• TABLE OF CONTENTS
HIDE
 Copyright
 Front Cover
 Abstract
 Title Page
 Acknowledgement
 Table of Contents
 List of Tables
 List of Figures
 Introduction
 A brief history
 Producer organization
 Competitive relationships
 The multinational vegetable...
 Reference






Group Title: Economic information report - Food & Resource Economics Department - 25
Title: Mexican winter vegetable production marketing and trade
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00027353/00001
 Material Information
Title: Mexican winter vegetable production marketing and trade an overview
Series Title: Economic information report
Physical Description: iii, 20 p. : map ; 27 cm.
Language: English
Creator: Andrew, Chris O
Publisher: Food and Resource Economics Dept., Agricultural Experiment Stations, Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville
Publication Date: 1975
 Subjects
Subject: Vegetable trade -- Mexico   ( lcsh )
Commerce -- Mexico -- United States   ( lcsh )
Commerce -- United States -- Mexico   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Bibliography: p. 20.
Statement of Responsibility: by C. O. Andrew.
Funding: Economic report (Gainesville, Fla.) ;
 Record Information
Bibliographic ID: UF00027353
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management: All rights reserved, Board of Trustees of the University of Florida
Resource Identifier: aleph - 000304242
oclc - 03627124
notis - ABT0819
lccn - 77620843

Table of Contents
    Copyright
        Copyright
    Front Cover
        Front Cover
    Abstract
        Abstract
    Title Page
        Title Page
    Acknowledgement
        Page i
    Table of Contents
        Page ii
    List of Tables
        Page iii
    List of Figures
        Page iii
    Introduction
        Page 1
    A brief history
        Page 2
        Page 3
    Producer organization
        Page 4
        Page 5
        Page 6
    Competitive relationships
        Page 7
        Resource considerations
            Page 7
        Technological considerations
            Page 8
            Page 9
            Page 10
        Transportation
            Page 11
        Price competition
            Page 12
    The multinational vegetable industry
        Page 13
        Factor and product trade
            Page 13
            Page 14
        Import procedures
            Page 15
            Page 16
        Processing for export
            Page 17
            Page 18
        Export development
            Page 19
        Conclusion
            Page 19
    Reference
        Page 20
Full Text





HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida





C. O. Andrew



Mexican Winter


Economic In"for-m "
reportt 25


Vegetable -"-


Production Marketing and Trade:


An


Overview


'od and Resource Economics Department
ricultural Experiment Stations
'titute of Food and Agricultural Sciences
diversity of Florida, Gainesville 32611


June 1975














ABSTRACT


Agricultural imports from Mexico exceed one billion dollars annually.
Vegetables grown in the state of Sinaloa in the production areas near Los
Mochis and Culiacan represent a major share of these imports. Producers
in these areas are well organized and represented by the Confederation of
Agricultural Associations of the State of Sinaloa, the National Union of
Horticultural Producers, and the West Mexican Vegetable Distributor Asso-
ciation all of which promote, control and coordinate vegetable exports.
While labor costs are relatively low compared to Florida, Mexican growers
continue to use advanced technology to more effectively utilize labor and
reduce produce damage. Bulk handling from the field to packing sheds and
palletization in marketing are key examples. Market coordination for the
West Mexican winter vegetable industry is greatly facilitated by a well
developed system of multinational, vertical and horizontal integration.

Key words: Vegetables, Mexico, exports, imports, production and marketing
system.



























MEXICAN WINTER VEGETABLE PRODUCTION
MARKETING AND TRADE:
AN OVERVIEW


by
C.O. Andrew











Acknowledgments


The author expresses his gratitude to Dr. Hugh Popenoe, Director
of International Programs, Institute of Food and Agricultural Sciences,
University of Florida for funding the travel upon which this paper is
based. Review comments by Dr. Donald Brooke, Mr. Ernest Smith and Dr.
W.W. McPherson, Food and Resource Economics Department, University of
Florida were greatly appreciated.














Table of Contents


Acknowledgments.. . ....... . i
List of Tables. 1 . . . . ; i
List of Figures . ... . .... .. . iii
Introduction. . . . . . 1
A Brief History . . . . . .. 2
Producer Organization ... . ... 4
Competitive Relationships . . . . . 7
Resource Considerations. .. . . ... 7
Technological Considerations .. . . 8
Transportation . . .. . . 11
Price Competition. ....... 12
The Multinational Vegetable Industry. .. . ....... 13
Factor and Product Trade .. . . . 13
Import Procedures. ... .. . ..... .. .. 15
Processing for Export. .. .. .. . 17
Export Development ..... ... . .... 19
Conclusion .. .... 19
References. . . . .20

















ii-











List of Tables

Table Page
1--Rate schedule for grade inspection of vegetables by
U.S. Authorities, 1975. . ... ....... .17



List of Figures

Figure Page
1--Map of Mexico designating vegetable growing areas. 3































iii











List of Tables

Table Page
1--Rate schedule for grade inspection of vegetables by
U.S. Authorities, 1975. . ... ....... .17



