Costs Are Squashing the Tomato Industry
Posted on: Monday, 3 March 2008, 09:00 CST
MIAMI _ Tony DiMare's family has been growing Florida tomatoes for three generations, but he worries the industry won't be around for his kids.
DiMare's fears directly reflect the pressures facing growers across the state, where a $500 million industry produces more fresh-market tomatoes than anywhere in the United States.
Skyrocketing costs of everything from fuel to fertilizer cut into profits. Immigration revisions make workers harder to find. Plus, increased competition from Mexico is forcing prices down. It's a combination that last year pushed three longtime growers out of the business. Another started shifting business to Mexico.
The struggles of the tomato growers portend yet another chapter in the demise of Florida's agricultural industry, which has seen farms of all kinds squeezed out by rising land costs and new development. Tomatoes have historically been the state's biggest vegetable crop, ranked just behind citrus and sugar in overall production.
"I don't know if there will be a fourth generation in our industry," DiMare said. "If we can't survive, then the industry won't survive. There will be a tomato industry, but it won't be in Florida."
The next looming challenge: the possibility that Burger King and other fast-food chains may shift all or part of their tomato buying outside of Florida because of a conflict with the Coalition of Immokalee Workers.
The group wants Burger King to agree to pay a penny more per pound for tomatoes to improve wages, similar to deals signed by McDonald's and Taco Bell. But Burger King has said it won't pay and is looking at a "contingency plan" for buying tomatoes outside Immokalee and Florida.
That would be a staggering blow to an industry that has grown increasingly dependent on restaurants and food-service operators such as cafeterias and hospitals, which now buy about 60 percent of the Florida round tomatoes.
"If we begin to lose significant customers, we begin to put the economic viability of the industry at risk," said Reggie Brown, executive vice president of the Florida Tomato Growers Exchange, a cooperative representing more than 90 percent of the state's growers.
"In a market that's purely supply-and-demand driven, if part of the demand leaves the marketplace it will have a significant impact on the price for all the product," Brown said. "The market reacts very quickly to oversupply and ends up selling at very cheap prices."
DiMare, one of the biggest growers in the country, can withstand the challenges better than most. Unlike many small operators, DiMare's company grows and packs tomatoes, and also repacks and sells directly to the retailer or restaurant. The multilayered approach helps DiMare offset potential losses at the farm level.
But the extent of DiMare's reach doesn't make the long-term outlook any better.
"Given the economics of our industry, it's very difficult to make money year in and year out," said DiMare, vice president of DiMare Homestead, one of the many subsidiaries of a family business that stretches across Florida, South Carolina and California and employs a couple of thousand people, including about 900 in Homestead.
Although the struggles have escalated, the industry has been suffering since the 1994 North American Free Trade Agreement with Mexico, which opened U.S. borders for the importing of cheaper produce from other countries. Nationally, Mexican tomato imports have grown from 352,312 metric tons in 1990 to 844,343 metric tons in 2006, according to the Department of Commerce.
Before NAFTA, 13,000 acres of tomatoes were grown in Miami-Dade County alone. Last season, that number was down to 3,000, the Dade County Farm Bureau reported.
University of Florida agricultural economist Fritz Roka says the problem is that most consumers don't care whether they're buying a tomato grown in the United States or a foreign country.
"Tomato production in the U.S. already suffers from a competitive disadvantage because it has been cheaper to grow tomatoes elsewhere," said Roka, who is based in Immokalee. "As long as it's healthy, looks good and there isn't anything wrong with it, people are going to shop on the basis of price."
During the past 10 years, the number of packing houses in the state has been roughly cut in half, to about 70 today. Of the industry's 12 largest growers, about one-fourth have left the business in recent years.
David Neill, whose family owned Diamond Tomato and Big Red Tomato Packers in Fort Pierce, is one of the three growers who decided after a disastrous season last year to get out of the business. Neill, whose family had been in the industry for more than 60 years, had already cut in half the 1,000 acres for planting tomatoes in Palm Beach, Collier, Broward and Martin counties.
But it wasn't enough.
"When the cost to produce tomatoes is $7 a box and a lot of times we were getting $3 or $4 a box, that's not a slow death, that's slashing your artery," Neill said. "It's not a game for the fainthearted."
