VEGETABLES AND SPECIALTIES April 29, 1996 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- VEGETABLES AND SPECIALTIES Situation and Outlook is published twice a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. VGS-268. Please note that this release contains only the text of VEGETABLES AND SPECIALTIES--tables and graphics are not included. Subscriptions to the printed version of this report are available from the ERS- NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock #VGS, $17/year. ERS-NASS accepts MasterCard and Visa. ----------------------------------------------------------------------------- Contents Summary Industry Overview Fresh Vegetables Specialty Vegetables Processing Vegetables Potatoes Sweet Potatoes Pulses Mushrooms Special Articles Florida-Mexico Competition in the U.S. Market for Fresh Vegetables Mexican Tomatoes--Fruit of New Technology List of Tables Situation Coordinator Gary Lucier Voice: (202) 219-0117 FAX: (202) 501-6782 E-mail:GLucier@econ.ag.gov Principal Contributors Gary Lucier (202) 219-0117 John Love (202) 219-1268 Charles S. Plummer (202) 219-0717 Doyle C. Johnson (202) 219-501-7159 ADP Support Patricia Bailey and Stacy Jones Editor Diane Decker Graphics, Table Design, and Layout Anne Pearl, Joyce Bailey, and Wynnice P. Napper Approved by the World Agricultural Outlook Board. Summary released April 25, 1996. The summary of the next Vegetables and Specialties Situation and Outlook is scheduled for release July 25, 1996. Summaries and text of Situation and Outlook reports may be accessed electronically; for details, call (202) 219-0515. The Vegetables and Specialties Situation and Outlook is published semi-annually (April and November) and supplemented by a yearbook (July). See back cover for subscription information. Summary After last year's 12 percent increase, retail prices for fresh vegetables (including potatoes) are likely to increase slightly in 1996. Strong prices for potatoes will continue seasonally through midsummer, before easing with the new 1996 fall crop. Lettuce prices during April-June are likely to average 50 percent below April-June 1995, countering higher retail prices for potatoes. The spring lettuce supply comes mainly from California, where last year's flooding sent lettuce prices to record highs. The anticipated lower prices during spring 1996 are contingent on favorable growing weather. Spring-season 1996 harvested area for lettuce in California is estimated down 1 percent from spring 1995, and weather-related shortages would send prices higher again. For fresh vegetables, generally changes in grower prices are passed on to consumers--even though there is a 1- or 2-month lag, retailers eventually pass on the difference. Consumers have seen wide fluctuations in fresh tomato retail prices in 1996, as supplies from Florida were reduced by a winter cold snap that damaged fields in the Immokalee-Naples area. Heavy rains in early March also contributed to higher prices. Spring-season tomato prices are typically volatile because the major source of supply is shifting from Mexico to Florida and poor weather can interrupt the continuity of supply. Spring-season 1996 harvested area for tomatoes in Florida is estimated down 6 percent from a year earlier. During January-March 1996, U.S. imports of six winter fresh vegetables from Mexico increased 20 percent from a year earlier. The vegetables are tomatoes, bell peppers, cucumbers, eggplant, snap beans, and squash. During October 1995-March 1996, fresh vegetable imports totaled 23 million cwt, 32 percent higher than a year earlier. Florida, the major U.S. supplier of winter fresh vegetables during the October-June season, accounted for 23 percent of the U.S. market supply through March. In comparison, Florida's share during October-March 1994/95 was 29 percent. Mexico, the main import supplier, accounted for 62 percent of the U.S. market through March of the 1995/96 season, compared with 53 percent a year earlier. The other suppliers (principally California) accounted for 15 percent, compared with 18 percent a year earlier. The U.S. farm-level value of vegetable production in 1996 is likely to decrease as much as $500 million from the $13.3 billion in 1995. Expected lower prices for fresh-market vegetables during first-half 1996 are behind the value decrease, even as output increases. Strong prices for the 1995 fall potato crop signal a possible expansion in 1996 acreage, but an increase in production could put downward pressure on market prices. However, strong domestic and foreign demand for frozen potatoes is expected to keep 1996-crop value about even with the 1995 crop. The farm value of processing vegetables is likely to rise slightly this year as output remains close to that of a year earlier and farm prices of green beans, green peas, and sweet corn rise. Expected larger output and higher contract prices in the processed tomato market are also boosting projected value. During the first quarter of 1996, wholesale prices for canned vegetables averaged 5 percent higher than a year ago while dried and dehydrated vegetables averaged 3 percent higher. However, abundant supplies have kept a lid on frozen vegetable prices, which remained flat during the first quarter. Frozen vegetable stocks were up 5 percent from a year earlier on April 1. Because of relatively large frozen vegetable output last year, stocks were higher for sweet corn, green peas, broccoli, and carrots. Freezer stocks were lower for squash, cauliflower, brussels sprouts, and okra. Processors of five selected vegetables (tomatoes, sweet corn, snap beans, green peas, and cucumbers) expect to contract for 1.47 million acres in 1996--down 4 percent from a year earlier. The decline is due to stagnant frozen vegetable prices, growers opting to plant alternative commodities such as field corn and soybeans, and the closing of several vegetable processing plants. Canners are expected to reduce contract area 2 percent while freezing firms pare acreage 9 percent due partly to lackluster prices and large stocks. Except for processing tomatoes, all the major vegetables for processing (both canning and freezing) are expected to register reduced acreage. Despite the reduced area, with average acreage losses and trend yields this coming season, output of the five leading processing vegetables could equal or exceed that of last year. Preliminary data indicate that per capita use of all vegetables and melons (on a fresh-equivalent basis) rose 1 percent to 433 pounds in 1995. Processing vegetables (excluding potatoes) accounted for 129 pounds per person in 1995, up 3 percent from a year earlier, while fresh vegetables (excluding potatoes) remained flat at 146 pounds. Strong grower prices and good demand will continue to characterize the potato situation this spring and early summer. As a result, U.S. fall potato acreage is likely to increase slightly this year as higher potato prices in many States outweigh the lure of higher field crop prices and farm program payments. Acreage will likely expand in the Pacific Northwest and in the Upper Midwest, where processor demand continues to underpin the potato markets. During the first quarter of 1996, reduced supplies and higher grower prices left the retail price for all types of fresh (tablestock) potatoes 14 percent above a year ago. In 1996, U.S. sweet potato growers intend to plant 90,000 acres, up nearly 2 percent from a year ago, and nearly 5 percent above 1994. Increases are expected in Alabama, California, Louisiana, and Mississippi. North Carolina and Louisiana will remain the largest planters of sweet potatoes, accounting for 39 and 26 percent of the U.S. total. Dry edible bean producers intend to plant 12 percent less acreage than in 1995. Declines in planted acreage will occur in all the major dry bean producing States, including North Dakota and Michigan (down 10 percent each), Nebraska (down 7 percent), Colorado (down 16 percent), and California (down 10 percent). The large reductions follow 2 years of strong yields and production, which led to rising stocks and falling prices. If growers plant the intended 1.8 million acres, acreage abandonment is average, and yields return to the recent 5- or 10-year average (decline 4 to 7 percent) in 1996, production for most major bean classes could fall as much as one-fifth. U.S. mushroom imports were record large in 1995, rising 15 percent from a year earlier to over 173 million pounds, product weight. Imports from China exceeded 75 million pounds, nearly double 1994. Most other major mushroom exporters, such as Indonesia, Chile, Taiwan, and India, increased their 1995 shipments to the United States. Last year's imports were valued at $196.4 million, compared with $162.7 million in 1994. China was the top mushroom supplier, with $50.4 million, followed by Indonesia with $44.5 million. Industry Overview Vegetable Crop Value Likely To Decrease in 1996 The U.S. farm-level value of vegetable production in 1996 is likely to decrease as much as $500 million from $13.3 billion in 1995. Expected lower prices for fresh-market vegetables during first-half 1996 are behind the value decrease, even as output increases. Strong prices for the 1995 fall potato crop signal a possible expansion in 1996 acreage, but an increase in production could put downward pressure on market prices. However, strong domestic and foreign demand for frozen potatoes is expected to keep 1996-crop value about even with the 1995 crop. The farm value of processing vegetables is likely to rise slightly this year as output remains close to that of a year earlier and prices of green beans, green peas, and sweet corn rise. Expected larger output and stronger field prices in the processed tomato market are also boosting projected value. U.S. exports of dry edible beans have slowed since October 1995, compared to a year earlier, even though 1995-crop prices have been below a year earlier. Dry bean acreage and production are expected lower in 1996, as competition for Midwestern acreage increases because of strong prices for corn, wheat, and other field crops. Despite increased processing tomato acreage in California, reduced processor demand elsewhere for snap bean, sweet corn, and green pea acreage has left contract area down 4 percent for the five major vegetables. Export value of U.S. vegetables is likely to pick up in calendar 1996, after posting a lackluster total in 1995. U.S. export value of fresh and processed vegetables increased only 3 percent in 1995, while total agricultural export value increased 22 percent. Fresh vegetable export volume was down 5 percent, due to reduced U.S. supplies and higher prices. Higher export volume of processed vegetables offset lower average export prices. Frozen potato exports--value and volume--are likely to continue posting large gains in 1996. Imports of fresh and processed vegetables are not expected to increase as much in 1996 as in 1995. Imports of fresh vegetables rose 21 percent in value (18 percent in volume) during 1995. Much of the increase came from Mexico, where the devaluation of the peso in December 1994 boosted exports. Although U.S. imports of many processed vegetables decreased in 1995, increases were seen in processed tomato products (Canada) and canned mushrooms (China and Indonesia). o Area harvested for fresh-market vegetables and melons increased 2 percent during first-half 1996. Grower and retail prices were lower in first-quarter 1996 than a year earlier. And imports of six winter fresh vegetables from Mexico were nearly 20 percent higher than in January-March 1995, more than offsetting lower supplies from Florida. o Sweet corn and green pea stocks in cold storage were above a year earlier this winter, and processors are expecting lower production in 1996. Tomato processors continue to see strong prices in wholesale markets. Canned and frozen vegetable exports are trending toward the $650 million mark in 1996--up from $597 million in 1995. o Potato growers are showing signs of increasing acreage for the 1996 fall crop. Prices for the 1995 fall crop have been 15 to 20 percent above a year earlier, and seed shipments through March were higher than a year earlier. o Dry edible bean growers intend to plant area sufficient for a 25-million-cwt crop in 1996. After large crops in 1994 and 1995, prospective prices below $20 a cwt in 1996 are pressuring