US to the Rescue as Processing Tomatoes Get Squeezed

Spend Matters welcomes a guest post from Nick Peksa, at Mintec Ltd.

Global processing tomato output in 2012 is currently forecast at 35m tonnes, down around 6% on the 37m tonnes produced in 2011. US output is anticipated to be up 6% in 2012 but falls are expected from China and the EU. Based on forecasts of crops already sown, the main producers of processing tomatoes in 2012 are expected to be the US (with 35% of world supply), EU (22%) and China (14%). Italy is the largest EU producer, with 59% of anticipated EU output, followed by Spain with 21%.

The EU accounts for the largest proportion of the world's processed and canned tomato exports. Within the EU, Italy alone is responsible for about 75% of the world's canned tomato exports. China is the main exporter of tomato paste (35% of world exports), followed by Italy (25%), the US (9%) and Spain (8%).

Good supply from the US and China in 2011 lowered prices for processed tomatoes in the first half of 2012. Aided by good weather and increased planting, continuing good supply is expected from the US, where the processing crop is likely to rise 5.8% year-on-year in 2012. The US grows about 95% of its processing tomatoes in California.

In the EU, as a result of Common Agricultural Policy (CAP) reform, the tomato supply in 2012 is forecast down 12% year-on-year, with Italian production falling 11.1% from 4.9m tonnes in 2011 to 4.4m tonnes in 2012. Fresh processing tomato prices in Italy during the marketing year 2011/12 were contracted at EUR 88/tonne, 26% above the price in 2010/11. Spanish prices were contracted at around EUR 75/tonne, 15% above 2010/11. Spanish production is forecast at 1.6m tonnes in 2012, down 22% on 2011, which itself was a fall of 15% on 2010.

Tomatoes produced for processing are very different from those intended for the fresh market. Typically they are of the plum variety, always picked red ripe and packaged aseptically, i.e. drummed, canned, or bagged in a sterile environment to prevent contamination.

Processing tomatoes can be peeled and packaged in their whole form, or alternatively they can be processed into many products including chopped tomatoes, paste, purée, juice, and powder. At the processing plant, the tomatoes are continuously unloaded using vast quantities of water (typically around 3-5 times the volume of unloaded tomato). The tomatoes are rinsed under a clean water spraying system and the green, damaged and excessively small tomatoes are removed while those suitable for processing are transported to the chopping station.

With slightly higher prices being contracted year-on-year for tomatoes in Europe, processors are also reporting the standard increase in processing costs, transportation and packaging. Many international buyers might be looking with hungry lips at the even more tasty US supply in the year ahead, since the squeeze on great supply of tomato products may happen in the future with these favourable prices and reduced global production.

- Nick Peksa, Mintec Ltd.

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