COMPREHENSIVE NEWS & ANALYSIS OF THE WORLD PROCESSING TOMATO MARKET

Transcription

1 ISSUE N 9 AUG. 23, 04 TOMATO MARKET REPORT COMPREHENSIVE NEWS & ANALYSIS OF THE WORLD PROCESSING TOMATO MARKET Europe Factories running at full capacity all over Europe! Stocks of paste now expected to build up! California Most processors have already achieved close to 60 % of their program! Turkey The beginning of the crop is affected by adverse weather conditions! China The volume of the 2004 crop to reach a record, possibly above 4 millions MT.! North Africa Algerian crop is better than in 2003; Tunisian crop close to its end! Breaking News Merko from Turkey forced to reduce its crop! Key number 11.5 millions short tons is the new forecast for Californian crop! The Tomato interview Chris Rufer President of Morning Star, world s largest tomato processor! (see online) Our Sponsor LOW COST TRANSPORT FOR FOOD D PRODUCTS Note : Exchange rates as of August 24 th... are 1.21 $ and per Euro. 1

2 Europe : factories now running at full capacity! Despite some isolated rains and storms in North Italy, Portugal, France and Greece, the harvests are going quite well all over Europe. Reported field yields for medium varieties are on the high side in many areas and the vast majority of the factories are running at full capacity at this moment. Although the start of the crop was not as fast as in 2003, it should be no problem to achieve the production program confirms both Spanish, Portuguese and Italian processors. The quality of raw materials is also good according to most processors but the production yields are lower than in 2003 in Extramadura, Provence and in the Puglia according to local sources. Also important to notice is the optimistic opinion about the volumes of fresh tomatoes available for the late crop in various places. Unless the weather turns really bad, we look forward for a good harvest in September according to our agronomists reveals a processor in Extramadura. Similar comments are coming from North (mainly Emilia Romagna, representing 33 % of the total Italian plantations in 2004) and South Italy (mainly Pugli with 37 % of the total plantations in 2004) and this situation could drive to a record crop in the leading European country. At this stage, and despite a slower start than in 2003, most European factories have already reached more than 50 % of the expected production; this figure exceeds 60 % in some cases according to our information. With all these fresh materials coming in, we have to process more paste then we would like explains a large Italian packer fearing an overproduction within Europe. The crop is not over but it looks like if we are heading for a good volume to be processed confirms a Greek packer. Except for very isolated problems, most of the news about the crop are positive all over Europe and expected crops are being revised upward : Italy could process up to 5.5 millions MT. (!); Spain could finally end up between 2.4 and 2.5 millions MT.; Greece and Portugal could pass the 1 millions MT. barrier when France should be close to 0.2 millions MT. The European Union (not counting the new EU countries with tomato processing) could break the 10 millions MT. limit (11 millions short tons), a level never reached before. One last word about the crops in the new EU countries : Poland, with a MT. production quota, is experiencing a poor crop with a possible drop of 20 % from 2003; Hungary, with a MT. quota, should also stay behind its 2003 level at around MT. of fresh tomatoes to be processed according to local sources. Cyprus, Czech Republic, Slovakia and Malta have a marginal production which cannot impact market conditions. As often at this stage of the crop, not to mention the impact of the summer holidays, the market is very quite within Europe. Buyers with products to buy are waiting for early September, and possibly later this crop, to shop around when sellers also prefer to finalize their production before offering their last volumes. The only serious demands currently come from Eastern European countries, namely Poland, Hungary and Czech 2

