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Grande Output

How business in this Texas valley is booming despite setbacks
MS_Grande Output

When some people think of the Rio Grande Valley, they imagine endless skies, long stretches of land, and few people. This may have been true years ago, but today’s Rio Grande Valley or simply ‘the Valley’ paints a very different picture.

The acreage is still there—the region spans a 4,872-square-mile swath of land—but the population has been growing full tilt. With nearly 1.4 million residents, it is one of the fastest-growing regions in the country and the fifth largest metropolitan statistical area in Texas.

Business growth is also surging with companies like SpaceX venturing into the area and longtime Texas grocery stalwart H-E-B expanding its retail and community footprint.

Growing and Harvests
Agribusiness in general, and the produce industry in particular, continue to play a key role in Texas. The Valley is a strong producer in its own right— despite a number of serious setbacks courtesy of Mother Nature last year. These weather episodes ran the gamut from too-cool temperatures, too hot, lack of rain, wildfires, Hurricane Harvey, and then late fall downpours.

First came colder than usual temps and freezes in the winter months, followed by record spring and summer heat for the third year in a row—with triple-digit temperatures, humidity, and little rain—and then there was hurricane season.

Although much of the Texas coast and Houston were pounded by Hurri-cane Harvey in late August, less than half an inch of rain fell across the Valley. It was a disappointment for many, who had high hopes for a drought-busting deluge, but it worked to the advantage of some growers. Overall, given the destructive force of the hurricane, the Rio Grande region was spared and the impact to growers was minimal.

Citrus
Citrus is especially critical to the Lone Star State’s produce landscape; it is the third-largest producer of citrus fruit in the nation and most is grown in the Valley. The annual harvest features oranges, Meyer lemons, tangelos, tangerines, and grapefruit. The latter includes the fabled Ruby Red grapefruit, which accounts for more than 70 percent of the state’s citrus crop.

Wonderful Citrus, a division of the Los Angeles-based Wonderful family of companies, ships citrus from three locations in Texas: Donna, Edinburg, and Mission.

According to Adam Cooper, the parent company’s vice president of marketing, Wonderful Citrus is responsible for about 70 percent of the total orange and grapefruit shipments going out of Texas. “Production has generally been stable over the years,” he says, noting the grower has increased tree plantings over the last four years.

Orange harvests got underway in late September, and though overall crop numbers and fruit size were somewhat smaller this year, quality was good. “This season, general industry trends point to a slight decrease in navels,” confirms Cooper, though this was balanced by an uptick in the winter season’s grapefruit crop.

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When some people think of the Rio Grande Valley, they imagine endless skies, long stretches of land, and few people. This may have been true years ago, but today’s Rio Grande Valley or simply ‘the Valley’ paints a very different picture.

The acreage is still there—the region spans a 4,872-square-mile swath of land—but the population has been growing full tilt. With nearly 1.4 million residents, it is one of the fastest-growing regions in the country and the fifth largest metropolitan statistical area in Texas.

Business growth is also surging with companies like SpaceX venturing into the area and longtime Texas grocery stalwart H-E-B expanding its retail and community footprint.

Growing and Harvests
Agribusiness in general, and the produce industry in particular, continue to play a key role in Texas. The Valley is a strong producer in its own right— despite a number of serious setbacks courtesy of Mother Nature last year. These weather episodes ran the gamut from too-cool temperatures, too hot, lack of rain, wildfires, Hurricane Harvey, and then late fall downpours.

First came colder than usual temps and freezes in the winter months, followed by record spring and summer heat for the third year in a row—with triple-digit temperatures, humidity, and little rain—and then there was hurricane season.

Although much of the Texas coast and Houston were pounded by Hurri-cane Harvey in late August, less than half an inch of rain fell across the Valley. It was a disappointment for many, who had high hopes for a drought-busting deluge, but it worked to the advantage of some growers. Overall, given the destructive force of the hurricane, the Rio Grande region was spared and the impact to growers was minimal.

Citrus
Citrus is especially critical to the Lone Star State’s produce landscape; it is the third-largest producer of citrus fruit in the nation and most is grown in the Valley. The annual harvest features oranges, Meyer lemons, tangelos, tangerines, and grapefruit. The latter includes the fabled Ruby Red grapefruit, which accounts for more than 70 percent of the state’s citrus crop.

Wonderful Citrus, a division of the Los Angeles-based Wonderful family of companies, ships citrus from three locations in Texas: Donna, Edinburg, and Mission.

According to Adam Cooper, the parent company’s vice president of marketing, Wonderful Citrus is responsible for about 70 percent of the total orange and grapefruit shipments going out of Texas. “Production has generally been stable over the years,” he says, noting the grower has increased tree plantings over the last four years.

Orange harvests got underway in late September, and though overall crop numbers and fruit size were somewhat smaller this year, quality was good. “This season, general industry trends point to a slight decrease in navels,” confirms Cooper, though this was balanced by an uptick in the winter season’s grapefruit crop.

Rains late in the season across the Valley were beneficial after the hot, dry summer months. When combined with a late freeze last winter, some growers were concerned about the season’s output. As Cooper points out, though, the summer’s oppressive heat is good for the crop as it can boost even, steady ripening.

