Though the town may seem small and unassuming, and the walnut trees that suggested its name are not as plentiful, Nogales is a crucial player in international trade and the fresh produce supply chain.
Long after the El Camino Real and Juan Bautista de Anza Trail were blazed through the region, the Nogales-Mariposa Port of Entry became the area’s newer significant trade route. The bustling port services more than 300,000 trucks each year, bringing billions of dollars of fruits and vegetables across the border—and has come a long, long way from its original purpose.
Built in 1973 as a way to reroute traffic and keep trucks from driving through the quaint desert town, the Mariposa entryway connects to its sister town, Nogales, in the state of Sonora in Mexico. Collectively, the two are known as Ambos Nogales and serve both Americans and Mexicans in equal measure.
Nogales is also where Mexico’s federal highway 15 meets with Arizona’s state route 189, an important artery for thousands of trucks bringing produce and other goods up from Mexico to the United States, and typically returning to Mexico filled with U.S. exports of manufactured goods as well as fresh and processed vegetables.
Business Good, Even with Bad Weather For distributors and receivers, last year was a decent year despite early weather woes in California and fall hurricanes in Texas and Florida.
The California rains delayed expected crops in the first half of the year, though luckily most were able to be replanted, harvested, and subsequently brought business back to the markets. The hurricanes, however, went much further—decimating many crops in the Southwest and Southeast.
Diego Ley Vela, general manager at Del Campo Supreme, Inc. in Nogales, still believes supply and demand will even out after better fall pricing, believing the market will stabilize soon. “Volumes will increase to normal levels after January,” he predicts.
Plantings and volume When weather affects normal supply expectations, it impacts price and the resulting shortages tend to be an opportunity for brokers and distributors to increase margins, even with lower volume. Conversely, when the weather is perfect, commodity markets can get flooded with product, driving down prices and compressing margins.
The effects can then linger, according to Ley Vela, well beyond the immediate harvest. When growers have a harsh year, they make less money, and tend to conserve and plant less the next season, leading to lower supply and better pricing.
“The opposite happens after a good year,” notes Ley Vela, “people plant more, and this was what happened last season.” So distributors and wholesalers were anticipating a more robust 2018 in response to the normalizing effect of planting less.
Though the town may seem small and unassuming, and the walnut trees that suggested its name are not as plentiful, Nogales is a crucial player in international trade and the fresh produce supply chain.
Long after the El Camino Real and Juan Bautista de Anza Trail were blazed through the region, the Nogales-Mariposa Port of Entry became the area’s newer significant trade route. The bustling port services more than 300,000 trucks each year, bringing billions of dollars of fruits and vegetables across the border—and has come a long, long way from its original purpose.
Built in 1973 as a way to reroute traffic and keep trucks from driving through the quaint desert town, the Mariposa entryway connects to its sister town, Nogales, in the state of Sonora in Mexico. Collectively, the two are known as Ambos Nogales and serve both Americans and Mexicans in equal measure.
Nogales is also where Mexico’s federal highway 15 meets with Arizona’s state route 189, an important artery for thousands of trucks bringing produce and other goods up from Mexico to the United States, and typically returning to Mexico filled with U.S. exports of manufactured goods as well as fresh and processed vegetables.
Business Good, Even with Bad Weather For distributors and receivers, last year was a decent year despite early weather woes in California and fall hurricanes in Texas and Florida.
The California rains delayed expected crops in the first half of the year, though luckily most were able to be replanted, harvested, and subsequently brought business back to the markets. The hurricanes, however, went much further—decimating many crops in the Southwest and Southeast.
Diego Ley Vela, general manager at Del Campo Supreme, Inc. in Nogales, still believes supply and demand will even out after better fall pricing, believing the market will stabilize soon. “Volumes will increase to normal levels after January,” he predicts.
Plantings and volume When weather affects normal supply expectations, it impacts price and the resulting shortages tend to be an opportunity for brokers and distributors to increase margins, even with lower volume. Conversely, when the weather is perfect, commodity markets can get flooded with product, driving down prices and compressing margins.
The effects can then linger, according to Ley Vela, well beyond the immediate harvest. When growers have a harsh year, they make less money, and tend to conserve and plant less the next season, leading to lower supply and better pricing.
“The opposite happens after a good year,” notes Ley Vela, “people plant more, and this was what happened last season.” So distributors and wholesalers were anticipating a more robust 2018 in response to the normalizing effect of planting less.
Mike Righetti, managing member at Righetti Farms, LLC, says the season started off well in the fall and was expected to carry over into the early months of this year. “Since we were oversupplied last year,” he says, “I don’t think we will see overproduction in 2018—which translates to healthier f.o.b. (shipments) or more value in the commodities, and more interest by customers.”
Not surprisingly, customers like to buy items with greater value. “When you’re at consignment levels and pricing, it doesn’t attract as much interest,” Righetti explains.
Thinking ahead
As growers are expected to come into 2018 with lower yields than 2017, it should offer better markets and margins, and depending on the weather—always the wild card—it could be an exciting year in terms of pricing and availability. Of course, distributors and exporters have to try to anticipate volumes and values to manage their businesses.
