How the Nogales port of entry stays ahead of the game.Originally printed in the January 2024 issue of Produce Business.
For generations, Nogales, AZ, located on the U.S.-Mexico border, has been a major commercial hub for the marketing and distribution of fresh fruits and vegetables grown south of the border, as well as for produce sourced from across the southwestern U.S.
The first — and, for a long time, only — gateway for produce heading north from Mexico, according to a University of Arizona study, Nogales has remained hugely significant to cross-border fruit and vegetable trading since the arrival of a consignment of oranges from Hermosillo, Sonora, in the late 19th century.
By 2022, the combined worth of Mexican produce imported through Nogales was estimated by USA Trade Online to have reached over $3.5 billion.
Citrus still accounts for a significant share of imported produce moving through the port of entry — $59.7 million worth in 2022 — but, Nogales has arguably become best-known for three commodities: tomatoes, grapes and, increasingly, avocados.
Imported from greenhouse and open field production in Sonora and Sinaloa, tomatoes shipped through Nogales reached $662.6 million in value in 2022, up 15.6% from 2019, according to USA Trade Online. Grape imports also increased by 5.4% over the same period, with a total worth of $620.8 million. Meanwhile, avocados sourced from Michoacán and, more recently, Jalisco, were worth $235.1 million.
A FRESH PRODUCE HUB
For companies operating in and around Nogales, the importance of the city’s status as a major produce port of entry is in no doubt.
“Nogales stands as a pivotal port of entry due to its rich history spanning over a century handling Mexican produce,” says Jose Luis Obregon, president of Nogales-based IPR Fresh.
“Nogales stands as a pivotal port of entry due to its rich history spanning over a century handling Mexican produce.”— Jose Luis Obregon, president of Nogales-based IPR Fresh
“Situated strategically close to the primary cultivation regions along the Mexican Pacific coast, it naturally becomes the gateway for winter vegetables from Mexico.
“Beyond this, its role extends as a vital distribution center facilitating the transit of produce to the West Coast of the United States,” he says.
Moreover, Obregon says, Nogales’ centrality as a hub for shipments across North America has solidified its indispensability for IPR Fresh and the broader market.
From tomatoes, bell peppers, squash and cucumbers to melons, hot peppers and sweet corn, Nogales serves as a conduit for an array of commodities that effectively elongate seasons for U.S. retailers, Obregon says. Their availability through Nogales, he adds, significantly contributes to retailers’ capacity to provide fresh produce year-round.
Headquartered in the Chicago International Produce Market, La Galera Produce imports Mexican zucchini, mangos, peppers, tomatoes and green beans almost exclusively through Nogales between November and May each year.
“Nogales is an extremely important port for us,” says company owner Paco Vega. “It’s our main access port, as a large majority of our imported fruits and vegetables come from Sinaloa and Sonora, Mexico. Nogales is the closest port to the farms and packinghouses, ensuring we are getting the freshest possible commodities, the soonest possible.”
Although La Galera’s portfolio also includes limes and green peppers, Vega says hot peppers is the category where the company is seeing the greatest demand, followed by avocados and mangos.
Divine Flavor, headquartered in Nogales, counts the location as one of its three ports of entry, including Otay Mesa, CA, and McAllen, TX. However, the company’s director of business development and strategic planning, Patrick Cortes, emphasizes that Nogales serves as Divine Flavor’s main port of entry, accounting for approximately 80% of its imports from Mexico.
“Overall, Nogales plays a very important role, as this border is primarily used for the import of goods from Mexico,” he says. “Our principal farming locations are based in the Hermosillo region of Sonora, which is only a two-and-a-half-hour drive to Nogales, and Culiacan, Sinaloa, being the home of the majority of our bell pepper and tomato farms being only eight hours away.
“I would say the most significant advantage for our company is having our main headquarters and state-of-the-art warehouse facility right here in Nogales,” he says.
Once product crosses into the U.S., Cortes says it is immediately brought to Divine Flavor’s cold storage facilities, quality inspected, and stored until it’s ready for pick up. This whole setup, he says, greatly facilitates the process of delivering produce to customers quickly and efficiently.
Gregorio Saldivar, president of Dallas, TX-based Nogales Produce, has a different take.
Although Nogales’ Mariposa Port of Entry is accountable for much of the company’s imported fresh produce from the northwest coast of Mexico, Saldivar views it as a crossing that doesn’t suffer from the over-saturation problems in other regions.
“It’s a less congested border port of entry, when compared to those of south Texas and Southwest U.S., resulting in quicker crossings and delivery of goods,” he says.
Like Obregon, Saldivar emphasizes Nogales plays a key role in helping U.S. retailers lengthen the season. “Citrus out of the Sonora area helps alleviate demand and end consumer costs in the U.S.,” he says. “There are also beautiful squashes of many varieties, watermelons, sweet peppers and cucumbers, to name a few.”
AN EVOLVING TRADE
With a large and growing Latino and Mexican population in North Texas, Oklahoma, Arkansas, Missouri and Louisiana, Saldivar says there is now demand for fresh items from all regions of Mexico.