growers to plant other field crops. Fresh Vegetables Area Harvested Increasing in 1996; Grower Prices Expected Lower U.S. growers expect to harvest more acreage of fresh-market vegetables during January-June 1996 than a year earlier. Growers increased area for harvest 2 percent, compared with the combined winter and spring seasons of 1995. The 1996 combined winter-spring area totals 634,500 acres of fresh-market vegetables. The total includes selected fresh-market vegetables, asparagus, onions, and melons. Most of the increase in area came from carrots, cabbage, and lettuce during the winter quarter, followed by snap beans, cantaloups, sweet corn, and onions in the spring. Florida increased spring-season vegetable area 2.8 percent to 112,300 acres, and California increased its spring-season area 1.9 percent to 170,600 acres. Texas area decreased 10 percent to 64,100 acres, due mainly to fewer watermelon acres. The three-State total of 347,000 acres accounts for 77 percent of 1996 U.S. spring-season area. The first-half 1996 acreage increase is higher than a year earlier, in part because the first-half 1995 harvest was reduced by a series of storms in Florida and California. Tropical Storm Gordon, hitting Florida in November 1994, contributed to reduced harvests of 1995 winter-season tomatoes, bell peppers, carrots, and sweet corn. Heavy rain and flooding in California during March 1995 reduced harvests of spring lettuce, broccoli, cauliflower, and celery. California's 1996 spring-season lettuce area is about even with a year earlier, while area is up for fresh-market tomatoes, broccoli, carrots, cauliflower, celery and cantaloups. Spring-season asparagus area is forecast down 3 percent, continuing a slide begun in 1989. Although U.S. asparagus yields have increased steadily, the decline in area has lowered production an average 2.4 percent a year. Asparagus area has fallen in California, Washington, and Michigan--the three top producing States--which account for 96 percent of production. Falling U.S.-produced supplies have been replaced by increased imports, while per capita asparagus consumption has remained flat. Fresh and frozen asparagus imports, coming mainly from Mexico, Peru, and Chile, have increased 13 percent annually since 1988. Spring-season onion area is forecast up 5 percent to 37,500 acres. U.S. spring onion production averaged 10.2 million cwt in 1994-95, but the increased 1996 area is offset by lower output in Georgia. Freezes in Georgia during March damaged fields and lowered yields. Georgia and Texas produce a mild, sweet onion, and the two States produce 60 percent of the spring crop. Texas onion yields are forecast up 7.5 percent to go along with a slight increase in area. To fill the gap left by Georgia's shortfall, onion imports--mainly from Latin America--are likely to increase during April-June 1996, compared to a year ago. During April-June 1995, U.S. onion imports totaled 2.5 million cwt, off 16 percent from a year earlier. U.S. fresh vegetable area for all of 1996 is likely to increase about 2 percent, based on estimated winter-spring area and projected summer-fall area. Along with the increase in total area, yields are expected to rebound. The 1995 fresh-market vegetable yield was down 1 percent from 1994, averaging 214 cwt per acre. During 1990 to 1994, fresh-market vegetable yields averaged 1 percent annual increases. Thus the average 1995 yield was 2 percent below trend-based expectations. Based on expected acreage and yields in 1996, U.S. fresh-market vegetable production is projected to increase 3-4 percent. The expected increase in supply is likely to bring lower grower prices than a year earlier. In 1995, U.S. fresh-market production was down 2 percent, to 388.5 million cwt. And grower prices averaged 16 percent above 1994, despite an 18-percent increase in fresh vegetable and melon imports in 1995. The higher 1995 prices likely contributed to increased demand for imported fresh vegetables. Much of the import increase in 1995 came from Mexico, whose weakened peso further spurred sales to the U.S. market. Lower Retail Price Increases Set for 1996 Retail prices for fresh vegetables (including potatoes) are likely to increase slightly in 1996, compared to the 12-percent increase in 1995. Strong prices for potatoes will continue seasonally through August, before easing with the new 1996 fall crop. Lettuce prices during April-June are likely to average 50 percent below April-June 1995, countering higher retail prices for potatoes. The spring lettuce supply comes mainly from California, and last year's flooding sent lettuce prices to record highs. The anticipated lower prices during spring 1996 are contingent on favorable growing weather in California. Spring-season 1996 harvested area for lettuce in California is estimated down 1 percent from spring 1995, and weather-related shortages would send prices higher again. Consumers have seen wide fluctuations in fresh tomato retail prices in 1996, as supplies from Florida were reduced by a winter cold snap that damaged fields in the Immokalee-Naples area. Heavy rains in early March also contributed to higher prices. Spring-season tomato prices are typically volatile because production areas are changing over from Mexico to Florida and weather can interrupt the continuity of supply. Spring-season 1996 harvested area for tomatoes in Florida is estimated down 6 percent from spring 1995. Generally, changes in grower prices are passed on to consumers -- even though a 1- to 2-month lag is necessary for retailers to fully pass on the difference. For example, monthly grower prices for celery increased 30 percent in 1995 because of a 4-percent drop in U.S. production. In turn, retail prices for celery in 1995 increased 35 percent, and the month-to-month changes in retail prices mirrored changes in grower prices. Occasionally, retailers are not able to charge consumers for all of the higher prices paid to U.S. growers. For head lettuce, monthly retail prices averaged 32 percent higher in 1995, while grower prices averaged 74 percent higher than a year earlier (table 9). Winter Fresh Vegetables: Increased Imports from Mexico in 1996 During January-March 1996, U.S. imports of six winter fresh vegetables from Mexico increased 20 percent from a year earlier. The six vegetables include tomatoes, bell peppers, cucumbers, eggplant, snap beans, and squash. During October 1995-March 1996 (two-thirds of the 1995/96 season), winter fresh vegetable imports totaled 23 million cwt, 32 percent higher than a year earlier. Florida, the major U.S. supplier of winter fresh vegetables during the October-June season, accounted for 23 percent of the U.S. market supply through March. In comparison, Florida's share during October-March of the 1994/95 season was 29 percent. Mexico, the main import supplier, accounted for 62 percent of the U.S. market through March of the 1995/96 season, compared to 53 percent a year earlier. The other suppliers (principally California) accounted for 15 percent, down from 18 percent a year earlier. Based on Florida's and Mexico's likely shipments during April- June 1996, Florida is expected to capture 31 percent of the October-June 1995/96 U.S. market, down from 34 percent a year earlier. Mexico is expected to register a 52-percent share of the 1995/96 market, up from 48 percent in 1994/95. (See the special articles in this issue of the Vegetables and Specialties Situation and Outlook Report for further analysis of Florida- Mexico competition in the U.S. market for winter fresh vegetables.) Fresh Market Vegetable Exports Likely To Increase in 1996 Exports of U.S. fresh-market vegetables (including melons) are likely to increase in volume and value in 1996. If U.S. output increases in 1996, putting downward pressure on prices, fresh vegetable exports could return to trend projections. From 1990 to 1994, fresh vegetable export value increased 8.5 percent per year. In 1995, the value increased about 2 percent--to slightly more than $1 billion--while volume decreased 5 percent. To return to trend levels in 1996, U.S. fresh vegetable exports would have to hit $1.2 billion. Tightened supplies and higher U.S. grower prices for many fresh vegetables contributed to the decrease in 1995 export volume. In addition, a recovery of onion production in Japan's Hokkaido region contributed to a 16-percent decrease in U.S. onion exports. Onions accounted for about 6 percent of fresh vegetable exports in 1995. Combined exports of lettuce, tomatoes, and potatoes, which account for 35 percent of the total volume exported in 1995, were down 11 percent. Export increases were notable for sweet corn (up 47 percent), carrots (13 percent), cabbage (11 percent), cauliflower (6 percent), and broccoli (3 percent). Export volume of fresh vegetables to Canada in 1995 was down slightly for the third consecutive year. Canada accounts for 75 percent of U.S. export volume and 70 percent of value. While export volume to Canada has decreased slightly since 1992, export value has fluctuated between $720 million and $775 million. Exports of fresh vegetables to Asia, representing about 22 percent of total U.S. fresh vegetable export value, were down 8 percent in volume and up 2 percent in value. Japan accounts for about 80 percent of total U.S. exports to Asia. The volume of fresh vegetable exports to Japan in 1995 was down from 1994, after increasing 36 percent per year during 1990 to 1994. The volume decrease to Japan was due entirely to a 22-percent decrease in melon exports, while combined exports of the other fresh vegetables went unchanged. Fresh Market Vegetable Production Down in 1995, Prices Were Higher U.S. production of 25 fresh-market vegetables and melons decreased 2 percent in 1995, compared to 1994, while the average price increased 16 percent. Production totaled 388.5 million cwt and per unit value averaged $19.10 a cwt. Total U.S. value of production increased $913 million--or 14 percent--to $7.42 billion at the farm level. Most of the total U.S. value of fresh-market vegetables is produced in California (52 percent), Florida (12 percent), Arizona (9 percent), and Texas (5 percent). Value of fresh-market production was higher in California (up 18 percent), Arizona (122 percent), and Texas (25 percent), and lower in Florida (down 13 percent). A combined 9-percent decrease in production of head lettuce, broccoli, cauliflower, and celery (25 percent of total output) was more than offset by a 36-percent increase in their farm value. The increase in grower prices for these four vegetables-- grown principally in California and Arizona--averaged 49 percent. The March 1995 flooding in California sharply reduced supplies for several months when few alternative sources were available. Production in other States and imports were not sufficient to fill the large, unexpected gap in supply. Florida's combined production of tomatoes, bell peppers, cucumbers, eggplant, and snap beans was down 5 percent in 1995, while farm-level value was down 15 percent. On average, grower prices for these five items were 10 percent below 1994. Although 1995 prices received by Florida growers were lower for snap beans (down 22 percent), cucumbers (11 percent), and eggplant (6 percent), increases were posted for tomatoes (up 4 percent), and bell peppers (up 9 percent). Fresh Per Capita Use Flat in 1995 U.S. per capita consumption of fresh vegetables (excluding potatoes) totaled 146 pounds in 1995, the same as a year earlier, but up from 139 pounds during 1988-1993 (table 47). In 1995, increased imports offset lower domestic production. The 1994 estimate was revised up based on revised U.S. production estimates. The 1995 consumption estimate is preliminary, based on USDA production estimates published in January 1996. Revised 1995 production estimates will be published in January 1997. The 1994 and 1995 U.S. estimates mark a change from the flat trend in per capita consumption since 1989. Several years of below-trend increases in retail prices, and improved growth in the general economy are two factors behind a change in demand. Fresh vegetable retail prices increased only 3.6 percent annually during 1990-1993, compared with 6.5 percent during the 1980's. In 1994, retail prices increased only 2.3 percent. In 1995, imports accounted for about 18 pounds per capita, up from 15 pounds a year earlier. Specialty