Border Battle for Mexican Produce Imports

Produce Importers

Fueled by avocado shipments traveling via Texas, companies are positioning themselves for a future of streamlined movement toward the East Coast.

In the battle to reduce transportation costs and expedite produce deliveries into the nation’s population centers, Texas is fast becoming the go-to state for importers. If statistics don’t lie, the Lower Rio Grande Valley is the apparent leader in the current skirmish to import Mexican produce from along the 1,900-mile-long U.S.-Mexico border.

Billions of dollars of produce and products from Sonora and Sinoloa, Mexico, flow across the border annually — including fresh, frozen and processed fruits, vegetables and nuts — according to the Center for North American Studies (CNAS), a Texas A&M University program that promotes agricultural ties between the United States, Mexico and Canada to expand trade, enhance the competitiveness of U.S. agriculture and foster greater cooperation in resolving critical trade issues of common interest. Nearly 90 percent of the imports involve fresh fruits and vegetables that enter the United States via primary land ports in Texas and Arizona, and to a lesser extent, New Mexico and California.

“In the next five years, produce imports from Mexico are expected to grow, with a majority of the growth coming into the United States via Texas,” says the CNAS.

This growth projection has implications throughout the border economy in general, and the Texas economy in particular.

“In the past 10 to 15 years, the import of vegetables — most notably through both Laredo, TX, and Hidalgo, TX — started on an extraordinary upward trend,” says Dr. Vera Pavlakovich-Kochi, regional economic development researcher on cross-border economic indicators at the Eller College’s Business Research Center and adjunct associate professor in the Department of Regional Development at The University of Arizona, both in Tucson, AZ.

Lance Jungmeyer, president of the Nogales, AZ-based Fresh Produce Association of the Americas, FPAA, says much of the business is generated by experienced produce executives out of Nogales, AZ. “The international line is an invisible one because we’re all in the same business of feeding people. I don’t look so much at the numbers of Texas versus Arizona, but at the companies themselves. The ones that have been in Nogales for decades are the ones driving a lot of that growth in South Texas. They’ve opened up operations there to have a foothold in both worlds.”

Pavlakovich-Kochi agrees. “One profound impact on Texas import numbers has been the addition of avocados in the total fresh produce category.”

Points of Entry

The Laredo District encompasses six entry points — Laredo, Hidalgo, Brownsville, Progresso, Rio Grande City and Eagle Pass. According to Pavlakovich-Kochi, by 2014, Hidalgo had overtaken Nogales with the highest dollar value of imported fresh produce ($3.5 billion). It was the exponential growth in imports of Mexican avocados that profoundly impacted the latest charts, but in the fast and ever-changing economic landscape, it’s difficult to pinpoint a single cause.

“While the increase in avocado exports plays a major role, it is difficult to isolate impacts of geography, distances, highway security, port infrastructure, inspection rigidity and the power of individual port promotional practices — all of which influence decisions about port entry,” says Pavlakovich-Kochi.

Among the major factors in the see-saw battle for No. 1 Import Port status between Texas and Arizona is the anticipated rise of American interest rates which, as the dollar appreciates, will spur more import activity from both points of entry. Add to that the improvement of the Mexican Federal Highway pavement from the source to the shipper, i.e., infrastructure improvements that reduce transportation time by measurable hours. In a contest where time is money, better roads mean faster transport and being able to shave hundreds, if not thousands, of dollars off truck transport costs.

“Sometimes you can bring a different product mix to Texas more economically than you can to Nogales, like Texas and their avocado imports — although we’re also going to try to bring some of that business into Arizona because bringing Mexican avocados into the United States is a $2 billion business,” says FPAA’s Jungmeyer.

Ronnie Cohen, vice president of sales for Vision Produce/Vision Imports in River Edge, NJ, explains it this way: “Increased import volume through the South Texas border is a result of the completion of the Durango Highway allowing trucks to move more efficiently and timely from West Mexico. Many of the hot house vegetable items and berries were traditionally shipped through Nogales or took a much longer route to get to Texas via Mexico’s mountains.”

