The Tomato Magazine
Florida Tomato Industry Looks at the Impact of Rising
Rising energy prices have had a signifi cant impact on growers, including
those involved in the tomato industry. Some are managing to remain competitive
but others are teetering on the brink of going out of business.
In a report given during the Florida Tomato Institute Sept. 6 in Naples,
Fla., John J. VanSickle delivered a presentation, Impact of Energy
Issues on the Florida Tomato Industry."
An agricultural economist with the Department of Food & Resource Economics,
IFAS, University of Florida, VanSickle also serves as executive director
of the International Agricultural Trade and Policy Center.
The study reported here was done in conjunction with Santiago Bucarum,
a graduate student in the Department of Food & Resource Economics.
Since the end of 2002, U.S. retail diesel prices have been generally
increasing, with a maximum of $3.15 per gallon in October, 2005, as a
result of Hurricane Katrina further tightening supplies, Van Sickle
told the group.
But the hurricane is only one factor, albeit a dramatic one, which
has caused diesel prices to rise in 2005, the researcher added.
A major factor infl uencing diesel prices in 2005 was the increase in
crude oil prices, Van Sickle said, noting that crude oil started the year
at around $42 per barrel and reached $70 by early September.
An additional factor, he explained, was the devastation from Hurricane
Katrina which initially took out more than 25 percent of U.S. crude oil
production and 10 to 15 percent of U.S. refi nery capacity.
On top of that, major oil pipelines that feed the Midwest and East Coast
from the Gulf of Mexico area were shut down or forced to operate at reduced
rates for a signifi cant period. The result was a 94 percent increase
in diesel prices during the period 2002 to 2005, the economist said.
Boosted Competitive Position
After studying the situation, particularly the impact of such changes
on horticultural growers, VanSickle and Bucaram concluded that increases
in fuel costs have helped the competitive position of Florida and other
East Coast suppliers at the expense of Mexico and California producers.
These results are not all that surprising, VanSickle said.
An increase in fuel costs of 94 percent should make it more expensive
for California and Mexico to get product into the large northeast markets.
Because the harvest of fresh market tomatoes can take place over several
harvests (weeks), increases in one production area will impact other producing
areas even if the bulk of their harvest would occur in other market windows.
Florida should be expected to gain ground against Mexico, and higher energy
prices will impact Mexican producers more as they battle for the winter
fresh tomato market.
As production in Florida increases, it also will impact fall, winter and
spring market window supplies, he added. Historically, the fall and spring
periods have been good markets for California. It is the dynamic nature
of the fresh vegetable market, harvesting product over several weeks of
the season that causes the competitiveness of the market to change so
The loss of profi table markets in the fall and spring market windows
will make it more diffi cult for California to maintain market share in
the summer market window, the economist predicted. Unless
technologies change or energy prices decline relative to other costs,
it would be expected that Florida would regain some of its prominence
in the market that it had in 1989 when it produced 62,500 acres of tomatoes.
The model used assumes that growers are able to make adjustment in planting
decisions as changes in competitiveness occur, VanSickle cautioned.
Some resources are fi xed, however, and it may be diffi cult to
adjust acreage in response to these changing marketing conditions,
he said. Packinghouses require a certain volume of product to remain
efficient, and packinghouse owners may encourage production to keep facilities
open over short durations to see if adjustments occur in the market.
Expansion in other areas may be constrained because certain resources
may not be able to be added, the researcher said. However, the results
can be used to gain insight on where expansion may occur.
If current energy prices are sustained, East Coast producing areas
are expected to increase their presence in the market at the expense of
foreign suppliers and California, Van Sickle said, adding that Florida
also would benefit from this situation.
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