List of Figures

Figure Page
1--Map of Mexico designating vegetable growing areas. 3































iii











MEXICAN WINTER VEGETABLE PRODUCTION
MARKETING AND TRADE:
SAN OVERVIEW

by
C.O. Andrew*


Introduction

Nogales, is the most important point for agricultural trade between
Mexico and the U.S. The town of Nogales is located in Southern Arizona
and Northern Sonora, a state in North Mexico. Through this port of en-
try pass agricultural products being exported from Mexico to the U.S.
and Canada and various agricultural inputs being exported from the U.S.
to Mexico.
Numerous production factors as well as agricultural products, valued
at over 610 million dollars in 1974, are exported from the U.S. to Mexico
[2]. Exported through Nogales to Mexico are farm supplies such as mach-
inery, repair parts, fertilizer, seed, and other inputs necessary for
production of vegetables and other crops. Important agricultural product
exports are livestock feeds (grains and oils), wheat and flour, meat and
dairy products, and fruit, vegetable and nut preparations.
Agricultural imports from Mexico to the U.S. were valued at about
one billion dollars in 1974. The primary food imports from Mexico to the
U.S. are'vegetables (over 500 million pounds per year) and shrimp (4].
Shrimp are caught in the Gulf of California and represent in import value
terms somewhat less than tomatoes, and significantly less than all vege-
tables. While duties are placed on vegetable imports, no duty is levied
on shrimp imports [5].
The'primary Mexican vegetable production region for export is in the
state of Sinaloa particularly around Los Mochis and Culiacan (see Figure

C.O. Andrew is associate professor of food and resource economics,
Institute of Food and Agricultural Sciences, University of Florida.







1). About 75 percent of all vegetable exports are produced in this
state and nearly all of the tomatoes for export. Of the cucumbers,
peppers and tomatoes grown in Sinaloa, about 80 percent are exported
tothe U.S. Strawberries for export are produced primarily in the state
of Sonora. Cantaloupes are produced near Mexico City in the state of
Michoacan. Attempts are underway to-develop production of vegetables
for. export in Baja California and the Yucatan but at present,volume
remains low.

A Brief History

The first reported shipments of vegetables from Mexico to the U.S.
were in the late 1800's and came by boat around the tip of Baja Califor-
nia and on to the Los Angeles and San Francisco areas. In 1905, the
Southern Pacific Railroad provided transportation to Culiacan. Export
of mature green tomatoes became the major Mexican vegetable export in
the 1940's. The volume of Mexican vegetable exports to the U.S., how-
ever, remained relatively low until the mid 1950's when truck transpor-
tation was made possible through development of new roads. At present
only about a dozen rail cars of fresh vegetables pass through Nogales
per day during the peak season as opposed to 300 to 400 trucks.
With the advent of rapid, daily truck transportation from Culiacan
to the U.S. came the possibility for changing from production of mature
green tomatoes to the production of vine _ripe tomatoes for export. In
a short period of time production for export changed almost entirely
to vine ripe tomatoes.
A great impetus to vegetable exports from Mexico to the U.S. came
with World War II when a significantly expanded demand for fresh winter
vegetables became evident in the U.S. Mexico responded by augmenting
the export program. It was at this.time that the producers in the
Culiacan area became closely associated with distributors in Nogales,
developing the strong ties that hold at present. Since World War II
exports have grown significantly until they now represent up to and
sometimes more than 50 percent of the winter market in the U.S. for
selected vegetables.






112 104 96 88
!-----------------------------------------------"~~ I ---r
Mexca UNITED STATES MEXICO: VEGETABLE
8 --- Ciudd aso .GROWING AREAS
SNo-gales Juarez
o. *"1 Fresh Vegetables
o Hermosilo '
\i l ..uah.a oProcessed Vegetables

T^ W H*NOTHER? t
\ t as DeI Melons
0 <.w I Nuevo
S0 -.- Intemational boundary
S- 4 -*-Estado or territory boundary
S- 3- Z-- one boundary
-. I '^ Torrebn %, ( Rio Bravos pat3moros Statute Miles
S
Durango /


SAti3mra G UL F OF EXCO



G a I 6 r C h a i n go
CI AHUA --'N .. .A- A.- Ve ra.U 4Z'i 2' 1 : n.iN- I : A
14- A FEDERAL DISTRICT. ''-" -,i" .- 3 ., /
G 2u 3yrr- 31 i 1C
2. ,UV IO. D ISTHa. 7 MUS OF

BAJA CAFORNIA 2...3. T'AXCALA ROO ), G F O-..
I c 6 A^ 'L : .-:' .. ,,-,- t At ^ ''0 ";* -, -" n.



KEY T ZNE LUIS TND ADMINISCOATIVE UNITS"




SOUTH 24. COLIMA 32. YUCATAN
10. CAHUART- 1. CHAGUASC S 2
SSINALHA I. EGERRERLOS V GLF OF A V
3. DURANGO IS. GUANAJUATO 2 QUINTANA GUAguaa ---





SOBAIORA 23. OTLAXCALA OO ) G
.NORTH 3LON TABASCO HIDALGO %, i 0
V. -ACATECAS ^ MORELOS V GULFOFMEXICO Acapufco.- *.- ,V .. 1.


9- BAIA CALIFORNIA I V SOUTHERN PACIFIC 31. V"RAC-UZ ( ^. "
SOUTH Z4, COLIMA 32. YUCATAN C ".'-"N
10. NAYARIT- 25. CHIAPAS ,
11. S1NALOA 26. GUERRERO 4 r .' "*o
I. SONORA 27. OAXACA .. "
112_ 104 9S9 88


Figure l.--Map of Mexico designating vegetable growing areas








Producer Organization


The West Mexican vegetable producer is represented by numerous
producer organizations. In the State of Sinaloa there are nine pro-
ducer federations basically organized because of regional and geographic
differences created by the nine rivers that pass through the state.
These nine regional organizations are joined together to form a state
producer federation called The Confederation of Agricultural Associations
of the State of Sinaloa (CAADES). CAADES, a producer organization for 25
years, represents all agricultural producers in the area and all commodi-
ties produced therein. CAADES also cooperates with the National Union of
Horticultural Producers (UNPH) which is organized for all Mexican vege-
table producers. Vegetable producers who export are represented by the
West Mexican Vegetable Distributor Association (WMVDA). The WMVDA works
very closely with CAADES in assisting producers with marketing problems
in Mexico, the U.S. and Canada as well as a few other international
markets. Both CAADES and the WMVDA receive a standard unit handling
charge levied per box for their services which is subtracted from the
value received by the growers for the export product.
The management of CAADES stems from an elected board of Directors.
Each one of the nine regional producer associations elects a man to sit
on this Board. From this group, the Board itself elects a man to serve
for two years as president of CAADES. The organization has a permanent
manager and a permanent assistant to the manager; both are responsible
to the Board. CAADES is divided into nine departments including a total
of about fifty employees. The departments are: Economics and Statistics,
Data Processing, Marketing, Weather Services, Accounting, Small Farmer
Programs, Agronomic Service, the Mexico City Office, and the Nogales
Office. The Department of Economics and Statistics is primarily responsible