However, and especially for Nogales Produce, some items are more in demand for others.
These Saldivar identifies as avocados, mangos, grapes and tomatoes, as well as peppers (fresh and dry jalapeño, poblano, serrano among other varieties), guava, papaya and berries. Specialty products, including prickly pears and jicama, also enjoy strong demand.
“Trade with Mexico is in the billions and continues to grow — many companies are taking their factories out of China and bringing them south of the border,” says Saldivar.
The company, which custom packs items at its Dallas facility, also operates a number of labels, including Mando’s Pride, Sarita’s Sweet Mandarins, La Más Dulce Oranges, Superfruit Grapefruit and Sarita’s Spices, which are shipped throughout the U.S.
Likewise, Divine Flavors focuses on table grapes, bell peppers, cucumbers, melons, squash (yellow straight neck and zucchini) and mini peppers, as well as tomatoes. The largest importer and exporter of Mexican grapes, the company is also emerging as a leading player in the bell pepper, cucumber and snacking grape tomato segments.
But Cortes says this trade is constantly evolving. Central Mexican states such as Jalisco, Nayarit, Michoacán and Guanajuato have been increasing production through investments in greenhouse technologies.
“The use of greenhouses has helped expand the season into later parts of the year before the traditional west Mexico season begins in November,” Cortes says. “Central Mexico expanding into greenhouse technology allows producers to go into the summer months all the way until Sonora/Sinaloa begins, bridging a gap to make Mexico year-round on most commodities.”
Divine Flavor recently kicked off its west Mexico winter/spring season, a core growing region for the company’s bell peppers, tomatoes, cucumbers and squash programs.
Among the varied imports handled by IPR Fresh from Mexico, bell peppers, cucumbers, sweet corn, and watermelons stand out as the top fruits and vegetables making their way through Nogales, according to Obregon.
“Over recent seasons, there has been a consistent increase in volume,” he says. “This uptick stems from both heightened consumption and amplified production. However, the unpredictability of nature plays a significant role each year, impacting supply.”
Despite these fluctuations, Obregon says staple commodities crossing through Nogales continue to be integral to the U.S. diet. “Providing fresh fruits and vegetables during seasons of limited or nonexistent domestic production remains a crucial service,” he adds.
As the new season unfolds, Obregon says IPR Fresh is gearing up to augment its offerings in bell peppers — both conventional and organic — sourced from diverse growing regions across Mexico.
Tomato specialist Del Campo Supreme is another company that has benefited both from a presence in Nogales, where it is headquartered, and further along the border in McAllen, TX. Sales manager James Munguia says having such a presence enables easy access to both the West and East coasts for its Mexico-produced items.
“With Nogales, you have accessibility to the West Coast, and the same for McAllen, accessibility to the East Coast. We’re fortunate we have those options in both locations,” he says.
Some 90% of the products handled by Del Campo comprise tomatoes, including beefsteak, vine ripe, Roma, grape, Medley, cherry and heirloom. Organic, although present, accounts for less than 5% of Del Campo’s volumes.
However, for Munguia, it is the Roma variety that offers the greatest potential for future development of the category. “I think the Roma tomato is more utilitarian, you have more options with it,” he says. “You can slice it, dice it, cook with it. It’s a more conducive variety for sauces and so on, whereas a round tomato is not.”
THE INFLATION FACTOR
With a constantly changing industry and some requirements — from sustainability and social certification to food safety regulations — leaving some produce companies in flux, Divine Flavor’s Cortes says agriculture, in general, is challenging.
“In recent years, weather has been a problem, and this past year especially,” he says. “At a time when most retailers are in desperate need of volume on most commodities, inclement weather and delays related to that puts a burden on the industry.”
IPR’s Obregon concurs. “Challenges persist due to factors like weather uncertainties, governmental regulations, trade barriers, and market fluctuations, posing ongoing hurdles to the industry,” he says. “Tariffs, trade barriers, and escalating labor or transportation costs have undeniably influenced this trade. These factors introduce complexities and uncertainties that necessitate adaptability within the industry.”
Saldivar from Nogales Produce paints a similar picture. “It seems that demand is consistently scratching at availability’s feet, and there are many Mexican commodities that are in high demand, but our weather has the last word,” he says.
“With increased water demand for both human consumption and agricultural production, and the lack of water conservation and unforeseen events, water shortages affect Mexican agricultural production year after year, resulting in increased costs in many commodities,” says Saldivar.
These challenges have been compounded, Saldivar says, by rising transportation and employment costs caused by labor shortages, and steadily increasing inflation for goods and services. “Mexico and other countries share the same issues as well,” he adds.
Cortes says the forward-thinking of some companies to invest in other areas throughout Mexico, such as central regions and Baja Sur, is helping with shortages and production gaps.
“Being consistent in agriculture can sometimes be challenging, but the companies who are willing to invest more are usually those who can navigate these challenges much better,” he believes.