Vegetables Greenhouse Production Continues To Rise The value of U.S. grower sales of greenhouse vegetables in 1992 was $91 million, according to the Census of Agriculture (table 17). This compares with $51 million in 1987 and about $32 million in 1982. If the growth trend in greenhouse vegetable grower sales since 1992 is similar to the trend between 1982 and 1992, annual sales would range from $150 to $200 million. If domestic grower sales of mushrooms are added, the total value of food crops grown under protective cover would be approximately 6.5 percent of the total value of the U.S. vegetable supply (excluding imports). The number of growers and the area in production of greenhouse vegetables flattened out between 1982 and 1987, but increased sharply from 1987 to 1992. In 1992, the Census of Agriculture listed 1,865 greenhouse vegetable growers and 28.5 million square feet of production area, increases of 65 percent and 41 percent, respectively, from 1987 estimates. Industry sources indicate that greenhouse vegetable sales have continued to rise dramatically while grower numbers are increasing slowly and production area is making moderate gains. California Leads in Sales and Growers California was the leading State in greenhouse vegetable sales in 1992 with about one-third of the U.S. total followed by Florida, Pennsylvania, and Ohio. California had the most growers with 140, of whom 36 were commercial-scale growers (those with more than $100,000 in annual sales of greenhouse vegetables). Ohio had 101 growers (16 produced more than $100,000) and Florida had 107 growers, of whom 7 were of commercial scale. In 1992, the United States had 27 large-scale growers (those with annual greenhouse vegetable sales of $500,000 or more). These growers accounted for nearly 44 percent of the production area and 58 percent of total sales (table 18 ). According to the 1988 Census of Horticultural Specialties, tomatoes were the most important greenhouse vegetable crop with 41 percent of the total sales, followed by cucumbers (28 percent), lettuce (13 percent), and peppers (2 percent). All other greenhouse vegetable crops accounted for the remaining 16 percent of total sales. Processing Vegetables Outlook for 1996 As slow economic growth in the U.S. economy gives way to more rapid growth during the second half of the year, demand for processed vegetables (especially frozen products) likely will pick up. Although the economy started slowly in the first quarter (partly due to a severe winter), it is expected to improve as the effect of falling interest rates over the past year begins to work its way through. Favorable economic factors on the demand side include continued low unemployment, rising real disposable income, and low overall inflation (which will help keep retail prices down by restraining processing and marketing costs). Given this economic outlook, spending on away-from-home meals, an increasingly important component of the consumer food dollar, is expected to show modest growth. Accounting for about half of the consumer food dollar, the foodservice sector is a major user of processed tomato products, potatoes, pickles, and other vegetables. According to industry projections, foodservice sales (of which two-thirds are restaurant sales) are expected to increase modestly, but at a slower pace than a year ago. Restaurant (eating and drinking places) sales rose 5 percent in 1995 with sales at full menu restaurants rising faster (7 percent) than either "chain" or "fast-food" establishments (each rose about 3 percent). In 1995, sales at all retail food stores (including specialty food stores) increased 2.7 percent, with real (inflation-adjusted) sales about flat. Wholesale prices during the first quarter of 1996 averaged 5 percent higher than a year ago for canned vegetables and 3 percent higher for dried and dehydrated vegetables. However, abundant supplies have kept frozen vegetable prices flat during the first quarter. Frozen vegetable stocks (excluding potatoes) on March 1, 1996, totaled 1.12 billion pounds (4.3 pounds per capita), up 5 percent from a year earlier. Because of relatively large frozen vegetable output last year, stocks were higher for sweet corn, green peas, broccoli, and carrots. Freezer stocks were lower for squash, cauliflower, brussels sprouts, and okra. Movement of frozen vegetables appears to be sluggish, apparently reflecting the slow economy during the winter. While prices received by processors either did not change or moved higher, changes in the associated costs of processing vegetables were mixed in 1995. Based on data from the ERS food marketing cost index, prices paid for some of the major processing inputs during 1995 changed as follows: o The cost of cans for vegetables and vegetable juices fell 2.7 percent; o The cost of paperboard boxes and containers jumped 4.7 percent; o Energy (electric, petroleum, natural gas) costs fell 4.1 percent; o Hourly labor costs rose an average of 2.6 percent; o Transportation service costs increased 0.4 percent; o Advertising costs increased 6.2 percent; and o Overall producer prices increased 3.0 percent. Contract Acreage Down for 1996 Processors of five selected vegetables (tomatoes, sweet corn, snap beans, green peas, and cucumbers) expect to contract for 1.47 million acres in 1996--down 4 percent from a year earlier (table 19). The decline follows a slight rise a year earlier. The decline is due to stagnant frozen vegetable prices, growers opting to plant alternative commodities such as field corn and soybeans, and the closing of several vegetable processing plants. Stocks of some frozen vegetables are higher than anticipated due to strong production in the Pacific Northwest last year and weak movement this season, which have depressed wholesale prices. Processing capacity was reduced as several small canning plants closed in the Midwest and a major frozen vegetable processor exited the industry in the Pacific Northwest, idling two frozen vegetable plants (pending the sale of the plants). Canners are expected to reduce contract area 2 percent while freezing firms pare acreage 9 percent due partly to lackluster prices and large stocks. With the exception of processing tomatoes, all the major vegetables for processing (both canning and freezing) are expected to register reduced acreage. Among the major States, contract acreage has declined the most in Oregon (20 percent) as a major processing plant closed. Acreage is also down in Washington (6 percent), Minnesota (4 percent), Wisconsin (2 percent), and New York (1 percent). Acreage is up 2 percent in California and unchanged in Michigan. Despite the reduced area, with average acreage losses and trend yields this coming season, output of the five leading processing vegetables could equal or exceed that of last year. During the first quarter of 1996, wholesale prices for frozen vegetables averaged about the same as a year ago due largely to ample stocks and weak demand. With large crops last fall and larger inventories, prices were lower for frozen sweet corn, green peas, and green beans (table 25). Frozen vegetable stocks are higher than a year ago and prices are flat, prompting processors to plan for a smaller pack than a year ago. Acreage of the five major vegetables for canning is expected to fall as higher wholesale prices signal a smaller supply during the 1995/96 season. Tomato production, which accounts for more than 60 percent of processing vegetable output, is forecast to increase 2 percent in 1996. The weather in California's tomato producing areas has been much more favorable for field work and crop development this year compared with the flooding conditions of a year ago. Contract acreage for sweet corn is expected to fall 2 percent to 518,600 acres (nearly all sweet corn for processing is produced under contract). Acreage of sweet corn for canning is expected to decline 2 percent while area for freezing is forecast to be off 3 percent. Sweet corn acreage is expected to be lower in major States such as Minnesota (1 percent), Wisconsin (4 percent), and Washington (4 percent). On March 1, frozen stocks of sweet corn (converted to a cut basis) were up 8 percent from a year ago with cut corn up 18 percent and corn on the cob down 13 percent. Despite lower planted area, production of sweet corn for canning is expected to be about the same as a year earlier under the assumption that the relationship between planted and harvested area will return to normal this year. In 1995, late planting in Midwest canning areas caused bunching at harvest and forced overtaxed processors to pass or abandon fields due to the lack of time and equipment to handle the surge. Thus, harvested area for canning was only 89 percent of planted area in 1995, compared with an average of around 93 percent. Normally, crops are planted in a staggered fashion to allow orderly harvesting and processing. Poor spring weather forced many growers to plant at the same time and resulted in an acreage surge that could not be fully harvested and processed in the limited time frame available. Record-High Processing Tomato Crop? In 1996, tomato processors are expected to contract for 361,240 acres--up 2 percent from a year ago. If harvested area is close to this level and yields remain close to trend, a record-large crop of around 12 million short tons could be produced. The expectation for a large crop is partly the result of increased processing capacity in the industry over the past few years, plus continued strong domestic demand for foods such as pizza, pasta, and salsa, and the continued expansion of U.S. exports. In the export arena, world competition could be a bit stiffer this year because tomato production increased 2 percent in the leading producing regions last year (mostly in South America and Turkey). Given last year's drop in output in important producing countries such as Italy and Spain, it appears likely that output in these countries could rise this year and add to world tomato stocks. Preliminary data from the California League of Food Processors indicated that March 1 inventories of processed tomato products in U.S. warehouses (on a fresh-equivalent basis) were up 5 percent from a year earlier. The December 1 stocks estimate indicated a 9 percent increase from a year ago to 8.4 million short tons. Some observations regarding the current situation include: o ERS estimates suggest that January 1 processed tomato stocks were among the highest on record; o Paste prices have been declining for the past several months as stocks have remained high; and o Although tomato product movement apparently increased this winter (perhaps reflecting declining paste prices), the sluggish economy during the past 6 months may have prevented even stronger movement. Despite the rapid growth in tomato product demand during the 1990's, this growth is dependent on a continued strong national economy. A strong economy is required to support incomes that allow the important away-from-home foods category to continue rising. Over the long run, the demand picture looks promising for the tomato industry. Private analysts expect a bright future for tomato-containing products such as salsa and pizza. Analysts project that over the next 5 years, pizza sales will match the 25-percent growth achieved over the past 5 years. Production during 1995 totaled 22.6 billion pounds, down 2 percent from the record crop of a year earlier. Tomato product imports declined in 1995 and accounted for just under 2 percent of total supply--down from 2.4 percent in 1994. Rising for the tenth consecutive year, processed tomato exports removed just over 5 percent of the supply from the domestic market. Domestic processing tomato use (on a fresh equivalent basis) totaled an estimated 19.9 billion pounds--equal to 75.5 pounds per capita. Assuming stronger economic growth during the second half of the year and stable or lower tomato product prices, per capita use is projected to increase in 1996. By agreement with the California Tomato Growers Association (CTGA), the average field price to be paid by processors for red ripe tomatoes in California is reported to be $53 per short ton-- up from $51.50 in 1995. The CTGA represents the majority of processing tomato growers. Although wholesale prices for most peeled, stewed, and diced products are above a year earlier, paste prices have been