Mexican law provides for the following producer representation:
a. Local organization can be formed when 100 or more growers
of one or more commodities join in an association,
b. State associations or regional associations can be formed
when a minimum of 3 local organizations become affiliated.
c. National associations can be formed when a minimum of 3
regional and/or state associations become affiliated.








for economic analysis and has developed a market projection model and a
demand-supply analysis model to determine what plantings will be made
each year. Data Processing collects price and production information
from the past season and makes the data available to the association and
other interested people. The Nogales Office works entirely with export
coordination.
The Marketing Department of CAADES is primarily responsible for
market information, using the market news service data from the U.S. and
distributing the information to producers and packers. This department
also collects price and quantity information to aid the Ministry of
Agriculture in establishing minimum price levels for grain producers.
The Marketing Department is also responsible for ~work in export develop-
ment. To the present, the export development activity of the department
has not been extensive, but plans are underw'ay to further study the
European market as a point of export for Mexican vegetables.
The Culiacan Association of Agricultural Producers, one of the nine
members of CAADES, is the largest agricultural producers'association in
the country of Mexico. There are 350 vegetable growers who are members
of the Culiacan Association and also within this area there are 63 packing
sheds. A packing shed usually works with no more than 8 or 10 producers.
The Culiacan Association provides various services to its growers that
are unique to the organization primarily because of its size. These ser-
vices include a farm supply program and assistance in coordinating sales
of vegetables and grains. The Association helps farmers in ordering
fertilizer and sometimes takes ownership of the fertilizer. It also
coordinates requests for fertilizer imports to serve the Culiacan area
and transmits the requests to Mexican Government import authorities. The
Association buys fuel and distributes it at cost to member-growers. Also
provided are seed storage facilities and some facilities for product
storage.
The .IW"VDA is a trade association designed to promote the Mexican
fresh vegetable export industry and provide services to the industry in
Mexico. The '.IIIVDA has a secretary-manager resporsihle to an elected
Board of Directors. All of the directors are produce brokers or distri-
butors working in distribution of Mexican produce and represent total
4







of 45 member-distributors.2
The '.iVDA membership represents Mexican growers and packers only
and in many instances is associated directly with one or more packing-
houses in the Culiacan area. An association lobbyist in Washington, D.C.
maintains continuous contact with the main offices concerning pending
legislation and policy changes relative to vegetable imports. The WMVDA
is the main source for accumulation and distribution of market informa-
tion from.the market news service in the U.S. It provides daily informa-
tion to the Marketing Department of CAADES on the amount of imports as
well as vegetable movements out of Florida to the U.S. markets. The
WMVDA and its members channel operating capital from U.S. sources into
vegetable production in the Culiacan area. The WMVDA also aids CAADES
and growers with technology transfers from the U.S. and occasionally
helps coordinate farm supply imports.
WMVDA distributors primarily are involved in product brokerage but
are seldom integrated into the customs brokerage business. To be a
customs broker, the distributor must be licensed to serve other distribu-
tors or handle products other than their own. In handling their own, a
customs broker license is not necessary. In most cases, the distributors
indicate that customs brokerage is a specialized function that they do
not wish to perform.
Vegetable producers in Mexico are also represented by the Union
Nacional de Productores de Hortalizas (UNPH). This national organization
consists of 29 local associations and 12 regional associations. The UNPH
basically is most concerned with marketing problems and the need to pro-
mote vegetables in the U.S. and other international markets. The UNPH
discusses with growers their individual export production desires in a
given season to further provide for orderly marketing. The UNPH is also
financed by assessments levied on export sales. These funds are used for
administration, regulation activities, research and development. No
charge is levied on domestic sales but the UNPH does have domestic
responsibilities.

2Several firms went out of business in 1974, because volume was
down for that year and for two preceding seasons.








Competitive Relationships

Resource Considerations

As is commonly known, the production situation including climatic,
soil, and human resource conditions favor West Mexican producers rela-
tive to U.S. producers for U.S. winter vegetable markets [1]. Moderate
temperatures, due to the proximity of the Culiacan-Los Mochis production
area to the Pacific Ocean, are important to West Mexican production in
Sinaloa. Because of these favorable weather conditions, most of the
vegetables are grown within about 100 miles of the coast. Water has
become readily available to producers through numerous irrigation proj-
ects financed by the Mexican government. The state of Sinaloa is divi-
ded by nine rivers from which irrigation is possible through dams and
waterways developed for the production region.
Some Mexican producers, as in Florida, prefer to lease land for
vegetable production. In doing so, it is possible to avoid many disease
problems by moving from one area to another annually. Other growers use
crop rotation systems including vegetables, grain, alfalfa and back to
vegetables.
Labor, while relatively inexpensive compared to that in Florida,
has become much more clostly in Mexico over the 1972-1975 period. Mini-
mum wage rates have increased rather significantly and fringe benefits
are becoming more and more prevalent for these workers. Much of the labor
available for the vegetable production and harvest season comes from
Oaxaca in the mountains about 1000 miles south of the production area.
Costs associated with employment of these laborers include transportation
to and from their homes as well as provision for health, school, and housing
facilities. A permanent labor pool, however, is developing as some of
the migrants continue to settle more closely to the production area. Most
of the packinghouse labor in particular is settling within 150 miles of
the production and packing area. It is estimated that about one half
of the picking, grading and packing work force is within this 150 mile
radius.
The minimum wage at 60 pesos ($4.80 U.S.) per day has more than
doubled since 1968 when the rate was 26 pesos ($2.10 U.S.) per day. All
packers are usually paid on a piece rate basis which was about 65








