• TABLE OF CONTENTS
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 Front Cover
 Mission and objective of the International...
 Title Page
 Abstract
 Table of Contents
 List of Figures
 Introduction
 Citrus and economic integratio...
 Citrus production and transnational...
 Mexico and U.S. convergence in...
 Florida and Veracruz divergence...
 Conclusion
 Reference






Group Title: International working paper series; IW97-5
Title: Global groves
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
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Permanent Link: http://ufdc.ufl.edu/UF00055263/00001
 Material Information
Title: Global groves the Veracruz and Florida citrus industries
Series Title: International working paper series
Physical Description: 28 p. : ill. ; 28 cm.
Language: English
Creator: Andrew, Chris O
Spreen, Thomas H
International Agricultural Trade and Development Center
Publisher: Food and Resource Economics Dept., Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville Fla
Publication Date: <1997>
 Subjects
Subject: Citrus fruit industry -- Florida   ( lcsh )
Citrus fruit industry -- Mexico -- Veracruz-Llave (State)   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Includes bibliographical references (p. 28).
Statement of Responsibility: C.O. Andrew and T.H. Spreen.
General Note: "April 1997"--Cover.
General Note: At head of cover title: International Agricultural Trade and Development Center.
Funding: Florida Historical Agriculture and Rural Life
 Record Information
Bibliographic ID: UF00055263
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 by the source institution and holding location.
Resource Identifier: aleph - 002263329
oclc - 37105337
notis - ALL6244

Table of Contents
    Front Cover
        Front Cover
    Mission and objective of the International Agricultural Trade and Development Center
        Page i
    Title Page
        Page ii
    Abstract
        Page a
    Table of Contents
        Page b
    List of Figures
        Page c
    Introduction
        Page 1
    Citrus and economic integration
        Page 2
    Citrus production and transnational marketing
        Page 3
        World production and consumption of citrus
            Page 4
            Page 5
        Citrus production in the United States and Mexico
            Page 6
            Page 7
    Mexico and U.S. convergence in citrus markets
        Page 8
        Marketing and policy
            Page 8
            Page 9
            Page 10
            Page 11
        Commodity chains
            Page 12
            Page 13
            Page 14
    Florida and Veracruz divergence in citrus production
        Page 15
        Citrus farming systems
            Page 16
            Page 17
        Production-oriented institutions
            Page 18
            Page 19
        procedure and packers association
            Page 20
            Page 21
    Conclusion
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
    Reference
        Page 28
Full Text


IW97-5


INTERNATIONAL AGRICULTURAL TRADE
AND DEVELOPMENT CENTER



GLOBAL GROVES: THE VERACRUZ
AND FLORIDA CITRUS INDUSTRIES
By

C. O. Andrew and T. H. Spreen

IW97-5 April 1997


INTERNATIONAL WORKING PAPER SERIES


6


* UNIVERSITY OF
SFLORIDA
Institute of Food and Agricultural Sciences
Food and Resource Economics Department
Gainesville, FL 32611







MISSION AND OBJECTIVE
OF THE
INTERNATIONAL AGRICULTURAL TRADE
AND DEVELOPMENT CENTER


MISSION:

To enhance understanding of the vital role that international agricultural trade plays
in the economic development of Florida, and to provide an institutional base for
interaction on agricultural trade issues and problems.

OBJECTIVE:

The Center's objective is to initiate and enhance teaching, research, and extension
programs focused on international agricultural trade and development issues. It does
so by:

1. Serving as a focal point and resource base for research on international
agricultural trade, related development, and policy issues.

2. Coordinating and facilitating formal and informal educational opportunities
for students, faculty, and Floridians in general, on agricultural trade issues
and their implications.

3. Facilitating the dissemination of agricultural trade-related research results and
publications.

4. Encouraging interaction between the University community and business and
industry groups, state and federal agencies and policy makers, and other trade
centers in the examination and discussion of agricultural trade policy
questions.














GLOBAL GROVES:
THE VERACRUZ AND FLORIDA
CITRUS INDUSTRIES'







C. O. Andrew and T. H. Spreen2





Food and Resource Economics Department
Institute of Food and Agricultural Sciences
University of Florida
Gainesville, Florida 32611-0240 U.S.A.


















Paper prepared as book chapter for the Latin-American and Caribbean Center, Florida International
University.
2 C. O. Andrew and T. H Spreen are Professors of Food and Resource Economics, University of
Florida.








ABSTRACT


The global nature of citrus brings Florida and Veracruz together as potential competitors. Citrus
production and marketing in the two states, however, have adapted to technical and institutional
change through unique networks and circumstances that influence the degree of competition. Farm
households in Veracruz generally have more impact on the citrus production system than they do with
the more commercially oriented Florida farms. Market oriented institutions are both more common
and more effective in Florida than in Veracruz. Farm-level and institutional conditions suggest that
divergence in the production and marketing of citrus in the two states will continue for the
foreseeable future.











