas tries to attract more traffic, the Hidalgo Port of Entry and Rio Grande Valley remain a significant lure to distributors crossing into Texas. The region is home to Pharr International Bridge, frequently referred to as the “Intelligent Bridge” with all its bells and whistles. The 3.2-mile full-service commercial artery connects Pharr with Reynosa in Mexico, and remains a top produce route for exports into the United States.

For its part, the Mariposa Port of Entry in Nogales, AZ underwent a number of improvements several years ago to facilitate the expanding flow of fresh produce coming into the United States. And though both Texas and Arizona receivers have enjoyed this successful maneuvering, both were hit by difficulties earlier this year when part of the cross-country Durango-Mazatlán superhighway was shut down.

The 140-mile stretch of highway, which opened in late 2013, was damaged by a tanker truck explosion in January. Nearly 9,000 feet of this vital trade route was damaged on the El Carrizzo suspension bridge. Though the accident caused a major disruption to shipments headed to the United States, fortunately, two lanes of the bridge were reopened in April. The remaining lanes are slated to be open and fully functional by late August.

Recognizing Quality
Omar Losolla, director of sales and marketing for GreenPoint Distributing, LLC in Rio Rico, AZ, believes imports are on the rise because Mexican growers have significantly raised the bar on quality and food safety. The shipper is grower-owned and has operations in both Rio Rico and McAllen, TX.

“We control the operation from seed to table,” Losolla points out and says new field innovations, state-of-the-art greenhouse operations, and enhanced food safety standards are all giving Mexico-grown produce a very real competitive edge.

“There’s a market for Mexican imports because the produce is high quality,” emphasizes Losolla. While price is important, he says most American consumers buy produce with their eyes. “For a lot of Americans, quality is number one,” he adds.

“I think Mexico can pump premium quality produce into the United States, day in and day out,” Losolla continues. “That’s why we’re seeing the import rates increasing, because there’s demand for it. People are buying it, and customers are asking for it by name. They go to the markets and ask for Mexican cucumbers, Mexican squash, or Mexican tomatoes.”

To top it off, many Mexican suppliers now offer fruit and vegetables all year. “We rarely have gaps, except a little bit in the summer—and we’re even starting to fill those gaps,” Losolla explains. Marketing is also key, keeping Mexican-grown produce front and center with consumers. “They’re exposed to our product all the time; they understand it’s good product.”

Labor & Regulation
Another reason for the spike in Mexico imports is the low cost of labor south of the border. “In the United States, our labor is at a minimum of $8 an hour, whereas in Mexico it’s $8 a day,” points out Jeff Fawcett, sales manager with Bagley Produce Company, Inc. in Edinburg, TX. “That’s a huge difference, so the competition is lopsided. We’re not even competing on the same baseball field.”

Fawcett also cites the U.S.’s regulatory atmosphere as helping his Mexican counterparts in growing and shipping. “There’s heavy regulation on the U.S. side,” he says. “We’re regulating ourselves out of being an agriculture country.”

Losolla counters, believing Mexican growers face plenty of oversight on their side of the border. “We’ve proven ourselves to consumers here in the United States, that we grow and compete at the highest level when it comes to food safety,” he remarks.

“The government is certainly not making it easy for Mexican importers, and rightfully so,” Losolla continues. “They’re demanding we comply with all food safety regulations, and the U.S. Food and Drug Administration (FDA) is stepping up with even more demands with the new Food Safety Modernization Act (FSMA) laws.”

He also points out that U.S. suppliers would not source Mexican produce without this level of scrutiny. “The big companies in the United States that can’t produce their own product in the winter wouldn’t be buying from or growing in Mexico if Mexican growers weren’t playing by the rules,” he stresses. “So I believe that’s another reason why imports are on the rise.”

Last but not least is the location advantage. Thanks to Mexico’s proximity to the United States, American importers can quickly gain access to fresh-picked produce from south of the border. “We have a logistical advantage over the rest of the world,” observes Losolla. “Other countries can’t compete because they have to boat or fly in product.” Better yet, he notes, is some of the company’s Mexican farms are only a three-hour drive from the U.S. border.

Nagging NAFTA Concerns
While a deluge of fruits and vegetables continues to cross the border for the time being, some produce professionals worry North American Free Trade Agreement (NAFTA) renegotiations could throw a wrench into future trade. Created in 1994 to increase the flow of goods across North America, NAFTA eliminates most import tariffs and reduces nontariff trade barriers.

According to the Center for North American Studies, U.S. agricultural exports have skyrocketed from $46.2 billion in 1994 to $134.9 billion in 2016, a 192 percent increase. In the same time span, U.S. agricultural exports to Canada and Mexico mushroomed from $10 billion to $38 billion, a 288 percent increase.

If NAFTA talks fall apart and the United States pulls out of the deal, these numbers could potentially plummet. It’s difficult, however, to predict exactly how NAFTA renegotiations will impact produce trade between Mexico, the United States, and Canada. With new tariffs on other regions of the world, creating turmoil with Mexico does not seem like a favorable plan, but few are placing bets on which way it will all go.