Competitive Relationships

Resource Considerations

As is commonly known, the production situation including climatic,
soil, and human resource conditions favor West Mexican producers rela-
tive to U.S. producers for U.S. winter vegetable markets [1]. Moderate
temperatures, due to the proximity of the Culiacan-Los Mochis production
area to the Pacific Ocean, are important to West Mexican production in
Sinaloa. Because of these favorable weather conditions, most of the
vegetables are grown within about 100 miles of the coast. Water has
become readily available to producers through numerous irrigation proj-
ects financed by the Mexican government. The state of Sinaloa is divi-
ded by nine rivers from which irrigation is possible through dams and
waterways developed for the production region.
Some Mexican producers, as in Florida, prefer to lease land for
vegetable production. In doing so, it is possible to avoid many disease
problems by moving from one area to another annually. Other growers use
crop rotation systems including vegetables, grain, alfalfa and back to
vegetables.
Labor, while relatively inexpensive compared to that in Florida,
has become much more clostly in Mexico over the 1972-1975 period. Mini-
mum wage rates have increased rather significantly and fringe benefits
are becoming more and more prevalent for these workers. Much of the labor
available for the vegetable production and harvest season comes from
Oaxaca in the mountains about 1000 miles south of the production area.
Costs associated with employment of these laborers include transportation
to and from their homes as well as provision for health, school, and housing
facilities. A permanent labor pool, however, is developing as some of
the migrants continue to settle more closely to the production area. Most
of the packinghouse labor in particular is settling within 150 miles of
the production and packing area. It is estimated that about one half
of the picking, grading and packing work force is within this 150 mile
radius.
The minimum wage at 60 pesos ($4.80 U.S.) per day has more than
doubled since 1968 when the rate was 26 pesos ($2.10 U.S.) per day. All
packers are usually paid on a piece rate basis which was about 65





-8-


centavos per box during the 1974-75 season. At this piece rate it is
possible for very good packers to make up to $20 (U.S.) per day. In
general, however, it is probably not likely that packers average more
than a $10.or $12 (U.S.) per day.
Not only are the laborers guaranteed a minimum wage but they are
also guaranteed employment on a five day per week basis for a certain
period of time once they begin to work for a particular packer or pro-
ducer. That is, should the employer not have enough produce to run for
the week or should his sales be curtailed due to a "soft" U.S. market,
he is obligated to pay the minimum daily wage.. In many instances,
employers have a somewhat formal agreement to employ their laborers on
a seven day a week basis. If there is employment available only for 5
days, then the 6th and/or 7th day usually do not require a full minimum
wage payment; one half of the minimum wage payment is often the agreed
upon minimum.
Many fringe benefits, including schooling, housing and medical
facilities are also supposed to be made available to laborers and their
families. Often the housing is of varied levels of poor quality and
the schools are not always entirely financed by the producers and
packers. In some instances matching funds from the Ford Foundation or
a similar organization, are available to help provide schools. Individ-
uals are not supposed to work in the agricultural labor force unless
they have a minimum of a sixth grade education. However, this rule is
overlooked by the government and the producers primarily because very
few people in the rural labor stream can meet the requirement and
because there are not sufficient schools to train the rural labor
force to this level.

Technological Considerations

The development and use of advanced technology in Mexico to more
effectively utilize labor and reduce produce damage is impressive. The
competitive need at present to save labor is not particularly strong.
Yet a significant potential for labor saving and cost reduction is
present as the research and development activities progress rapidly, in
some instances exceeding those in the U.S. Two advances in particular
will illustrate this trend. One is the use of bulk handling from the







field to packing plant where water-flush unloading systems are used.
One plant has reduced its need for labor in unloading alone from thirty
individuals to one man who runs the water machine. Secondly, the move-
ment toward palletization is advancing rapidly. Nearly all packing
sheds use palletization for their straight loads. The tendency in the
vegetable export industry is toward complete palletization and firms
not currently using these methods will be forced to do so by handlers
and receivers, and possibly by competitive costs.
Because palletization of vegetable exports by Mexican packers can
have a significant competitive impact on U.S. markets and producer-
packers through labor cost reductions throughout the production and
distribution system, special emphasis is given in this report to this
change in handling. Palletization of vegetable exports from Mexico is
relatively new but expanding very rapidly. At present, nearly all of
the straight loads coming from Mexico have been palleticized by packers
3
in the Culiacan area. The distributors, brokers, and receivers are
promoting the use of pallets to improve coordination and reduce costs
in the marketing and handling system.
The exception to palletization is primarily for mixed loads. Mixed
loads from production areas are most common early in the season when it
is not possible to assemble a straight load due to inadequate volume.
The same condition may hold for small producers throughout the season.
Thus, mixed loads are not palletized as they leave the production-
packing area. However, some of these mixed loads, when broken down by
the distributors in Nogales, are then placed on pallets. Mixed loads
for distribution are often desired by the buying broker.
Most pallets are produced for disposal in the U.S. and are not
returned to the production area. Pallets made at the Cannellas Brothers
Farm and Packing Shed, Culiacan cost about 40 cents (U.S.) each and
these costs are passed on through the system to the retailer. Because
the pallets are paid for by retailers, there is an incentive at the
producer-packer level for pallet use. There is a built-in incentive for

3When I visited the CAADES compound on February 24, 1975 there were
22 trucks passing through with 15 hauling produce on pallets. All
straight loads of tomatoes, peppers, and cucumbers were on pallets.