soft. Reported quotes for 55-gallon drums of industrial paste in early April ranged around 35 cents per pound compared with 39 cents a year earlier. If contract production is fully realized, larger supplies could result in reduced wholesale prices this fall. Processed Exports Up, Imports Fall In 1995, the United States was a net exporter of processed vegetables (excluding potatoes and mushrooms). Processed vegetable imports fell 5 percent to $601 million, while exports increased 9 percent, reaching $716 million. The net difference-- $115 million favoring exports--compares with a $24-million trade surplus in 1994. U.S. canned vegetable import value declined 8 percent to $324 million in 1995. Imports were sharply lower for artichokes (down 23 percent), tomato paste (38 percent), water chestnuts (22 percent), and green peas (41 percent). Strong gains were registered for tomato catsup (up 485 percent), bamboo shoots (24 percent), and chile peppers (22 percent). Canned import volume accounted for 2.3 percent of total U.S. supply in 1995, down from 2.8 percent a year earlier. With domestic supplies large and prices lower, the value of frozen vegetable imports declined 3 percent to $219 million in 1995. Broccoli, which accounts for 47 percent of frozen import value, increased 12 percent. However, this was outweighed by declines in cauliflower (down 40 percent), green peas (19 percent), and okra (58 percent). Imports accounted for 9.0 percent of the frozen vegetable supply (excluding potatoes) compared with 9.7 percent a year ago. U.S. canned vegetable exports were valued at $456 million in 1995, up 10 percent from 1994. Led by tomato paste (which increased 17 percent), canned tomato exports increased 8 percent to $209 million, while sweet corn also rose 8 percent to $133 million. About 6.1 percent of the supply of canning vegetables was exported in 1995--up from 5.8 percent a year earlier. Frozen vegetable exports increased 7 percent in 1995, reaching $142 million. While export value for sweet corn, the leading frozen export (excluding potatoes), declined 8 percent, exports rose 61 percent for green peas and 62 percent for green beans as volume increased for both. About 7.2 percent of the supply of vegetables for freezing was exported in 1995--about the same as a year earlier. About half of U.S. processed vegetable exports in 1995 was shipped to Asia, mostly Japan. Canada accounted for 27 percent of the total, while Western Europe accounted for 16 percent. Sweet corn to Japan and canned tomato products to Canada are two leading export opportunities continuing to show recent growth for U.S. exporters. Per Capita Use Up in 1995 Preliminary data indicate that per capita use of all vegetables and melons (on a fresh-equivalent basis) rose 1 percent to 433 pounds in 1995 (table 47). Processing vegetables (excluding potatoes) accounted for 129 pounds per person in 1995, up 3 percent from a year earlier. Some highlights: o Within the processing category, vegetables for freezing rose 3 percent to 22.7 pounds per person while canning vegetables increased 3 percent to 106 pounds. Increases are again expected in both categories in 1996 due mostly to lower retail prices caused by continued large supplies of major items. o Tomatoes for canning, which account for nearly three-fourths of all canning vegetable use, rose 3 percent in 1995 to 75.5 pounds per person. With the economy forecast to strengthen later in the year and prices expected to average at or below a year ago, domestic use of canning tomatoes could reach a record high in 1996. o Per capita use of processing sweet corn, the second most popular processed vegetable, rose 8 percent to 21.0 pounds. While canning use rose 3 percent to 10.5 pounds, large supplies and low prices allowed sweet corn for freezing to jump 14 percent to 10.5 pounds. Higher prices in 1996 may lead to slightly lower use. o Use of snap beans for processing fell 9 percent to 5.3 pounds per person in 1995 as both canning and freezing use declined. o For the second consecutive year, use of cucumbers for pickles rose in 1995. Per capita use increased 6 percent to 5.0 pounds-- the highest since 1991. The continued expansion in fast food outlets was likely a factor. o Use of green peas for processing rose 3 percent to 3.7 pounds per person in 1995 as canning use increased slightly while freezing use remained constant. Potatoes Outlook for Fall 1996 Strong grower prices and good domestic and export demand will continue to characterize the potato situation this spring and early summer. As a result, U.S. fall potato acreage is likely to increase slightly this year as higher potato prices in many States outweigh the lure of higher field crop prices and farm program payments (see box). Acreage will likely expand in the Pacific Northwest and in the upper Midwest where processor demand continues to underpin the potato markets. However, strong competition from Canadian potatoes has hindered price increases this season in the East and will likely keep acreage near last year's levels. An improvement in Maine potato yields, which have steadily declined under various adverse conditions during the past few seasons, will be the key to increased Eastern States production this fall. Despite rather disjointed grower-processor contract negotiations this spring, settled contract prices appear to be averaging 3 percent or more above a year earlier. Although potato prices are well above a year earlier, the prices for alternative commodities that could be planted in place of potatoes are also well above a year earlier. Despite a lot of speculation, it appears that no noteworthy shifts in acreage will involve potatoes in most areas. In the case of dry beans, some acreage was lost to field corn and soybeans in the upper Midwest but the dry bean market has been very soft this past year with above normal stocks and slower than expected export demand. Potatoes, on the other hand, have had better prices than last year, good processor demand, and strong exports. Prospective acreage of wheat, the most common program crop grown in rotation with potatoes, is up 7 percent with durum wheat up 5 percent and other spring wheat up 3 percent. Prospective acreage for barley, the second most important crop grown in rotation with potatoes, is up 8 percent. The potato industry faces at least two potential changes this season. The first concerns the new farm act and how it might affect the industry (see box). The second is the proposed futures contract sponsored by the New York Cotton Exchange. The National Potato Council has come out against the trading of potato futures because it believes that market distortions will result due to the perishability of potatoes and the seasonality, regionality, and marketing complexities of the potato industry. Others have pointed out potential benefits such as hedging to set effective price limits and using call options to smooth income streams for tax purposes. The Cotton Exchange sponsored a series of seminars around the country this winter to introduce the concept of potato futures and options and explain the potential benefits to users. The Exchange hopes to begin trading this season. As usual, the weather will be of concern this season. However, weather's impact on yields could be less of a concern than its affect on the costs of production. If a cool, wet season develops, increased incidences of late blight will signal the need for additional preventive spraying and chemical vine dessication. Allowances reportedly have been built into some processor contracts (such as for processor-requested sulfuric acid vine dessication). Although potato seed prices will be up, the prices paid for inputs such as fuel, fertilizer, and chemicals will rise much more slowly than a year earlier and the cost of production credit is expected to decline. Overall, the index of prices paid for all inputs is expected to rise 1 to 3 percent in 1996. Assuming a small increase in planted area and a range of yields between trend and last year's average, the 1996/97 fall potato crop could range from 410 to 420 million cwt. If production from the winter, spring, and summer seasons totals 43 to 45 million cwt, 1996 potato production could range from 2 to 5 percent above the 442 million cwt of 1995. Spring Crop Up Slightly The first estimate of the 1996 spring potato crop was 21.1 million cwt, up 4 percent from a year earlier (table 31). Most of the expected gain is due to a 4-percent increase in area harvested. All the increase will come from California and Arizona, with the other four States (Florida, Texas, Alabama, and North Carolina) producing less. With processing potato supplies from last fall's crop more limited this year, fry processors contracted for more russet potatoes in the two Western States this spring. Florida's production is expected to decline for the second consecutive year as a series of freezes this winter reduced yields. In California and Texas, freezes threatened the potato crop but did little damage. With output up in both California and Florida, winter-season potato production increased 18 percent to 2.9 million cwt (table 30). Harvested acreage rose 13 percent and per acre yields increased 3 percent. Production in Florida rebounded from last year's water-damaged crop despite freeze damage in southwestern areas. Potato Stocks Down On April 1, fresh potato stocks stood at 112.9 million cwt, down 12 percent from the record high of a year ago. April 1 stocks represented 29 percent of fall production in the 15 potato-storage States, down from 31 percent a year ago. Stocks were 20 percent below a year ago in the three major processing States (Idaho, Washington, and Oregon). Given the continued strong demand for finished products, processors have had to contract for supplemental raw product from the spring-season crop and are likely counting on early availability from the fall season. To this point, the pace of processing remains near that of a year ago and finished product prices are relatively stable. Although still a small part of domestic french fry supply, imports of frozen french fries from Canada continue to increase. Idaho potato shipments (fresh and chip) through April 1 were running 10 percent behind a year earlier. North Dakota fresh and chipper shipments were down 17 percent due to a 26-percent drop in chipping potato shipments. The only major State to register increased shipments was Michigan with 3 percent more tablestock and 12 percent larger chipping potato volume. With volume declining in most States this season, U.S.combined fresh and chipping potato movement is down 8 percent through April 1. In a reversal of last year, stocks are up in the East and down elsewhere. Compared with a year earlier, April 1 stocks were down 17 percent in the Western States, but up 4 percent in the Central States and 10 percent in the three major Eastern States. Eastern stocks are higher despite a smaller crop last fall and reduced competition from other domestic regions. Movement in eastern and some central States has been slower than in Western States due to the burdensome influence of last fall's large Canadian crop. Less costly Canadian potatoes have displaced U.S.