Sources suggest Mexican drug cartels interfering with produce imports

MCALLEN -- Cinco de Mayo will be here soon, and with it, lots of food, drinks and celebration.

However, the holiday, which marks the victory of Mexico’s Battle of Puebla, may be costlier this year for Americans with imported produce prices on the rise.

Inflation of fruits and vegetables has been increasing steadily due to several factors, including unseasonably colder weather and the rising cost of oil, which has been hovering around $100 per barrel, according to some agricultural experts.

The cost and lack of supply of certain imports, such as limes and avocados, also may be due in part to Mexican drug cartels charging growers and packers, limiting product supply and hijacking shipping trucks.

In a Christian Science Monitor article earlier this month, drug traffickers were directly blamed for the hike in lime prices in December and January in Mexico City.

The Tamayo family, farmers in the state of Michoacán, forks over 800 pesos (about $66) per shipment of limes headed for Mexico City to gang members, according to the article.

“All packing companies pay the money,” Tania Tamayo said.

Drug cartels also try to control supply by restricting harvests, according to Tamayo.

Individually, these issues may seem proportionately small, but they are collectively adding up to a growing problem that is affecting almost every aspect of the produce industry.

Others affected include importers and shipping companies.

IMPORT IMPACT

The McAllen Produce Terminal remains busy throughout the week, receiving truck after truck of imported Mexican produce.

An employee from a large import company, who asked to remain anonymous for fear of being targeted by cartels, said the interference of the organized criminals is affecting how some importers do business.

“We wait for a load to get here, and it doesn’t arrive,” he said.

The receiving office calls drivers repeatedly, but no one answers, he said. Days later, the truck will be found empty on the side of the road.

To avoid being the target of kidnappings, he said, some import company owners are intentionally defaulting on payments to lower their business’ Blue Book rating.

Many growers, importers, distributors, receivers and others in the industry rely on the Blue Book rating, which serves as a credit and marketing service for those listed in the database, to determine which company they’ll do business with.

Owners also are dressing more casually and have stopped driving their luxury cars to work, he said.

Norma Myers, manager and owner of Sunny Produce and Brokerage, blames the weather for higher prices, rather than crime in Mexico, she said.

“I’m not really familiar with the (cartel) operations,” Myers said. “That’s not a subject that we’ve really faced yet. I’ve heard rumors, but I don’t see it as a factor in produce.”

An executive from a large refrigerated trucking company based in North America (who asked for anonymity for him and his company due to potential targeting) doesn’t believe the rising produce price can be largely attributed to cartel activity, but the crime in Mexico has affected his company in other ways.

“The company, fortunately, has not been approached for any demands of payment,” he said. “However, our industry has been affected by crime in Mexico that we believe to be related to cartel activity.”

In the past two years, the company has lost equipment to armed hijackings believed to be cartel-related, he said.

As a result of theft, though minimal, and the increasing level of danger traveling in Mexico, drivers have had to take different routes, which has increased costs that have been passed on to the consumer, he said.

“Certain sections of highway in Mexico have become dangerous to both private and commercial traffic because of growing cartel presence,” the executive said. “The shipping routes that are being used today are no longer the shortest, most cost-effective routes based on distance and transit time. Today shipments are routed based on the safety of the routing for the driver, the customer’s merchandise and the company’s assets.”

The trucking company has ramped up security and added more advanced technology for asset tracking and special seals that will indicate when doors have been tampered with, he said.

“There are many types of seals available,” the executive said. “Some serve as deterrents and prevent the doors being opened.”

From colder weather and cartel fees to theft and longer shipping routes to the price of gas and demand of certain fruits and vegetables, any combination of these factors can impact shoppers in the produce section of their local grocery store.

INCREASED COSTS

According to the United States Department of Agriculture, limes jumped in wholesale to $70 per box (40 lbs.) in January.

Currently the market is stabilizing and the price was about $17 per case.

Last year, limes were being purchased at about $30 per case in January, and in April, prices fluctuated $40 to $55.

The Packer, a fruit and vegetable news source, reported the cost of vegetables has increased by 9.8 percent in March, compared to last year.

Hass avocados from Mexico averaged $30 per two-layer carton in January 2010, and remained about the same in April 2010.

This year, imported avocados came in at about $35 to $40 in January, and have reached $54 in April.

It’s difficult to determine what exactly affects the cost of produce aside from simple supply and demand, but it is clear to many in the industry that the cartel presence has changed how things operate in Mexico.

John McClung, president of the Texas Produce Association, said he can’t quantify the frequency or magnitude of how many farmers, packers or shippers are victims of theft or extortion.

“I don’t know that anyone has any credible statistics on that sort of thing, but I have heard various tales of drivers being stopped on the road and threatened if they don’t add narcotics to their loads, and things like that,” he said.

Regardless of the cartel and gang violence in Mexico, McClung doesn’t attribute the gang activity to the volume of imports of fruits and vegetables to the United States, he said.

“But it has affected the way we do business,” McClung said.

Those in the industry, both Mexican and U.S. citizens, are more careful in their travels.

“They take precautions in how they travel, when they travel, where they travel, who knows that they’re traveling,” McClung said.

More than 35,000 people have been killed in drug-related violence in Mexico since the country’s president, Felipe Calderon, declared war against the cartels in 2006.

While the cartel-related issues have affected industry workers seemingly on all levels, the anonymous shipping executive said his company won’t cease doing business with Mexico.

“The environment hasn’t reached a boiling point so severe as to warrant a decision as sweeping as this,” he said. “We hope that it does not.”