NFAPP's Newsletter March 1998
Featured Articles :
"Imports and Cooperative Promotion Efforts", By Richard Adu-Asamoah, Ph.D. and Paul M. Patterson, Ph.D.
(Topic : Mexican Avocado Imports and their impact on US Avocado industry).
"Fresh Tomato
Market Watch:
Dosis por Dos
", By Pieter van Ispelen.
(Topic : Mexican Shipments of Tomatoes and their impact on US Tomato industry).
"Legislative Update" , By Amy Ridings.
Imports and Cooperative Promotion Efforts
Richard Adu-Asamoah, Ph.D. and Paul M. Patterson, Ph.D.
Last November, Mexican avocados began entering markets in the continental United States for the first time since 1914. Their entry followed many years of negotiations between the U.S. and Mexico, with U.S. growers and officials citing concerns over the potential for pest infestations. Throughout however, Mexican avocado shipments to Alaska had been allowed. Under the new import agreement, officially announced in February 1997, Mexican avocados from selected municipalities in Michoacan are allowed to enter 19 northeastern and midwestern states and the District of Columbia during November through February. For the period November 1997 through January 1998, Mexican imports summed to 4,285 metric tons and accounted for about 33 percent of total U.S. avocado imports (13,050 metric tons). In comparison, Mexican imports during November 1996 through January 1997, summed to only 438 metric tons, accounting for less than 3.4 percent of the 12,640 metric tons imported. Thus, avocado imports are up slightly (3.2%) with Mexico capturing a larger share.
The impact of the increased imports of avocados on domestic markets and on domestic growers has been debated. Some have made predictions of declining domestic acreage. However, some have looked for the silver lining in the dark cloud and have suggested that increased imports could increase domestic consumption, noting that the Mexican import window is not during the peak California harvest period. The increased consumption of domestically produced grapes, following increased imports of off-season Chilean grapes, is one often cited example of the complimentary relationship that can arise between imports and domestically produced produce. It appears that U.S. consumers have become accustomed to seeing grapes year-round and are more prone to buy them on each shopping trip. The same growth opportunity could arise for avocados and could be further advanced by a coordinated marketing effort by all the interested parties.
Indeed, this appears to be the thinking of the California Avocado Commission, which has discussed the formation of either a voluntary or mandatory agreement, which would develop a mechanism for promoting avocados. Under a federal marketing order, domestic growers and importers of avocados would be required to pay an assessment on the imported fruit. The assessment funds could then be used for research or promotion in accordance with the authorizing legislation. This type of a marketing and promotion order is currently being considered by the California Kiwifruit Commission and was considered by U.S. sheep and wool producers in 1996.
The sheep marketing order showed that establishing an order can be a contentious matter. Sheep growers held a referendum twice to consider the order, due to alleged voting irregularities on the first vote. The order failed on the second vote. Sheep growers were concerned with the organizational structure of the marketing order board, the potential growth of assessments, allocation of assessment funds, and the different assessment rates for imported and domestic wool. While many of their concerns were industry specific, similar and other concerns could arise for avocados or kiwifruit.
In the current world trading environment, some may question whether an assessment on imported avocados is not an import tax, which could violate the agreements under the WTO. However, as long as domestic and foreign producers are treated equally, it is unlikely that this charge has firm grounding. However, foreign producers will not get to vote on the referendum.
Under these conditions, foreign producers will obviously ask what's in it for them. If foreign growers have lower costs, they may stand to gain more from a coordinated promotion effort than domestic growers, assuming that the return per assessment dollar is the same for both parties and that U.S. consumers perceive imported and domestic avocados to be at least equal in quality. The returns that Mexican growers realize from a coordinated marketing effort will also depend on their ability to respond to changes in demand, which is currently restricted under the import agreement, as only certain acreage is approved for imports.
Increased imports of avocados may prove to beneficial to domestic growers if it leads to increased consumption of avocados year-round. Further, an effort to coordinate marketing efforts between domestic and foreign producers may further enhance opportunities for all parties. However, past experience suggests that care needs to be taken in establishing these agreements.
Fresh Tomato
Market Watch:
Dosis por Dos
By Pieter van Ispelen.
The Market
Ups and downs are not unusual in many processes of life, and especially not in market processes of the volatile fruit and vegetable industry. A prime example of that over the years has been the U.S. fresh tomato market. And this season forms no exception. Except for the fact that within the relative short period of the winter season it's usually one or the other for either of the two big 'players', Mexico and Florida. This season however, the often quoted El Nino decided to deliver some for everyone sofar. While Florida profited from delayed harvests in Mexico caused by freezes early in the season, Mexico is currently profiting from crop damages in Florida caused by relentless heavy rains. El Nino is providing a dosis por dos instead of recent past deliveries that either profited one (Mexico in 1982/1983) or the other (Florida in 1992).
