Tomato Markets Brace for U.S. Withdrawal of Fresh Tomato Suspension Agreement

On February 7th 2019, the US Department of Commerce announced plans to withdraw on May 7th from the 2013 Suspension Agreement on Fresh Tomatoes from Mexico. While renegotiation efforts have been in the works, there does not appear to be a compromise reached at this time. If the U.S. withdraws, it is expected that a 17.56 percent tariff will be placed on Mexican tomato imports and the department will resume its antidumping investigations. The US fresh tomato producers, led by the Florida Tomato Exchange, have contended that the agreement has not been working and has been harming domestic growers, leading to suppressed U.S. prices, declining U.S. production and increased imports.

While the exact ramifications are unknown at this time, several things are expected to happen:

1. Fresh tomato prices would increase for consumers and U.S. fresh tomato producers. Recent analysis from Arizona State University estimates that consumer fresh tomato prices could rise 40 to 80 percent if the withdrawal goes though.
2. Consolidation in the fresh tomato market will increase.
3. On the processed tomato side, short-term acreage impacts are expected to be minimal as acreage has already been contracted and planted for this year. However, there could be ramifications at the margin for next year.
4. While typically de-linked, upward pressure on processed tomato prices is expected.