-10-


retailers, wherever possible, to reuse the pallet at least within the U.S.
system. A basic problem with the pallet system is the need for standard
pack and pallet sizes to reduce loading and storage problems. Size
characteristics of the pallets utilized for export products are as follows:
Peppers. Thirty pound boxes are used for peppers; these boxes are
stacked seven high on the pallet with six boxes per layer or 42 boxes on
each pallet. The pallet size is 36 inches by 42 inches. Palletization
does reduce the weight and volume of peppers that can be moved per trailer
due to the low weight, and high volume nature of the product. Peppers,
however, are the only product that have this particular problem. Often
additional boxes are stacked above the pallet load within the trailer.
Tomatoes are loaded in flats 11 layers high with six per layer or
a total of 66 flats per pallet and the weight per flat is 22 pounds net.
The size of:the pallet is 36 inches by 42 inches.
Cucumbers are packed in boxes and stacked 10 layers high with six
per layer, representing 60 boxes per pallet. There are 24 cukes usually
in a box. The size of the pallet for the boxes or cartons is 40 inches
by 40 inches. Some of the cukes are loaded in the traditional wire bound
basket or box and the size of the pallets for these boxes is 40 inches
by 44 inches. They are stacked seven layers high with six per layer or
42 per pallet. Truck loading problems for cucumbers and tomatoes are
not prevalent because of the high density volume of the two commodities.
Thus, it is possible to reach the weight limits of 40,000 pounds per
truck without stacking boxes of tomatoes or cucumbers to the roof inside
of the trailer.
Watermelons are also placed on pallets with four boxes to the layer
and 8 layers high representing 32 boxes to the pallet. These boxes
contain 8 small melons. At present the pallet size for melons is 36
inches by 56 inches and cartons are 8-18-27 inches. In 1976 carton size
will change to 18-19-24 inches and pallets will be 40-48 inches. Carton-
ization of watermelons depends upon the price of the melons.4 Early in
the season melons are packed in boxes and placed on pallets as long as
the price is above about six or seven cents per pound. The cost of this

4Some melons were being packed for export through Los Angeles to
Japan on February 25, 1975. These melons were in cartons on pallets and
contracted for 144 per pound.




11--


palletization procedure is about two cents per pound. When price falls
(usually about May 1) below the six or seven cent level then the melons
are packed 50 to a bin and costs are reduced to one cent per pound. The
bin, also placed on a pallet, is made of corrugated cardboard which is
collapsable and returnable to the distributor.5 Because the box charge
is passed on to retailers and,.the bins are reusable, an attempt is made
to use the bins several times.
Eggplant is packed and placed on pallets six to the layer and seven
high with 26 pallets to the truck. These pallets are the same size as
those used for tomatoes.
Cherry tomatoes are packed on pallets 15 high and six to the layer
with the pallet the same size as for regular tomatoes.

Transportation
Time in transit is an important factor in maintaining a quality prod-
uct capable of competing favorably in U.S. markets. To this end, the
export transportation system has evolved into a well coordinated set of
activities closely linked to the various shippers in Culiacan and the
distributors in Nogales.
Two main transport arteries serve in West Mexico's vegetable export
industry. Both the international highway and the railroad pass south
from Nogales through Hermosillo, Guaymas, Obregon, Navajoa, Los Mochas,
Guasave, Culiacan (600 miles from Nogales), Mazatlan and to Guadalajara
and Mexico City. Today over 90 percent of West Mexico's vegetable ex-
ports to the U.S. move by truck. A major bottleneck in trucking vege-
tables to and from Nogales has been congestion in the inspection compound
and traffic within Nogales. A new compound and truck route around
Nogales are near completion to alleviate this problem.
The trip from the main Culiacan growing area for a truck load of
export vegetables usually begins in late afternoon and terminates 15
hours later in Nogales. Before the truck arrives a complete manifest
and various information exchanges are made in Nogales among distributors,
customs brokers, trucking companies and the original shipper in Culiacan.

5The bulk bins for watermelons are made by Best Box Company in
California at a cost of $7.00 per box.





-12-


Often the grower or his shipper call their distributor in Nogales as the
truck leaves the growing area to advance the necessary information for
export. This information is passed to the various appropriate authorities
so that export approvals can be granted and the numerous assessments can
be levied.
The transportation system is served by about forty truck brokerage
firms with half belonging to the Nogales Truck Brokers Association. This
association was recently organized primarily to standardize rate structures
and better coordinate trucking activities with the needs of shippers,
brokers and distributors.
Price Competition
Due to an inadequate domestic market, one cannot really talk about a
domestic price for Culiacan produce. Only occasionally will produce move
into the major Mexican markets, and in these cases the primary considera-
tion usually is that some profit be obtained above transportation costs.
In most instances, the value of the produce is lower in Mexico City than
normal transportation costs from Culiacan.
For exports, the Nogales price divided into shares received by
Culiacan producers and the distribution system is about 65 percent for
producers, and 35 percent to distributors. Thus, with approximately 30
percent of the U.S. consumer dollar going to the point of import at
Nogales, 65 percent of that, or approximately 20 percent of the U.S. con-
sumer dollar goes to the Mexican packer and somewhat less to the grower.
Gassing of tomatoes is done purely on a price speculation basis;
that is, when tomatoes are moving without difficulty and the market is
solid in theU.S., then the tomatoes may be picked up to 25 times per
season, and there is no need for a gassing program. When the market
softens, however, the picking frequency is reduced to possibly 4 to 5
times per season and gassing becomes necessary on a purely speculative
basis.
CAADES, acts very effectively as a quasi marketing order or as a
means of regulating production and in turn prices and returns. The
association gives instructions to producers as to what days to pick and.
not to pick. If the market becomes very soft in the U.S. and Canada,
then it is possible that they will tell producers not to pick for one
or two days. If the time extends for several days, pickers are sent to




-13-


the fields and the ripened tomatoes are picked and left on the ground
so that new tomatoes will set.

