Rotting fruit, spoiled vegetables: How Texas just made the supply chain even worse

CNN, CNNBUSINESS

By Alicia Wallace and Vanessa Yurkevich, CNN

A weeklong protest by Texas Gov. Greg Abbott against President Biden’s recent immigration policy reached a resolution on Friday, but the gridlock it created has resulted in hundreds of millions of lost dollars and delays in shipments of everything from avocados to automobile parts that will have a longer-term impact.

On Friday, Abbott reversed course on an order he put in place last week that required lengthier “enhanced safety inspections” of commercial vehicles entering Texas. The efforts, he said, were to help stop the flow of illegal contraband and human trafficking.

Abbott’s move, which Texas Agriculture Commissioner Sid Miller criticized as “political theater,” ultimately created a logjam of trucks between the US and its largest goods trading partner. Vegetable producers say their produce is spoiling in idling trucks and they are losing hundreds of millions of dollars.

Mexico is a critical supplier of vehicles, automotive parts, electrical machinery, chemicals and agricultural goods. Nearly $9 billion of fresh produce crosses the Texas border from Mexico each year, said Dante L. Galeazzi, CEO and president of the Texas International Produce Association.

And for the past week, that produce has been held hostage, with businesses and goods “being used as bargaining chips,” Galeazzi said.

What used to be a routine border crossing turned into a 30-hour wait for some trucks. Meanwhile, the fruits and vegetables in those trucks spoiled, leaving some produce department shelves sparse or empty in advance of the holiday weekend, he said.

“It could take a week or longer, up to probably three weeks, before the supply chain realigns,” Galeazzi said.

In recent days, Abbott has met with the governors of the four Mexican states that border Texas, and reached agreements to cease the increased checks. On Friday, after meeting with the governor of Tamaulipas, Abbott said the commercial checks would end immediately.

The “financial pain” was a necessary consequence to “get the public to insist that their government leaders” take action to curb illegal immigration, Abbott said.

‘One thing after another’

Losses to fruit and vegetable producers are estimated to be more than $240 million, said Lance Jungmeyer, president of the Fresh Produce Association of the Americas.

Consumers will also pay a price as producers look to recoup some of their losses and supplies run low.

Americans can expect to spend more on strawberries, avocados and asparagus as soon as this weekend, with the impacts being felt the heaviest in the Midwest and Northeast, Jungmeyer said.

“This is not just a localized issue,” said Jerry Pacheco, president and chief executive officer of the Border Industrial Association in New Mexico. “It’s going to hit you in St. Louis or up in Seattle. We’re connected to a global supply chain.”

“It’s a bad time to be adding this to consumers’ pockets to pay out their pocketbook,” Jungmeyer said.

At El Corral Supermarket, a Mexican specialty grocery store and meat market in Stephenville, Texas, co-owner Santos Avila was warned of shortages by his beer suppliers because of glass that got delayed coming into the US from Mexico.

“It’s just one thing after another,” Avila said, noting the price increases and product shortages that have occurred over the past two years due to pandemic-induced supply chain disruptions.

At places like Luna’s Mexican Restaurant in St. Francis, Wisconsin, which have yet to see any price hikes as a result of the delayed shipments from Mexico, the mere prospect of any delays or shortages for staples like avocados, tomatoes and limes causes worry, said owner Jenny Bustillos, who runs the restaurant with her daughter, Brittanie Sexton.

Luna’s has already seen prices triple because of pandemic-related supply chain challenges and inflation, Bustillos said. A case of limes that used to run $30 a case pre-pandemic is now $90, and a case of avocados rose from $40 to $120, said Bustillos.

“Everything [we make] contains some type of fresh vegetables, so that is very worrisome for a business like us,” said Sexton, Luna’s manager. “Everyone who works here, we are supporting our families with this. We aren’t some chain [restaurant]. This is our livelihood.”

Adding to supply chain instability

It could ultimately take several weeks for supply chains to recover from the weeklong slowdown at the border, said Matthew Hockenberry, a Fordham University assistant professor who studies supply chains and logistics.

“It’s also just so hard to predict, because there’s so much supply instability right now,” he said, noting that China’s latest wave of lockdowns and the war in Ukraine are causing even more disruptions. “The amount of supply uncertainty is so high that to add another straw here to the camel’s back is a dangerous proposition.”

The logjam also has the potential to compound existing supply chain issues in the manufacturing industry, said Erik Lundh, principal economist at The Conference Board.

Following the early stages of the pandemic, when lockdowns in China resulted in significant delays in shipments, it spurred a renewed interest by US companies in working with suppliers in Mexico, he said.

“What are companies going to think about this?” he said. ‘What are they going to think when they see that Mexico, which has emerged as a potential alternative to China, can suffer these kinds of impacts in this US political sphere.”

Those issues could further compound inflationary woes that are already heightened by the war in Ukraine and the new wave of Covid that has hit China, he said.

“Coupled with the difficulty in getting things across the border from Mexico,” he said, “it layers two different kinds of sources of inflationary pressure on top of one another and makes things even more complicated.”

The-CNN-Wire
™ & © 2022 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.