Tariffs to Positively Impact Florida and California Growers
Tomato disputes between the U.S., Mexico and China may finally be put to rest by means of tariffs.
For decades Florida tomato farmers have protested cheap produce flooding into the country from Mexico, and have pointed to dumping as a controllable factor in the decline of production in America. At the peak of production in 2000 the United States had an output of 4.5 billion pounds of tomatoes but by 2020 output had decreased to 2.5 billion pounds. While part of the decline can be attributed to severe weather, flooding and droughts, growers in Florida believe trade agreements also allowed Mexico to undercut the U.S. market.
Since 1996, The Department of Commerce and Mexican growers have entered into new tomato trade agreements six times. American growers continue to maintain that Mexico is not upholding their end of agreements and that they are still dumping cheap produce into the United States. At the time of the first agreement Mexico’s fresh tomatoes accounted for just 20% of American consumption. Today, they account for 70%. While that doesn’t prove dumping, American farmers add that price hikes on Mexico’s tomatoes quickly followed by reductions support their injury claim; a factor that has been the catalyst for six revisions to trade agreements.
In California, farmers growing for processors have faced similar obstacles. Over 90% of tomato products like pastes, sauces, and condiments are imported; primarily from China. In recent years, China has increased their production of tomato products prompting U.S. investigations into dumping and forced labor production. The result of investigations is the Uyghur Forced Labor Protection Act, UFLPA, which was put in place to prevent the flow of goods produced using forced labor into the U.S. It also acts as protection for domestic tomato growers. While it hasn’t removed all barriers of entry into more competitive markets for California farmers it is creating room for strategic market growth in the sustainability and organic sectors.
What do Tariffs Mean for the U.S. Tomato Industry?
For U.S. tomato growers tariffs could, at the very least, reduce the influx of cheap produce imported into the country and, in a best case scenario, lead to market expansion.
California growers have not only faced steep competition from China, they have also been hindered by water restriction and high loan interest rates. Farmers have abandoned attempts to compete with the cheaper imported tomato based products and instead focused on quality and environmental sustainability. Or they stopped growing tomatoes and started growing a more competitive product.
Tariffs are unlikely to negatively impact exports of California’s sustainability produced tomato products, but they could encourage more domestic purchases. Consumers want to purchase produce for the same price they did decades ago, yet they increasingly desire alternate, and more expensive growing methods. The tariff factor could allow for this gap to narrow giving California’s farmers a higher return on their crop yields. Consumers may be willing to pay a few cents extra per product if they know that their sauces and condiments were produced ethically and the ingredients sourced locally, but in general sales data shows this support is limited.
The industry is wary of overproducing and aims to grow what they know they can realistically move off the shelves. But, the United States is not the only country seeking to confront cheap Chinese tomato products. Italy and other European countries are looking to protect the quality of their tomato based products and could turn to American farmers for the caliber of tomatoes they need. Creating new demand would be a win for farmers who have struggled to turn a substantial profit in recent years.
Will Tariffs Improve The Tomato Industry?
Price fixing is typically a last resort for market dilemmas such as the one faced by U.S. tomato farmers. While this measure of control tends to remove the consumer’s power to influence market pricing, it can level the playing field in a way that allows for increased innovation. The biggest reason farmers don’t invest in innovative technology or new growing methods is because they have one to two years of financial investment before they can potentially turn a profit. One year with no guaranteed return is too great of a risk for farmers who have been under market pressure for decades.
Tariffs could make baseline prices in the tomato sector a reality. Baselines afford farmers predictable profit margins and predictability can reduce risk on new investments like automated technology, alternative fertilizers, or innovative irrigation methods. Innovation sparked an industry boom in the early 2000s and could play a role in re-establishing U.S. tomato production.
It is particularly exciting for greenhouse production. American consumers fear they will lose access to affordable fresh produce year round. States like Minnesota, Nebraska and New York with established greenhouse crops could be part of the solution to this food security issue. Greenhouse growing is a more expensive method of producing tomatoes, but also a predictable one. As greenhouse crops increase in coming years domestic supply and demand could level out, reducing our reliance on produce from Mexico. The chance for industry development might outweigh loss of cheap goods.
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