Key Words: Mexico, citrus, trade, Veracruz, Florida, policy, marketing, commodity chains,
institutions, farming systems, oranges, grapefruit, Persian limes








TABLE OF CONTENTS


Abstract ................................................................... a

Citrus and Economic Integration ............................................... 2

Citrus Production and Transnational Marketing .................................... 3

World Production and Consumption of Citrus ................................. 4
Citrus Production in the United States and Mexico .............................. 6

Mexico and U.S. Convergence in Citrus Markets .................................. 8

Marketing and Policy .................................................... 8
Commodity Chains ..................................................... 12

Florida and Veracruz Divergence in Citrus Production ............................. 15

Citrus Farming Systems .................................................. 16
Production-Oriented Institutions ........................................... 18
Producer and Packer Association .......................................... 20

Conclusions .............................................................. 22

References .............................................................. 28








LIST OF FIGURES


Figure 1 Map of Major Citrus Producing Areas in Mexico -........................ 24
Martinez de la Torre, Veracruz, Mexico

Figure 2 Conceptual Model of the Citrus Commodity Chains for Veracruz ............ 25

Figure 3 Persian Lime Commodity Chain for Florida and Veracruz (Roy, 1995) ........ 26

Figure 4 Orange (0), Grapefruit (G) and Lime (L) Commodity Chain ................. 27
for Florida Product








GLOBAL GROVES:
THE VERACRUZ AND FLORIDA CITRUS INDUSTRIES
by
C.O. Andrew and T.H. Spreen



Citrus production and marketing in Veracruz and Florida have adapted to technical and

institutional change through unique networks leading to the consumption of citrus commodities. The

authors of this chapter identify commodity chains, from production to consumption, particularly for

the citrus industries of Florida and Veracruz. The chapter is focused on oranges and limes in

Veracruz and oranges, grapefruit and limes in Florida. Particular emphasis is placed on labor, water,

land and technology as factors of citrus production and marketing that differ greatly between the two

states. The effects of changes in global institutions, such as those induced by the North American

Free trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT), on

national programs and policies are considered, relative to state and local adjustments in the Mexican

and U.S. citrus industries.

The global nature of citrus, coupled with its importance in both Florida and Veracruz, in relation

with other commodities and resources, is one important indicator of agricultural trade and

competition. The existence of a citrus production, trade and resource use nexus is apparent. While

market policy, communication and coordination reflect global economic conditions and involve citrus

producers in close international competition, diverging resource usage policies, implemented by the

United States and Mexico, become important to the success of firms and farms in the competing

citrus subsectors. Thus, the citrus subsector, as a transnational unit of analysis, may signal what can

be anticipated by other agricultural interests as a result of NAFTA.







Citrus and Economic Integration

With tendencies toward hemispheric economic integration, subregions that are separated by

political and geographic barriers, as in the case of the Gulf of Mexico and the rim states, gain new

importance for resource usage and agriculture, particularly for international commodities such as

citrus. Both agribusiness, emerging around citrus and other farm commodities, and agricultural policy

influence the process of economic integration. Socioeconomic stability and converging policies,

which relax barriers to land markets, capital flows and labor movements, may enhance multinational

business ventures in citrus. Concerns for accelerated natural resource exploitation, human welfare

and safety and food safety, however, have generated uneven policy and institutional responses from

Mexico and the United States. Because such policies restrain the use of some citrus production

technologies in Florida and influence competition with imports, the U.S. citrus industry is desirous

of policy convergence with Mexico. By selecting citrus, as an international commodity group for

study, Florida and Veracruz provide one basis for comparative analysis with broader agricultural

scope. Florida orange producers watch with concern when U.S. orange concentrate imports from

Mexico increase. To the possible detriment of Veracruz agriculture, its shift from sugarcane to lime

production could oversupply the world lime market (Roy). As U.S. consumers, who play a major

role in the world lime market, benefit from the lower prices that result from Veracruz'

overproduction, Florida's lime producers stand to lose. While we do not assess who loses as a result

of evolving policy and technical changes in citrus production for global markets, we do recognize the

high value that citrus holds for the state economies and people of Florida and Veracruz. Citrus

represented 30.6 percent or $1.65 billion of cash farm receipts for all agricultural crops in Florida in

1994 (USDA-ERS). Of these receipts oranges represented 77.4 percent; grapefruit 17.5 percent; and








tangerines, tangelos, limes and lemons represented the remaining 5.1 percent. Citrus in Veracruz with

a value of $133.9 million in 1992, represented 13.7 percent of cash farm receipts for all agricultural

crops and was distributed among oranges (71.8 percent), limes (8.3 percent) and grapefruit (7.3

percent), tangerine/mandarin (12.6 percent) (INEGI).


Citrus Production and Transnational Marketing

Citrus, marketed from several major producing areas of the world, is a transnational and global

commodity group. While the United States and Mexico, in general, and Florida and Veracruz, in

particular are important producing areas, Brazil remains a formidable competitor for U.S. and world

markets. Many other countries produce citrus, primarily for home consumption, yet notable world

market competitors, depending on the commodity, are Spain, Italy, Israel, Cuba and Argentina.

Citrus products, historically shipped from country to country over relatively short distances or

in small quantities, have become international commodities as a result of technological advances in

transportation and processing. Refrigerated ocean transport and air shipment of high-value citrus are

responsible for extending the world markets of some producers. Processing, however, may be the

key cause of world market expansion.

The bulk shipment of frozen orange concentrate in the 1970s opened the door for Brazil's

development of the largest citrus-exporting subsector in the world. The Florida citrus industry,

supplemented by Brazilian imports, was able to augment and stabilize the Florida supply, thus

securing supply stability for growing U.S. and European markets. Brazilian juice provided a cover

for the short-falls that resulted from a series of freezes in Florida in the 1980s. With convenient

family packs of frozen orange juice concentrate available year-round in the United States and

expanding world markets, particularly in Europe, per capital consumption advanced dramatically.

