The rapidly growing greenhouse tomato industry has become
an important part of the North American fresh tomato industry. Greenhouse
tomatoes now represent an estimated 17 percent of U.S. fresh tomato
supply. Even though greenhouse tomatoes still constitute a minority
share of the U.S. fresh tomato market, their influence is concentrated
and growing in retail channels, which represent about half of U.S.
tomato consumption. Around 37 percent of all fresh tomatoes sold
in U.S. retail stores are now greenhouse, compared with negligible
amounts in the early 1990s.
Greenhouse tomatoes can be seen as just one more development
in a trend toward more differentiated fresh tomato offerings, including
more variety in field-grown tomatoes. New types of tomatoes, improved
varieties and handling, and positive health benefits associated
with eating tomatoes have all contributed to a 30-percent rise in
U.S. consumption of fresh tomatoes since 1985, with estimated 2003
annual per capita consumption levels around 8.8 kilograms (19.4
pounds). Growth in the greenhouse industry has challenged growers
of fresh field tomatoes. With rising consumption of all tomatoes,
field tomato sales in the U.S. retail market increased through 2001,
in part due to new fresh field products, such as grape tomatoes.
But in 2002, the combined retail sales volume of all field tomato
types began to slip. Field tomatoes still dominate the growing foodservice
market (restaurants, schools, hospitals, etc.) where greenhouse
tomatoes are scarce. Foodservice sales are increasingly essential
to the health of the field tomato industry.
While greenhouse tomatoes have higher per unit costs
of production and generally higher retail prices than field tomatoes,
several other characteristics have contributed to the growth in
this sector. Since they are protected from weather and other conditions
affecting open field production, greenhouse tomatoes generally have
a much more uniform appearance than field tomatoes. They are also
less prone to swings in production volumes. These factors lead to
greater consistency in quality, volumes, and pricing—issues
of particular concern to the retail and foodservice industries.
The United States, Canada, and Mexico have all developed
major greenhouse industries. The United States is the largest North
American market for greenhouse tomatoes, and U.S. imports from Canada
and Mexico are larger than domestic production. In recent years,
the growth in U.S. imports has exceeded the growth in U.S. production.
In 2003, Canada accounted for an estimated 46 percent of U.S. imports
of greenhouse tomatoes. Mexico’s share was 45 percent. As
the greenhouse tomato industry has transitioned from niche to mainstream
status, it has become part of a more integrated North American market,
following the pattern established by the field tomato industry.
The greenhouse industry is facing growing pains. With
rapid growth in Canada and the United States during the 1990s, greenhouse
tomato prices declined, causing financial problems for some growers.
More recently, as the industry has expanded in Mexico, heterogeneity
in production methods has increased. Growers in the United States
and Canada, and some Mexican growers, have high-technology and high-cost
greenhouses. Many of these growers view the growth of lower technology
greenhouses and shade houses in Mexico with some alarm. This has
led to a debate in the industry about how to define a greenhouse
tomato (see “What Is a Greenhouse Tomato?”).
Regardless of how this issue is resolved, higher expected year-round
production volumes in Mexico portend greater competition in all
seasons, and continued downward pressure on prices.
What Is a Greenhouse Tomato?
There is no official USDA or Federal definition
of a greenhouse tomato. Here, we define greenhouse tomatoes
as those grown in fixed structures, as opposed to open fields
or temporary structures, such as shade houses. Both shade
houses and greenhouses are referred to as protected culture,
offering advantages relative to open-field production. A shade
house is a temporary structure that supports shade cloth,
a type of screen that provides some passive environmental
control, such as shading the plants from excessive sunlight
and wind. Growers using fixed structures can choose the degree
of environmental control to adopt and whether to grow in soil
or use hydroponics, a production system where plants are grown
in a nutrient solution with an artificial medium to provide
mechanical support to the root system. Active environmental
control could include heating, cooling, humidity control,
and use of carbon dioxide to boost yields. Growers select
technologies based on environmental and economic considerations.
All the large commercial greenhouses in the United
States and Canada use active climate control and hydroponics,
and many U.S. and Canadian growers would like to define a
greenhouse tomato as one grown in that type of greenhouse.
Although some greenhouse growers in Mexico have similar technology
levels, others produce in greenhouses with lower technology
systems, perhaps without fully active climate control, hydroponics,
or both. Lower technology systems are less costly than high-technology
greenhouses, but they produce lower yields and a less consistent
product. However, this article uses a broader definition of
greenhouses (not requiring active control and hydroponics)
in order not to exclude expanding production volumes in Mexico.