3 Republic, but with a strong competition from China and possibly Turkey. Many processors are expecting a higher than normal demand in September as many buyers are not fully covered yet. Potential sales are mentioned in Germany and England where buyers have delayed their purchases to take advantage of lower prices after the crop. Although the contracting has been indeed delayed this crop, it is not easy for us to confirm whether a large volume remains actually uncovered by European buyers. It is however unlikely to see any drastic change in market conditions in the coming weeks. Most processors have indeed sold between 50 and 75 % of their expected production with much lower figures in some cases! This percentage can widely vary from products with a much higher values for low concentration products and diced tomatoes in average. The main problem comes from tomato paste summarizes an Italian processor. Despite the threat of a large pack, paste prices tend to remain unchanged from early August. It is still to early to get cheaper prices indicates an experienced trader. Spain remains the most competitive source with 28/30 % aseptic paste between 550 and 570 Euros ( US $ / GBP) per MT. ex-works for Extramadura. Deals at lower levels have been closed under special conditions but still remain in minority. 36/38 % paste prices also remain close to previous levels around 700 Euros (845 US $ / 470 GBP) per MT. Free on Truck. Most Italian packers are also resisting lower prices with most offers for 28/30 % ranging between 570 and 590 Euros ( US $ / GBP) per MT. ex-works Parma area; here again and although rare, some contracts have been closed at lower levels, as cheap as 550 Euros (665 US $ / 370 GBP) per MT. ex-works for German users! 36/38 % aseptic paste is available at 720 Euros (870 US $ GBP) from first class processors. Portuguese prices are slightly higher with 28/30 % paste currently available at 580 Euros (700 US $ / 390 GBP) per MT. and 740 Euros (895 US $ / 500 GBP) per MT. both on ex-works. Add about 20 Euros per MT. to obtain FOB Lisbon prices. Greek prices are less uniform with some packers offering prices close to the Spanish ones and others close to Italian levels. As often in past years, Greece should be more competitive after the crop, at least for some specific processors. Last, French packers are still aggressive with 28/30 % aseptic paste available below 550 Euros (665 US $ / 370 GBP) per MT.! Prices for crushed / aseptic diced tomatoes have further dropped in Spain with processors unable to market enough of their coming crop. Our goal is to have our products tested in most places and we are ready for some sacrifices confirms a new processor. These reductions had some positive effects and good volumes have been closed with European buyers during August. Aseptic diced tomatoes are indeed available at 320 Euros (385 US $ / 215 GBP) per MT. exfactory again in Extramadura. On the other hand, Italian processors have contracted a large share of their production and are reluctant to offer these products. Consequently, prices remain unchanged, 3

4 above 350 Euros (425 US $ / 235 GBP) per MT. Greek packers are also firm on prices with offers close to or slightly lower than Italian ones; we have not recorded any price offers from Portugal recently. Traders predict offers as low as 300 Euros per MT. for aseptic diced tomatoes if the weather remains favourable! The market for low concentration products is also very quiet; most requirements have been covered according to our information with Italian processors still grabbing a big chunk of the market. Extra needs should be limited and prices remain unchanged : 350 Euros (425 US $ / 235 GBP) per MT. for 12/14 % aseptic pizza sauce from Italy and around 40 Euros cheaper for 10/12 brix product. Just like paste and if contacted before the end of the crop, buyers could expect for further price reductions. As explained before, Spain and other European source are less active on this market except for one or two factories that moved to these products a few years ago. The market for retail tomato products mainly paste, passata, peeled and chopped tomatoes has been more active than the one for industrial products in August. Some volumes have been contracted by European retailers both in canned paste and peeled / chopped tomatoes. Reported prices are overall lower than in 2003 but the drop is much smaller than for industrial packed items. The impact of a larger crop is not as rapid in this market explains a South Italian packer and the demand outside Europe is quite good, both for paste in African or Middle East and for peeled tomatoes in Asia or America. Still, and based on the expected paste crop in China (a large part of the canned paste being repacked from Chinese origin tomato paste) and also the good conditions of the crop in South Italy, one can expect the prices of both paste (and repacked passata) and peeled (as well as chopped) tomatoes to ease in coming weeks following the trend of the industrial tomato products. Peeled tomatoes in 1/2 Kg. tin are currently available at 4.1 Euros (4.95 US $ / 2.75 GBP) per cartons of 24 units ex-works Salerno basis (add about 40 Euro cents for easy open cans). Further reductions are of course possible but not before processors are perfectly safe on the volume of the crop. Tomato paste 28/30 % in 70g., 140 g. and 425 g. cans are respectively offered at 6.50 Euros (7.85 US $ / 4.40 GBP) per carton of 100 tins, 6.20 Euros (7.5 US $ / 4.20 GBP) per carton of 50 tins and 8.90 Euros (10.75 US $ / 6.00 GBP) per carton of 24 tins on ex-factory basis, also Salerno region. As said in our last report, most of the paste business should be done around these levels or slightly cheaper with European retailers. Last, we have learned that CPC, the peeled tomatoes factory in San Giorgio, has reopened its doors after 8 months of inactivity following an investigation by financial authorities. Some tomato processing should resume shortly but in limited volumes according to our information. USA : California ahead for a bigger volume! CTGA weekly data (available on line in the Market report folder of our website) show 4

