This week is the inaugural edition of a new industry event: A collaboration between two industry associations has led to a conference with a focus on US/Mexican trade. We asked Pundit Investigator and Special Projects Editor Mira Slot to find out more:
Q: What was the impetus for launching the America Trades Produce U.S./Mexico Trade Conference?
A: McClung — Fresh Produce Association of Americas and my organization teamed up to put this conference together because, in our opinion, it was time for a regional, sector-specific conference for the produce trade.
Well over $6 billion a year worth of produce is imported from Mexico to the U.S., and that number is increasing every year, amounting to a significant part of U.S. produce supply. Because we are dealing with two cultures, language problems and challenges and opportunities you don’t have in traditional domestic trade, this conference will look at a broad array of issues; everything from our historic relationship to food safety concerns — probably the single biggest issue concerning us all — phytosanitary concerns, unrest in Mexico and what it means to business. These matters are intense.
It is the right conference concept at the right time. This is not just for the private sector but the governments in both countries. We want to believe people will attend because they understand its importance, but we don’t know how successful it will be as it is brand new.
Q: For those on the fence, why should people come to this conference?
A: Jungmeyer — It is really a great venue to unite buyers on the U.S. side and sellers on the Mexican side, box to seed companies all in one location, at the same time as having government officials in the same room. All the players involved in making the deal happen and regulating it will be gathered in the same place. That should be a huge attraction.
A: McClung — Obviously, there are always issues between buyers and sellers across national boundaries. We need to take a frontal approach, lay it all out and minimize the risk or economic barriers, or deal with whatever the problem is. That requires input from the private sector and government; both have obvious roles. The goal is to address these issues as directly and with as much expertise as possible. We are bringing together an esteemed panel of speakers to cover a wide range of topics.
A: Jungmeyer — One of the most exciting sessions is food safety because of the new food safety laws on the scene. We’re still finalizing speakers on the U.S. and Mexican side, but Bob Whitaker of PMA will be leading the session, and Dan Vache of United Fresh will be discussing the role traceability will play.
Both importers and exporters from Mexico have such a high level of business at stake, understanding the changes that need to be implemented will be a big draw. One aspect requires importers to verify food safety standards. While this may already be done based on a company’s own reasons or what buyers have required, not 100 percent of importers are doing so. This puts the burden on the importer to prove product is grown in a safe manner, which is good for the industry.
Q: Is there unease from members about meeting new legal mandates?
A: Jungmeyer — For the most part, the requirements mirror Good Agricultural Practices that the industry has already suggested to FDA. Congress has given FDA the authority to direct foreign governments or third-party auditors to certify product imported to the U.S.
Mexico already has been doing all this work to verify safe product, but so far FDA hasn’t had the authority to recognize efforts going on in Mexico to satisfy FDA’s own standards. There are aspects parallel to what the U.S. is doing. Now FDA will be able to work with the Mexican Government to make changes or tweak practices to meet our standards.
Q: Do you think this will help combat safety concerns in the marketplace about Mexican produce?
A: Jungmeyer — Another important session to attend gets to the heart of this problem: Dispelling Myths to Sell More Produce – A Communications Toolbox for Mexican Produce.
Because of pervasive negative connotations, it is often challenging for the importer or seller of Mexican produce to refute them, even though these perceptions are false. Mexico has all sorts of safety requirements, and companies in Mexico are already used to meeting high standards — in many cases above and beyond those of the U.S. However, a disconnect remains entrenched with many buyers and retailers, who say they don’t want Mexican produce because they think it’s unsafe.
I see stories about Mexican produce on the Internet and I look at the comments. There are so many disparaging things written that aren’t factual. Many Americans just don’t get it. We hope to give marketers of Mexican produce ammunition, that Mexican produce is safe and not grown with banned pesticides. Frankly, so many misperceptions out there need to be countered.
Q: How is demand for Mexican produce evolving, and what are the key logistical issues and infrastructural changes that are taking place?
A: McClung — If you look at USDA statistics generated, in the last year or so, you’ve got huge volumes of produce coming across the Mexican border, 3.3 million truckloads of produce in given years, and that doesn’t include produce going from the U.S. to Mexico.
Q: Do you see a long term shift of business from Nogalas to Texas?
A: McClung — Historically, Nogales has been a primary port of entry. In the year ended August 2010, 543 10,000 pound units from Mexico were imported through Nogales. This compares to California with 218 10,000 pound units and Texas with 524 10,000 pound units.