While this definition excludes shade houses, in reality all
of protected culture will impact the North American fresh
tomato industry, since shade houses are becoming more common
in Mexican export-oriented field production regions, and it
is becoming increasingly difficult to distinguish greenhouse
and shade house production in the marketplace.
Seasonality Drives Market Integration
Seasonality is a major factor shaping the North American
fresh tomato industry. Consumers increasingly demand a steady year-round
supply of an ever-greater variety of tomato products. The greenhouse
industry has seasonal production patterns similar to the fresh field
industry, despite the fact that greenhouse production takes place
indoors. Greenhouse supplies vary over time and across geographical
regions, and marketers often try to extend their seasons to periods
typically marked by lower tomato production and higher prices, sometimes
by sourcing from more than one location. The result has been the
development of an integrated North American greenhouse tomato industry
that can provide the variety of tomato products that consumers demand
throughout the year. While there is some overlap, Mexico is the
primary foreign winter supplier to the U.S. market and Canada the
primary foreign summer supplier.
In 2003, total production of North American greenhouse
tomatoes was estimated at 528,078 metric tons. Canada’s share
of this total was 42 percent, followed by the United States with
30 percent, and Mexico with 28 percent. Though greenhouse tomato
production soared in all three countries from the early 1990s, it
has been stabilizing in the United States and Canada. In Mexico,
the industry is still growing rapidly. Mexico’s growing area
exceeds the combined total area of U.S. and Canadian greenhouses,
but with many Mexican growers using extensive production methods
with relatively simple low-yielding technology, output is lower
than in the other two countries.
Canada was the first big greenhouse tomato producer in
North America and still has the highest yields and total production.
The Canadian industry is centered in southern British Columbia and
Ontario. Long, relatively mild, summer days in these regions generate
high yields. During the March to December period, Canadian production
is a market force. U.S. and Mexican tomato producers, both field
and greenhouse, have to compete with the high Canadian summer volume.
The Achilles heel of the Canadian greenhouse tomato
industry is its lack of winter supply. As greenhouse tomatoes have
become a mainline commodity, retailers are increasingly demanding
consistent year-round volumes from their suppliers. Given current
greenhouse prices, it is uneconomical for most Canadian producers
to provide light and heat for winter production. To better serve
their customers, Canadian marketers supplement their winter supply
by sourcing from U.S. and Mexican producers. But this pattern could
change. More Mexican producers may become year-round suppliers and
decide to market their tomatoes independently. Foreign direct investment
in growing operations could become more common as a strategy for
controlling supply. For example, one large British Columbia grower
built a greenhouse in California to help supplement winter supplies.
leads North American greenhouse tomato production in 2003
greenhouse tomato yield (metric tons/hectare)
field tomato production, excluding processing (1,000 metric
fresh field tomato yield (metric tons/hectare)
share of total fresh production, by country (percent)
greenhouse exports to U.S. (1,000 metric tons)
imports of greenhouse tomatoes are thought to be underreported
for Mexico due to tariff code misclassification; 58,357
metric tons of greenhouse tomato imports from Mexico were
reported by the U.S. Department of Commerce in 2003. The
figure shown here includes estimated additional miscoded
imports, based on information from industry sources obtained
by Cook and Calvin. This figure may include some production
from shade houses.
Sources: Statistics Canada, Ontario Greenhouse Vegetable
Producers’ Marketing Board, British Columbia Vegetable
Marketing Commission, U.S. Department of Commerce, interviews
by Cook and Calvin, USDA’s National Agricultural
Statistics Service, USDA’s Foreign Agricultural
Much of the U.S. greenhouse tomato industry began in
the northeast in the early 1990s, with production in the same months
as Canadian producers. Eventually, several producers moved west
and south, lured by the prospect of producing tomatoes year-round
and capturing a slice of the high-priced winter market. The four
largest greenhouse tomato firms in the United States are now located
in Arizona, Texas, Colorado, and coastal southern California, and
account for 67 percent of domestic production. Smaller greenhouses
are located throughout the United States but these are frequently
seasonal producers and local marketers. The profitable winter market
helps the year-round U.S. producers withstand the very low prices
during the summer season when Canadian volume inflates supplies.
However, southwestern greenhouses face special challenges posed
by the summer heat and often need expensive cooling systems to produce
high-quality tomatoes. Furthermore, expanding winter production
in Mexico will likely reduce greenhouse tomato prices and increase
competitive pressure on year-round U.S. growers.
The Mexican greenhouse tomato industry is the fastest
growing in North America and the most varied. In Mexico, large field
tomato grower-exporters in Sinaloa on the northwest coast and the
Baja California peninsula are experimenting with protected culture,
either shade houses or greenhouses, near their field operations.
