MexECON Blog

Unusual Freeze Destroys Vegetable Crops

For the first time in some 55 years, large agricultural regions in the western Mexican states of Sonora and Sinaloa suffered freezing temperatures on the nights of February 3 and 4.  The freezing weather reportedly devastated large amounts of agricultural land, and up to 80% of the states' open-field and shadehouse crops have been lost.  The crops destroyed include white corn, tomatoes, cucumbers, bell peppers, eggplant, squash, melons, and others.  The freeze is big news because Sonora and Sinaloa are among the main sources of supply for North America's winter-season vegetables.  Of course, Florida is also a major supplier, but Floridian growers reportedly reduced their plantings this year.  In addition, Florida suffered freezes in December and could suffer further freezes before winter is finished.  With North American vegetable supplies now seriously crimped, prices have started to rise dramatically, and they are expected to stay high for months to come.  As one example, wholesale tomato prices have reportedly tripled over the last week, from approximately $9.00 per box before the freeze to about $27.00 per box now. 

Comment:  Although it is impossible to control the weather, the Mexican freeze damage may have been worse than it had to be.  One industry source reports that many growers failed to take precautions because forecasts called for temperatures to be 5 to 10 degrees higher than they actually were.  In any case, U.S. consumers will likely see much higher vegetable prices in the coming days.  The crop damage will also hurt the local economies of Sonora and Sinaloa by reducing export earnings and throwing farm hands out of work, but the impact on the overall Mexican economy is likely to be limited because the country's exports are dominated by manufactured goods.  In contrast with the situation for most of the Sinaloa growers, Terra Nova's operations have been little affected by the freeze.  Most of our production is in greenhouses, so our crops suffered very little damage.  In fact, since we have ample supplies of tomatoes, cucumbers, and bell peppers to sell, the high prices now being received should give our companies an extraordinary boost for the rest of the winter season.

Patrick Fearon, CFA
Vice President, Fund Management

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