3








Brazil stepped in to take advantage of this expanding world market and, by 1993, exported 1.16

million metric tons (MT) of orange juice concentrate, more than six times the combined export

volumes of its major competitors (the United States, Mexico, Spain and Italy) (FAO, 1994).

Advances in fresh produce transportation and handling provide consumers access, throughout

the developed world, to a stable supply of fresh citrus products. Grapefruit shipments are available,

primarily from Florida, with Israel, South Africa, Honduras, and the U.S. states of Texas and

California also providing year-round shipments. As a result of Veracruz' production of Persian limes

and its established export system with the United States, U.S. consumers at the supermarket, were

hardly aware of Hurricane Andrew's destructive impact on Florida's lime groves in 1992.



World Production and Consumption of Citrus

While citrus consumption by low-income countries tends to be limited by proximity to the point

of citrus production, for high-income countries, citrus is available through international markets.

Producers must be favored by both adequate and competitive citrus production conditions and

progressive marketing processes. Import-oriented consumption demands a consistent supply of high-

quality product, and herein lies the continuous, evolving challenge faced by the citrus industries in

Mexico and the United States.

Brazil, producing 14.1 million MT (metric tons), was the world's leading producer of oranges in

1993-94 (FAO, 1994). The United States, Spain, Mexico and Italy followed with 8.5, 2.6, 2.6 and

2.0 million MT, respectively. The dominant producer of grapefruit in 1993-94 was the United States

(FAO, 1994), accounting for 54 percent of total world production (2.3 million MT). Israel, Cuba,

Argentina and Mexico were other leading grapefruit producers. Mexico's grapefruit production of








120,000 MT was 5 percent of the total U.S. production. Delineation of world lime production was

more problematic because the Food and Agriculture Organization (FAO) reported lemons and limes

as an aggregate. Mexico (777,000 MT), Brazil (751,000 MT) and the United States (40,000 MT)

were the major lime producers in the Western Hemisphere (York et. al.).

Processed orange consumption (primarily in juice form) is highest in the developed countries of

North America, Western Europe and Japan (FAO, 1993). Consumers in these countries purchase

orange juice, either chilled or frozen, but consumers in less-developed countries purchase fresh

oranges because of their lower cost and a lack of refrigeration. These oranges are often processed

into orange juice in the home. Mexicans purchase oranges in fresh form and later home-process the

oranges into juice while the vast majority of U.S. orange consumption is in preprocessed juice form.

The consumption of grapefruit is highest in developed countries (FAO, 1993). North America

and Western Europe account for most of the world's consumption ofgrapefruit, and the United States

is the primary supplier to these markets. Israel, South Africa and Cuba supply grapefruit to Europe

in the summer and fall.

Lime consumption is found primarily in Mexico, Brazil, the United States and Western Europe.

Mexico, as the world's largest exporter of limes, produces primarily for markets in the United States,

Western Europe and Japan, as well as for a large domestic market. Served by Mexicans with every

meal and also consumed with alcoholic beverages, limes play a central role in the Mexican diet. Per

capital lime consumption in Mexico is estimated to be between 13 and 14 pounds per year (SARH).

In comparison, per capital lime consumption in the United States is approximately 1 pound and limes

are typically consumed with beverages. Given the increased acceptance of Mexican cuisine in the








United States and a larger Hispanic population, U.S.lime consumption has experienced considerable

growth; as recently as 1980, U.S. per capital lime consumption was 0.2 pounds.



Citrus Production in the United States and Mexico

Florida is the most important citrus-producing (oranges, grapefruit, limes) U.S. state (FASS).

Of the 8.9 million MT of citrus produced in Florida for the 1993-94 season, 79.2 percent was

oranges; 20.7 percent was grapefruit; and 0.1 percent was limes. Besides Florida, California, Texas

and Arizona are the only other states that commercially produce citrus.

In the 1993-94 season, Florida produced nearly 76 percent of the oranges grown in the United

States; California produced more than 23 percent; and less than 1 percent was produced by Texas

and Arizona combined (FASS). More than 90 percent of Florida's orange crop is destined for

processing making it the dominant domestic supplier of orange juice. California specializes in fresh

orange production; in a typical year, approximately 75 percent of California's orange crop is sold in

the fresh market. Thus, California holds a dominant position in the U.S. fresh orange market.

Florida is the dominant grapefruit-producing state (FASS). In 1993-94, Florida produced nearly

82 percent of the grapefruit grown in the United States. Other U.S. production of grapefruit was

distributed as follows: California, 11.5 percent; Texas, 4.5 percent; and Arizona, 2.2 percent. Given

the position of the United States in world grapefruit production, Florida produces approximately one-

half of the world's grapefruit. Unlike its role in the Florida orange industry, Florida is a major player

in both the fresh and processed grapefruit markets. Approximately 50 percent of its grapefruit crop

is sold fresh, and the other 50 percent is processed. Florida is the major supplier of both fresh and

processed grapefruit to Western Europe and Japan.








Almost all U.S.lime production occurs in Dade County, Florida. This area, devastated by

Hurricane Andrew in August 1992, lost about two-thirds of its lime groves. Annual production

plummeted from approximately 65,000 MT before the hurricane to 8,000 MT in 1993-94. It is still

not clear whether production will return to pre-hurricane levels. California which produces a very

small number of limes, is not likely to augment its volume because of Mexico's dominance of the U.S.

market.