Texas proudly touts a lot of superlatives, one of them being the Pharr-Reynosa International Bridge, a three-mile-long span that crosses the Rio Grande River and connects the two countries with both commercial and passenger traffic going through the Pharr Texas Port of Entry, which is part of the Hidalgo Port system. The roadway, billed as “The Intelligent Bridge” offers state-of-the-art technology, including GAMMA Ray inspection equipment and programs like Free and Secure Trade (FAST) implemented on both sides of the border.

Daily data indicates that Pharr/Hildago maintains the lion’s share of Mexican produce going through Texas ports — an estimated 60 percent of total produce imports going through Texas. The saving of transport time means produce arrives at its final destination in better condition while incurring less cost.

Another factor that has brought industry attention to Texas involves a new highway that runs from West Mexico — Mazatlan on the Pacific Coast — to Matamoros on the Texas border, La Supervia Mazatlan-Matamoros, a speedy conduit that has been referred to as a direct pipeline into South Texas.

Industry contacts in Reynosa are cited in a USDA Foreign Agricultural Service report on global agriculture as predicting, “With this new infrastructure, producers from the Pacific Coast who want to target the eastern United States will benefit from lower freight costs (saving approximately $1,000 USD) and by a reduction of one day of travel time.”

When asked to weigh in on the surging Texas import numbers, the United Fresh Produce Association, Washington, D.C., said “no comment,” but the Texas International Produce Association (TIPA) in Mission, TX, wasn’t so bashful. “From South Texas, you can hit anywhere in the United States,” says Dante Galeazzi, president and chief executive of TIPA. “We try to incorporate everyone involved in the produce supply chain because ultimately, decisions that affect everyone are made at all levels.

“All produce grown along the west coast of Mexico can now go from field to the Texas border in 15 to 18 hours, saving time and shelf life. Fresh fruit and vegetables can be anywhere in the United States in two or three days, with another day added for Canada. It saves about 24 to 48 hours in transport time over shipping through Arizona for East Coast markets,” he continues.

Presumptively, according to a CNAS report titled, Economic Impacts of Increased U.S. Imports of Fresh Produce from Mexico by 2025, more than 688,000 truckloads of fresh fruit and vegetable imports (a 49 percent increase from 2016 statistics) will head north from ports in Mexico and Texas, with predominantly the Lower Rio Grande Valley handling more than half those imports, or roughly 350,000 truckloads.

The estimate is justified in large part, according to the report, to higher recent growth in imports through Texas due to Mexican highway, bridge and cold storage improvements.

“These improvements will not only attract produce previously shipped through Western U.S. destinations, but may also attract imports from Central and South America and possibly Asia,” says the report.

“We use Texas as a distribution point for our production from central and eastern Mexico because there is a time and freight savings,” says Matt Mandel, vice president of operations for SunFed in Rio Rico, AZ. “Much of the growth in the Lower Rio Grande Valley market is an indication of the expansion of production in central Mexico and its east coast; Texas ports handle a wide variety of products from several different microclimes, meaning that product crosses 52 weeks out of the year in a stable flow.”

The Economies

The economic impact is staggering. Considering the entire four-state border region, the 2016 direct economic output attributed to produce imports of $516 million will grow to more than $766 million by 2025, according to CNAS.

Graphs Courtesy of Azmex U.S. Trade Online

And while Texas border ports are happy to be acknowledged as No. 1 in volume, TIPA’s Galeazzi says, “This is a big pie and there’s enough to go around. Sure, Texas is carving out its piece of the pie, but Arizona ports can also claim their fair share.”

The value of imported fresh produce through Nogales in the past six years has varied little, ranging from getween $2.5 and $2.6 billion a year.

