In 1996, the Department of Commerce and Mexican tomato growers agreed on the installation of the Tomato Suspension Agreement (TSA). The agreement ensures that Mexican tomatoes are sold in the U.S. at or above the TSA reference price. This living document is being extended every five years and was most recently updated in 2019. However, in April of this year, the U.S. Department of Commerce published an intent to terminate the U.S.-Mexico Tomato Suspension Agreement. This triggered a 90-day period, after which the agreement will officially end on July 14, 2025.

"The agreement has been providing stability in the marketplace," says Allison Moore with the Fresh Produce Association of the Americas (FPAA). "Minimum pricing, requirements for sales between importers and buyers, as well as exhaustive quality inspections benefit the entire supply chain, from growers, to exporters, retailers, and consumers."

Innovation
Since the installation of the Suspension Agreement, the tomato category in Canada, the U.S., and Mexico has evolved due to a shift in consumer demand. "From round and Roma tomatoes that were grown outside, growers have invested in greenhouse technology and started growing other tomato products, including on-the-vine, snacking, and other specialty tomatoes," commented Moore. "These innovative products are very different from the green mature tomatoes that Florida grew 30 years ago and still grows today," she said. "Mature green tomatoes are predominantly used in foodservice and while they have a place in the market, they are very different from the greenhouse tomatoes that are grown in Mexico, Canada, and the U.S. today, and won't be able to substitute greenhouse product."

"That greenhouse innovation just didn't take place in Florida like it did in Mexico and getting rid of the Tomato Suspension Agreement wouldn't all of a sudden change consumer demand," added Moore. Consumers will still want to eat the convenient and tasty products they've come to know. "The end of the Suspension Agreement also wouldn't solve the problems Florida has, including labor issues, pest pressures, hurricane threats, and poor soil."

Increased consumer prices
However, the end of the agreement will drive up the price consumers are paying. After July 14, tomatoes imported from Mexico will likely be subject to a 17.09% tax. "Although the final tax rate will be determined during the concluding review of the Department of Commerce," shared Moore. This could take up to two years and in case of an upward adjustment of the tariff, additional charges will be imposed retroactively. "The need for a cash flow for unknown financial liabilities two years from now is just really challenging," she said. Margins in ag are very small and the additional duties would be hard to absorb. "I think importers will be responsible for paying the taxes and they will have to pass them on to the consumer."

It would probably take a couple of months for the impact of the termination to become evident. Due to U.S. production in the summer months, and the high temperatures in Mexico, summer is a slower time to grow tomatoes in Mexico, when lower volumes cross the border with the U.S. "However, this coming fall, U.S. consumers will be confronted with higher prices and lower supply and it's not just consumers who will bear the brunt. Tomato imports from Mexico support about $8.5 bln. in economic impact in the U.S. and provide 46,000 jobs, significantly contributing to the U.S. economy."

Source - https://www.freshplaza.com