5 continuous high weekly intakes of fresh tomatoes, above short tons for six weeks in a row! This exceptional harvest is the direct consequence of very high yields in most regions. This takes the total expected volume processed at 7.2 millions short tons (6.53 millions MT.) as of August 28! Local processors have already achieved close or even above 60 % of their initial program. The total solid of the fresh material is little low and this will affect the total volume of paste produced this crop explains a large US packer. The forecast for the total crop is revised upward at 11.5 millions short tons (10.45 millions MT.) of fresh tomatoes as the late crop tomatoes look good in the fields according to local agronomists. This was not expected and probably not wished by Californian processors; such a production could lead back to high inventories after a significant decline in 2004 at 3.1 millions short tons as of June 1 st., down from 4.4 millions short tons. The mood of the industry is not good at the moment confirms a local processor. Rumours of factory sales or even closing and financial losses are spreading around. The market is very calm at this moment with the bulk of the business already concluded. Current prices stand at 28 cents per Lb. (615 US $ per MT. / 510 Euros per MT.) of 30/32 brix hot break paste packed in bins ex-works; this is equivalent to 475 Euros for 28/30 % paste, back to much cheaper levels than in Europe! Most probably, we will have paste available for exports confirms a Californian seller; will these attractive prices be sufficient to help US players to finally achieve significant sales abroad is not known yet. Offers should be available by the end of the crop early October. An exclusive interview of Chris Rufer from Morning Star, Californian (and world) largest tomato processor, will be available shortly on line; his traditional direct speech and his innovative ideas should help us to have a better picture of the US tomato industry today. TURKEY : The start of the crop marked by adverse weather and Merko troubles! The crop has started around August 8 th. in the Northern regions (Karacabey, Kemalpasa, Balikesir, Biga) with very poor weather conditions; Heavy rains have indeed disrupted the first days of harvesting and forced some factories to close down for one or 2 days! Weather is now much better and most factories run at full capacity at this moment! The quality of the fresh materials is reported excellent but with low solid contents after the heavy rains of early August. Following the announcement of Merko problems (see below) the price for fresh tomatoes has rapidly decreased at the beginning of the crop, allowing cheap supplies for some competitors. Although market conditions are now back to a more normal situation, the price of fresh tomatoes is still much lower than contracted prices for cash payments, between 60 and 70 millions Turkish Liras (40 to 47 US $ / 33 to 39 Euros per MT.) according to local sources (cheaper prices are also reported in the Southern region where the crop now ends)! The quantity of fresh tomatoes is currently abundant in the fields but local professionals fear a severe drop as early as September 10 th. according 5

6 to agronomists. Local professionals now expect a crop between MT. and MT. of tomato paste; this is around MT. less (minus 30 %!) than in 2003 (see the details of the Turkish crop last year in the Production Data folder). According to average Turkish production and processing yields, this gives a total volume of fresh tomato production of around 1.48 millions MT., very close to the initial forecast! Merko, the second largest Turkish tomato processor with a production of MT. of tomato paste and MT. of diced tomatoes in 2003, is currently facing serious financial troubles. Just before the beginning of the crop, while the company was on the way to sign a global loans repayment plan with its creditors, one of Merko s bank, namely Oyak Bank (part of Oyak Holding owner of Tukas, another Turkish tomato processor), took a legal action against its customer to recover its loan. This simple fact forced the other banks to stop granting loans for the new season to Merko. This should greatly impact Merko s production this crop! See the article on the homepage for more details. According to our information, Merko has been able to secure some financing to partially run its factories and has also closed a rental agreement with another company to process tomato paste. Thanks to a reduced volume of contracts, top management at Merko remains confident they will be able to produce most of the contracted quantities and customers should feel secure about their supplies even if a third party company is required for the invoicing confirms Merko. We feel confident we will overcome this crisis and that Merko will remain a major player in the world tomato industry in the coming years explains a top manager at the troubled Turkish company. Should Merko disappear and it will be bad for the whole Turkish industry indicates a local competitor; according to our sources, Merko has rather enjoyed support from its Turkish counterparts, not to mention direct help supplied by other processors. One should be aware that Merko only processes aseptic products for the export markets. Assan Gida, a subsidiary of industrial holding Kibar and the 3 rd. largest processor in 2003 (when taking into account all the co-packing agreements signed with smaller factories such as Deneks or Venus) and Tukas, a subsidiary of industrial holding Oyak and the 4 th. biggest Turkish processor last crop, are now competing for the second spot, TAT remaining the undisputed leader. After Tunhe s crisis and several bankruptcies revealed in Italy, this new problem shows one more time the financial weakness of tomato processors worldwide. Many of us, tomato processors, could be put into a similar situation by banks summarizes a large European processor when learning about Merko s problem. We shall keep you posted about any new developments at Merko. Prices remain overall stable since the beginning of August. 28/30 % is available between 670 and 700 US $ ( Euros / GBP) per MT. on FOB Izmir basis. 36/38 % aseptic paste can be found between 780 and 820 US $ ( Euros / GBP) per MT. 6