-produced crops in eastern markets and may have limited U.S. export opportunities in Canada and elsewhere. Strong price signals may encourage increased potato acreage by both domestic and Canadian growers this fall. This could again lead to large supplies and lower prices in eastern markets this fall. Frozen potato products in cold storage on April 1 were about the same as a year earlier at 1,166 million pounds. Stocks of frozen french fries were 3 percent higher than a year ago, accounting for 81 percent of all frozen potatoes in storage. Of stocks held, 71 percent were in public warehouses and the remainder were privately held. The Pacific and Mountain States held 73 percent of french fry inventories and 62 percent of other frozen potato products. Processing capacity has been increasing for the last several years in the Central States and has been reflected in frozen stocks. Frozen potato stocks in the North Central States accounted for 19 percent of April 1 stocks--up from 17 percent in 1992. Prices Up in 1995/96 With reduced supplies this season, fresh (tablestock) potato prices are averaging above a year earlier at all levels of the marketing chain. U.S. grower prices for fresh-market potatoes averaged $7.98 per cwt during October to February, up 61 percent from a year earlier and 47 percent above the 1990-94 average (table 36). Fresh table potato prices have remained above a year earlier since last June. Prices for processing potatoes have also averaged above a year ago each month since September. The 1995/96 preliminary U.S. season-average price for all potatoes is forecast at $6.35 per cwt, up 14 percent from 1994/95. Because stronger prices outweighed reduced volume, the value of the 1995/96 potato crop is estimated to have increased 8 percent to $2.8 billion. With prices up a tenth from a year earlier, the value of Idaho's crop improved 3 percent to $709 million. Average prices in the State of Washington are expected to rise a fourth from a year earlier and propel the value of the potato crop up 17 percent to $493 million. In terms of value, potatoes are now the sixth most important crop grown in the United States. With supplies reduced and grower prices higher, the retail price for all types of fresh (tablestock) potatoes averaged 14 percent above a year ago during the first quarter of 1996. Retail prices for fresh-market potatoes will likely continue to rise until midsummer when the market begins to anticipate late summer and fall crop harvests. Retail prices for frozen french fries averaged $0.87 per pound during the first quarter of 1996, up just 3 percent from a year ago. With a majority of potatoes destined for processing moving under contract, raw product prices typically do not change as rapidly as the more volatile fresh market. Assuming other processor costs such as vegetable oils, energy, and labor are stable, there tends to be less pressure on finished product prices to change. The retail portion of the frozen fry market accounts for around 15 percent of the volume packed, with the majority of the pack headed to the foodservice industry and a smaller (but growing) amount going to export. The pack of frozen potatoes increased 7 percent during the first half of calendar 1995 with full-year statistics available soon after the release of this report. The retail price for potato chips averaged $3.00 per pound during the first quarter of 1996, down 1 percent from a year earlier. Through April 1, shipments of chipping potatoes for the 1995/96 season are down 8 percent from a year earlier. Fresh Shipments Down, Processing Up While tablestock (down 8 percent) and chipping potato (down 7 percent) shipments through April 1 are down from a year ago, processors have managed to increase volume through their plants. As of April 1, the eight major processing States have processed 3 percent more potatoes than a year ago (table 35). Over three-fourths of the increase can be attributed to the four upper Midwestern States (MI, MN, ND, and WI). Through April 1, processing in the upper Midwest has jumped 57 percent from just 2 years ago due to added processing capacity in the region. The upper Midwest now accounts for about 17 percent of potato processing in the eight major States. ERS forecasts suggest that domestic disappearance of potatoes (including imports) for frozen french fries will hit a record 12.7 billion pounds in 1995/96 (table 29). This would be 1 percent above 1994/95 but 11 percent larger than 1993/94. On a fresh-equivalent per capita basis, disappearance of potatoes for french fries would be little changed from a year earlier at 48 pounds (24 pounds on a product-weight basis). Disappearance of potatoes for other frozen products (hash browns, home fries, tater tots, frozen whole, etc) is expected to total 2.7 billion pounds in 1995/96--equivalent to 10 pounds per person. About 10 percent of the total supply of potatoes for frozen french fries was exported in 1994/95. Growth in exports is projected to outstrip expansion in supply in 1995/96 with the export share likely rising to 11 percent. Imports of frozen french fries, largely from Canada, also continue to rise. In 1994/95, imports accounted for 4 percent of the supply of frozen french fries and are expected to increase to almost 5 percent in 1995/96. Potato Trade Surplus at $437 Million in 1995 Despite lower fresh export and import value in 1995, U.S. net potato trade remained in surplus with exports of $618 million and imports totaling $181 million. The value of potato imports rose 12 percent as a 12-percent drop in the value of fresh imports was outweighed by a 26-percent increase in frozen products. Potato export value rose 8 percent due largely to increased sales of frozen fries (up 30 percent) and potato flakes (up 48 percent). Exports of dehydrated products and frozen potato products now account for roughly 25 million cwt (close to 6 percent of the total potato crop) and are expected to continue growing in the coming year. Given strong potato prices this season and successful export movement, another large potato crop is likely this fall in the Maritime provinces of eastern Canada. This means continued large fresh exports to the United States and more pressure on eastern U.S. potato prices in 1996/97. The value of frozen french fry exports rose 30 percent to $259 million, with export volume rising 31 percent in 1995. French fries accounted for 45 percent of U.S. potato export value last year, up from 38 percent a year earlier. With the Japanese economy continuing to improve, the value of french fry sales to Japan increased 19 percent to $124 million. With sales to South Korea, Singapore, and countries of the European Union also surging last year, Japan's share of U.S. fry exports fell to 48 percent--from 53 percent in 1994. After several strong seasons, the value of U.S. potato chip exports fell 16 percent to $168 million in 1995. Although reduced exports were noted for several major trading partners, drastically reduced demand in Mexico caused U.S. potato chip exports to that country to decline from $15 million in 1994 to just $0.2 million in 1995. Part of this decline was offset by increased sales to Belgium (up 27 percent). Potato flake exports totaled $44 million in 1995, up 48 percent from 1994. Japan is the major destination for U.S. flake exports with 59 percent of the total value in 1995. The biggest gains came in exports to the EU (up 436 percent), which rose primarily because of a poor potato crop across much of Europe in 1994/95. BEGIN BOX Vegetables, Potatoes, and the 1996 FAIR Act The recently enacted 1996 farm act is a significant departure from the farm programs of the past several decades. The Federal Agriculture Improvement and Reform (FAIR) Act of 1996 allows growers to receive fixed declining payments over a 7-year period during which time farm subsidies will be phased down. As with previous farm acts, there are individual payment limits. Growers participating in Federal farm programs will now be free of most program restrictions in deciding what to plant on their program acreage. However, program participants who do not have a history of planting fruits and vegetables (including potatoes) are prohibited from planting these crops on their FAIR Act contract acreage (the term "contract acreage" should not be confused with acreage contracted with processors and other buyers). The only exceptions to the commodity prohibition are mung beans, lentils, and dry peas (see the pulse section in this report for more details). There are no planting restrictions on acres not covered in a FAIR Act Contract. Specific rules and regulations governing program operations are forthcoming. Generally, the new farm program will not impede expansion in the vegetable/potato industry. A grower on a farm that has a history of planting fruits and vegetables (including potatoes) and also participates in Federal farm programs, may continue to plant and expand fruits and vegetables on contract acres. However, the grower will lose an acre of FAIR Act payments for each acre planted to fruits and vegetables. Thus, if the grower has an established planting history for a specific fruit or vegetable, the grower may continue to plant that specific fruit or vegetable on the farm(s) with the history base. If the grower becomes the operator of another farm that does not have an established fruit or vegetable acreage history, the grower can still plant fruits and vegetables. However, on the farm without a history, the grower is limited to his/her average annual planting history of the specific fruit or vegetable during crop years 1991-95 (years with no acreage are not included in determining the average). This annual planting history is important because it establishes a "hip pocket allotment" which that grower can then take to other farms that do not have a history of planting fruits and vegetables. In situations where the farm itself has a fruit or vegetable acreage history, there is no requirement to stay within the 5-year average acreage. In both cases, contract payments are reduced on an acre-for-acre basis for fruits and vegetables grown on contract acreage. The only major exception to this acre-for-acre payment reduction is for growers in areas where fruits and vegetables are normally double-cropped with contract commodities (wheat, feed grains, upland cotton, and rice). In these areas, double cropping with contract commodities does not result in a loss of farm program payments. An individual farm or producer does not have to have a history of double cropping as long as double cropping has or does take place in the region. Potato producers are typically also participants in Federal farm programs. Three of the top four crops grown on farms along with potatoes are major program crops. According to the Census of Agriculture, the crops grown most frequently on farms also producing potatoes are (in order of prevalence) wheat, barley, alfalfa hay, corn, and sugarbeets. According to a sample of 14 selected potato-producing States (covering 92 percent of U.S. potato output) from the 1987 Census of Agriculture, farms that produce potatoes and also participate in farm programs accounted for about 42 percent of all farms reporting potatoes and 60 percent of U.S. potato production. Farm program participation rates for farms also producing potatoes were highest in North Dakota (75 percent), Idaho (70 percent), and Minnesota (55 percent). Program participation was lowest in Florida (3 percent). [For more information on the new farm legislation, refer to the special April 1996 farm bill supplement to the "Agricultural Outlook" magazine.] END BOX Sweet Potatoes Acreage Up for 1996 In 1996, U.S. sweet potato growers intend to plant 90,000 acres, up nearly 2 percent from a year ago, and nearly 5 percent above 1994 (table 38). Increases are expected in Alabama, California, Louisiana, and Mississippi. North Carolina and Louisiana will remain the largest planters of sweet potatoes, accounting for 39 and 26 percent respectively of the U.S. total. Louisiana's increase in planted acreage continues the State's recent upward trend. Planted acreage has increased in each of the last 3 years in Louisiana, with 1996 plantings 25 percent above the State's 1989-93 average. In North Carolina, however, planted acreage has remained steady for the past 3 years, and has increased just 2 percent from the 1989-93 average. The U.S. sweet potato yield in 1995 averaged 152 cwt per acre, second only to 1994's record of 162 cwt. Strong yields helped to produce 12.9 million cwt of sweet potatoes in 1995, down 4 percent from the previous year, but the second highest since 1985. For the past 5 years, U.S. sweet potato yields have averaged just over 148 cwt per acre, 11 percent higher than the average for the previous 5 years. Much of the overall U.S. yield increase can be attributed to large yield improvements during the last half decade in the southern States of Alabama, Georgia, Mississippi, and Texas. The preliminary season-average price for the 1995 crop is $15.00 per cwt, up 7 percent from 1994. As an indication of higher prices for 1995-crop sweet potatoes, free-on-board (f.o.b.) prices for the first quarter of 1996 were up slightly from a year ago. F.o.b. prices for 40-pound cartons of Louisiana Beauregard and North Carolina Jewels have averaged roughly 5-11 percent above first-quarter 1995 prices (table 39). If growers plant their intended 90,000 acres, acreage abandonment is average, and yields continue on their recent upward trend (154 cwt per acre), production would