Environmental and Economic Drivers of Greenhouse Tomato Competition in U.S. Markets

This paper examines how trade policy and technological change have jointly shaped competition in the U.S. fresh tomato market. Since 1996, the U.S.–Mexico Tomato Suspension Agreements have imposed minimum reference prices on Mexican tomato exports, while Mexico has simultaneously expanded greenhouse production through sustained investment in protected agriculture. Using weekly product-level data from the USDA Agricultural Marketing Service (AMS) Terminal Market and Movement reports from 1998 to 2025, we first document that suspension-agreement price floors bind frequently, with binding episodes occurring in approximately two out of every five weeks over the sample period. We show that these binding episodes disproportionately constrain lower-priced open-field products while greenhouse tomatoes, which command higher prices, are less frequently affected. This creates incentives for compositional shifts toward greenhouse production and higher-value export categories. To evaluate these mechanisms, we estimate a structural model of differentiated tomato demand that allows substitution across products defined by origin, production technology, variety, and organic status. The model incorporates heterogeneous preferences for greenhouse production and recovers implied marginal costs and markups under Bertrand competition. We then use the estimated framework to evaluate counterfactual policy scenarios involving tariffs on Mexican imports, reductions in marginal costs associated with Mexican greenhouse investment, and comparable subsidies for U.S. greenhouse producers. The preliminary results suggest that price-based trade protection primarily redistributes surplus, whereas technological change and greenhouse expansion have played a more important role in reshaping market structure, trade composition, and welfare outcomes in U.S. tomato markets. The paper contributes to the literature on non-tariff barriers by showing how differentiated price floors interact with production technology and quality differentiation in agricultural trade.