Florida started the winter season strong despite heavy fall rains. Shipping volume in December was up 21% from last year (46% up from two years ago) and the market was strong which reflected in relatively good prices. This despite the fact that Mexican shipments during that month were also up from recent years. Usually Mexican shipments really pick up in January and reach highs in February and March, but very unusual freezes in the western part of Mexico caused delays in harvests and this was being felt especially during late January and February. January saw a decline in Mexican shipments of 12% while the February volume was off 23% from last year's levels and 8% from 1996 levels (Figure 1).
Florida in the meantime had an average good January month (6.5% down from last year but 24% up from 1996) and a slightly higher volume in February when Florida shipments are seasonally lower and outpaced by Mexican volume (Figure 2).
Due to this supply gap, prices were high during most of February. Towards the end of February the tide seemed to turn. The rains in Florida were relentless and kept volumes of shipments down while the pace in Mexico picked up. At the time of writing Mexico shippers were enjoying strong prices and high volumes.
The Floor Price
Feelings have been mixed about the floor price that was established in the fall of 1996 after a long process of dumping allegations filed by Florida. The growers in Florida have been enthusiastic about it, while the Mexican side has been more skeptical. What the true effects of the floor price have been is hard to measure. Some observations at the Mexican border suggest that rejections of shipments of lower quality product have increased and as such have improved the overall quality. However, there is no real indication that the price actually helped reducing the quantity of shipments from Mexico.
Unmistakably the floor price gives growers in Florida an easier state of mind. They can grow and pack confident that the bottom of the market won't drop out. For the second year in a row Florida growers are making money again after some miserable years before that. To link that directly to the establishment of the floor price might be jumping to a conclusion a little bit too quickly though. NFAPP projections in 1996 showed that the market was reaching a new equilibrium after years of strong reductions in acreage in Florida, mainly caused by loss of market share to the heavily improved Mexican tomatoes. Shipments of tomatoes from the two regions have kept each other in equilibrium since then. For the second year in a row even aggregate shipments have gone up slightly, while prices also have shown some increases across the board. This seems to be a little bit of a paradox. Fact is that consumer demand must be strong enough to support that. It could be caused by overall increase in quality of fresh tomatoes on the market, but others naturally question if these price increases (both f.o.b. and retail) are caused by the floor price and if the strong consumer market is paying the price for that. It is too soon to draw any conclusions like that, but fact is that after some darker years the sun seems to be shining a little bit more again in the Sunshine State. Even during this El Nino season.....
Legislative Update
by Amy Ridings
As was mentioned in the last legislative update, the issue on everyone's mind this year is food safety. Congress has taken up the challenge and introduced various pieces of legislation and most seem to be bi-partisan. However, given the fact that this is an election year, Congress will likely end the legislative year as early as possible. This means that any concerns industry may have with the pending legislation should be addressed as soon as possible.
Among the pending food safety legislation summarized last month, there are a few more that warrant attention. One of these is Representative Debbie Stabenow's (D-MI) bill, H.R. 3148, the Safe Food Action Plan Act. H.R. 3148 establishes food safety research, education, and extension as a priority of the Department of Agriculture, and requires that the Department use a designated team in order to respond rapidly to food safety emergencies, and lastly to improve food safety through development and commercialization of food safety technology. Representative Stabenow worked with the food safety community and then created the Food Safety Advisory Committee, which is made up of educators, scientists and researchers, producers, and public health officials, among others. Congresswoman Stabenow stated on the floor of the House that, "The Safe Food Action Plan has been built upon the four pillars of research, consumer education, technology transfer programs, and a federal Rapid Response Team." For more information on this legislation, contact Representative Stabenow's office at 202-225-4872.
The second piece of legislation is one that President Clinton mentioned in his March 4 speech on food safety. Specifically, it is S. 1707 and H.R. 3052, the Safety of Imported Food Act of 1998, introduced by Senator Mikulski and Representative Eshoo. This bill would serve to amend the Federal Food, Drug, and Cosmetic Act (FDCA) to declare that imported food that has not been prepared, packed, and held under conditions meeting FDCA requirements (or similar conditions that achieve the same protection) are adulterated. The legislation also takes into account whether inspection, testing or other procedures were refused, and subsequently allows denial of importation on the basis of such refusal. The President urged enactment of this legislation and stated his belief that, "Any food that doesn't meet clear and strict standards should not come into the United States." There has been little action on either version of this bill. For more information on this bill, contact Senator Mikulski at 202-224-4654 or Representative Eshoo at 202-225-8104.
Lastly, H.R. 2801, the Safe Food Act of 1997, by Representative Fazio, was reviewed. The main purpose of Fazio's legislation is to consolidate in a single independent agency in the executive branch, all of the responsibilities that regard food safety, labeling and inspection. This is currently divided among various Federal agencies, and the proposed consolidated, independent agency would administer and enforce all food safety laws. If enacted, the President would terminate the food safety-related Federal agencies to the extent their activities relate to administration or enforcement of food safety laws. For more information on this bill, contact Representative Fazio at 202-225-5716.
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