RIO RICO, AZ - Many of the challenges of 2022 can still be felt along the supply chain today. Cost increases were among the top challenges for the year, and operators are entering 2023 with new strategies in mind. SunFed Chief Executive Officer Craig Slate recently addressed this topic in a letter to the industry.

“Thank you for your support of SunFed in 2022. It was a challenging year as we navigated the post-Covid new normal of supply chain issues, rampant inflation, and the continued difficulty of profitable farming,” Slate wrote in the letter. “There’s a saying out there, ‘when the U.S. gets a cold, Mexico gets the flu.’ Looking ahead at 2023, I write today to address the sober reality of what our farms, and most certainly all farming operations across North America, face. Year over year cost increases are unprecedented.”

In the letter, Slate stated that the three most significant cost components in Mexico are labor, growing/packing inputs, and transportation.

“From 2020 to 2022, minimum wage in Mexico went up 48 percent, and in 2023 it will increase another 20 percent. For comparison, in the U.S., Arizona minimum wage is up 26 percent over the same period, and will increase 8 percent for 2023,” Slate explained.

He continued, “Even with wage increases, the farm labor market remains especially tight. According to MacroTrends, unemployment in Mexico is 4.38 percent. Farming operations struggle to attract and retain skilled labor as many individuals choose less physical labor-intensive industries. Complicating matters further is rising street violence resulting in workers finding work closer to the safety of their own home.”

Slate wrote that cardboard and plastic materials are up over 16 percent, while pallets are up 19 percent. He added that the YCharts price index confirms December 2022 fertilizer prices are 160 percent higher than December 2019.

“Sourcing the USDA refrigerated truck data, cost per mile peaked February 2022 at ~$4.97 per mile,” Slate continued. “Although rates have retreated over the last few months to between ~$3.75 and ~$4 per mile, it is still well over 2019.”

Slate added, “While these cost increases are real, unfortunately YOY FOB prices have remained stagnant. Labor, growing/packing inputs, and transportation costs can’t be avoided.”

For more from the letter, click here.

ANUK will continue to report on the state of the industry.

SunFed