Unlike the United States, citrus production occurs throughout Mexico. Mexico has a larger area

suitable for citrus production than does the United States. Veracruz (Figure 1) accounted for more

63 percent of the oranges grown in Mexico in the 1992-93 season (Garcia Chavez and Gomez Cruz).

Other major producing states are San Luis Potosi (9.6 percent), Tamaulipas (11.6 percent) and

Yucatan (6.4 percent). Veracruz produced 2.114 million MT of citrus in 1994 of which 84.4 percent

was oranges; 7.4 percent was tangerines/mandarins; 4.1 percent was grapefruit; and 4.1 percent limes

(GEV).

Two varieties of limes are produced in Mexico: Key (70 percent) and Persian (30 percent). Key

limes (known as Mexican limes in Mexico) are preferred in the Mexican diet. The major production

area for Key limes is located along the southwestern coast in the states of Colima and Michoacan.

Persian limes (also known as Tahiti limes in the United States) are produced primarily for the export

market. Veracruz was the largest producer of Persian limes and accounted for nearly 75 percent of

Mexican production in 1988 (Becerra and Orozco, 1991).








Mexico and U.S. Convergence in Citrus Markets

Transnational markets and policies, coupled with market realignment, permeate the historical

structure and process of the citrus industries in Mexico and the United States. As participants in the

markets of two of the most important citrus producing and consuming countries in the world, U.S.

and Mexican producers, packers and processors are concerned about maintaining or expanding their

production and market shares. The markets are conditioned by interrelating policy (NAFTA, GATT,

etc.); logistics (transportation, communication, financial); resource usage; and consumer activities.

Subsector and commodity policies are influenced by the political environment surrounding other

broader policy and economic considerations. This political environment provides scope to the

transnational citrus marketing system in response to NAFTA and GATT.



Marketing and Policy

Production and marketing systems within the citrus subsector, particularly for domestic

consumption, differ greatly between Mexico and the United States in terms of structure, organization

and performance. Different forms of political advocacy, cooperative marketing, product promotion

and quality control are found in the U.S. and the Mexican Persian lime industries. Mexico's

production and marketing system, particularly for oranges and Key limes, tends to be more atomistic,

generally less efficient and less quality-conscious. The production system for citrus in the United

States is more technologically uniform than Mexico's; this system influences the yields and export

potentials of both countries. Export marketing in the Mexican lime industry, however, is well-

organized and modeled after that of the U.S. because of the broker system at the U.S./Mexican

frontier which responds to U.S. marketing institutions.








Mexico and U.S. Convergence in Citrus Markets

Transnational markets and policies, coupled with market realignment, permeate the historical

structure and process of the citrus industries in Mexico and the United States. As participants in the

markets of two of the most important citrus producing and consuming countries in the world, U.S.

and Mexican producers, packers and processors are concerned about maintaining or expanding their

production and market shares. The markets are conditioned by interrelating policy (NAFTA, GATT,

etc.); logistics (transportation, communication, financial); resource usage; and consumer activities.

Subsector and commodity policies are influenced by the political environment surrounding other

broader policy and economic considerations. This political environment provides scope to the

transnational citrus marketing system in response to NAFTA and GATT.



Marketing and Policy

Production and marketing systems within the citrus subsector, particularly for domestic

consumption, differ greatly between Mexico and the United States in terms of structure, organization

and performance. Different forms of political advocacy, cooperative marketing, product promotion

and quality control are found in the U.S. and the Mexican Persian lime industries. Mexico's

production and marketing system, particularly for oranges and Key limes, tends to be more atomistic,

generally less efficient and less quality-conscious. The production system for citrus in the United

States is more technologically uniform than Mexico's; this system influences the yields and export

potentials of both countries. Export marketing in the Mexican lime industry, however, is well-

organized and modeled after that of the U.S. because of the broker system at the U.S./Mexican

frontier which responds to U.S. marketing institutions.








Marketing institutions for citrus incorporate pricing, information and promotion, physical

movement and storage of the commodity and various quality maintenance practices and regulations.

The flow of citrus products from producers to consumers differs between fresh fruit and processed

juice as well as between Veracruz and Florida. Market opportunities for Florida's citrus industry have

been enhanced marketing organizations and supportive trade policies. The linkage between citrus

growers and consumers, who have experienced a growing market demand for orange juice and

expanded markets for fresh grapefruit, is further strengthened through institutions and organizations

designed to promote citrus products. Florida growers, while independent and proud of the

subsector's ability to adjust and to compete in the global citrus economy, value cooperative endeavors

to improve market access. Organizations, such as The Florida Department of Citrus, provide funding

for market research and promotion as well as enhanced market coordination through charges per box

or "check-offs", established by growers.

Institutional support to enhance the production and marketing of Veracruz fresh citrus, oranges

in particular, for domestic consumption is less organized and less effective than the support that exists

in Florida. Only recently have attempts at "cooperative" marketing been made in Veracruz,

particularly by larger producers and packers of lime exports; these ventures have had limited success.

Lime production, packing and marketing in Veracruz is most influenced by the institutions of the

United States and other importing countries through essential linkages with export marketing policies,

brokers and market mechanisms.