In contrast, U.S. field tomato growers usually have no connections
to the greenhouse industry. This gives Mexican growers a foot in
both camps and potentially reduces market and other types of risk.
Because of its hot, humid summers, Sinaloa, the principal fresh
field tomato-exporting region in Mexico and a leading greenhouse
exporter, is a winter producer only. Growers there have less incentive
to invest in the highest technology greenhouses because the limited
shipping season reduces the return on investment. Nevertheless,
the technology levels and yields in coastal areas are improving,
with more growers moving into midlevel technology systems to improve
yields, quality, and marketing.
Several clusters of greenhouses are also emerging in
temperate, higher altitude areas in central and north central Mexico,
and in Imuris in northern Sonora, near the U.S. border. With the
exception of those in Imuris, most of these firms are new entrants
to agriculture and have no connection with field tomato growers.
Their advantage is the ability to produce year-round, in some cases
with investment in summer cooling required. As a result, more growers
in these areas are investing in high-technology greenhouses similar
to those in Canada and the United States. As greenhouse production
in temperate, noncoastal areas expands, Mexico will become more
of a competitive force in all seasons.
The Mexican greenhouse tomato industry has both advantages
and disadvantages over the U.S. and Canadian industries. Mexico’s
major advantage is its ability to produce during the winter months—the
same edge it holds in field tomato production. Its major disadvantage
is the much higher cost of capital, a problem given the capital-intensive
nature of greenhouse production. As a result, many growers find
it difficult to invest in technologies that generate the best yields
and consistent quality. Mexico is also hampered by lack of local
greenhouse input industries, public research, and experienced management.
High heating costs in many temperate locations are also a problem.
Although hourly labor rates are much lower in Mexico, typically
lower labor productivity means that total labor cost savings are
less than the differential in labor rates. Overall, at this stage,
Mexico’s greenhouse tomato industry does not appear to have
a clear advantage in unit costs.
Greenhouse Tomato Prices Falling
Despite rising demand for greenhouse tomatoes, the industry
is facing downward price pressures, as demand growth has sometimes
been outpaced by expanding supply. Two periods of very low producer
prices had significant effects on the industry. In 1999, low grower
prices for beefsteak tomatoes (a large, round, red tomato and the
leading greenhouse product at the time) stung growers who had invested
in greenhouses when prices were much higher. In response, greenhouse
expansion faltered and some less profitable greenhouses were closed.
Growers diversified their product mix by shifting to more tomatoes-on-the-vine,
or cluster tomatoes. Between 1999 and 2003, the share of beefsteak
tomatoes in the total retail quantity sold of fresh tomatoes fell
from 18 to 13 percent, while the share of cluster tomatoes rose
from 13 to 24 percent. But the rapid growth of cluster tomatoes
led to overproduction in this segment and extremely low prices by
the summer of 2004. The price drop is slowing further expansion
in cluster tomatoes.
Production of the leading greenhouse tomato products—beefsteak
and cluster—has now grown to the point where they are becoming
mainstream commodities. For specialty niche products with limited
supply, it is generally easier to command consistently high prices,
in part because buyers place less emphasis on aggressive price negotiations
for products that are not major contributors to the bottom line.
But sales of greenhouse tomatoes are now critical to the profitability
of overall retail tomato sales, and prices play a more influential
role in purchasing transactions. Increasing competition drives down
As the industry matures, greenhouse tomato growers strive
for continual product innovation as a strategy for adding value,
stimulating consumer interest, and maintaining margins and profitability.
The expanding product line currently consists of smaller cluster
tomatoes (such as cocktail tomatoes, including Campari), roma and
mini roma cluster tomatoes, heirloom, and different-colored tomatoes.
Greenhouse tomato producers tend to be closer to the pulse of consumers
because they market a retail- and consumer-ready product. In addition,
they increasingly market directly to retailers, rather than through
intermediaries, such as repackers and wholesalers, as is the case
for most field tomato shippers.
Impacts on Field Tomatoes Mixed
Competition from greenhouse tomatoes has brought major
changes in the quantity and composition of field tomato sales. While
total retail quantity sold of all fresh tomatoes increased from
1999 to 2003, the volume of field tomatoes declined after 2001,
with the share falling from 69 to 63 percent. Over the same years,
the share of all round tomatoes (mature green and vine ripe) declined
from 43 to 31 percent (see “Field Tomato
Variety Expands”). The roma share fell from 23 to 19 percent,
but the grape and cherry category grew from 3 to 13 percent. Most
grape and cherry tomatoes are field grown, mitigating the impact
of greenhouse tomatoes on the field-grown category. Within the declining
round category, the share of mature green tomatoes fell from 78
to 39 percent, with vine ripe tomatoes benefiting.