In terms of estimating crop production and future yields from Mexico, Ley Vela does more than guestimate; he reviews crop permits. “When you decide to grow a certain crop in Mexico, you need a permit,” he explains.
“The permit contains the number of hectares you intend to grow along with the medium—field, shade house, and so forth,” Ley Vela continues. “As you begin to plant, you turn in the permits and they’re available to the public.”
Greenhouses and shade houses
Del Campo’s focus is predominantly tomatoes and peppers, with lesser quantities of strawberries and other items. “We’ve seen an increase in demand for Roma tomatoes as well as more stable markets across the category,” Ley Vela says.
And with Canada “growing greenhouse varieties year round, they’re competing directly with Mexico during the winter, which used to be a Mexican market,” Ley Vela explains. “Where that will go, we don’t know, but we’ve seen production increase year after year.”
“Shade house [growing] has been on the rise for the past few years,” contributes Raquel Espinoza, director of sales and marketing at Produce House, LLC. “We get a better yield and better quality, particularly in Romas and cucumbers. We also grow colored bell peppers in shade houses.”
Espinoza says she is anticipating a growth spurt for Produce House next year, though she anticipates “some shortages coming, maybe in bell peppers.”
Higher volume
Distributors moving shade house and greenhouse vegetables are forecasting a solidly positive outlook for 2018. “We’re anticipating continued growth in dry vegetables and have added volume in cucumbers and green peppers,” comments Chris Ciruli, chief operating officer of Ciruli Brothers, LLC.
“We’re offering about the same amount of eggplant and squash as last year,” Ciruli notes, with plans to bring in both hot peppers and tomatillas this month. Next month, February, will begin the company’s substantial mango deal out of Mexico.
Ciruli says the increase in Mexican greenhouse volume allows shippers to get crops to market earlier in the winter season and keep them on the market longer. As far as competing with Canada’s greenhouse produce, he admits there is some competition, but it’s more of a complementary nature.
“There are two different types of cucumbers,” elaborates Ciruli, “there’s the European cucumber, which is mostly what the Canadians grow, and the traditional cucumber, that’s grown in Mexico.” Each commodity has a market and demand that may overlap, but generally do not compete directly.
He also points to another factor in the rising demand for greenhouse-grown commodities: for some consumers, once they buy and taste greenhouse vegetables, they become accustomed to the consistent quality of ‘perfect’ produce.
“They want a green cucumber—one that’s all green, with no yellow underbelly or field blemishes,” Ciruli says. And once this happens, some consumers will no longer accept “the old-style bush cucumbers grown in the field anymore.”
Variety is the spice of life
Bill Sykes, president of The Sykes Company in Nogales, sources everything from Mexico—including grapes, various types of squash, watermelon, and other fruits and vegetables—and has seen upticks for certain commodities. The grape deal beginning in May went well; then came the cascade of vegetables.
“We’re increasing our volume on watermelon and all varieties of hardshell squash—butternut, spaghetti, kabocha,” Sykes shares. “It’s hard to say where the demand is coming from exactly, but I suspect it is a byproduct of the industry’s effort to educate consumers and increase their confidence and desire to eat healthier and include more vegetables.”
Espinoza of Produce House is on the same page as Sykes, with more plantings of hard squash such as acorn, butternut, kabocha, and spaghetti.
Much of the surging demand is attributed to the vegetable ‘noodle’ craze, with squash varieties among the more popular items sliced into thin spirals and packaged like fresh pasta. The trend continues to gain steam with foodservice suppliers selling to supermarkets and chefs serving creative dishes at restaurants across the country.
Shifting Consumer Trends
Consumer trends, as pretty much everyone in the industry has experienced, can be peculiar. In the tomato sector, Del Campo’s Ley Vela says the once-popular beefsteaks and on-the-vine varieties have stagnated a little, while Romas continue to increase in popularity.
Previously, Romas were used mostly in cooking, but are now being consumed fresh as well. This could be a price point choice by consumers, or shifts stimulated by chefs, new recipes, marketing, or other media influences.
Robert Bennen, Jr., president at Ta-De Distributing Company in Nogales, is taking full advantage of the various health trends directed towards millennial consumers. “Our new MaidenEarth label helps young people maximize produce procurement and usage,” he says.
The new brand sells in small and medium-sized grocers with both organic and conventional produce, including limited-assortment retailers like Lidl and Aldi. Pricing and packaging vary, from small-serve item options to value packs, and feature a mix of melons, squash, figs, and heirloom fruit or vegetable varieties.
The ongoing organic trend continues to creep upward year after year, and is rooting deeper in Mexico.
“I don’t see any major commodity trends lately except that organics are continuing to grow in popularity,” comments Righetti. “More and more growers are including organics in their crop manifests, and, in particular, more Mexican growers are offering organic. This is a trend I would expect to continue to grow.”
