Mexican Competition:
Greenhouse
Now from the
Dan Cantliffel and John Vansickle2
IHorticultural SciencesDept., UP, Gainesville,2Foodand
ResourceEconomicsDept., uP, Gainesville
Commercialgreenhouse
productionof horticultural cropsin Mexico
startedin the 1950s.Initially local growersproducedflowers in woodtype structurescoveredwith plastic. It was not until the 1980s,however,
that greenhouse-typestructureswere used in vegetableproduction. By
today's standards,thesestructureswere semi-rustic.In the 1990s,larger,
more modemgreenhousestructuresbeganto appearin variousplacesin
Mexico. More vegetablesstartedto be produced,primarily destinedto
exportmarket,and thus at that time investmentcapital becameavailable
as well as interestsfrom various groupsfrom countriesincluding Israel,
Holland, and Spainbeganto both sell and operategreenhousesfor vegetableproductionin Mexico.
Presentlythere is in excessof 5000 acresof greenhouseproduction
in Mexico. Estimatesplace about half of this production in vegetables
andthe otherhalf in floral production.
Growersin Mexico have turned to greenhouseproduction of vegetablesin order to provide a controlled environmentto improve product
quality.Mexican greenhouseproducershavebeenattemptingto develop
vegetablebrandsthat areacceptedin the marketplaceby wholesalersand
other buyers.They hope to improve their image on product quality and
food safetyaswell as maintain stricter control of water quality.
It is estimatedthat there are approximately 12 major providers of
vegetablegreenhouseproductsto the United Statesfrom Mexico (Lopez
and Shwedel,2001). Theseproducersare primarily targetingthe winter
market when the prices are highest.The use of greenhouseproduction
helpsthe Mexican producersoffset certainproblemswith productionas
it relatesto weather,both rain and cold temperatures,and thus they are
ableto betteradjustthe timing for market delivery.
Presentlytherearevariousreasonsfor Mexican producersto develop a greenhouseindustry for vegetables.Theseinclude 1) the need to
reduce the impacts from variations in climatic conditions on produce
quality. 2) The openingof the Mexican economy,bringing with it access
to different types of technology, i.e. people are willing to invest in
Mexico. 3) The searchfor solutionsto different problemsthat affect open
field production,for instance,variousdiseases,insects,weeds,etc. 4) An
increasein demandby consumersfor better and saferproducts,especially for exportmarketswherefood safetyissues,including the borderquality, havethe potentialto becomemajor trade issues.
Mexican vegetablegreenhouseproduction has been highly developed in five statesincluding Baja California which is 9.5% of the production, Baja California Sur 13.5%,Sonora6.9%, Sinaloa 26.3%, and
Jalisco27.4% (Lopez and Shwedel,2001).It is estimatedthat total value
for vegetableproductionfrom Mexican greenhouses
is in excessof $300
million today.The major vegetablecropsproducedaretomatoes(60% of
the total greenhousearea),cucumbers(20%), andpeppers(10%). Of the
tomatoes,the main varietiesare vine-ripe largerounds,cherry tomatoes,
Romatomatoes,and also a group called greenhousetomatoes.
Twelve yearsago, in 1991,therewere only 125 acresof vegetables
being producedin greenhousesin Mexico. Becauseof NAFTA and the
enhancedaccessto the U.S. market,interestin greenhouse
productionhas
grown dramatically over this period. Further, as the Mexican economy
improvesandthe pesostrengthens,
the greenhouse
industryhasexpanded
greatly in the last two or threeyears.Presentlythereis in excessof 2500
to 3000 acresof greenhousesbeing dedicatedto vegetableproduction.
Although much of the productionis in the five Mexican statespreviously
mentioned,there are 15 statesin Mexico with greenhousevegetableproduction. About 84% of the total production, however,is in those five
states.
The U.S. is by far the most important market for Mexican greenhousevegetableproducers.Over 92% of the greenhouseproduction for
export goesto the U.S. The rest goesto Canadaand as far away as to
Europeand the E.U. (Lopez and Shwedel,2001).
In 2000, total imported tomato value into the U.S. was approximately $147 million, or 95,000tons of fresh market tomatoes.Of those
values,$78 million of tomatoesproducedin the greenhousewere being
imported from Canada,while $36 million worth of tomatoeswere being
imported from Mexico. In contrastto only one year previous, 1999,the
value hadrisen over $100 million becauseof import of greenhousetomatoes into the U.S. which in 1999 was somewhatunder $44 million at
28,000 tons. Mexican producershad only $4.2 million of that market
share. Thus, in the one-year period, importation of tomatoes from
Mexican greenhousesincreasedin value from $4.2 to $36.1 million.
Subsequentto that, importation of tomatoesfrom Mexican greenhouses
has increased.Severallarge field producersof Mexican tomatoeshave
convertedto partial or total production coming from greenhousesover
the past4-5 years.Dutch and Canadiangreenhouse
tomatopricesarestill
higher than thosetomatoescoming from Mexico. The lower prices are
somehowreflected in transportationcost differential to major markets,
cheaperlabor costsand newnessof the Mexican greenhouseindustry in
the marketplace.As the greenhouseindustry matures, it is bound to
expandand productprices are boundto improve.
