1 Price Relationships for Mexican Fresh Tomatoes in U.S. and Mexican Terminal Markets

Abstract: Tomato trade between the U.S. and Mexico has grown significantly during the past decade, with significant implications for markets in both countries. This work examines how terminal market prices for Mexican fresh tomatoes are being affected by price dynamics in distant, integrated markets by analyzing reaction patterns to various innovation shocks. We conclude that a high interdependence in the price formation process between Mexican markets and Los Angeles, as well as among Mexican markets, exists. 2 Growing, year round demand for fresh fruits and vegetables stimulated international trade over the last decade. In the case of fresh tomatoes, imports to the United States (U.S.) increased considerably during the 1990´s, especially from Mexico and Canada. Mexico was the leading supplier of those imports, representing 91.0 percent of total imports of fresh tomatoes on average, while Canada accounted for only 4.8 percent. Moreover, imports from Mexico have entered the U.S. every week in recent years in increasing volumes. Tomato growers located in the Sinaloa and Baja California Peninsula of Mexico supply the majority of fresh tomatoes exported to the U.S., but they also supply domesti