TEX-MEX.ORG...... News Flash

10/26/99

Broccoli Market Update

During the 14 month period ending January 1999, the Mexican frozen broccoli processing industry suffered through two severe winter freezes, a spring/summer drought and two fall floods which seriously disrupted industry supplies. In response to this ever unfolding story - a new chapter every couple of months - the industry misjudged the late winter/spring production period and transplanted significantly more acreage than that required to cover current orders and rebuild inventories. As a result, late spring and summer inventory levels were significantly higher than normal.

New Crop Year Beginning September 15

In response to the financial burden that is incurred when carrying excess inventories, all processors sharply reduced their transplantation's beginning June 15 - September 15 harvest. Similarly, transplantation's for July, August, and September - October, November, December production - were likewise reduced from normal levels. As a result, we currently anticipate that fall production will be approximately 25% below normal operating levels. Assuming Mother Nature cooperates - quality and yields are currently projected to be good- we are anticipating that the 1999 year end inventory will return to a more normal level.

Financial Impact

1996-97 insect problems followed by 1998 weather disasters and now a 1999 inventory oversupply situation have exacted a very heavy financial toll on our industry. The current problem is further exacerbated by a decline in the peso:dollar exchange rate during the last 12 months from 10.04 pesos in October 1998 to 9.38 per dollar today - an effective decline in Mexican purchasing power of 6.6%. This, coupled with a projected internal Mexican inflation rate of 13.2% for 1999, has created a 19.8% negative financial swing for Mexican exporters. As a result, several plants have already closed - several other may soon follow - others have substantially weakened balance sheets. Hopefully, this four year string of adverse conditions is coming to a close and we can begin to move on to a more normal operating environment.