“I’m not sure how it will affect business,” acknowledges Fawcett, echoing the thoughts and mixed feelings of many along the fresh produce supply chain. “It’s kind of like immigration—I don’t know what answer will be conducive to everybody. Some parts of NAFTA would benefit me, but it might hurt another commodity. It’s hard to tell what’s going to happen.”

Top Crops & Hot Exports
While Mexico is a top exporter for a string of fruits and vegetables, a few specific commodities continue to move with lightning speed…

Ample Avocados
It’s no secret that Mexico grows tons of avocados, primarily in the Pacific Coast state of Michoacán. Often referred to as ‘green gold’ by the nation’s growers, Mexican avocados account for nearly half the world’s production.

The Michoacán town of Tancítaro alone ships out more than $1 million worth of avocados every single day. This one town is solely responsible for 80 percent of all U.S. imported avocados. An unfortunate side effect of Tancítaro’s success is becoming a target for criminal cartels and threats of extortion. In response, the town formed its own armed vigilante group for protection, at an estimated cost of $1.2 million a year.

Avocados are second to only tomatoes as Canada’s largest agri-food imports from Mexico. According to Statistics Canada, the country’s avocado import volume increased by more than 255 percent from 2006 to 2016—and another 11 percent from 2015 to 2016. More than 95 percent of Canadian avocado imports come from Mexico.

As for the United States, avocados are the nation’s number one fruit import from south of the border, representing 22 percent of all Mexican fruit imports in volume. It is important to note that although the United States imports the lion’s share of its avocados from Mexico, both California and Florida produce the fruit and dominate regional supply during their growing seasons.

Avocado imports from Mexico decrease as these local favorites become available, generally over the summer months. Quite simply, though, U.S. production cannot keep up with demand, so it must augment supply with imports.

Bountiful Berries
Berries, like avocados and mangos, are big business for Mexico. As American and Canadian demand for the sweet and tart fruits continues to rise, so do berry imports from Mexico—particularly blackberries, raspberries, strawberries, and blueberries. The combined export value of these shipments has climbed to more than $1.5 billion annually.

When it comes to blackberries, Mexico is the U.S.’s go-to source; it also turns to Mexico for strawberries in the winter to fill gaps in domestic production, and these cold-weather imports have steadily increased over the past two decades. Mexico also ships its fair share of berries to the True North, with fresh raspberries as Canada’s third largest agri-food import from Mexico.

As Mexican growers race to keep up with demand, berry acreage is on the rise across the nation. Gerardo A. López is commercial vice president of the aptly-named Berry Lovers brand, which grows and distributes berries through Growers Union, LLC. The company specializes in Mexican blackberries, blueberries, and strawberries.

“We’re growers of conventional and organic blueberries in Jalisco, with a 200-acre operation,” López shares, adding that the company has plans to double its Jalisco blueberry acreage in the coming years. “Demand for berries is growing and consumers are aware of the Mexican blueberry’s quality,” he notes.

“Blackberry volume has remained stable for the last couple of years, but blueberries are on the rise, and it seems this trend will continue for a few years.”

The top U.S. vegetable import from Mexico is tomatoes (though botanically, it’s a fruit), which represents 29 percent of all vegetable imports from south of the border.

As domestic fresh tomato production has declined in recent decades, Mexico has been filling the gap (though not without controversy and rancor from some U.S. growers). After tomatoes, the next few leading vegetable imports from Mexico include cucumbers, chile peppers, squash, bell peppers, onions, and shallots.

Canada is also a major importer of Mexican tomatoes, and similar to the United States, the other top vegetable imports include both bell and chile peppers as well as cucumbers. Other popular imports include gherkins (pickles), asparagus, papaya, melons, guava, grapefruit, and strawberries.

Another American favorite, watermelon, is grown nearly year-round in Mexico. About 99 percent of the country’s sticky-sweet fruit exports go to the United States—augmenting the U.S.’s already impressive domestic production. The remainder of Mexico’s watermelon shipments go to Japan with a very small amount sent to Germany.

Thanks to Mexico’s lengthy and varied growing season, Losolla says GreenPoint is able to maintain an almost continuous supply of imports. “We operate pretty much 10 months, if not 12 months out of the year,” he says. “We’re closing the gap a little bit more every year. This year, in particular, I think we’re going to have a summer deal, so we’ll be operating pretty much year-round.”

Crops and Growing Regions
An expansive country with varying climates and landscapes, Estados Unidos Mexicanos (the United Mexican States) produces a cornucopia of fresh fruit and vegetables, grown in fields, orchards, shade houses, and greenhouses across the nation.

Just south of the border from San Diego, the westernmost Mexican state of Baja California produces chile peppers, green onions, squash, and tomatoes. On the Pacific Coast, directly south of Nogales, the states of Sonora and Sinaloa are home to sprawling fields, orchards, and acre upon acre of shade houses. This region serves up a gamut of produce from bell and chile peppers, broccoli, cucumbers, and eggplant to cantaloupe, grapes, honeydew, limes, oranges, and watermelon.

Further south on the Pacific Coast, Nayarit, Jalisco, Colima, Oaxaca, and Chiapas grow a variety of vegetables as well as tropical fruits including pineapples, papaya, and mangos.