rise to about 13.4 million cwt, and the price could range between $11.00 and $12.00. However, if yields return to the previous 5-year average of 148 cwt per acre, production could again be near 12.9 million cwt, and prices could stay above $12.00 per cwt. Pulses Dry Edible Bean Production Likely Lower in 1996 This coming season, dry edible bean producers intend to plant 12 percent less acreage than in 1995 (table 40). Declines will occur in all the major dry bean producing States, including North Dakota and Michigan (down 10 percent each), Nebraska (down 7 percent), Colorado (down 16 percent), and California (down 10 percent). The large decreases follow 2 years of strong yields and production, rising stocks, and falling prices. If growers plant the intended 1.8 million acres, acreage abandonment is average, and yields return to the recent 5- or 10-year average (decline 4 to 7 percent) in 1996, production could fall as much as 15-20 percent. Production Up, Prices Down in 1995 In 1995, the second highest yields on record helped to produce 31.0 million cwt of dry edible beans. This was 7 percent above 1994 production, and 42 percent above 1993. Strong production came in spite of late crop development in the early season, and hard freezes that hit Mountain and Plains States in September, killing vines in many fields. Yields in many of these States were not as high as anticipated, but heavy crops were produced in Michigan (up 48 percent from 1994), North Dakota (up 18 percent), and California (up 7 percent). North Dakota, Michigan, and Nebraska combined to account for 57 percent of U.S. production. Consequently, significant increases in navy, great northern, and black bean production were realized, as North Dakota, Michigan, and Nebraska are major producers of these varieties. Several California-dominated varieties, such as garbanzo and blackeyes, also registered notable increases, as overall California dry bean production was up 7 percent from 1994. The preliminary 1995 season-average price for all dry beans is $19.20 per cwt, down 15 percent from 1994 and 22 percent from 1993. The decline in overall dry bean prices can largely be attributed to sharp declines in prices for navy and black beans, which together account for 31 percent of production. Prices for these two classes will likely be down between 30 and 40 percent for the 1995/96 season (September 1995 through August 1996). Prices for pintos (the largest class of dry bean produced) will likely rise only slightly from 1994, and great northern prices may rise 7-10 percent. Prices for some smaller bean classes that are produced primarily in California, such as limas and garbanzos, may rise 5-30 percent. Prices for most other bean classes for the 1995 season are expected to be lower than in 1994. Dry Edible Bean Trade Up in 1995 Total dry edible bean exports rose for the third consecutive year to 840.3 million pounds in 1995 (table 43). This was up 4 percent from 1994 and 18 percent from 1993. Pinto beans were again the largest class of dry bean exported, with 64 percent going to African countries largely through Food for Peace programs (table 44). Navy beans were the second largest class of dry bean exported, with 60 percent going to the United Kingdom. Garbanzo and black beans realized the largest percentage growth in exports, increasing 166 and 84 percent respectively from 1994. Colombia and Spain were the largest importers of U.S. garbanzo beans, while Mexico, Venezuela, and Brazil were the leading foreign markets for U.S. black beans. Exports of dry beans for 1996 are uncertain. January 1996 exports of all dry beans (excluding seed) were down nearly 25 percent from a year earlier. However, industry sources indicate that the recent upward trend in exports may continue well into 1996. Dry Pea Prices Down, Lentil Prices Up Grower prices for whole green and yellow peas are down for the first 7 months (September through March) of the 1995/96 marketing season. The average price for 1995-crop whole green peas through March was $8.65 per cwt, down 21 percent from a year earlier. The average grower price for whole yellow peas for the period was $8.90 per cwt, down 4 percent. Lower prices for peas can be attributed largely to higher processor stocks. At the end of February, green pea stocks were 173 percent above a year ago, and 29 percent above the 5-year average, due primarily to last year's record crop. February 1996 yellow pea stocks were up 46 percent from a year ago, but were 18 percent below the 5-year average. Lentil stocks are also up slightly (about 5 percent) from a year ago, but prices for the first 7 months of 1995/96 are also up 19 percent. Strong domestic and export demand are factors maintaining lentil prices above a year ago. If increased demand continues for both peas and lentils, grower prices for each will likely rise through the remainder of the 1995/96 marketing year. Dry Pea and Lentil Acreage Down in 1996 Members of the U.S. Dry Pea, Lentil and Chickpea Industry Board project a 13-percent decline in acreage in 1996 in the Pacific Northwest. The decrease is attributed to strong wheat and barley prices. Specific estimates reported by the Board are: o Green pea acreage down 23 percent; o Yellow pea acreage down 15 percent; and o Regular lentil acreage down 14 percent. 1996 Farm Act and Mung Beans, Peas, and Lentils The Federal Agriculture Improvement and Reform (FAIR) Act of 1996 will allow farmers to receive fixed declining payments over a 7-year period through fiscal 2002. Under the new program, mung beans, dry peas, and lentils were granted eligible alternative crop status under planting flexibility--meaning they can be planted on contract acreage under planting flexibility provisions without loss of production flexibility contract payments. The production flexibility contract payments under FAIR will be based on 85 percent of the grower's contract acreage (1996 base acreage). Producers receiving payments will be required to comply with conservation compliance and wetlands requirements, planting flexibility limitations, and to maintain the land in agricultural uses. In addition, the FAIR Act has authorized the Market Access Program (MAP), formerly the Market Promotion Program (MPP), at $90 million annually. The Food for Progress and the Food for Peace programs (PL-480) were extended through 2002, with the Title II program (the program used by the pea and lentil industry) maintaining many former requirements and standards. Mushrooms Mushroom Imports Continue To Rise U.S. mushroom imports hit a new record in 1995, exceeding 173 million pounds (product weight) and up 15 percent from 1994. Imports from China exceeded 75 million pounds, nearly double 1994. Most other major exporters of mushrooms, such as Indonesia, Chile, Taiwan, and India, increased their 1995 shipments to the United States. Imports from Hong Kong and the Netherlands fell off while those from Mexico were steady (tables 48 and 49). All product categories, including fresh and canned, registered increases. Last year's imports were valued at $196.4 million, compared with $162.7 million in 1994. China was the top mushroom supplier to the United States in 1995 with $50.4 million, followed by Indonesia with $44.5 million, Taiwan ($40.5 million), Mexico ($7.3 million), Japan ($6.4 million), and India ($6.0 million). Canada is the major supplier of fresh mushrooms; 82 percent of the $5.8 million imported from Canada last year were fresh (table 50). According to the most recent data published by the Food and Agriculture Organization of the United Nations, world production of mushrooms for all uses totaled 4.24 billion pounds in 1994, the highest on record, and about 2 percent higher than production in 1993 or 1992. The United States had been the world's leading mushroom producer up until 1988, when China surpassed it. Mushroom production in China, excluding Taiwan, has continued to increase every year and is estimated at 948 million pounds in 1994 (22 percent of the world total) compared with U.S. production of 781 million pounds (18 percent) (table 51). Special Article Florida-Mexico Competition in the U.S. Market for Fresh Vegetables by John Love and Gary Lucier 1/ Abstract: Florida and Mexico are long-time competitors in the U.S. market for fresh tomatoes, bell peppers, cucumbers, eggplant, snap beans, and squash. Florida produces from October to June. Mexico has traditionally exported mostly during January to March. Since late 1994, short run effects of weather and the Mexican peso devaluation have increased Mexico's competitiveness in the U.S. market. Over the next several years, adoption of new varieties and efficient irrigation technologies are likely to maintain Mexico's heightened competitiveness. Keywords: Florida, Mexico, vegetables, tomatoes, trade. Florida-Mexico Competition Has Regulatory and Economic Dimensions Competition between Florida and Mexico in the U.S. market for winter fresh vegetables has a long economic and regulatory history. 2/ Regulation of fresh tomato imports under the authority of the Agricultural Marketing Agreement Act of 1937, as amended, and the Florida tomato marketing order began in early 1956. In the 1968/69 season, the United States applied different minimum size standards to imported tomatoes of different maturities. After extensive litigation, the authority of the Secretary of Agriculture to establish different size requirements for different maturities was upheld. Tomato import regulations in subsequent seasons have been based on the minimum grade and sizes required by domestic handling regulations established under the Florida tomato marketing order. 1 Agricultural economists with the Commercial Agriculture Division, Economic Research Service, USDA. 2 Winter fresh vegetables refer to fresh-market tomatoes, bell peppers, cucumbers, snap beans, eggplant, and squash produced by Florida or imported from Mexico. Under the North American Free Trade Agreement (NAFTA), tomatoes and other vegetables grown in Florida were designated sensitive crops, and U.S. tariffs on imports of these products are set to phase out over a 10-year period, while other tariffs were to be phased out over a shorter period. In April 1995, Florida growers sought economic relief from the effects of increased imports from Mexico by petitioning the U.S. International Trade Commission (ITC). However, the ITC ruled against the Florida petitioners, saying that the Florida winter crop could not be given special treatment on the basis of seasonality. In 1996, a group of Florida growers, the Florida Department of Agriculture, and growers from several other States filed another petition for economic relief with the ITC, followed by a suit charging that Mexican tomatoes have been dumped on the U.S. market at prices below the cost of production. Based on preliminary data for the 1995/96 season, Florida's share of the U.S. market for fresh vegetables is below the historical average. The principal short run economic factors behind increased competition from Mexico are the devalued peso and weather. The weakening Mexican peso apparently increased the profitability of exporting fresh vegetables to the United States in 1995. Florida's 1995/96 season started late due to cold and rainy weather during the fall, and a February 1996 cold snap reduced supplies in the Immokalee and Homestead areas. Long run economic factors include Mexico's adoption of new varieties and irrigation technologies in the last several years, which increased Mexico's competitiveness. Demand for Fresh Vegetables Flattens in the 1990's U.S. per capita demand for winter fresh vegetables flattened in the 1990s, after rising in the 1980s. Per capita consumption of tomatoes, bell peppers, cucumbers, snap beans, eggplant, and squash totaled 32 pounds in 1995, about 23 percent of total fresh-market vegetable consumption. In 1980, per capita consumption totaled 23 pounds, with a slightly smaller share. Consumption statistics account for supplies from most sources, including other States and other exporters to the United States. Florida's share of the annual U.S. market for winter fresh vegetables has decreased from its historical average (about 40 percent) and from the extraordinary high in 1992. As a proportion of U.S. consumption, Florida's 1995 production represented about 30 percent of the total, down from 47 percent in 1992.3/ For the October-June