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Title: impact of Mexican tomato imports on the Florida tomato market. A review of recent studies
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Title: impact of Mexican tomato imports on the Florida tomato market. A review of recent studies
Physical Description: Book
Language: English
Creator: Shonkwiler, J. S.
VanSickle, John
Publisher: Food and Resource Economics Dept., IFAS, University of Florida
Publication Date: 1981
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Spatial Coverage: North America -- United States -- Florida
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Bibliographic ID: UF00047743
Volume ID: VID00001
Source Institution: University of Florida
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7C &


Staff Report














FLORIDA
AGRICULTURAL MARKET RESEARCH CENTER
FOOD AND RESOURCE ECONOMICS DEPARTMENT
Institute of Food and Agricultural Sciences
University of Florida
Gainesville, Florida 32611


DOCUMENT





















THE IMPACT OF MEXICAN TOMATO IMPORTS ON THE FLORIDA
TOMATO MARKET: A REVIEW OF RECENT STUDIES


By

J. Scott Shonkwiler and John VanSickle


Staff Report 11


November 1981


Staff papers are circulated without formal review
by the Food and Resource Economics Department.
Content is the sole responsibility of the author.




Food and Resource Economics Department
Institute of Food and Agricultural Sciences
University of Florida, Gainesville, Florida 32611















The Florida Agricultural Market Research Center is
a service of
the Food and Resource Economics Department
of the
Institute of Food and Agricultural Sciences


The purpose of this Center is to provide timely, applied research

on current and emerging-marketing problems affecting Florida's agri-

cultural and marine industries. The Center seeks to provide research

and information to production, marketing, and processing firms, groups

and organizations concerned with improving and expanding markets for

Florida agricultural and marine products.

The Center is staffed by a basic group of economists trained in

agriculture and marketing. In addition, cooperating personnel from

other IFAS units provide a wide range of expertise which can be applied

as determined by the requirements of individual projects.











THE IMPACT OF MEXICAN TOMATO IMPORTS ON THE FLORIDA
TOMATO MARKET: A REVIEW OF RECENT STUDIES


By

J. Scott Shonkwiler and John VanSickle


INTRODUCTION

The U.S. winter tomato market has undergone dramatic changes in the

last two decades. Florida fresh tomato production has grown from an

average of 23.775 million cartons during the 1962-63 through 1964-65

seasons to an average of 34.000 million cartons during the 1977-78

through 1979-80 seasons, an increase of 46.8 percent. Averaged over the

same seasons however, Mexican tomato imports increased from 8.255 million

cartons to 23.532 million cartons, an increase of 185 percent. Clearly,

such growth in tomato imports has had significant impacts on domestic

winter tomato growers.

Two recently completed studies, have investigated the winter tomato

market. The Hammig-Mittlehammer (H-M) paper examined the effectiveness

of the U.S. tariff in protecting Florida tomato producers from Mexican

competition. The Shonkwiler-Emerson (S-E) paper examined how Florida

tomato producers responded to increased Mexican tomato imports. The

following two sections will briefly summarize the findings of both

papers and a final section will offer likely conclusions concerning the

future of the U.S. winter tomato market.


The Hammig- Mittlehammer Study

These authors considered how Mexican and Florida tomato prices and











quantities are determined using quarterly historical data. They explicitly

modeled the effect the U.S. fresh tomato tariff has on Mexico's tomato

exports. From this model they tested the effects of alternative tariff

structures on the U.S. market. In one case the U.S. tariff was entirely

eliminated. Under this scenario it was found that the largest impact

would be on the quantity supplied by U.S. producers, which drops considerably.

In fact, over the period studied U.S. production would have declined

23.8 percent from that which was observed. Even more importantly, H-M

showed that U.S. prices are affected very little by the tariff. Elimination

of the tariff would have resulted in only a .6 percent decrease in

tomato prices over the period studied. H-M maintain that the protection

the tariff provides to the U.S. producers has been rapidly eroding in

recent years. They reason

"The tariff has become substantially less effective as a mechanism
for protecting the Florida producer from Mexican competition. It
should be noted that a principal cause of this decline in effective
protection is the fact that the tariff...has not been altered of
fixed values of 1.5 C/lb. in January and February and 2.1 C/lb. in
March since 1966."

These conclusions suggest that altering the tariff in the future will

have even less impact on consumer prices than anytime previous, since

"the tariff has become less important as a cost item in the marketing of

Mexican tomatoes."

The Shonkwiler- Emerson Study


In this paper a model of the Florida tomato industry was formulated

under the hypothesis that growers make production decisions as rational










economic agents. This assumption implies that anticipated Mexican

tomato imports as well as other economic variables are taken into account

when the planting decision is made. Further, the model permitted tomato

yields to vary in response to the impact of imports on Florida price.

This allowed the model to capture the effect of current imports on

actual production.

The model showed that tomato acreage planted is influenced by the

level of anticipated imports. It was found that a 10 percent increase

in expected Mexican imports would decrease Florida acreage planted by

nearly 2 percent. The authors state that this relationship "reveals that

Mexican imports have contributed to the contraction of the Florida

industry in terms of acres planted."

Actual imports were shown to impact Florida quantities and prices

different ways. The study determined that a 10 percent increase in im-

ports reduced Florida production by almost 6 percent, but reduced prices

by less than 3 percent. In terms of revenues, a 10 percent increase in

Mexican tomato imports reduced Florida revenues by a full 8.59 percent.

The S-E study came to the conclusion that

"Perhaps a major implication of Mexican tomato imports is the
differential impact of imports on Florida prices and quantities
sold. The dominant effect of these imports is the reduction of
domestic supply, not domestic wholesale price."

Thus, imports have a two-pronged effect on Florida tomato producers be-

cause as Mexican imports increase, not only does this reduce current domestic

supply, but anticipated increases in imports reduce domestic acreage in

following years as well.










CONCLUSIONS

Both the H-M and S-E studies arrive at many of the same conclusions

despite the differences in models employed by them. Essentially, they

find that the dominant effect of changes in Mexican imports is the

impact on domestic quantities and not domestic prices. The H-M study

documents the relative ineffectiveness of the current tariff structure

due to its per unit rather than ad valorem nature. Because the tariff

is employed on a per unit basis, the effect of inflation has been to

reduce the real level of the tariff, i.e., the tariff has become a much

less significant cost item in the marketing of Mexican tomatoes. The S-

E study documents the role of market information which aids producers

trying to adjust to changes in Mexican imports. The study surmised that

the information collection and dissemination services of the Florida Tomato

Committee help producers to better allocate their production resources among

alternative activities.

As trade restrictions on tomatoes are re-evaluated, policy makers

must make some difficult decisions for the important winter tomato industry.

Certainly given the great degree of sensitivity in tomato production to

variations in growing conditions, consumers benefit by having more than

one producing area supplying tomatoes during the season. This suggests

that some protection for Florida producers is needed. Furthermore, the

results of the studies considered indicate that increased protection for

Florida producers will result in increased domestic production with much

smaller proportionate effects on consumer prices.










REFERENCES


Hammig, Michael D. and Ronald Mittlehammer. "Protection of Florida
Tomato Growers Using Tariffs: A Quantitative Assessment through
Industry Simulation." Presented at Southern Agricultural Economics
Association Meetings, February 1981. Atlanta, Georgia.

Shonkwiler, J. Scott and Robert Emerson. "The Market for Winter Tomatoes:
A Rational Expectations Interpretation." Presented at American
Agricultural Economics Association Meetings, July 1981. Clemson,
South Carolina.


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