The Texas red grapefruit season, which runs from October to May, was under extra pressure this year, thanks to the impact of destructive Atlantic storms like Hurricane Irma. While most Lone Star citrus is for the fresh market and not juice, Florida’s losses and the continued scourge of citrus greening created scarce supply.

The resulting decline provided an opportunity for both California and Texas producers. “We expect Texas citrus will play a more prominent role this year,” shares Cooper, especially in shipments to Europe. At the same time, Wonderful Citrus is also planning to expand exports of another type of citrus—limes—to new segments of the European market.

Watermelon and other homegrown favorites
In addition to its citrus industry, Texas is the biggest watermelon producer in the country, generating more than $75 million annually. Though the sweet thumpers are grown in many counties, the Lower Rio Grande Valley is the state’s top producer.

This year’s crop, despite all the weather drama, was pretty good though supply was often tight during peak demand in June and July. Growers certainly had their share of worries, which included heavy spring rain in some regions. Fortunately, the dry summer months (detrimental to other crops) prevented the spread of diseases like black rot that thrive in excess moisture.

Of course, there are plenty of other fruits and vegetables besides citrus and watermelon growing in the Valley, from onions and chile peppers to tomatoes and blackberries. Some crops, primarily winter vegetables like onions, saw delayed plantings due to rain.

For pumpkin growers, it was indeed a rollercoaster last season: first came reduced fruit size due to high temperatures, followed by excessive rains from Hurricane Harvey in northern counties in the late summer. Next came downpours in October, delaying harvests during the critical fall marketing window for Halloween and Thanksgiving.

Cabbage harvests got underway at the end of October and beginning of November, but many suppliers were already deep into Mexican imports for asparagus, celery, berries, lemons, and more.

Crossing the Border
As a leading economic engine in Texas, demand continues to climb for Mexican imports crossing the border.

Overall, loads going to and from Mexico have risen the last few years, though most are coming into the Lone Star State—up 7.4 percent in 2016—commandeering a healthy slice of the $23 billion in agricultural goods imported from Mexico.

The Valley makes use of a dozen ports of entry for commercial cross-border trade, with Hidalgo County home to two of the most important crossings for produce in the nation: the Pharr International Bridge and the Anzalduas International Bridge.

The city of Pharr continues to compete with Nogales, AZ to be the largest U.S. port of entry for Mexican produce. With the completion of the Baluarte Bicentennial Bridge in Mexico in 2012, linking Sinaloa to Durango, travel time from the Mexican coast to Reynosa (and, by default, distributors and shippers on the U.S. side) has been cut by four to six hours. As a result, transportation costs have also shrunk by $500 to $1,500 per load.

This means Pharr, which boasts easy access to markets in the Midwest and Northeast, is quickly becoming the belle of the produce ball. An added bonus regards truck weight—in 2015 the Texas legislature passed a bill that allows overweight trucks from Mexico to cross over on the Pharr Bridge, which means they no longer have to unload a third of their cargo before crossing. Instead, they can use designated routes to reach warehouses in Pharr, McAllen, or Mission.

Wholesale Happenings
Despite all the produce coming across the border and grown nearby, only one Valley city has a terminal market (at least so far). The McAllen Produce Terminal Market, owned and operated by the Abasto Corporation, is conveniently located—just a stone’s throw from the Hidalgo International Bridge.

Given the flow of produce imports, the terminal market offers plenty of warehouse space to receivers and distributors, from 1,400 to 20,000 square feet.

There is also ample cold storage all around the terminal market in McAllen and the surrounding area, as well as opportunities to consolidate loads.

Pluses and perks
As for doing business in the Valley, people in every aspect of the industry from growers and wholesalers to shippers and retailers say the advantages outweigh the downsides.

“This location has a major impact on our industry,” says Richard Ruiz, president and CEO of Pharr-based Ruiz Sales, importer and distributor of fresh produce from Mexico and South America. “We can load our fresh produce daily, with a competitive freight price for on-time delivery to major Midwest and East Coast cities.”

Tony Incaviglia, vice president of sales and marketing at GR Fresh, based in Torreón, Mexico but with an office in McAllen, agrees, noting that the Mazatlán-to-Matamoros superhighway, which opened in 2014, has had a favorable impact on business.

“There’s more focus on McAllen from a produce standpoint,” Incaviglia explains, and “more value because of logistics.”

Surrounding growth
The impetus has led to a hustle and bustle of new business in town. From the state-of-the-art, multimillion-dollar facilities to others expanding or improving existing structures, Incaviglia takes it in stride.

“There are more people setting up shop here, but there are also more people looking to buy here,” he explains. “I always feel that competition is a healthy thing—if there are more people here with more product available, so much the better.”

FRESH FORUM
What is your biggest (business) fear going into 2018?

Victor Dominguez, Dominguez Fresh Produce
My biggest concern is if Trump shuts down NAFTA [the North American Free Trade Agreement]. Shutting it down would be a total disaster; the United States would find itself very short on produce, and it would be terrible for businesses on this side of the border.