The marketing of oranges produced in Veracruz is conditioned by local institutions and practices.

The handling and pricing of these oranges is most distinguished by traditional practices that employ

their own market ethic. Tradition, evolving from the time of animal transportation to motorized







transport, has not generally emphasized the development of quality standards and supported practices

in the maintenance of fresh produce quality. Grades and standards have not yet been integrated into

the fresh orange marketing process in Mexico. Bulk handling lies literally in the hands of pickers who

hand-carry large baskets of fresh fruit to a truck and then climb up a ladder to dump the fruit over

sideboards that are 4 or 5 feet high. Truck transportation to rural assembly markets and the terminal

market (Central de Abastos) in Mexico city, over winding and often rough roads, may involve more

than one off-loading and/or reloading using scoop shovels or dumping fruit for repack into bags

destined for wholesalers, intermediaries and various retailers. Many transactions and people are

involved in the marketing of Mexican oranges. Only a low volume of sales is conducted through the

emerging direct marketing channels that are being formed by supermarkets.

Most oranges purchased by the Mexican housewife are juiced and consumed soon after their

purchase so that shelf-life losses are reduced. Should commercially processed orange juice gain favor

among Mexican housewives because of convenience and quality, the production and marketing

process will be challenged and new institutions may emerge. Recent apple imports into Mexico from

the state of Washington demonstrate that some Mexican consumers are prepared to purchase a

quality differentiated fresh product. The local apple production and marketing system has responded

to this stimulus by improving the fruit's appearance.

In several respects, the Mexican Persian lime marketing system resembles the orange marketing

system. Producers in both systems believe that market power lies with their buyers. The lime system,

however, responds to pricing and quality commands transmitted by brokers in McAllen, Texas at the

U.S.-Mexican border (Roy), while commercial orange producers sell to domestic truckers and

brokers linked to the terminal market in Mexico City. The Persian lime product channel, primarily







oriented to the export market in the United States with minor shipments to Western Europe and

Japan, is more responsive to the consumer demand and supporting institutions of these importing

countries.

Contrary to the somewhat disperse and fragmented market channel linkages for oranges and limes

in Mexico, Florida's citrus industry displays highly coordinated and facilitative marketing institutions.

For example, Florida's lime industry, while much smaller than the orange industry, is composed of

about 50 vertically integrated firms with grower, packer, shipper and importer roles. Because of

output reductions resulting from Hurricane Andrew, imports from Veracruz, managed by Florida

handlers and even transported to Florida for repacking, show some indication of a transition toward

closer ties between the two industries. As with orange juice concentrate imports from Brazil by

Florida processors, Florida Persian lime handlers may also find Mexican product complementary to

Florida's reduced production as a means of maintaining the eastern seaboard market share. Some

Mexican packers also may find these sales important as a way to bypass the broker system in

McAllen, Texas.

In summary, facilities, infrastructure and marketing practices for handling, shipping and

processing favor Florida's citrus products over Veracruz' products, generally without regard to

market location. Improved marketing practices are also transmitted from the United States to

Veracruz through the market system and result in improved Mexican market coordination and

performance. Recent changes in Mexico's policies for foreign investors and socioeconomic stability

encourage similar capital and management transfers. In Veracruz, access to capital, in the form of

producer and packer credit, however, is a major limitation to improved production and more effective

market coordination.








Commodity Chains

Citrus commodity chains vary by commodity (oranges, grapefruit, limes); product form (fresh,

processed); and state (Veracruz, Florida) or national (Mexico, U.S.); organizational structures and

institutions. These chains involve the producing, processing and distributing of products and may

consider linkages to complementary and substitute products in consumption. A complete analysis of

citrus commodity chains requires more empirical work. A commodity chain for citrus in Mexico, with

reference to Veracruz, is conceptualized in Figure 2. This model is suggested for oranges but may

also apply to Persian limes, particularly with reference to linkages with complementary support

systems such as land, technical inputs, capital, labor, energy, equipment and machinery, and real

estate.

Mexico-U.S. Persian lime commodity chains interact through the importation of fresh Persian

limes to the U.S. market. The production areas in Veracruz and Florida are but two components of

the commodity chains for Persian limes depicted in Figure 3 (Roy) and Figure 4. There are numerous

intermediaries along the chains. The route followed by Persian limes from Veracruz to the U.S.

consumer is represented by the shaded area in Figure 3. The components outside the shaded area do

not affect the flow of limes but may be responsible for price and policy changes. After harvest, the

Veracruz-originated Persian lime commodity chain is coordinated through various rural assembly

points and direct linkages to the packers. Veracruz producers may manage the harvest and delivery

of fruit to the packers, or they may be informally or formally integrated with the packing process.

Technical elements in the linkage include provision for packing materials, picking and packing labor,

transportation, time of harvest, quality control, and pricing and payment. Ultimately, 10 pound, 20








pound, and 40 pound cartons of graded, sized and waxed Persian limes are exported for sale to

consumers in the United States, Japan and Europe.

Veracruz' producers and packers interact, at the institutional level, with several government

agencies, while the packers association channels the specific legal documentation necessary for export

marketing. Financial institutions are necessary, but industry representatives believe that marketing

credit is one serious limitation relative to the market power of the U.S. import brokers. Veracruz

packers neither have the cold storage facilities nor the financial capital to hold limes in anticipation

of price changes. The import broker plays a significant role in imports and in sales to terminal

markets, to other brokers and to supermarket chains. As a result of NAFTA and the possible

expansion of holding capability through investments in cold storage facilities in Veracruz, the import

broker role, in time, may be replaced by direct marketing from Veracruz packers and brokers.