Tomato Variety Expands
There are two types of round field tomatoes—mature
green and vine ripe. Mature green tomatoes are the backbone
of the U.S. fresh field tomato industry and are the
major type of tomato grown in Florida and California,
with minimal production in Mexico. They are harvested
at an early stage; while still green, they are sufficiently
mature to ripen after harvest when treated with ethylene
gas, the plant’s natural ripening agent. Mature
green tomatoes are firm, have a long shelf-life, and
slice well. They are also one of the lower cost tomatoes.
Mature green tomatoes are the dominant tomato in food
service, particularly in the fast food industry.
Vine ripe tomatoes are harvested at a slightly
riper stage and ripen fully without ethylene treatments.
During the winter, most of the vine ripe tomatoes consumed
in the United States come from Mexico, with Florida
as a minor supplier. During the summer, southern California
and Baja California are the main suppliers. Mexican
round tomato exports are almost entirely vine ripe.
While the vine ripe tomato may appeal to some high-end
foodservice firms, most sales have traditionally been
to the retail market, in part due to a generally higher
cost than mature greens. However, with short supplies
of mature green tomatoes in fall 2004, foodservice buyers
were more willing to try other types of tomatoes as
substitutes. This may lead to shifting foodservice preferences
Fresh roma tomatoes (also known as plum tomatoes)
grew rapidly in the 1990s, in part due to retail demand
from the expanding Mexican consumer segment, and more
recently due to their expanding use in foodservice menus.
They are grown primarily in Mexico, with California
and Florida also garnering part of this market.
Other types of field tomatoes growing in
popularity include such specialties as cherry, grape,
pear, organic and heirloom tomatoes (older, often misshapen,
varieties recognized for their flavor). While some of
these tomatoes are grown in greenhouses, most are field
grown. Grape tomatoes, in particular, represent a very
important new product offering in field tomatoes.
While mature green tomatoes are being forced out of
the retail market by competition from both greenhouse and other
field tomato types, they still dominate the expanding foodservice
market, which represents about half of U.S. tomato consumption.
With declining retail sales, the mature green industry is increasingly
dependent on the foodservice market, where greenhouse tomatoes have
not yet made significant inroads. However, this could change since
some greenhouse firms have recently begun to experiment with developing
an acceptable product for foodservice users.
If foodservice demand falters, mature green tomato growers
would need to consider other alternatives, with serious industry
structural adjustments likely. Growers could continue to attempt
to reposition field tomatoes through new varieties, products, and
packaging with more commercial appeal. Alternatively, the industry
could diversify into the greenhouse industry, either through alliances
with existing producers or through direct investment. However, greenhouse
tomato production is very capital- and technology-intensive, creating
barriers to entry. In addition, the rapid greenhouse expansion in
the United States was accompanied by mixed profitability results;
thus, most field tomato growers did not consider the greenhouse
industry an attractive alternative. But recent profitability in
the California field industry caused by weather-induced high prices
may provide the financial wherewithal for some field growers to
explore greenhouse production. If they were to invest, they would
be new entrants in a maturing industry.
Greenhouse and Field Tomato Market Interactions
In the early days of the evolution of greenhouse tomatoes,
the greenhouse and field tomato sectors operated on a relatively
independent basis. Now that they are a major market force, greenhouse
tomatoes are increasingly influenced by supply and demand trends
in the fresh field tomato industry, and vice versa.
In fall 2004, a weather-induced period of short supplies
of fresh field tomatoes enabled greenhouse producers to benefit
from a brief period of extraordinarily high prices as buyers substituted
greenhouse for field tomatoes, where possible. In contrast, earlier
in summer 2004, a record-high supply of greenhouse tomatoes caused
greenhouse prices to decline, making them even more attractive to
retail buyers, and placing a damper on demand for fresh field tomatoes.
With greater supply has come an increased willingness on the part
of consumers, retailers, and foodservice users to experiment with
Developments in Mexico Will Shape the Future
Notwithstanding brief periods of abnormally high prices,
average grower prices for greenhouse tomatoes have been trending
downward. If this trend continues, some parts of the North American
greenhouse tomato industry may become less viable. Growers will
continue to seek the lowest cost production regions and form marketing
alliances to build year-round supply. Greater competition means
that new entrants have less room for error; the learning curve is
shorter than in the 1990s, when the industry was in its infancy
and average prices were higher. The greatest source of uncertainty
for the future of the North American greenhouse tomato industry
will be the changing structure of the Mexican industry, which is
still seeking out the best locations, technology packages, and management
practices. U.S. and Canadian growers will be following developments
in Mexico closely when making their future investment and marketing