Translated into detailed statistics, from Jan. 1 to Sept. 30, 2017, the Pharr-Reynosa International Bridge location logged 119,000 trucks of produce at 40,000 pounds each while the Lower Rio Grande Valley (the bridge port and facilities at Progresso and Rio Grande City, which reports up to the Laredo field office) posted a trio total of 145,000 truckloads, according to TIPA’s Galeazzi. That’s 5.8 million pounds of fruits and vegetables in just three sites.

Success begets success, and the Texas import industry is gearing up for more progress. That’s good news for the 29 ports of entry in the state overseen by U.S. Customs and Border Protection.

“The region understands how important this growth spurt is, and they’re cautiously optimistic for continued improvement, investing in resources and infrastructure to keep up with this pace,” says Galeazzi.

“We operate two cold storage facilities in Rio Rico, AZ, with nearly 70,000 square feet of refrigeration. While our current Texas footprint is only 20,000 square feet, our expansion plans include doubling that in the next 12 to 18 months,” says Mandel.

Vision Import Group’s Cohen says its current product line of limes, lemons, pineapples and mangos are not directly impacted by the rise in volume in Texas, but the company is looking to add commodities to its core items. “Berries have been an interest of ours for many years, and our infrastructure can take on more capacity with no problem.”

“Retail buyers can look for Texas ports to be more active year-round and not just for specific commodities. Mexico is diversifying produce beyond its current Top 5 imports…”

— Dante Galeazzi, TIPA

One recent change the company has made is partnering with a Texas firm run by industry veteran Ben Britton Sr., formerly of Tavilla Sales Co., of Los Angeles, to offer national distribution of core items.

Companies that didn’t have a presence in Texas are building facilities while existing players are expanding their operations to keep up with the demand. Adjacent cities are adding developments while other support industries — food safety companies, laboratories and auxiliary players including the education sector — are also coming on board.

“Recognizing agriculture is a big player, one of our local universities has opened a Sustainable Agriculture and Rural Advancement Center to train qualified help for all pieces of the puzzle,” says Galeazzi. He also adds the forward progress movement has also moved south and, “Mexico is trying to get up to the same level we are.”

Forward-thinking industry players are recognizing a need to maintain a presence in both import arenas as Arizona companies open facilities in Texas or work with Texas companies whose mission is to haul produce to East Coast or Midwest markets.

Firms like Vision Produce Company and Vision Import Group (located in Hackensack, NJ) cover all the bases. With warehousing in Arizona and cold storage in Pharr, TX, their produce lines can be speedily imported and rapidly sent on its way all the way up both coasts and across the Canadian border.

What this means for supermarket produce retailers are both bigger and better.

“Retail buyers can look for Texas ports to be more active year-round and not just for specific commodities,” says Galeazzi. “Mexico is diversifying produce beyond its current Top 5 imports — tomatoes, limes, avocados, mangos and broccoli — to supply an increasing demand for specialty items like guava and papayas.”

For three generations, Ciruli Brothers in Rio Rico, AZ, has dealt with border produce in both Arizona and at its Texas facility, which has been recently remodeled. Mangos are the biggest produce item in a season that begins in mid-February in Chiapas in southernmost Mexico to mid-September from Los Mochis, Sinaloa, Mexico. “We cross mangos in both Nogales and South Texas, but some routes are faster through Texas, like saving one to two days tracking Chiapas loads through Texas,” says Sandra Agular, the ccompany’s marketing manager. “Central Mexico products have shorter transport times and are easier to cross through Texas. It’s worth noting that wait times for crossings through the recently renovated Nogales port are sometimes shorter than those crossing through Texas. Everything considered, the decision to cross products through any port is driven by customer demand, market conditions and availability.”

The need for larger volumes of product is there, according to a recent Wall Street Journal article by Sarah Chaney, who wrote: “In relative terms, fresh fruits and vegetables are cheaper today than processed fruits and vegetables. Fresh product prices have remained relatively static since the 2008 recession while prices for processed items are higher now than before the recession.