The Florida orange, grapefruit and lime commodity chain depicts the state's citrus production and

marketing system with minor differences between the three commodities (Figure 4). This citrus

commodity chain embodies labor markets, particularly for picking, packing and processing; various

technical input suppliers for production, packing, processing and marketing; natural resource markets

and institutions, including land and water; and by-product markets such as animal feed.

Fresh fruit and processed juice in the Florida citrus commodity chain are generally managed in

the same manner as oranges and grapefruit. Some producers or growers sell to handlers who, in turn,

supply both packers and processors. Other producers may be engaged in the packing of fresh fruit

through either cooperatives or vertically integrated ventures. Similarly, some producers participate

in processor cooperatives or may be vertically integrated with processing.







The international market plays a particular role in the commodity chain for orange juice. The

import of orange concentrate, often blended with Florida product, is important to maintain stable

supplies; in recent years, the export of orange juice products has been limited by insufficient domestic

production and relatively high U.S. demand. Broker to consumer orange channels are again similar

to those of limes. While fresh oranges represent a relatively minor share of marketing, in general,

and are negligible in exports, fresh grapefruit sales in the United States and for export are quite

important.

Florida-produced and/or -packed Persian limes are marketed by brokers through channels similar

to those used by U.S. import brokers of Mexican-produced and -packed Persian limes. These

Florida-based brokers may turn to imports when Florida supply is insufficient to meet fresh lime

market orders, and they play a linkage role between the U.S. and Mexican Persian lime commodity

chains. Because of production reductions caused by Hurricane Andrew, Florida packers are inclined

to fill some of their orders with imported fresh limes. Florida-produced limes are packed by an

integrated producer/packer organization or by packers alone. Most of Florida's limes are sold in the

fresh U.S. market. The export of Florida fresh and processed limes is relatively minimal. Juice is

processed from the fruit that is eliminated by packers during grading for the fresh lime market. The

Florida commodity chain is generally well-financed, and brokers tend to be more responsive to Florida

producer and packer concerns.

Convergence in citrus production and marketing practices in Mexico and the United States is

stimulated through trade most specifically by Mexican lime exports to the United States. The

marketing system in each country, as well as the international commodity chain for limes, conveys








technical and institutional information necessary for successful competition by Florida and Veracruz

in the U.S. market.



Florida and Veracruz Divergence in Citrus Production

Veracruz and Florida have in common the production of several agricultural commodities and

require similar resources in their respective production processes. Citrus, sugar and livestock, often

alternative farm enterprises in Veracruz and Florida, are important examples. Farming systems

dominated by citrus respond to culture, history, labor, capital, land, climate, water management,

distance to market, crop species, alternative crop varieties, and pests, all factors influencing the

agricultural economics of each state. Thus, citrus farming systems in Florida and Veracruz reflect

the varied technical and institutional environments of the United States and Mexico. Each embodies

a firm, or a farm household, that interacts with crop, enterprise and plant-biological systems.

Generally, the farm household has a greater impact on the citrus production enterprise in Veracruz

than it does on the Florida enterprise.

Citrus production is challenged by different natural, technical and institutional conditions in

Florida and Veracruz. Frost, a significant factor in the relocation of citrus production in Florida, is

less of a problem in Veracruz but did cause citrus production to move south to Veracruz from Nuevo

Leon. Topography and soil structure, and fertility tend to favor Veracruz over Florida. High

investment water management systems in Florida help growers cope with shallow soils, water quality

(compelled by governmental rules and regulations) and irrigation problems (O'Connor). Microjet

irrigation, while present to a lesser extent in Veracruz, is necessary in the citrus production systems








that emerged in Southwest Florida in the 1980s. Once established, this water management system

enhanced the long-term competitive ability of Florida citrus producers.

Agricultural industries, like citrus, that cross national borders, link consumers, through

commodities, to production and marketing systems and to unique and shared resources. Natural

resource-based economic activity dominates the growth and development of much of Florida and

Veracruz. Tourism, a sector of growing economic importance in Florida and Veracruz, shares with

agriculture a rich history, and it has the potential for expanding across the frontiers of the Gulf of

Mexico. A successful tourism industry juxtaposed with agriculture, including citrus, is concerned

with sharing and sustaining water quality and land resources through time. Florida's citrus industry

responded to the land use pressures of tourism in the Central Florida citrus belt by moving much of

its citrus production south, where land prices were lower, in the 1980s.



Citrus Farming Systems

Citrus trees provide a unit of analysis for comparing the citrus farming systems in Veracruz and

Florida. Between the monocrop systems of Florida and Veracruz, the rootstock used, the tree and

row spacing used and the degree of grove maintenance may differ significantly. Rootstock resistance

to virus could present a major challenge to Veracruz producers because most of its citrus trees are

grafted to sour orange rootstock, which is susceptible to the tristeza virus. Generally, tree density

is higher and grove maintenance is more uniform and costly in Florida. Because of monocrop culture,

scale economies and market orientation, most of the production systems in Florida are relatively more

homogeneous in comparison to the heterogeneity found in Veracruz, particularly on small farms.