Other challenges cited by Saldivar — not just for Nogales Produce, but for the industry as a whole — are Mexico’s product standards, labor laws, sustainability and environmental practices.
However, he says “conducting thorough due diligence, keeping a conservative mind, and learning Mexican laws and procedures will help guide companies through many challenges.”
Where companies in Nogales have an advantage, he believes, is in their easy access to several border ports of entries, meaning they can get Mexican produce into coolers quicker.
“The cold chain is consistently good and that allows Nogales Produce to sell good fresh products to our customers and end consumers,” Saldivar adds.
A challenge most keenly felt by many companies working in the hothouse sector has been tomato brown rugose virus, which has spread across North America since first being detected in the Middle East in 2015.
“That’s been one of the biggest challenges we’ve had. Anyone that grows hothouse produce has been experiencing rugose,” admits Del Campo’s Munguia. “We’re now using rugose-resistant varieties.”
OPPORTUNITIES IN EDUCATION
Many Nogales-based companies believe there are clear opportunities to be exploited in the market, partly thanks to Mexico’s broad seasons.
“We have the ability to grow year-round and have produce consistently through the year,” says Munguia. “We do have ups and downs because of transition period, but it’s a very small timeframe.”
For Divine Flavor’s Cortes, one such opportunity is consumer demand for more convenience, more snacking, and more flavorful produce. At the same time, there is also demand for items on a year-round basis, which can be challenging for some produce companies.
One factor that Cortes says has contributed to Divine Flavor’s success has been its expansion of its grape sourcing into new regions of Mexico, as well as complementary imports from Peru and Chile outside the Mexican season. “Not only has this given us the opportunity to expand our offerings for longer periods of the year, it gives us more flexibility going from one growing region to another,” he says.
For IPR’s Obregon exploiting the opportunities presented by produce imports involves emphasizing the health benefits associated with increased consumption of fruits and vegetables.
“Similar to the success story of Hass avocados, strategic promotions can significantly elevate the demand for specific produce,” he says.
Likewise, La Galera’s Vega views education around certain commodities as being both a challenge and an objective moving forward. “There are so many variations of items, so educating store buyers about different fruits and vegetables can sometimes be difficult,” he says.
“Also like many cultures, there are items that are particularly used by Mexican people that are unfamiliar to other cultures. For example, there is a fruit known as Xoconostle, which is a cactus fruit native to central Mexico. This is typically used to make sauces, salsas and jellies. This fruit is not typical and so we’ve had to step up our marketing to educate both customers and consumers alike.”
To make the most of these educational opportunities, Vega argues produce quality needs to be consistently high to appeal to buyers, emphasizing the importance of developing relationships with like-minded growers and packers. In La Galera’s case, this strategy takes the form of the company’s heads of departments regularly visiting farms to make sure they are comfortable with quality and safety levels.
WHAT’S NEXT FOR NOGALES
With prevailing inflation rates and escalating production costs, IPR’s Obregon says the trajectory points toward an “inevitable price increase” to sustain profitability within the industry.
“The industry in general is challenged by cost, and there are no borders to this challenge,” agrees Munguia. “Our costs have gone up significantly, so the more efficient we are and the more efficient we will be, that’s how we will mitigate the costs. And new technologies are giving us better yields with less acreage.”
Vega from La Galera also anticipates significant inflation for the 12 months ahead.
“We have already seen the trucking industry take a significant toll, as many trucking companies have gone out of business,” he says. “The industry is volatile, and we believe that we have to be fiscally responsible so that we can be prepared for sudden changes.”
Cortes from Divine Flavors echoes the note of caution. “We expect prices to rise across the board,” he says. “The cost of materials, inputs, transportation, labor, etc. are all on the rise, and this will have an effect on the final price.”
To counter price inflation impacting consumption, Cortes stresses the importance of delivering quality products full of flavor. “This is important to the consumer, and will drive repeat purchases,” he argues. “Fantastic, quality, great-tasting products always sell.”
Headquartered close to Nogales in Rio Rico, AZ, but with a second facility in Pharr, TX, SunFed specializes in squash, eggplant, cucumber, bell pepper and melon imports from Mexico.
The company’s vice president of sales and marketing, JC Myers, says misconceptions around food safety, combined with rising labor and materials costs, is affecting Mexican growers’ ability to profitably produce fruits and vegetables.
“Demand for safely grown, quality fruits and vegetables will continue to grow, and the reliance upon our southern neighbor will be that much more important.”— J.C. Myers, SunFed
Despite this, he believes that imports from south of the border will only increase. “Demand for safely grown, quality fruits and vegetables will continue to grow, and the reliance upon our southern neighbor will be that much more important,” Myers predicts.
Looking ahead, Saldivar says Nogales Produce plans to expand its food safety, sustainability and good international labor practices in accordance with partners in Mexico.
Outside his own business, Saldivar predicts the trend toward steadily increasing prices is likely to continue. “We hope for the future for this to subside a bit, but it may be wishful thinking only. We will see,” he adds.