It’s quite even between Nogales and Texas, but a lot of people don’t realize that. What’s happening is a gradual shift to Texas because of improved infrastructure and price of diesel. It can be a savings of $1,000 or $1500 on a trip.
There are not very good east/west highways and two very substantial mountain ranges.
Mexico has opened up some new roads, and next year will be opening a major east/west highway. That is what is driving a big part of the shift. Companies aren’t abandoning Nogales, just shifting some of their accounts.
Infrastructure is improving in both Mexico and Texas. The demand hasn’t been there for the capacity until recently. We’re now in a very substantial growth spurt.
A: Jungmeyer — I don’t see a long term shift to Texas. I see importation of Mexican produce growing in general. Especially with freezes on the east coast, buyers that didn’t previously purchase Mexican produce now have it on the radar screen. There is a great market through the entire U.S., not just the Western half. Until recent times, Mexico supplied winter vegetables for the western side, and Florida would take care of the east side. Buyers on the east coast are seeing consistent, quality supplies out of Mexico.
Q: Do you envision FPAA and the Texas Produce Association merging down the line?
A: McClung — We’re very different organizations. We cover 90 percent of the business between our two organizations, but I don’t see a merge.
A: Jungmeyer — Those are my sentiments as well.
A: McClung — Arizona is about 100 percent imports. Texas is 60 percent imports and 40 percent domestic. If you break it down, Arizona has considerable production in the Yuma area, but that doesn’t come under the FPAA umbrella for the most part. Texas is the second largest state in terms of consumption of fruits and vegetables in the country, certainly representing major markets, but Mexican produce is going all over the country.
A: Jungmeye — We’re receiving good feedback from the members that they like seeing these issues being brought to a greater audience.
Q: Is this the first time you’ve had a conference like this?
A: Jungmeyer — FPAA has had a border trade symposium in 2008 and 2009, held in Nogales and geared toward what’s happening there, which represents about 45 percent of the produce coming in from Mexico. Texas represents 45 percent, and California the other 10 percent. By launching America Trades Produce U.S./Mexico Trade Conference, we cover the breadth of the market.
A: McClung — I’m hopeful that people in the produce industry interested in trade between Mexico and U.S. will come to this conference. There is just too much meat on the table to walk away.
Few things are more important to the future success of the produce industry than successfully integrating trade between the US and Mexico, so a conference devoted to facilitating that process is a great idea.
It is also great to see industry associations collaborating to make things work.
One of things that happens when the industry shifts is that the relevance of industry organizations has to shift as well. One wonders if down the road the Texas Produce Association won’t split, with one organization representing the interests of importers and another of grower/shippers. Although many grower/shippers are now importers, it still is a challenge to represent the interests of, say, Texas citrus growers and those who would like to import citrus from Mexico.
On the other hand, Mexico has the potential to become sufficiently integrated with the US industry that the conferences and organizations we need today may not be needed in the future. Already, organizations such as Wal-Mart and H-E-B are leveraging the procurement arms of their Mexican retail divisions to supply US stores with Mexican produce.
With movement on the Mexican trucking issue, the new highway that will ease east coast access to Mexican produce and a growing interest by retailers in being direct importers, one can see a more seamless web developing.
The big obstacles:
1) Food safety and traceability are significant issues. Although many US companies have operations in Mexico that are run to US standards, and the top Mexican producers are operating at world class standards, the Mexican industry is split with many producers selling on the domestic market without adhering to world standards. Although little of this product reaches the US or global markets, its existence means that a fully integrated market is not yet feasible.
2) Corruption and safety are issues that preclude full integration of markets. Although many of our friends do business with Mexico — in fact they are increasing business with Mexico — they are not oblivious to safety issues and have changed their travel plans and the routes they take.
One big reason why direct importing from Mexico is not more common is corruption.
Years ago the Pundit used to buy a lot of Mexican watermelons for shipment overseas. Back in those days, we needed a Generalized System of Preferences Certificate, which testified to the fact that the melons were grown in Mexico, classified as a developing country, and thus exempt from certain duties. We found that some shippers would promise to get us those certificates and try as they might, they never could. Other shippers seemed to have stacks of these official government certificates in their desk drawers.
The situation has certainly changed but corruption is still a big problem.
Obviously no one conference will resolve all the issues, many of which have more to do with Mexico than the produce industry, but this new event has a great program and a powerful list of speakers. It is an important addition to our industry resources.
If you are at all interested in Mexican/US produce trade, it is certainly the place to be.