With regard to structures,plastic greenhousescover about 95% of
the total areaof the greenhouse
productionandonly 5% or lessof the area
is coveredwith glass.The primary reasonis the price differential andthe
fact that in many regionsin Mexico, glassis not needed.The plastic film
usedis PVC (polyvinilic chloride) andmost of the greenhouses
arehighroofed generally4-5 metersfrom floor to the top beam.A large number
of the greenhousesare locally producedin Mexico. However,there are
also a largenumberof greenhouses
from Israel,Canada,the Netherlands,
Spain,France,and the U.S. Mexican greenhousesare of somewhatless
quality, but also cost lessthan importedhouses.Israeli greenhousemanufacturerswill sometimeshelp with funding of greenhouseconstruction,
while greenhousemanufacturersfrom Spain will setupgreenhousesfor
certaingrowersfree of cost for a certainpercentageof return on the crop
that will be producedfrom the greenhouse.It is estimatedthat the basic
structure for 2.5 acres is $165,000USD for construction(Lopez and
Shwedel,2001).This price includesall the metal andplastic,but doesnot
include any mechanicalfeatures,or the irrigation. Many times local labor
is used for construction,and wheneverlessermaterials are used constructionpricescanbe somewhatloweredasmuch as50% from that cost.
In Mexico local bankswill loan capital for investmentsfor periods
of only up to five years.The credit markethasrelatively high borrowing
costs in local currency,thus most producersare forced to go with less
expensiveplastic style greenhouses.
In many areasof Mexico, especially
in Sinaloa,which is the secondlargestvegetableproducing state,temperaturesin the winter time can fall either near or below freezing.Most
greenhouseswere constructedwithout heating systems,however new
greenhousesare being constructedwith either hot water tubing or gas
generatedspaceheater~.The heatersare generally manually operated,
and thus producerscan be assuredthat if temperaturesgo to or below
freezing, they will have produce to sell in the winter time in the U.S.
market.
In summary,most areasof Mexico provide a perfect environment
for greenhousevegetableproduction. Good day length and strong light
intensity during the winter months are prime factors in developing a
greenhouseindustry in this region of the world. Technologyhas been
availablefrom outsidesourcesand especiallycost effective in construction are the Israeli type high-roof passiveventilated greenhouses,and
more recently into Spanishnew-style greenhouses.
Productionof crops
from the greenhousegives production advantages,such as improved
scaleof efficienciesfrom a variety of different systemsand the ability to
market a premium product. Someof the constraintsare the fact that in
much of the productionareasthereis a long distanceto the marketplace,
especiallyin placesin Baja or Sinaloaor Jalisco,in many casesa 36-hour
ride or longer to southernCalifornia or southernArizona. Further,material costsare similar to the U.S. or higher,but labor in generalis considerablylower.Another/concern,especiallyin the Baja,is water,both quantity and quality.
Greenhouseproductionis in fact becomingmore commonandmore
popular in Mexico. Medium and largeproducersarebeginningto develop strong greenhouseproductionsystemsandtake advantageof existing
marketing outlets. With accessto North America, especiallythe U.S.,
through NAFTA, foreign investment has been greatly stimulated.
Tomatoesare still the most important crop producedin Mexican greenhouses,although cucumbersand peppershave continuedto increasein
quantity of production. Continuationof constrainton the entire industry
relatesto the volatility of the marketfor greenhouseproducts.Generally
with field producedvegetables,many of the Mexican companieshave
establishedcontractualagreementsboth within the local marketswithin
Mexico, aswell aswith marketsin the U.S. This hasallowedthem to better adjust to price fluctuations.Finally, althoughMexico hasinexpensive
labor, it is not an absolutelow-costproducerbecausecapital and energy
tend to be higher than in North America and in fact, than in the E.U.
Essentially,if premium prices are not continuedto be paid for Mexican
producefrom the greenhouse,it is potentiallypossiblethat theseproducers are in dangerof going out of business.
It shouldbe recognizedthat tomatoproductionfrom greenhouses
in
Mexico is still only a smallpercentageof the total productionof tomatoes
being producedandexportedfrom that country.The most significant factor to concentratea threat from Mexican greenhousetomato production
to the Florida market would be the broadeningof the greenhouseproduction area.As alreadyexperienced,5-6 other statesoutsideof Sinaloa
that normally would not produce tomatoes in winter now do.
Continuationof high price returnsin a high quality market could have a
profound influence on the future for Florida tomatoproducers.
As to the future of greenhousetomato production,presentlythere
are approximately850 acresof greenhousetomatoesbeing producedin
the U.S., or about6% of the total tomatoesproducedin this country.The
major states producing greenhousetomatoes are Arizona, Texas,
Colorado, and Pennsylvania.On a global scale, Canadais producing
approximately 1600acresof greenhousetomatoes,Belgium 1700acres,
Mexico 1800 acres,and Holland produced2200 acres.Again, this does
not seemlike a lot coming from greenhouses
on a world basis,but if one
would look at the statisticsof wheremostof thesetomatoeswind up, this
production is in many casesin direct competition with Florida tomato
producers.A last thoughtto leavehowever,and onethat hasbeenrelated
by these authorsin a previous paper and a previoustalk to the Florida
Tomato Institute, is the fact that the world leader,Spain,presentlyhas
well over 50,000acresof greenhousespacedevotedto the productionof
tomatoes. Further, as the Spanish greenhouseindustry matures and
improves on their marketing abilities, they too will be not only another
competitor,but may be the major competitorfor Florida productiontomato market spacein the U.S.
Reference
Lopez, J. and K. Shwedel.2001. The Mexican greenhousevegetable
industry.Industry Note 032-2001,5 pp.
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