The Multinational Vegetable Industry

Factor and Product Trade
International trade of vegetable products has become a multinational,
multi-million dollar operation;'. Seldom have agricultural trade economists
had the opportunity to study multi-national, vertically or horizontally
integrated multi-firm industries and corporations in agriculture. U.S.
growers, representing U.S. capital and U.S. management skills, are suf-
ficiently mobile to be able to function in many countries besides the U.S.
Ties by these growers to production in the U.S. are not particularly
strong. Opportunities in other countries, when available, become appealing
and in many cases have enticed numerous vegetable growers to begin production in
Mexico, in the past in Cuba, in many of the island countries and probably
will entice growers to produce in Central America and possibly sometime
in South America. It is impressive how readily and freely resources flow
from the U.S. to Mexico and the relative ease with which vegetable prod-
ucts from West Mexico flow to the U.S.
In viewing the West Mexican vegetable production industry as a multi-
national agricultural enterprise some important trade interrelationships
are apparent. The important primary factors of production provided by
Mexico include land, labor, and water. Management skills have been
primarily derived from the U.S. In the beginning, U.S. producers became
involved in vegetable production in West Mexico and provided their manage-
ment ability to help develop the region. Numerous young men from Mexico
have been trained in the U.S. in various agricultural colleges and with
U.S. firms and have returned home to become owners and managers of some
of the West Mexican production firms. These management ties have pro-
vided a direct pipeline from the U.S. to Mexico for much of the technolo-
gical research and innovation provided by U.S. agricultural experiment
stations. Thus, both management skills and new technology have become
available in an international factor transfer to Mexico. New research
developments presently pass to Mexico in very short periods of time, pos-
sibly, only involving one or two years. For example, the Walter and MH-1
$




-13-


the fields and the ripened tomatoes are picked and left on the ground
so that new tomatoes will set.

The Multinational Vegetable Industry

Factor and Product Trade
International trade of vegetable products has become a multinational,
multi-million dollar operation;'. Seldom have agricultural trade economists
had the opportunity to study multi-national, vertically or horizontally
integrated multi-firm industries and corporations in agriculture. U.S.
growers, representing U.S. capital and U.S. management skills, are suf-
ficiently mobile to be able to function in many countries besides the U.S.
Ties by these growers to production in the U.S. are not particularly
strong. Opportunities in other countries, when available, become appealing
and in many cases have enticed numerous vegetable growers to begin production in
Mexico, in the past in Cuba, in many of the island countries and probably
will entice growers to produce in Central America and possibly sometime
in South America. It is impressive how readily and freely resources flow
from the U.S. to Mexico and the relative ease with which vegetable prod-
ucts from West Mexico flow to the U.S.
In viewing the West Mexican vegetable production industry as a multi-
national agricultural enterprise some important trade interrelationships
are apparent. The important primary factors of production provided by
Mexico include land, labor, and water. Management skills have been
primarily derived from the U.S. In the beginning, U.S. producers became
involved in vegetable production in West Mexico and provided their manage-
ment ability to help develop the region. Numerous young men from Mexico
have been trained in the U.S. in various agricultural colleges and with
U.S. firms and have returned home to become owners and managers of some
of the West Mexican production firms. These management ties have pro-
vided a direct pipeline from the U.S. to Mexico for much of the technolo-
gical research and innovation provided by U.S. agricultural experiment
stations. Thus, both management skills and new technology have become
available in an international factor transfer to Mexico. New research
developments presently pass to Mexico in very short periods of time, pos-
sibly, only involving one or two years. For example, the Walter and MH-1
$





-14-


tomato varieties, which are relatively new to Florida producers, are
also favored and widely used by Mexican growers.
Machinery and other agricultural supplies, such as fertilizer and
seed, are imported from the U.S. Due to transportation and duties, costs
to Mexican growers for these imports often are quite high, particularly
for machinery and repair parts.- -To meet these costs, distributors and
particularly the WMVDA have provided operating capital to help growers
with annual capital investments necessary for vegetable production.
These distributors also act as important sources of information for
growers relative to new varieties and new practices in the U.S. Often
the distributors play a major role in management and in decision making,
although the leadership of the association indicates that thefinal
decision for varieties produced, and timing of production lies in the
hands of the producers.
Little is known of the capital transfer mechanism between the U.S.
and Mexico for vegetable production. Growers and other individuals in
states such as California, New Mexico, Arizona, Texas, Michigan, Florida
and probably others, are involved in investments in vegetable production
and distribution in Mexico. Some estimate that as much as three-fourths
of the operating capital needed for vegetable production-for export is
channeled through the WMVDA brokerage firms in Nogales, to CAADES growers.
Factor flows have also occurred in the opposite direction, i.e.,
from Mexico to the U.S. The primary factor in this flow has been labor.
Labor has moved into the U.S. not only from Mexico but also from the
Carribean countries to assist with vegetable and food production through-
out the country. At present, this flow is no longer possible because of
U.S. legislation. The functioning of the relatively unrestricted market
for products and factors related to U.S. and Mexico vegetable trade, and
the restricted Mexican labor flows to the U.S., tends to favor U.S. con-
sumers and Mexican producers and distributors, and to be detrimental to
U.S. producers.
Because of the disruption in the flow of less costly labor from
Mexico and other countries to the U.S., major adjustments have been made
to take advantage of the less expensive labor in Mexico. One example of
such an adjustment is the production of celery sets in Mexico. The seed
for these plants is sent by case to Mexico from California, each case




-15-


holding,442 sets. In 1975 a total of 380.5 cases or 168,181 sets were
produced and imported back into the U.S. for production in California;
While utilizing less expensive labor in producing the sets, this method
provided for the production of sets much earlier than would have been
possible in California giving California producers a competitive edge in
the U.S. market.