Marketing and social advocacy
Bennen characterizes the MaidenEarth effort as part marketing, part social responsibility to continue the industry’s health initiatives.
Ta-De Distributing is a sponsor of Comer Bien, which translates to “Eat Well,” a community partnership with the Mariposa Community Health Center to increase awareness of diabetes and obesity.
The program has initiated two community projects so far: Binational Health Week, held last October to promote healthy eating and lifestyle choices, and sponsorship of the Mercado Farmer’s Market to provide availability of fresh seasonal produce to area residents.
The Comer Bien program, in turn, is part of Healthy Border 2020, an initiative created to address prevalent health issues in U.S.-Mexico border populations through healthy eating. Bilingual materials, chef demonstrations, and participation by local food banks are all part of the effort.
Border Business
Several years after the Mariposa Port’s modernization project, which added new lanes, inspection areas, and some impressive sustainable measures (like photovoltaic systems, a solar hot water system, advanced lighting, rainwater harvesting, and building automation systems)—the most talked about topic of conversation is a familiar refrain: the lack of trained staff for peak periods.
“Unfortunately, staffing issues at the port continue to be a problem and an ongoing source of discussion,” acknowledges Russ Jones, chairman of the Border Trade Alliance. “At our quarterly meetings with the state, Homeland Security, and U.S. Customs and Border Patrol (CBP), we bring up the issue,” he says.
Jones says the agencies involved are “sensitive to this [issue] and there have been some regulations and special legislation that include additional incentives to encourage new hires by CBP to help staff the Arizona ports.”
Around the time of the rebuild completion in 2014, Jones says Congress authorized an additional 2,000 staff to the Arizona ports but only about half of these positions have been filled.
Hiring requirements, as well as internal policies and procedures, continue to create a challenge finding and hiring qualified candidates.
Possible solutions During the off season, the Port operates fairly well—but not at peak season.
One solution is bringing in officers from other ports during peak season; another is the Unified Cargo Processing (UCP) program, which brings Mexican officials across the border to perform inspections simultaneously with U.S. officials to save time for everyone involved. Currently, the UCP program is limited to certified FAST (Free and Secure Trade) carriers, which does not encompass the vast majority of trucks coming across the border.
Other measures include the SENTRI (Secure Electronic Network for Travelers Rapid Inspection) program for expedited clearance of preapproved, low-risk travelers, or Ready Lanes, dedicated lanes for border crossing using radio frequency identification (RFID) for prescreened travelers.
While these programs are under consideration, the Mariposa Port is still hoping to secure more staff to increase efficiency and decrease crossing times.
“Congress has authorized CBP to hire a number of officers for the port,” confirms Jones, “and my understanding is that they have made some changes in the requirements [to] increase the number of applicants.” He says incentives are also on the table for officers willing to come to Arizona to work.
NAFTA—and the Future of Trade
One big unknown relates to any potential import/export regulations brought into force by retooling the North American Free Trade Agreement (NAFTA) or other trade-related laws, which continue rounds of discussion. Most wholesalers, growers, and retailers are continuing business as usual until any definitive changes are presented.
“There’s a lot of conversation about changes, especially here at the border,” acknowledges Sykes, saying Mexican growers are nervous about possible quotas and tariffs. But he isn’t particularly worried, due to the billions in trade at stake for all three countries. “Nobody wants a trade war,” he contends.
Produce House’s Espinoza says most are in a watch-and-wait mode. “We’re at a standstill waiting to see what will happen with any changes to NAFTA.
It’s been in place for more than 20 years and has been great for all of us, not just Mexico, but the United States and Canada. Can it be improved? Yes, but making major changes would be a big mistake,” she adds.
Not repeating past mistakes
Sykes recalls how in 2010 when the United States refused to open its borders to Mexican trucks, purportedly due to safety concerns, and Mexico imposed a 20 percent tariff on apples and other items in retaliation. Ultimately, the stalemate didn’t benefit either side.
“I think there will be changes at some point, but I don’t think they’ll be consequential as NAFTA has worked for a long time,” Sykes says.
Ley Vela looks at the situation in a slightly different way, citing both present and future impact. “There is nothing we can do right now,” he posits. “Until we can put our finger on changes and where they will take us, we’ll continue with the status quo.
If anything,” Ley Vela adds, “the uncertainty is dissuading and even stopping future expansion projects, though not creating a decrease in production at this time.”
“Retooling is definitely a concern for importers,” observes Righetti. “Everyone down here believes in free trade, and most are worried about adverse changes. The impact goes beyond the border,” he points out.
“There are California and other domestic growers who have built farms in Mexico to seek relief from U.S. land and labor costs,” Righetti continues, adding, “and they don’t want an obstruction to expanding their businesses across the border.”
Concluding Thoughts
With plenty of questions and no answers, produce buyers and sellers are doing what they always do: getting up early in the morning to load and unload trucks and ship fruit and vegetables across the country.
This year, they’ve battled extreme weather and rampant trade rumors, but nothing has stopped the flow of goods in and out of Mexico or Nogales.