Richard Ruiz, Ruiz Sales
Big challenges and changes in the retail business as Amazon/Whole Foods now sells produce through high technology at a reduced price—this will challenge all of the produce industry.

Tony Incaviglia, GR Fresh
My biggest concern is NAFTA and how it could affect us, not just the produce industry but also vehicles, meat, clothing, and more. It would be crazy to pull out of it… When you think of all the items we import from Mexico, it would put a lot of people in harm’s way.

Adam Cooper, Wonderful Company
We work very closely with the industry to prevent diseases like HLB (citrus greening) and canker from spreading… Although the disease is present in Southern California, it is not in Central California, where our mandarins are grown. The situation in Texas is more advanced than California, but there has been no real commercial impact to date.

Victor Dominguez, owner and founder of Dominguez Fresh Produce LLC on the McAllen terminal market, is also impressed with the availability of cold storage and its ability to draw new players to the vicinity. “There’s a lot more movement than three or four years ago, and much more cold storage now,” he says. “It has definitely increased the competition.”

A prime factor in his success, according to Dominguez, is proximity. “If a client cancels an order, we can find another client to take the order since we’re on the border,” he relates. “And if a product doesn’t work, we can easily return it to Mexico.”

Abundant Retail
The more-is-better adage can be applied to the retail grocery sector in the Rio Grande region as well. While some areas of the Valley were once considered food deserts—lacking adequate access to supermarkets or farmers’ markets—much has changed over the past few years.

Researchers at the University of Texas-Rio Grande Valley say major retailers have been expanding into the region, as sales in eight of the region’s cities—McAllen, Brownsville, Harlingen, Edinburg, Pharr, Weslaco, Mission, and Mercedes—are expected to jump by nearly $13.7 billion between now and 2030.

Inspired by the Valley’s economic growth, powerhouse chains have taken notice. San Antonio-based H-E-B, with 332 stores in Texas and 56 in Mexico, is now the largest privately held employer in the state. It also has 32 stores across the Valley, with some in every county.

Retail juggernaut Walmart boasts more than 20 regional locations in different formats. Neither Whole Foods Market nor Trader Joe’s has yet to make the trek, however, natural foods retailer Sprouts Farmers Market made an appearance, but has only one location so far, in McAllen.

Independents, small grocers, and club stores
This part of South Texas doesn’t rely solely on national supermarket chains for its shopping.

Independent stores like Ruben’s Grocery, which has been in the same McAllen location for 43 years, continues to cater to the area’s largely Hispanic population.

The same is true for local chains like A & V Lopez Supermarket, which has six locations throughout the lower Valley, and Junior’s Supermarket, which boasts eight stores. Houston-based chain La Michoacana has a small empire with 144 stores across Texas and Oklahoma, with eight locations in the Valley.

And then there are members-only club stores like Costco Wholesale. Thanks to an $11 million incentive from the city of Pharr, the country’s largest membership warehouse club opened there in 2012. So far, it remains the only Costco location in the Valley. Sam’s Club, in the meantime, has four locations across the area from Brownsville to Edinburg.

Competition, selling strategies, and differentiation
The retail bonanza also requires differentiation for stores to survive, so there’s plenty of seasonal sales, special promotions, and social media interaction, as well as perks like online ordering, in-store cafés, and an abundance of prepared foods.

A recent arrival is Instacart, which began operating in the Valley in June of last year. Shoppers can place orders with local supermarkets online or through a mobile app, and Instacart will deliver it within two hours or at a scheduled time.

Already available in 40 markets across the United States, Instacart joined the Valley due to existing partnerships with Costco and H-E-B.

Challenges
Weather and Otherwise
Everyone knows weather can be a challenge in the produce industry, and 2017 brought a bit of everything, with Texas getting more than its share. Even so, few could predict the arrival and impact of Hurricane Harvey, which affected businesses throughout the Rio Grande Valley in myriad ways.

Some growers lost crops or delayed plantings, while distributors had gaps in supply, damage and cleanup, or idle trucks. Dominguez had clients in several areas that were forced to stop placing orders for a time due to Harvey and its aftermath.

At Ruiz Sales, the price of getting product to customers went up due to flooded, damaged, or closed roads. “Harvey affected us for weeks with a higher freight cost for extra miles, with an extra day for on-time arrival through Dallas to Florida,” he says.

This was in direct contrast to early in the year, when there was an overabundance of good weather and booming crops. “Our biggest challenge last year was that there was no interruption in the growing process,” says Incaviglia of GR Fresh. “There was too much product.”

Of course, Mother Nature made some adjustments in Texas and throughout the rest of the country, and oversupply was not a major concern for the coming months.

On the Horizon
Few would argue that the future remains rosy for the Valley, despite last year’s hiccups.

Given its ongoing growth, which many predict will accelerate even more over the next decade, the issue may be how the region handles it.

It would undoubtedly be easy to be overwhelmed by the influx of new residents and businesses—produce-related and otherwise—but Incaviglia offers a more measured approach. “We’ll deal with competition the way we always have: go to work every day and take care of business.”

Images: artjazz, Professional, ED Reardon/Shutterstock.com

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