Diversification
Diversification
Many times, we have heard about the need to add value and diversify the exports of fresh fruits and vegetables from Mexico. Commonly, the belief exists that “added value” means to make sauces, drying fruits, making nutraceuticals, pasta, and other products. Truth is that, as the fresh vegetable being sown as such, it cannot be intended exclusively as a process, as the highest value will always be as a fresh product.
The added value of fresh fruits and vegetables can be addressed from different views.
One is through special varieties, such as “mini-peppers”, purple tomatoes, very sweet tomatoes, and many others. Having a small but significant differentiator, which keeps the product apart from being “commodity”, adds value. In the same manner, using special and full of marketing packages achieve the same. Bagged and colorful peppers packed as traffic lights, ready-to-eat lettuce and salads, and all the examples we see in supermarkets. Nothing new. Although, during the pandemic, these packages considerably increased their demand.
There is also an added value in doing market intelligence, searching for more appropriate logistics, having adequate volumes and strategies to ensure payments and reducing this way the gap with the end consumer. In other words, reducing the number of middlemen to obtain a better price. It sounds obvious, but it is not when a high percent of what is grown in Sinaloa is still distributed by a few hands in two border ports: Nogales and McAllen. How many growers sell direct in Las Vegas? How many of these deliver in Chicago? How many in NY? Although it may be complicated to hand the fresh produce to the end consumer, it would be very close if we could reach supermarkets and restaurant chains all across North America directly.
In 2019, Mexico exported about $7,800 million dollars of vegetables and $7,400 million dollars of fruits. The sum of these represents $15,200 million dollars, that is, 3% of total Mexican exports. Although it may seem like a low percent, it represents 40% of total agri-food exports ($38,600 million dollars). The automotive sector is the leader in Mexican exports with $121,300 million dollars.
It doesn’t take a genius to figure out where these exports went. “So far from God and yet so close to the US” said the intellectual Nemesio García Naranjo (no, it is not a quote by Porfirio Diaz). Indeed, North Americans are privileged to consume 96% of the vegetables we export and 84% of our fruits. Sinaloa sends practically everything to the US and a little to Canada.
This dynamics has not changed much in the last 100 years. The US has always been our main market, and Sinaloa has been its “Winter garden”. In general, it has been a generous dynamics both for farmers and the consumer. Of course, it was achieved through many sacrifices and hard work by farmers.
Obviously, it has also involved dealing with difficult seasons, hard climates, low markets, and other types of challenges; which reminds me of an experience at Fruit Logística in Germany. In February 2017, the price of Italian squash was very low in Mexico. It was given as food to cattle. At the same time, while I was in Germany, that same box had a starting price to the Spanish farmer in $64 USD. In other words, they were throwing it away in Mexico, and in Spain it was sold at a very high price. Do you think it would have been possible to bring squashes from Sinaloa to London or Amsterdam? Do you think it would have been profitable? Would they have paid for them?
There is a market beyond North America. South Americans are “so far from the US”, and they are much more diversified in their export markets. Countries such as Russia, the United Arab Emirates, Saudi Arabia, Hong Kong, China, the European Union, South Korea and Singapore are major importers of fresh food. Mexico, and specifically Sinaloa, has little or no participation in those markets.
To give us an idea of the potential from tomato, the Emirates, Japan, Singapore and Saudi Arabia import between them $200 million dollars each year; and although there is a lot of competition in Europe, only England; for example, imports $650 million dollars of tomatoes.
In the case of cucumber, from which we are large farmers, Russia imports more than $100 million dollars; and Germany $590 million dollars. In peppers and hot peppers we meet Russia again importing $200 million dollars, and we see Japan importing $128 million dollars.
If we go 25-30 years back, we would realize that this was already a talking point in Sinaloa. Even the first kabochas were sent to Japan in the 80’s, and the tomato market for Japan was phytosanitarily opened about 10 years ago. However, we have not been able to establish a system which allows us to be consistently and profitably present in some of the above markets.
A system which contains the following information: demand by country of the commodities and varieties produced, average prices, phytosanitary status (Mexican peppers do not enter to Japan, for example), informational market tools (such as the USDA’s AMS), potential customers (some type of Blue Book), food safety requirements (although in Sinaloa we have the highest food safety standards in the world), payment methods, logistics (the greatest challenge, in my opinion), person at destination (could be an audit company), lawyers at destination and also, Artificial Intelligence that sums up all the variables described above to find opportunities. The future is now and the sector cannot be left behind. Although it may not seem like it, this is the best moment, with the highest quality, under the highest food safety standards and with the best farmers in the world, so Sinaloa stands out for its flavor, from Dubai to Seoul.