crop year, Florida shipment data indicate a 30-percent share in 1995/96, compared with 57 percent in 1991/92. Imports have gained importance in U.S. consumption of the six fresh vegetables, increasing from 17 percent in 1992 to 32 percent in 1995. Mexico is the main source of U.S. imports of fresh vegetables, and imports from other sources have not kept pace. 3/ The share of Florida's production in actual U.S. consumption is lower by the amount of Florida's exports (data unavailable). Florida's Vegetable Crop Off in Recent Years Florida's farm value of tomatoes, bell peppers, cucumbers, snap beans, eggplant, and squash totaled $708 million in calendar 1995, down from $1.2 billion in 1992. On a crop-year basis, the farm value in 1994/95 totaled $799 million, down 31 percent from 1991/92. During the 1991/92 season, stormy weather limited Mexico's production and forced up Florida grower prices and value of production. Florida produces vegetables more or less continuously from October to June, with the heaviest volume shipped in the fall and spring months. During the winter months, when Mexican production usually peaks, Florida's production is located in the southernmost areas of Dade County and Southwest Florida. As spring approaches, production shifts north toward the Palmetto-Ruskin area. Mexico Supplies Domestic and U.S. Demand Producers in Mexico's Sinaloa and Baja California Peninsula regions supply domestic markets (mainly Mexico City) and the United States. Per capita consumption of fresh-market tomatoes in Mexico is about 20 pounds. During 1993 to 1995, Mexico exported 25 percent of its fresh-market vegetable production, compared with about 10 percent for the United States. Sinaloa exports vegetables to the United States during December to June via Nogales, Arizona. Sinaloa shipments peak during January to March. Mexican-owned firms account for most of Sinaloa's production, and only a few U.S-owned firms operate in Sinaloa. Producers on the Baja Peninsula export to the United States during June to December--mostly through Otay Mesa, California. In the Baja region, U.S. firms invest heavily in the growing and shipping of fresh vegetables. Traditionally, Florida ships fresh vegetables mostly to eastern U.S. cities, while Mexico ships primarily to western cities. However, each competes in the other's primary markets during some months. In 1994, data from 22 major U.S. cities showed Florida growers shipped 13 percent of their volume to 4 cities in the West. Mexico shipped 15 percent of its volume to 9 cities in the East. While Florida ships tomatoes to all the 22 cities, Mexico shipped none to Miami and very few to Columbia, SC and Buffalo, NY. Changes in Florida's Competitive Position Weather and the peso-dollar exchange rate are two short run factors affecting Florida's competitive position in the U.S. fresh vegetable market. Tariff increases--possible under the rules of NAFTA--are relatively ineffective currently, because the potential increases are small under the 10-year phaseout. Short run factors are beyond the direct control of Florida producers. In contrast, yield and quality improvements and production costs are more directly controlled in the long run. Generally, higher yields allow growers to spread fixed costs over more units, translating into lower costs per unit. According to data from the University of Florida, the cost of producing and marketing fresh vegetables in Florida varies across the State. For fresh-market tomatoes, the highest cost region is the southwest (Immokalee-Naples-Ft. Myers), where most of Florida's tomatoes are grown. Costs in the Dade County area are the lowest. Preharvest costs are about 50 percent of the total, and labor and pesticides account for about 40 percent of that. Of the harvest and postharvest costs, hand-picking and hauling are about 20 percent, and packing is about 60 percent. Florida's Yield Trend Is Flat, Costs Rise The cost of producing vegetables has increased in Florida. For example, total costs in Dade county were about 15 percent higher in 1994/95 than 5 years earlier. Contributing to increased costs of producing tomatoes is the flat trend in Florida's per-acre yields and rising input prices. During 1986 to 1995, average prices paid for all items in U.S. agricultural production rose nearly 3 percent annually. Short run factors affecting yields include weather and crop prices. Florida's 1994/95 yields were reduced when Tropical Storm Gordon damaged crops in November 1994, raising prices and greatly increasing the incentive to import more Mexican vegetables. Because fresh vegetable crops are typically harvested multiple times, high prices encourage more pickings and thus higher yields. In 1991/92, storms damaged Mexican tomato production and raised U.S. market prices, which led to higher Florida yields. Florida's per-acre tomato yields increased an average of only 1 percent during 1979/80 to 1993/94. Technologies developed for tomatoes in the early 1970s were later adopted on other vegetables in the 1980s. The yield increases for bell peppers averages 7 percent per year, cucumbers 4 percent, snap beans 5 percent, eggplant 2 percent, and squash 5 percent. No new yield- increasing technologies have been successfully adopted by Florida tomato growers in recent years. For the other winter fresh vegetables, the trend in recent years is flatter than during the 1980s. Extended shelf-life varieties of tomatoes--adopted successfully in Mexico--have proved unsuccessful in Florida. Extended shelf-life tomatoes were bred to be less perishable, thus reducing the costs of marketing by reducing waste. Heavy rains--typical for Florida during the tomato season--cause extended shelf-life varieties to scar or crack on the vine, which reduces their marketability. In Mexico, the successful adoption of extended shelf-life varieties in recent years was accompanied by increased use of plastic mulch, drip irrigation, and increased efficiency in fertilizer application. The Mexican Peso Devaluation The Mexican peso devaluated against the U.S. dollar in late December 1994, going quickly from about 3 pesos per dollar to 6 pesos during most of first-half 1995. Because of the devaluation, Mexican producers could get twice as many pesos per dollar, in the short run boosting the profitability of tomatoes and other fresh vegetables for export to the United States. In second-half 1995, the peso continued to weaken, signaling to Mexican growers that the U.S. market would improve even further. Also, demand in Mexico City was depressed because of unemployment and inflation due to the peso devaluation. The devaluation also had a negative effect on Mexican producers. The currency change increased nominal prices paid by Mexican growers for imported inputs used to produce fresh vegetables. Export revenue and some production inputs (seed, irrigation equipment, cartons, some chemicals) are paid in U.S. dollars. Therefore, prices paid by Mexican producers for imported inputs rose with the weakened peso. Over a third of the cost of producing tomatoes is labor and management, paid mostly in pesos. Although wages will eventually adjust to the increased costs of living, presently labor costs in Mexico have declined due to the devaluation. In dollar terms, the reduced wages and lower costs for domestically purchased inputs have likely resulted in lower overall production costs in Mexico compared with the previous year. Special Article Mexican Tomatoes--Fruit of New Technology by Daniel J. Plunkett 1/ Abstract: Mexico's tomato export sector, which is concentrated in the states of Sinaloa and Baja California, has improved its production technology in the last few years. In particular, successful adoption of extended shelf-life tomatoes are distinguishing the Mexican vine-ripe from the Florida mature green. Mexico's old comparative advantages (climate, labor, land) are now augmented with improved quality, producer organization, and a lengthened harvest. The peso crisis in 1995 added incentive for Mexico to increase exports to the United States. Keywords: Mexico, tomatoes, technology, NAFTA. Mexico's Exporters on the Cutting Edge The tomato originated in Mexico, in pre-Hispanic times, and is now Mexico's most important horticultural export item. Mexico began its export orientation during the 1960s, after the U.S. ban on imports from Cuba and termination of the U.S. bracero (Mexican guest-worker) program. Cuba had been the main winter supplier of tomatoes and other winter fresh vegetables to the United States. Mexico's investment in export capacity led to strong growth in yields and output during the 1970s and 1980s. 1/ Agricultural economist with the Commercial Agriculture Division of the Economic Research Service, USDA. Tel: (202) 219-0670. Two principal exporting regions emerged in Mexico, both favored by proximity to the U.S. market, proper soil/weather conditions, and complementarity of seasons. The Mexican states of Sinaloa and Baja California Norte ship to U.S. markets and to domestic markets within Mexico. Usually more than half of Sinaloa's tomato production goes to the United States, and an even larger share of Baja's output is exported. These states typically account for 75 to 90 percent of Mexican tomato exports. Sinaloa harvests chiefly in the winter and spring, while Baja harvests in the summer and fall. Both regions, which have significantly higher yields than the rest of the country, have been boosting yields and decreasing area planted in the last few years. Tomato production in Sinaloa and Baja differs technologically from the rest of the country. Most of Mexico's export producers use drip irrigation, fertigation, plastic mulch, planed stakes, and--perhaps most important--extended shelf-life (ESL) varieties (see glossary). Florida has used essentially the same technology package for the last 20 years, except ESL varieties grow well in Mexico and not in Florida. Mexican ESL tomatoes, which are vine ripened, are increasingly perceived by U.S. wholesalers and retailers as qualitatively different from Florida's mature green tomatoes. With these new varieties, Mexico has increased market share of sales in U.S. supermarkets. Florida tomatoes are preferred for slicing in many foodservice operations. The adoption of new technology was underway before the North American Free Trade Agreement (NAFTA) started in 1994. Baja turned to drip irrigation in the late 1980s, due to water scarcity. Sinaloa adopted drip irrigation and plastic mulch technology in the last 3 or 4 years to complement the ESL varieties. Mexican export growers are now in their second or third season with the full technology package in place, so there is still room to improve management skill in using the new technology efficiently. For Mexico, labor has traditionally been viewed as one of its comparative advantages. Labor is needed to sow transplants, tie the vines to stakes, and harvest, grade, pack, and ship tomatoes. Mexican wages are much lower than U.S. wages. But lower productivity of the average worker means more workers in production and marketing. Living conditions are very poor for the unskilled laborer, who must contend with unsafe drinking water and unsanitary conditions. In Baja, workers are often transported into the scarcely populated region. All of these factors hinder labor's productivity. Mexico's Strong Organization The main voice for Mexican tomato growers is CAADES (Confederation of Agricultural Associations of the State of Sinaloa), an umbrella group for Sinaloa groups. CAADES conducts residue testing, farm extension, scientific experiments, quality inspection, and weather forecasting. CAADES also works with the Volcani Institute of Israel to develop new hybrid seeds. Because of limited Mexican government involvement in research and support, CAADES fulfills many of the functions that government agencies, marketing boards, or land grant universities perform in the United States. About 90 percent of the tomatoes produced in Sinaloa are grown by CAADES members. Two recent voluntary measures taken by CAADES growers illustrate their organizational power. They agreed to raise quality standards, so that tomatoes shipped to the United States would be 90 percent or more of the U.S. No. 1 grade. Also, Sinaloa growers reportedly halted shipments to the United States for 2 days (March 2 and 3, 1996), and Florida prices increased. The