In Veracruz, on many of the small farms, citrus trees are interplanted with other crops. In an

interplanted system, orange and banana trees can serve as shade for coffee. The use of inputs, such

as fertilizer, herbicides or water, when available, may be more efficiently applied and more effective

when crops are interplanted. These interplant systems display varied degrees of biological and

economic competition and complementarity. In a farm household context they provide both

economic security and a demand for family labor.

In Florida, citrus may be produced by a firm or company that invests in other major agricultural

and nonagricultural enterprises. All citrus, however, is produced as a monocrop. Production may

be vertically integrated within the market system through ownership or cooperative, and/or

contractual arrangements. Such linkages are less common in Veracruz. The farming system in

Florida may be quite large or relatively small, but a large portion of production is conducted on farm

units where the owner's household, in contrast with Mexico, has little to do with how citrus is

produced.

Farming systems in Veracruz, inclusive of orange production, vary by farm size and use of

improved technology conceptualizedd in Figure 2). Orange-growing practices are influenced by the

degree to which the household and the entire farming system are integrated with orange production

and marketing. For small and medium holders with a low orientation to advanced technologies, such

as in monocroping, close tree spacing, spraying, pruning and irrigation, citrus fruit is used for home

consumption and sold to the local market. It is also used as a hedge against losses in coffee, banana

or livestock. The farming system is based on a livelihood or even possibly a survival strategy. Family

security is too critical to risk on one product since the crop or market failure of that one crop may








leave the family without sustenance. Advanced monocrop technologies often are neither appropriate

nor profitable in this mixed cropping system, but family labor and management are integral.

Large orange farming systems in Veracruz with medium to high levels of monocrop technology

may also produce other crops or livestock, but this citrus enterprise is commercially oriented to the

domestic market (Figure 2). Medium and small farming systems with high orientation to technology

also produce primarily for national commercial markets. Fresh limes, not sold for export, enter the

national markets in the same way as oranges. Labor is often hired for peak season production and

harvesting activities. Limes are primarily sold to intermediaries, who usually sell in the Mexico City

terminal market, and fresh oranges are ultimately consumed as home-squeezed orange juice. While

family concerns no doubt influence these large growers of oranges, the household may be less-

integrated with the farming system than in the small farm/low technology case. Farming systems that

are large with low technology, medium-sized with medium technology and small with medium

technology are most responsive to local market and price conditions and to intermediaries for the

national market.



Production-Oriented Institutions

Production-oriented institutions have influenced both Veracruz and Florida citrus producer

responses to natural conditions and to rural and agricultural policies. The orange and lime production

processes within the farming systems reflect a wide variety of practices, rules and policies, particularly

those related to land, labor and technology. Land tenure in Veracruz and land prices in Florida have

influenced the size and location of the citrus subsectors. Access to quality land and capital, in








quantities and at prices that permit competitive scale economies, productivity, and labor and

management competency, influence the Florida and Veracruz citrus industries.

Citrus exemplifies some of the changes and needs of Mexico's agricultural land, capital and labor

markets. The emerging land market, because of changes in the land tenancy laws, now permits some

consolidation of small units into larger farms. Capital markets do not favor agriculture, including the

production and marketing of citrus. "Until 1991, the citrus subsector in general and the Persian lime

industry especially were welcomed by these (lending) institutions, but the decline of citrus product

prices at the domestic and international market have slowed down the amount of lending to the citrus

industry" (Roy, p.110). Thus, markets for modern technical inputs, as well as equipment and

machinery, often are not accessible to citrus producers because of limited financial capital. In some

cases, lime packers provide special production services such as management and fertilizer/herbicide

application in return for access to a producer's fruit throughout the year. As a means of assuring

quality and maturity, lime packers for the export market may send their own laborers to pick a

grower's fruit (Roy).

The availability of technical assistance from a land grant university has provided a continuous

flow of information and technology that give Florida citrus growers a built-in comparative advantage

at the grove level. These public and private investments in the development of improved technologies

in Florida have increased the resistance of citrus trees to threatening pest problems, improved cold

tolerance, altered cultural practices, mechanized much of production and made extensive advances

in juice processing. Ongoing research in Florida includes the study of improved citrus rootstock, tree

nutrition, tree wraps, wind breaks, pest management with emphasis on biological control, grove

layout and reset management. Contrary to the situation in Florida, rootstock resistance to the citrus








tristeza virus is a concern in Veracruz, where capital investments in improved technology trail those

in Florida. Citrus canker and fruit fly infestations cause concern for commercial producers in both

Veracruz and Florida.

Open access to information and educational programs permits international transfers of

technology across the Gulf of Mexico. Veracruz farms sometimes benefit from the import of

technical know-how from Florida, but they require basic and continuing education. Florida can

access a better-trained management and labor pool, yet labor-related policies tend to be more

restrictive than those in Veracruz and increase grower costs in Florida. While field labor wage rates

are markedly lower in Veracruz than in Florida, labor productivity, benefitting from the wider use of

improved technology in Florida, is a compensating factor.



Producer and Packer Associations

Producer and packer associations provide institutional forms for assisting both production and

marketing in Veracruz and Florida. Through a long tradition of cooperative action by farmers in the

United States, the sociocultural norm of cooperation and the accompanying traditions are effectively

honored by the Florida citrus industry. Cooperative action was not strongly encouraged in the post-

revolution ejido system in Mexico, depriving farmers and marketing people of the opportunity to

develop and experience an effective cooperative tradition and the supporting institutional structures.