Import Procedures
The value of over 520 million pounds of U.S. vegetable imports
annually from Mexico passing through Nogales is about 200 million dollars.
This is the value assigned to the products at the times they cross the
border, and is significantly less than retail value which is about 600
million dollars. To the U.S. government the value of these imports in
terms of duty revenue is slightly over $38 million dollars.
The procedure used by the U.S. customs office in checking vegetables
where duties are levied on a weight basis is reasonably exact and rela-
tively easy to conduct. Early in the export season; ten boxes are
selected and weighed from each load passing through the CAADES compound.
The gross and net weights are determined and an average weight for each
commodity is specified; then as the season proceeds, this average weight
figure is used as the basis for assessing the duty. Occasionally through-
out the season a few more boxes are sampled from each load to determine
whether the average weight is still representative for duty purposes.
Duties levied on an ad valorem basis are not as easily assessed.
The ad valorem duty cannot be assessed until after the product has been
delivered at a wholesale market and the price determined. Watermelons
for example have a 20 percent duty. This 20 percent duty cannot be
levied until both the volume and price information are known at the
wholesale level at which time the duty is then specified. The export
broker is then charged and makes the appropriate adjustments with his
client.
Import quality and quantity of vegetables is regulated by varied
techniques for the different fresh products. U.S. market orders are
responsible for grade levels for citrus, onions and tomatoes while CAADES
imposes regulations of a similar nature on cucumbers. CAADES also
specifies the proportion of imports which must pass through Nogales




-16-


as U.S. number ones. The percent is imposed as an average per box and an
average for all boxes ina load. On March 1, 1975, for example, thepropor-
tion for tomatoes went up from 60 percent to 85 percent U.S. number ones.
This isa seasonal change so as fall approaches the percentage will once again
decline based upon volume available for export and U.S. demand for to-
matoes. Size regulations, based upon the U.S. market order for tomatoes,
require that no tomatoes enter below 7-8's. When arrivals in Nogales in-
clude smaller sizes the shipment may be bonded for crossing the U.S.
and exported to Canada where no such regulations are in effect.

Inspection begins when the produce arrives in Nogales; no inspec-
tion is performed at the shipping point. The intensity or care taken
in the inspection process varies with price to some extent. When price
is high U.S. authorities are most alert to attempts made to export
marginal quality produce. If price is low and volume is high CAADES
authorities want to maintain very tight control to help reduce volume.
Grade inspections are made both by CAADES and by U.S. inspectors.
U.S. grade inspection fees are listed in Table 1. Besides size, U.S.
inspectors.also check pulp temperature in every load of tomatoes and
cucumbers. Tomato pulp temperature must be between 45 and 55 degrees
F and the minimum for cucumbers is 35 degrees F.
The U.S. plant quarantine inspections, performed by another set of
U.S. inspectors, are not routine unless a problem has been prevalent.
The grade inspectors are alert to regulations by Plant Quarantine and
will ask for such an inspection if the produce appears to be suspect.
These inspections are designed to protect both growers and receivers.
Quarantine inspections are performed with the objective of keeping
plant pests and diseases out of the U.S. These inspectors in Nogales
deal primarily with produce (nearly 100 percent) but also check all
plant material. If problems are encountered,especially for tourist sized
volumes, a free treatment is given to the material to remove the problem.
At times the inspectors do reject entire loads of produce.
The Purefood and Drug Administration (HEW) is responsible for con-
tamination inspections usually performed every other week but daily if
a major problem occurs such as that for peppers in 1974. In some
instances treatment is routine (citrus and mangos are examples) and




-17-


Table l.--Rate schedule for grade inspection of vegetables by U.S.
Authorities, 1975


Lugs Rate in dollars

1-70 1.00
71-140 2.00
141-210 3.00
211-280 -. 4.00
281-350 5.00
351-420 6.00
421-490 7.00
491-560 8.00
561-630 9.00
631-700 10.00
701-770 11.00
771-840 12.00
841-910 13.00
911-980 14.00
981-1050 15.00
1051-1120 16.00
1121-1190 17.00
1191-1260 18.00
1261-1330 19.00
1331-1400 20.00


this treatment may occur in USDA approved fumigation chambers in Mexico.
Occasionally inspectors have checked production areas and packing sheds
to determine what types of materials might possibly come into the U.S.
and to advise packers and producers on regulations.
When tests are needed to determine if produce contains contaminated
materials the load from which it came is placed under surveillancee pro-
cedures." This permits the load to move on into the distribution system
but it can be stopped and destroyed at any point should the tests be
positive. Regulations state that all tests must be completed within 10
days but in reality more rapid testing must be accomplished because by
10 days the produce may have reached the consumer.