7 These prices are higher than Chinese ones but Turkish processors are rather competing with their European competitors. According to our information, several processors still have aseptic tomato paste for sale, not to mention some stocks of 2003 still unsold! This is also true for aseptic diced tomatoes, currently available at 320 Euros (385 US $ / 320 GBP) per MT. FOB Izmir. CHINA : China ahead for a record crop! Tomato harvesting has started late July in Xinjiang, about 10 days earlier than in After some heavy rains very early in the crop, the weather has turned to much better conditions during the first 20 days of August. Local reports indicate large volumes of fresh tomatoes delivered to all factories both in North and South Xinjiang. The quality of fresh tomatoes is also much better than in 2003 both for colour and Hmc levels. Both Gansu and Inner Mongolia experienced some poor weather conditions in the first 7 to 10 days of production but are also now enjoying better weather! We remind you here that Tomatoland has made available to its members a very detailed weather follow-up tool in most producing regions (see on the homepage). Volumes of fresh tomatoes still to be harvested are also reported good but all 3 Chinese producing regions are quite vulnerable to severe climatic problems from September 5 or 10. Nevertheless, first detailed estimates about the volume to be processed are now available : between and MT. of paste in Xinjiang (equivalent to millions MT. of fresh tomatoes according to our data), between and MT. of paste ( millions MT. of fresh materials) in Gansu and again between and MT. in Inner Mongolia despite serious technical problems and delays for the new processing lines in this area. In total, the Chinese production should range between and MT. of tomato paste (between 3.3 and 4.2 millions MT. of fresh tomatoes), up from MT. in 2003 according to Tomatoland estimations. The poor quality of Chinese tools to record the actual total production and the volumes of tomatoes available in the fields makes it difficult for us to give you a more precise estimation at this stage. A trip to China within the next 10 days by Tomatoland should help us to give a more precise value. These figures could also be affected by Tunhe s ability to process in fully normal conditions till the end of the crop. Thanks to the cash money (about 45 millions US $) provided by COFCO company (see the article available in the Processors corner for more details), Tunhe factories have ran almost normally up to that stage according to the company internal sources. Other Chinese sources are indicating that COFCO has rather provided guarantees to Tunhe s bank to secure a new loan of 400 Millions Yuans (about 45 millions US $) but did not inject any money directly into Tunhe. In exchange, COFCO should get a share of all Tunhe incomes related the the current crop. Local sources also indicate that COFCO is also directly marketing the products of Tunhe on the International markets. The decision for COFCO to actually get involved in Tunhe s 7

8 operations has not been taken yet; meaning that Tunhe is still far away from a real recovery! In terms of prices, we have seen a small decrease of the offers available from China in the past weeks. 36/38 % aseptic paste is currently available between 500 and 530 US $ ( Euros / GBP) per MT. on FOB basis, giving C&F prices between 550 US $ per MT. for close destinations in Asia to 600 US $ per MT. for Europe. Prices vary mainly based on shipment period and it is possible to close better deals for immediate shipments. Thanks to an early start in Xinjiang, new crop goods should be available for shipment at the very end of August or latest very early September. The 2 largest processors, namely Tunhe and Chalkis are both reporting very high sales with only 15 to 25 % of the program still unsold, provided that they reach the expected quantity. Smaller packers in Xinjiang (an estimated production between and MT. of paste), Gansu and Inner Mongolia have sold a smaller share of their coming production and try hard to close quick shipments contract mainly through Chinese traders and brokers. OUR CONCLUSION : World crop to reach a record level! tomatoes, up almost 15 % from 2003! The main growth comes from Europe, up almost 14 %, North America, up more than 20 % and of course China, up more than 30 % from 2003! We insist that these figures are forecasts that will again be adjusted before the end of the crop; nevertheless, the predictions made at this stage of the crop are normally quite close to final figures (the difference was less than 3 % in 2003 between the August 28 estimation and the final output). Besides the extra acreage of tomato plantations in most regions except Turkey, the good weather conditions in Spring and now during the crop have turned a good crop into a record one, with the largest volume so far at 29.4 millions MT. in Although we entered the current crop with low stocks both in the USA, Europe and China, this production will inevitably lead to an over production situation and some stocks build ups. The growth of the consumption in Central and Eastern Europe, and at a lesser level in China, will not be able to compensate this additional quantity. This is no good news for tomato processors that were just started to enjoy better prices after difficult times in 2000 and Prices should indeed suffer from this extra volume, especially in Europe but also in the rest of the world; more companies could face financial troubles after the ones mentioned earlier in our report! Our latest estimation of the world tomato crop for 2004 now stands at 31 millions MT. of fresh 8

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