The 'patient' Fed has been lamenting the "lack of inflation" for far too long. It is about to get its wish.
American food merchants are struggling to import fruits and vegetables from Mexico as wait times at port of entries along the Mexico–US border have surged because of a shift in Customs and Border Protection (CBP) personnel away from the port of entries to remote regions of the border to fight illegal crossings. As a result, shipments of food have dramatically declined in recent weeks, and the result is an imminent spike in imported food prices in the coming months that could put a sizeable dent in consumer wallets.
Fruit and vegetable importers that wholesale to grocery stores throughout the US, could inflate prices by at least 20% to 40% if the wait times continue, with avocado prices already soaring (see "Mexican Avocado Prices Explode By Most In A Decade After Trump Border Threat").
And it's not just avocados: cucumbers, eggplants, bell peppers, squash, cherry tomatoes, watermelons, and most other fruit and vegetables imported from the tropics would be affected.
"(The) Mexican border, it’s one of the most important crossings to the United States," said Joshua Duran, Amore Produce sales representative.
About 43% of all US fruit and vegetables originate from Mexico. In the last several decades, Mexico has become the top trading partner with the US. Much of the US-Mexico commerce involves mega-corporations that send products back and forth across the border as part of a critical segment of their supply chain that has increased since the North American Free Trade Agreement (NAFTA) took effect in 1994.
This month [April], distributor Amore Produce truck drivers hauling product from Mexico have experienced a 300% wait time at the various port of entries along the Mexico–US border, stuck in line for up to 15 hours.
"Now we are having a lot of problems in the border," Duran said. "So, let’s say we used to have like five hours. We’re getting 10 or 15 hours to pass that truck to the United States…one or two (gates) are not enough to get all the entire trucks coming from Mexico and not only for produce, for all the products that people here in the United States get from Mexico."
Increase wait times have depleted cold storage inventories of McAllen Produce Terminal Market, located just 20 minutes from the border. Duran said the importer cannot ship fresh produce across the country anymore becuase their truck drivers are waiting almost a day to move product across the port of entry - by the time it makes it to the US, the produce won't make it fresh to the wholesaler.
"We couldn’t get it here and we couldn’t send it to the customers in the north," Duran said.
Marabella Produce owner Alejandro Knight suggested that wait time increases have impacted his cold-storage levels in the last month. Knight said his warehouse is always at full capacity, but now, the floors are covered with empty pallets. Most of the produce Knight receives from Mexico is spoiled, thanks to wait time increases, warehouse workers have to immediately throw out the produce once it arrives.
"We cannot deliver a fresh product anymore if we have to wait for each load to cross, five to six days, it's impossible to work like this," Knight warned.
Knight said Mexican farmers are now "afraid" to export fruits and vegetables to the US because of extended wait times.
Salavador Contreras, an economist at the University of Texas Rio Grande Valley, said if wait times increase, it could inflate produce for everyday American consumers.
"It's going to be felt at the grocery stores when we start paying more for limes and our avocados at the grocery store," Contreras said.
If the wait times persist at the border, in the coming months Americans will be shocked by soaring prices in the produce section of their local grocery stores, a move that could reverse consumer sentiment right before an important election year. But at least the Fed will be delighted: it will have achieved some of that "symmetric" inflation overshoot it has been seeking for so long... and all thanks to Trump.