Mexican tomato industry, where it's geared for export, uses a "dual market optimization strategy." The strategy compares prices at the U.S. port of entry with prices prevailing in domestic Mexican markets--Mexico City, Guadalajara, and Monterrey. By regulating the quantity shipped to each market, whether domestic or export, the strategy hopes to mitigate large price swings and optimize earnings in both markets. Furthermore, Mexican companies are active in the continent-wide trend toward developing a year-round supply of tomatoes (often as a "branded" product, with a small sticker on each tomato). There is increasing integration across borders, with a handful of Florida producers investing in Sinaloa. Many California companies operate in Baja, and a few Sinaloa tomato growers are active in Florida, California, and Baja. With operations in different regions, companies can ensure an adequate supply even when bad weather affects production in one region. And they are poised to benefit from high prices at those times. The year-round supply strategy in Sinaloa and Baja extends their harvest seasons at both ends by planting some fields earlier and some later than before. How the Peso Devaluation Affected Mexico's Tomato Sector The December 1994 peso devaluation led to an economic crisis in Mexico that cost consumers about half of their purchasing power in a span of 4 months. During 1995, per capita income fell about 9 percent, and unemployment more than doubled. With the peso weakening from 3.4 pesos per U.S. dollar before the devaluation to 7.7 pesos at the end of 1995, Mexican producers could get twice as many pesos per dollar--doubling the peso value of Mexican tomatoes and other fresh vegetables for export to the United States. The Mexican peso's devaluation lowered labor costs, reduced domestic demand, and made business much more attractive in dollars than in pesos within Mexico. Mexican producers faced a severe liquidity problem and uncertainty about receiving payment for fresh tomatoes if they sold in the domestic market. Although the crisis caused Mexican costs of production to soar in peso terms, in dollar terms those costs actually fell because the price of labor and other domestic inputs lagged behind the rate of devaluation. For example, due to a depressed labor market, the costs of field preparation and harvesting were down by about half in dollar terms. For imported inputs, such as planting and transplanting material, dollar costs went up 23 percent. The "dollarization" of Mexico's tomato export industry insulated growers from the full effects of peso devaluation. Irrigation equipment, tomato seeds, fertilizers, and most other inputs are typically purchased in dollars. Tomatoes shipped to the United States are priced in dollars and paid for in dollars. However, the main factors lowering the dollar price of Mexican tomatoes at the border are reduced labor costs and the price-depressing effect of lower domestic demand for tomatoes. The peso devaluation occurred precisely as the 1995 winter tomato harvest was gaining momentum and exacerbated the normal price drop that comes at peak harvest. Price relationships between the U.S. border and Mexico City wholesale markets changed abruptly in January. The U.S. market remained attractive for several months, similar to what happened during the Mexican debt crisis of the early 1980s. Mexican Tomato Exports Since the Peso Devaluation U.S. tomato imports from Mexico hit a record 593,000 metric tons worth $406 million during calendar 1995, up 58 percent by volume but only 29 percent by value from 1994. Throughout 1995, Mexican exports were the highest in the last 5 years. Before the peso crisis, producers had expected continued robust domestic demand based on Mexico's relatively strong economic performance during the early 1990s. And Mexican growers knew that Florida had been hit by Tropical Storm Gordon. Mexico increased 1995 tomato exports to the United States about equally from the winter crop and summer crops (through May and June-November, respectively). Summer producers doubled the share of their harvest exported to nearly 25 percent, from 13 percent a year earlier. Winter producers increased their export share of production from 28 percent to about 33 percent. U.S. Tariffs and TRQs During 1996, five separate tariff periods are in effect for tomatoes from Mexico, including winter and spring tariff-rate quotas (TRQs). Tariff liberalization under NAFTA has played a minor role in tomato trade, because tariffs were relatively low. U.S. tariffs on Mexican tomatoes averaged only about 4 percent in recent years during the winter period (November 15 to the end of February). Even when the pre-NAFTA "snapback" tariffs are triggered--because TRQ volumes are breached--protection is minimal. Under NAFTA, all tariffs will be gone by 2003. In the first 2 months of this year's winter season (December 1995 and January 1996), tomato imports from Mexico were up 49 percent (35 percent in value). The winter TRQ was filled on February 12, 1996, triggering the "snapback" tariff for the rest of that month. Currently, tomato imports are governed by the spring TRQ (March 1 to July 15). During spring 1995, Mexico exported about 250,000 tons of tomatoes to the United States. A similar quantity is expected to enter in 1996, although slightly lower area planted in Sinaloa and very low water levels may dampen the supply. BEGIN BOX Glossary Drip irrigation is critical to tomato production in Baja, where irrigation water comes from wells. The wells are contaminated by salinization from nearby seawater. In Sinaloa, where water comes from mountain reservoirs, drip irrigation has permitted tomato production to remain high, even though reservoir levels have been extremely low since 1994. Among local irrigation authorities, tomatoes get first priority in water allocation. Virtually all tomato area in Sinaloa (about 67,000 acres) and Baja (about 12,500 acres) uses drip irrigation. Drip users consume one-third as much water and get higher yields than growers using movable irrigation rigs. Hoses with regularly- spaced drip holes are laid permanently at the center of the tomato beds, delivering water right at the root base of the plant. Water is not wasted between the rows as with the movable rigs. Fertigation uses the same drip irrigation hoses to efficiently deliver liquid fertilizer to the roots of the tomato plants. A farmer usually applies dry fertilizer before planting, and then supplements with fertigation. A side-benefit of fertigation is reduced water pollution from leaching and run-off of agricultural chemicals. Tomatoes for export are grown according to U.S. tolerance standards for chemical residues. Plastic mulch reduces weeds, promotes growth, and blocks microorganisms moving from the soil to the plant. The result is less need for herbicides, fungicides and other plant protection measures. Plastic raises the soil temperature, reduces water evaporation, and increases total photosynthetic activity of the plant. After the raised and rounded soil beds are formed, long clear plastic sheets are laid over the entire bed, pierced only where the young transplants are sown. New plastic is used each year. Planed stakes are replacing the traditional bark-covered sticks and branches in Sinaloa and Baja, because planed stakes are stronger and do not bend as much. As the plants grow, they are tied to lines strung between the stakes. Growing plants upright, rather than along the ground, increases disease- and insect-pest control efficiency. About two-thirds of the plants in Sinaloa are "determinate" types, meaning their height is limited and more of the plant's energy goes into bearing fruit. Extended shelf-life seed varieties (ESL) are based on Israeli (and to a lesser extent, Dutch) research that allows the tomato to be left on the vine several days longer, until 90 percent of the fruit is pink and red. Most ESL varieties are products of traditional breeding techniques, but ripening-inhibitior genes have been isolated and may be biotechnologically transfered in future commercial varietes. After reaching the supermarket or wholesaler within 5 to 7 days, ESL tomatoes last about 2 to 3 weeks on the shelf--a week longer than a mature green tomato (picked just before it turns pink). Tomato growers in Sinaloa and Baja have completely converted to ESL varieties, all within the last 2 or 3 years. The primary benefit of the vine-ripened ESL tomatoes is their appearance-- bright, red, and firm--usually considered a key factor in consumer purchasing decisions. List of Tables Table Page 1. U.S. vegetable industry: Area, production, value, unit value, and trade, 1994-96 2. Selected fresh vegetables: U.S. trade volume, 1994-95 3. Domestic utilization of selected processing vegetables, 1981-96 4. Potatoes: U.S. retail prices by type, 1984-96 5. Fresh vegetables: Prices received by U.S. growers, by month, 1991-96 6. Commercial vegetables and potatoes: Indexes of prices received by U.S. growers, by month, 1991-96 7. Vegetables: Producer price indexes, by month, 1991-96 8. Vegetables: Consumer price indexes, by month, 1991-96 9. Fresh vegetables: U.S. average retail prices, by month, 1990-96 10. Fresh vegetables: U.S. area, production, and value, 1993-95 11. Winter-season fresh vegetables: U.S. harvested area, selected crops,1993-96 12. Spring-season fresh vegetables: U.S. harvested area, selected crops, 1993-96 13. Fresh vegetables: U.S. shipments, by quarter, 1995-96 14. Selected fresh vegetables: U.S. import volume and value, by region or country, 1995 15. Selected fresh vegetables: U.S. export volume and value, by region or country, 1995 16. Vegetables: U.S. farm cash receipts, 1986-94 17. Greenhouse vegetables: Growers area in production, and sales, major States, 1987 and 1992 18. Greenhouse vegetables: Growers by size of annual sales, 1992 19. Processing vegetables: Selected U.S. contract plantings, 1990-92 average, 1994-96 20. Processing vegetables: U.S. acreage, production, and value, 1993-95 21. Canned vegetables: Quarterly wholesale price trends,1988-95 22. Selected canned vegetables: U.S. import volume and value, by region or country, 1995 23. Selected canned vegetables: U.S. export volume and value, by region or country, 1995 24. Frozen vegetables: U.S. carryover, pack, seasonal supply, shipments, 1989/90-1995/96 25. Frozen vegetables: Quarterly wholesale price trends, 1991-96 26. Frozen vegetables: U.S. cold storage holdings, January 1, 1993-96 27. Selected frozen vegetables: U.S. import volume and value, by region or country, 1995 28. Selected frozen vegetables: U.S. export volume and value, by region or country, 1995 29. U.S. frozen french fry crop-year supply and utilization, 1993-96 30. Winter-season potatoes: U.S. acreage, yield, and production, 1986-90 average, 1991-96 31. Spring-season potatoes: U.S. acreage, yield, and production, 1986-90 average, 1991-96 32. Domestic shipments of U.S. potatoes, 1985-96 33. Fall potatoes: March 1 stocks, by area, 1980/81-1995/96 34. U.S. potato shipments: Season total through April 1 35. Potatoes: Processing use through December 1, monthly and season total, major States, 1984/85-1995/96 36. Potatoes and pulses: Prices received by U.S. growers, by month, 1989-96 37. Potatoes: U.S. export volume and value, by region or country, 1995 38. Sweet potatoes: U.S. planted acreage, 1989-93 average, 1994-95, indicated 1996 39. Sweet potatoes: Shipping-point prices, by State, selected weeks, 1992-96 40. Dry edible beans: U.S. planted acreage, 1989-93 average, 1994-96 41. Dry edible beans: U.S. production, by State, by class, 1995 42. Dry edible beans: Prices received by U.S. growers, by class, 1983/84-1995/96 43. Dry edible beans: U.S. trade volume, by quarter, 1994-95 44. Selected dry peas, lentils, and beans: U.S. export volume and value, by region or country, 1995 45. Vegetable imports: U.S. value, by group, by month, 1992-96 46. Vegetable exports: U.S. value, by group, by month, 1992-96 47. U.S. per capita use of selected, commercially produced, fresh, and processing vegetables and melons, 1987-95 48. Mushrooms: Quantity of imports, by leading countries, 1992-95 49. Mushrooms: Quantity of imports, by product category, 1992-95 50. Mushrooms: Value of imports by product category and country, 1995 51. Mushrooms: Production, all uses, ranked by top 20 countries, 1990-94 END-END-END .