U.S. Snubbing Mexican Tomato Pact Could Bring Rising Prices

(Bloomberg) -- Tomato prices could take off from recent lows as the U.S. withdraws from a pact with its top supplier Mexico.

The so-called Tomato Suspension Agreement expired on Tuesday, triggering duties of more than 17 percent on supplies crossing into the U.S. from Mexico. The decision was made in part to protect growers in Florida.

Tomato growers in the Latin American country now need to pay collateral to cover the cost of the duties, before they are able to export to the U.S., Mexico’s economy ministry said in a statement on Tuesday. That could mean more than $350 million in extra costs for producers -- fees many small and medium exporters probably will be unable to bear, the statement said.

“It’s a win for our group,” Michael Schadler, executive vice president at the trade association Florida Tomato Exchange, said by telephone. He said tomatoes from Mexico sold below the U.S. cost of production make it hard for Florida growers to compete.

Prices for tomato imports jumped when the move was announced by the U.S. Department of Commerce on Feb. 6, and will probably increase again to account for the duties, according to David Magana, a senior analyst at Rabobank International.

The tariffs could “impact prices in the U.S. in a matter of days,” Magana said in an email Monday.

U.S. tomato retail prices could climb by 40 percent to as much as 85 percent, with the bigger gains like coming in the October-June period, according to a study by Arizona State University. The study was commissioned by the Fresh Produce Association of the Americas.

On April 26, the average cost had fallen to about 98 cents a pound, the lowest since October, the most recent government data show.

--With assistance from Kevin Varley.

To contact the reporters on this story: Michael Hirtzer in Chicago at mhirtzer@bloomberg.net;Eric Martin in Mexico City at emartin21@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Millie Munshi, Christine Buurma

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