South of Colima, the state of Michoacán harvests honeydew, cantaloupe, limes, and a handful of vegetables, but has become world-famous for its unparalleled production of avocados.

Chihuahua, which sits just east of Sonora on the Gulf of Mexico, primarily produces squash and tomatoes. Further south on Mexico’s Gulf Coast, Veracruz produces bananas, green beans, and chile peppers, among other commodities.

Protected Agriculture
In recent decades, advances in protected culture technology have revolutionized Mexico’s agriculture industry. Protected culture, which includes everything from lower-tech shade houses and tunnel areas to sophisticated greenhouses, is another driving force in Mexico’s flourishing fruit and vegetable trade.

Central Mexico is home to many of the highest-tech greenhouse operations, made from plastic or glass and complete with contemporary heating systems. Other structures, mostly located in Northern Mexico, grow in lower-tech protected agriculture environments, such as mesh shade houses or tunnel systems.

For quite a few commodities, particularly tomatoes, Mexico growers have moved away from open field production to protected agriculture operations. Greenhouse acreage has mushroomed in Mexico from just over 1,700 acres in 2000 to 60,000-plus today. On average, the country’s greenhouse industry grows by nearly 3,000 acres each year.

Many Mexican growers are making the switch as an ideal solution to problems like limited water availability and threats from pests and disease. Protected agriculture generally results in higher yields and more consistent quality of product.

“A lot of the farmers in Mexico are high-tech growers, especially in Central Mexico,” points out Losolla. “They grow in shade houses and high-tech greenhouses. With protected agriculture, you have superb, extremely high-quality produce.”

This, of course, is certainly not news to growers in Leamington, Ontario, the mecca of greenhouse growing for Canada, and a highly respected older sibling to Mexico’s efforts. And thanks to the success of Canada and Mexico, more commercial growers in the United States are now dabbling in protected growing.

Large greenhouses have sprung up in various pockets of the country, including the Midwest and East Coast. There are relatively new operations in Illinois and Ohio, as well as Virginia and even in New York, built to survive that region’s incredibly inhospitable winters, providing fresh ‘local’ vegetables to wholesalers, retailers, and restaurants.

Vegetables Dominate for Now
Like Leamington, Mexico’s protected operations primarily grow tomatoes, bell peppers, and cucumbers—but some are branching out into berries and other commodities. The highlands of Central Mexico are home to large clusters of these high-tech structures.

Today, more than half of total protected culture acreage can be found in Sinaloa, Baja California, Baja Cali-fornia Sur, Jalisco, and Estado de Mexico. Guanajuato and Michoacán, however, are also hotspots seeing strong growth in the category.

As these protected operations continue to expand, the Mexican market is flush with greenhouse-grown produce. For the 2016-17 marketing year, Mexico’s greenhouse tomato production was estimated at almost 3 million metric tons, an increase over the previous year.

Annually, nearly 80 percent of Mexico’s greenhouse vegetables are exported to the United States, with 4 percent shipped to Canada to augment its own protected agriculture supply. According to the Mexican Association of Protected Horticulture (AMHPAC), half of all Mexican vegetables exported to the United States are grown in greenhouses.

The Association includes 200 partners producing more than 1.1 million tons of vegetables each year—primarily tomatoes (70 percent of production), peppers (19 percent) and cucumbers (17 percent). A few partners, as mentioned above, are producing the usual fare but also branching out to include eggplant and other items like strawberries.

On the Horizon
With NAFTA renegotiations still underway, the future of trade between the United States, Mexico, and Canada is somewhat uncertain. Even so, many Mexican produce importers and growers believe it will all work out.

Losolla seems confident about what lies ahead, pointing to Mexico’s many advantages. “Logistically, we’re very well positioned to the United States,” he says. “We grow a lot of protected agriculture, which yields really high quality. We play by the highest standards in food safety and trade practices, and we compete at the highest level with anybody in the world.

“All these things have been the backbone of growth in Mexican imports in recent years, and I think the trend will continue,” Losolla contends. “We’ll continue to see growth in many sectors,” he says, noting higher demand in berry categories, as well as avocados—which still haven’t maxed out—and he believes there’s still plenty of room for tropical fruit like pineapple and papaya.

On the other hand, some importers worry the United States will become far too dependent on Mexican imports. “Between U.S. regulation and labor, I’m fearful it will be our main source of produce,” comments Fawcett.

“We import seasonally, but we’re also domestic growers too,” he adds. “Looking at food security, who is going to supply this country with food? Are we going to be totally dependent upon other folks to feed us, or are we going to take care of ourselves?”

While industry professionals on both sides of the border have differing perspectives and predictions about the future of trade between the three NAFTA partners, one thing is certain: Mexico has proven itself as a produce powerhouse well-positioned to feed the world with fresh fruit and vegetables.

López predicts Mexico’s reputation for high-quality fresh fruit and vegetable imports will only be strengthened in the coming years, and “demand for its produce will continue to rise.”

Image: trekandshoot, Roman Korotkov/Shutterstock.com