Thus, present cooperative action in the citrus subsectors of Veracruz and Florida rests on entirely

different normative and institutional bases.

At present, producer associations are much more effective in Florida than in Veracruz. Florida

Citrus Mutual is a grower organization which provides market information to its members. Current








market information is published biweekly and distributed to members. The organization also helps

members to locate buyers for their fruit. In addition, Florida Citrus Mutual represents growers'

interests in regulatory and other policy issues at the local, state, and national levels. There is not a

producer federation in Veracruz that is so pervasive in its organization and support. In 1992 a

Veracruz orange producer association began accumulating a fund from a charge per quantity

produced (a check-off) to support the mutual needs of association members but has yet to formulate

a plan of action. More joint action is apparent at the packer level which may also represent producer

interests relative to the exports of Persian limes from Veracruz to the United States.

Eleven Veracruz Persian lime packers in Martinez de la Torre formed an association in 1985,

with a goal of combating U.S. import restrictions on their product (Roy). The attempt lost

momentum but flared again in May 1992 when increased production and excessive exports to the

United States threatened the price and market stability that Veracruz growers had enjoyed. Members

were aware of shipments and were concerned by the increasing trend in total Persian lime exports to

the United States; they monitored daily shipment volume information, provided by the association

for each packer, for both export and domestic destinations. Hurricane Andrew temporarily squelched

these concerns. Thirty four packer-members of the association, however, have recently expressed

concern that an oversupply crisis is nearing as a result of production growth. They have expressed

interest in combining their efforts with those of Florida's marketing people to design an advertising

campaign to expand the U.S. market for Persian limes. The association, funded by a truckload tax,

issues the required license for every export packer. The Mexican government grants tax breaks to

the country's exporters, but the benefits are gained only through membership in the association. The







association is the only source of the mandatory export documents and the certificate of origin for each

shipment.



Conclusions

National policies and institutions, in response to international trade and competition, influence

the citrus industries in Florida and Veracruz. Common concerns of U.S. and Mexican citrus

production and marketing have involved the roles of land use, agricultural labor, rural capital, and

commodity-specific technology, all of which have shaped the environment for trade and competition.

Sufficient information, necessary for an accurate comparison of citrus producers in Veracruz and

Florida, relative to responses to agriculturally oriented institutions, is lacking. In Veracruz,

socioeconomic research is needed to provide an understanding of the diversity in farming systems and

household decisions. This diversity emphasizes the household as a mini-economy involving various

crops, livestock, and farm and non farm objectives.

There is a natural tendency to convergence, which results from science and technology in

response to similar biophysical production and marketing conditions; this is consistent with the

investment lag for technology development and adoption in Mexico. Yet, institutional and farm-level

conditions suggest that divergence in the production of citrus in Veracruz and Florida will continue

for some time. Convergence in resource usage and human welfare policies, unless specifically

dictated by international policy, will continue to respond to very different national institutions in

Mexico and the United States. These institutions are not naturally inclined to convergence as a

historical and cultural precedent. With more recent advances in transportation and communication,

labor and commodity markets, which are increasingly responsive to each other and global trade and







competition, have emerged within the region. Market convergence, however, will not be complete

in the absence of greater uniformity in production between the two states.

Globalization of agriculture and the economic integration of rural people in Veracruz and Florida

are encouraged by shifts in the commodities produced, such as citrus, and the relative ability of these

commodities to compete in global consumer markets. Domestic market shares are challenged and

transformed by international competitors. Production-oriented institutions, as interacting responses

to biophysical and sociocultural situations, tend to differentiate the citrus farming systems within and

between the states of Veracruz and Florida. Converging citrus industry responses, either policy-

induced or market-driven, may or may not further enhance balanced agricultural development, trade

and sustainability. Thus, long-term adjustments can be expected.











U.S.A.


PACIC OC

PACIFIC OCEAN


MEXICO


GULF OF MEXICO


GUATEMALA


GULF OF MEXICO


Figure 1: Map of Major Citrus Producing Areas in Mexico Martinez de la Torre,
Veracruz, Mexico















Extension


large / / \ \ nign
Land P ducTechnical
Market P nduct n I puts
SMarket





Capital Labor Energy
Markets Markets Markets



Equipment and //
Machinery
Markets Intermediaries



Producers Packers

Marketing

Br s & Shippers &
Brokers Haulers
Processing

Wholesalers



SRetailers







Figure 2: Conceptual Model of the Citrus Commodity Chains for Veracruz












Market
Mexican Domestic

Terminal Markets
F Te~;;;


Broker


Japanese
Market


Flow of Limes -


Canada and
Other Destinations


Restaurants

Retailers
I .....r


CONSUMERS


Figure 3: Persian Lime Commodity Chain for Florida and Veracruz (Roy,1995).












































Capital Land & Labor Public Policy
Technology
Technology


( ) = represents specific commodities
- = product flow


Figure 4: Orange (0), Grapefruit (G) and Lime (L) Commodity Chain for Florida Product











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Colima, en Sobre Sistemas de Produccion en Citricos. Universidad Autonoma, Chapingo,
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Food and Agriculture Organization (FAO). 1994. Citrus Fruit: Fresh and Processed, Annual
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Food and Agriculture Organization (FAO). 1993. Citrus Production, Demand, and Trade Projections
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References




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