Neill closed Big Red Tomato Packers in June 2007. Now he plans to raise other vegetable crops like green peppers, eggplant and cucumbers.
Two others that decided to leave the business in the past year are Taylor & Fulton of Palmetto and Thomas Produce of Boca Raton.
Pacific Tomato in Manatee County has found another way to tackle the problem. The 80-year-old company has moved part of its tomato production to the northwestern Mexican states of Sonora and Sinaloa.
"We do the best we can, but our costs are going up every day," Bill Heller, Pacific's chief operations officer, told The Bradenton Herald. "It's not possible for us to get an economic return that justifies the investment."
DiMare says the family has considered Mexico, but right now it's not a move the company is willing to make.
Instead, to improve the bottom line, DiMare has reduced acreage. While DiMare once had more than 5,000 acres in Homestead alone, the company now has about 3,500 acres in Florida.
DiMare has also diversified. The company now produces grape tomatoes, has expanded production of roma tomatoes and cut back on traditional round tomatoes. While round tomatoes still represent about 75 percent of the business, that's down from 90 percent.
At the same time, DiMare in the past five years has more than doubled its repacking business, adding locations in Chicago, Houston and Dallas.
Those moves have helped, but in the end, DiMare says the problem is a 25 percent jump in costs over recent years. The biggest jump is a tripling in diesel fuel, which runs everything from tractors to water pumps. Plus, there are cost increases for labor, fertilizer, pesticides and plastic mulch.
Unlike in other industries, DiMare says he can't add the cost increases to the price of the tomatoes. So it comes directly out of profits.
When it comes to setting the price of tomatoes, the growers say, unfortunately, they're "price takers not price makers."
"It's not a hard good that if you don't like the price you can put it on the shelf and wait," DiMare said. "You're dealing with a highly perishable commodity."
That's what happened last year, when the average 25-pound box sold at $7.69, less than the $8 or $9 per box it costs to grow and harvest them. That was the lowest price growers have earned since the 1999-2000 season.
But those cheaper prices are not being passed on to the consumer. Tomato prices at the supermarket continue to remain at record levels, in the neighborhood of $2 per pound. It's the retailer and the repacker that benefit from those higher prices.
"If the growers got paid based on the price consumers are paying for the product, they would be making a whole lot more per box," said Mary Lamberts, vegetable agent for the University of Florida's Miami-Dade County Extension Office. "Everything would be fine, and these guys would have a much rosier future."
While consumers haven't seen any benefit in price, what they have gotten is many more varieties of tomatoes on supermarket shelves. Traditional round tomatoes now have to compete with vine ripe, beefsteak, campari, heirloom, yellow and more.
Even so, Publix spokeswoman Maria Brous says consumers have made Florida round tomatoes the supermarket chain's top seller during the winter months for the past three years. "It just might be what they know best," Brous said.
Publix's policy of buying Florida products first helps the industry.
The fast-food chains also prefer the Florida-grown tomato because it has a nice size, slices well and looks good on a sandwich.
That's why Burger King executive Steve Grover says the company will do everything it can to avoid pulling its purchasing out of Florida. But the fast-food chain remains adamant that it won't agree to demands by the Coalition of Immokalee Workers that it pay a penny per pound more for its tomatoes. The reason: Burger King buys its tomatoes from repackers, not growers, so it has no way to get money to the workers.
"The tomatoes are a lot cheaper from Mexico, but you just don't have the quality and the consistency," said Grover, vice president of food safety, quality assurance and regulatory affairs for Burger King. "Florida produces a high-quality tomato, and we want to do everything we can to keep those in our system."
Jan Risi, who runs Subway's independent purchasing cooperative, hopes she won't have to make a choice between paying an extra penny per pound for Florida tomatoes or buying more of the fast-food company's tomatoes in Mexico. Subway now buys less than 10 percent of its tomatoes in Mexico.
"If you put somebody at a disadvantage they'll leave, because it's about saving their business," said Risi, president and chief executive of Subway's IPC, which is based in Kendall and handles buying for all Subway restaurants. "Nobody can stand not to stay competitive."
But, as a Florida resident, Risi fears for the future.
"I find it very sad that we're going to be the state that gets rid of agriculture," Risi said. "We're going to be driving by five years from now, and in the place of tomato fields there's going to be big McMansions and golf courses."
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Source: The Miami Herald
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