Processing for Export
Processing has not been particularly important for the Culiacan
area. Expanded world demand for tomato paste has stimulated increased




-18-


processed tomato production for export. More than three-fourths of
Mexico's.1975 tomato processing crop was grown in the Sinaloa area.
Of the 210,000 metric tons produced, up 31 percent from 1974, about
50 percent went into paste with puree and catsup each utilizing about
20 percent of the tonnage. The U.S., Canada, Australia and Japan, in
order of volume, are the-major importers of Mexican processed tomato
products [31.
One Culiacan firm, involved in preparation of tomato paste, loads
the product on bulk tankers for shipment to Mexico City were further
processing and canning occurs. As a part of this program the firm is
also entering tomato seed production. This same firm is drying pep-
pers for export, primarily to be used in soups and various other
preparations in the U.S. Besides using its own product:, this firm
buys some culls from other pepper packing plants. The processing pro-
gram, however, is considered to be purely a salvage-surplus operation,
as is true with the tomato paste.
Only limited quantities of vegetables are grown in Sinaloa specifi-
cally for processing purposes. Salvage, however, should not be under-
estimated as a means of maintaining a processing industry in West Mexico.
There is only a very limited domestic market for salvage produce due to
distance from major Mexican market centers. A significant amount of the
produce presently must go to waste in the Culiacan area. The domestic
market is not strong because production for Mexico City, Guadalajara
and Monterey is around these cities and a definite location advantage
prevails for producers near those cities. Thus, the surplus product in
the Culiacan area is dumped or fed to steers because the vegetable con-
suming population is relatively small inthe immediate area. In some
cases, the packing sheds maintain small livestock herds to eat excess
and cull peppers and tomatoes. These livestock often are fed better
quality produce than arrives in U.S, super markets because fully ripened
produce is not packed. Thus, a potential is present for further proces-
sing to absorb the great amount of salvage and surplus produce. Insta-
bility of this supply, however, can be a concern for major.processing
firms.




-19-


Export Development
Several of the very large growers in the past year have seriously
considered purchasing used Boeing 707's from the U.S. to transport vege-
tables to Europe. This plan, however, met with resistance from Air
Mexico because to buy the planes, would require more frequent use
than is possible with vegetable exports particularly during the summer
season. Thus, the group'proposed that the planes be used for transport
of tourists. Air Mexico refused to grant permission for the producers
to obtain a license for this purpose and the negotiations were subsequent-
ly closed. But the ideas and aspirations remain and these producers
expect in the near future to resolve the problem so that European export
pptentials can be realized. With this expansion will come added multi-
ational vegetable industry activity.
CAADES and the UNPH are currently involved in a pilot program to
determine if they want to get heavily involved in promotion of vegetable
products in the U.S. Five years agothrough the United Fruit and Vege-
table Association, CAADES and the UMVDA mounted a rather significant
and somewhat successful advertising campaign. At present, a pilot
study is designed to determine what type of advertising or promotion
program would be appropriate in the U.S. The reason for again consid-
ering a major promotion program apparently stems from the research recom-
mendations of a private consulting firm that was hired in 1974 by the
UNPH.

Conclusion
Improved transportation systems coupled with the necessary inter-
national marketing infrastructure have stimulated factor and product
trade for a rapidly expanding West Mexican vegetable export industry.
Multinational produce distributors facilitate capital as well as product
transfers between growers in West Mexico and firms in the U.S. Unre-
strained movement of production marketing and management technology from
the U.S. has complimented an ample labor, lahd, water and climatic
resource base in West Mexico. Those conditions have helped West Mexico
establish a strong competitive position in the U.S. winter'vegetable
market.




-19-


Export Development
Several of the very large growers in the past year have seriously
considered purchasing used Boeing 707's from the U.S. to transport vege-
tables to Europe. This plan, however, met with resistance from Air
Mexico because to buy the planes, would require more frequent use
than is possible with vegetable exports particularly during the summer
season. Thus, the group'proposed that the planes be used for transport
of tourists. Air Mexico refused to grant permission for the producers
to obtain a license for this purpose and the negotiations were subsequent-
ly closed. But the ideas and aspirations remain and these producers
expect in the near future to resolve the problem so that European export
pptentials can be realized. With this expansion will come added multi-
ational vegetable industry activity.
CAADES and the UNPH are currently involved in a pilot program to
determine if they want to get heavily involved in promotion of vegetable
products in the U.S. Five years agothrough the United Fruit and Vege-
table Association, CAADES and the UMVDA mounted a rather significant
and somewhat successful advertising campaign. At present, a pilot
study is designed to determine what type of advertising or promotion
program would be appropriate in the U.S. The reason for again consid-
ering a major promotion program apparently stems from the research recom-
mendations of a private consulting firm that was hired in 1974 by the
UNPH.

Conclusion
Improved transportation systems coupled with the necessary inter-
national marketing infrastructure have stimulated factor and product
trade for a rapidly expanding West Mexican vegetable export industry.
Multinational produce distributors facilitate capital as well as product
transfers between growers in West Mexico and firms in the U.S. Unre-
strained movement of production marketing and management technology from
the U.S. has complimented an ample labor, lahd, water and climatic
resource base in West Mexico. Those conditions have helped West Mexico
establish a strong competitive position in the U.S. winter'vegetable
market.




-20-


References


1. Fliginger, J.C., Gavette, E.E.' et al. Supplying U.S. Markets with
Fresh Winter Produce: Capabilities of U.S. and Mexican Pro-
duction Areas. Agricultural Economic Report No. 154. Economic
Research Service Foreign Agricultural Service, USDA. March
1969.


2. USDA/ERS "Foreign Agricultural
tics Program Area, Foreign
Economic Research Service,


Trade of the United States," Statis-
Demand and Competition Division,
USDA, November 1974.


3. USDA/FAS "Foreign Agriculture," Foreign Agricultural Service, U.S.
Department'of Agriculture, September 22, 1975.

4. USDA/FAS "Fruits and Vegetables, United States Imports From Mexicc--
Foreign Agricultural Service. Fruit and Vegetable Division,
Commodity Analysis Branch, July 1973.


5. U.S. Tariff Cqnmmission. "Tariff
Annotated, TC Pub. 457,1972.


Schedules of the United States,




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