TOMATO MARKET REPORT. 1

Transcription

1 ISSUE N 5 April TOMATO MARKET REPORT COMPREHENSIVE NEWS & ANALYSIS OF THE WORLD PROCESSING TOMATO MARKET Europe Numbers too optimistic? USA High inventories confirmed! China EU to take actions against China? Turkey Domestic market improving! S. America Needs in Brazil? Australia Lower crop confirmed! C. & E. Europe Low demand! N. & W. Africa Tunisia ahead to export! Middle East Waiting for the end of the war! Japan & S. East Asia SARS virus damaging local economies! Breaking News Acorex, the new Spanish cooperative, experiencing financing difficulties? Key number 8 months stocks in USA on March 1. Alerts Snow from North Italy to Turkey! Our Sponsor 1

2 Note : Exchange rate as of April 10 th.. is 1.07 $ per Euro. EUROPEAN UNION : Are numbers too optimistic? Several sources confirm an increased demand in very recent period. Final users as well as some processors are indeed looking for industrial tomato products for delivery before the next crop. We have ourselves recorded demands for 28/30 % and 36/38 % Cold-Break paste, for Hot-Break pizza sauces in various concentrations as well as for diced tomatoes both in cans and aseptic bags in drums. Also according to our information, it seems that some of these demands just cannot be fulfilled, at least for some speciality products ; and we have more than 3 months to go before the first deliveries of This situation had no effect on market prices yet but could lead to new price hikes after the small drop mentioned in our last report. Latest deals on Tomatoland trading floors were still made around 680 Euros (720 $) / MT. and 800 Euros (850 $) / MT. respectively for aseptic 28/30 % and 36/38 % paste on Ex-Works basis. Prices for pizza sauce or passata are not so clear but exceed 425 Euros per MT. for 10/12 % again on FOT basis. For diced tomatoes, buyers should not expect to pay anything less than 480 Euros (510 $) per MT. also ex-works when goods are available. Some European traders expect even more tension in the coming weeks as not all processors have fully informed their customers about the lack of product yet. We are not in a position to confirm this opinion. Moving to new crop, one should not focus too much on the numbers given in our last report. Reported contracted volumes in Europe turned out very high and, when compared to 2002 crop, the increase seems tremendous! However, one should know that : Italian volume (over 6 millions metric tons) is overestimated by South Italian packers always reporting quantities exceeding actual volumes; following last crop disaster in several regions, many processors have contracted larger volumes to secure raw materials supply; last, volume estimates are made using optimistic values in terms of field yields. Taking such elements into consideration, the Italian crop is expected to range between 5.4 and 5.8 millions MT., a much lower volume; analysts also doubt Spain can reach 1.8 millions MT. After looking at the production side, it is also necessary to have a closer check at the stock situation. The stock as of August 1 st. is calculated by deducting any volumes to be delivered from 2002 contracts from all undelivered or unsold quantities from 2002 crop; using this method, we can clearly state that the European stocks are negative! In some cases, the sellers have up to 10 % of the next crop already reserved by old engagements; that figure goes up to 20 % or above in selected products such as aseptic diced tomatoes! How do these elements turn into prices for new crop? By an undeniable price increases for all products and from all 2

3 sources! The question is by how much? According to our observations so far and by comparing contract prices for similar products and conditions (by comparable suppliers) made for new crop and average prices in 2002 (all contracts made between March and August 2002), our answer is : between 5 and 8 % for 28/30 % CB / HB, between 6 and 8 % for 36/38 %, between 10 and 15 % for crushed and diced tomatoes and between 7 and 10 % for pizza sauces and passata. Price wise, here is the situation for aseptic products in new drums with deliveries crop to crop on ex-works basis : 28/30 % is between 600 and 640 Euros ( US $) per MT.; 36/38 % between 750 and 800 Euros ( US $) per MT., 12/14 % pizza sauce between 350 and 380 Euros ( US $); Diced tomatoes between 360 and 390 Euros ( US $) per MT. For delivered prices, add between 30 Euros (North Italy to South Germany) and 80 Euros (Extramadura to Sweden) - for more details check our updated Transport costs April 2003 soon available in our website. Discounts based on returnable or used drums or shorter delivery periods can reach 3 to 4 % to be deducted to prices above. Also to be noticed are some offers from newcomers, both in Spain and Italy, at slightly lower prices according to brokers; although these prices could indeed represent good opportunities for buyers on limited quantities, they do not reflect the general market prices so far. Where are prices going to go till new crop and after? Although difficult negotiations could lead to some price reductions here and there, we do not see any reason why prices should drop significantly before the new crop; only a serious decrease in consumption or tougher than expected competition from China (see below) could affect market prices downward. On the other hand, if spot demands mentioned above grow larger before the new crop, one could expect prices to move upward; we again doubt that these potential demands could affect 2003 crop prices significantly. One unpredictable element people have learned to be more cautious about since last year is of course the weather; should we have climatic troubles again and anything can happen then as expressed by a experienced trader. That leads us to advise buyers to avoid too much speculation as the price to pay could be high this crop! As of May 2004, European Union will extend to 10 more countries and 75 millions people. How will that affect the tomato products market within the EU? Here are some elements that could help us answer this question : Current trade for tomato products between EU and the 10 new members is limited at about MT. in 2001/02 representing MT. of fresh tomatoes according tour calculations : paste exports from EU is stable around MT. per year; canned tomatoes exports have doubled to reach about MT. in 2001/02; ketchup and sauces sales are almost equal at about MT. from both sides (Malta and Czech Republic are exporters to EU); last, EU sells about 2000 MT. of puree per year. 3

4 Six of the ten countries are fresh tomato processors (in order of importance, Poland, Hungary, Slovakia, Malta, Czech Rep. And Cyprus); they have been granted a total EU quota (volume to be given subsidy rules and amounts will be adjusted on a 3 to 5 years period depending on countries) of MT., a quite large volume in our opinion. Trade barriers, mainly import duties, are due to disappear but, in order not to destabilize the markets by the suppression of all tariffs, free trade will be instituted progressively according to bilateral association agreements for each individual product. Exports of tomato products to EU from new members pay a maximum of 14 % and, in many cases, enjoy free duty quotas barely fulfilled. Estonia, Lithuania, Latvia, Slovakia, Czech Republic and Slovenia apply similar duty rates below 15 % (0 % for all products in the first 2 countries above!) but EU products pay very high custom duties in Malta, Hungary, Cyprus and Poland, between 40 and 80 % (even more than 100 % in Poland under certain circumstances). And, as of today, no reductions have been clearly decided We therefore believe that old EU producing countries should not benefit very much of this new markets for their paste exports, at least in the near future unless drastic tariffs reduction take place in Poland, a country which accounts for more than 50 % of the total new European population. On the other hand, we expect continuous increases in the sales of canned tomatoes as GDP improves in these countries; sales of EU origin ketchup and sauces could also benefit from the enlargement although local industries are now strong enough to fight competition on some of these markets (Heinz and Orkla companies are already processing finished products in Poland). As in past years, the French market for retail packed tomato products reveal quite competitive; it is one the worse in Europe as explained by an Italian processor. The leading players for retail brands are Russo ( CPC and Giaguaro ( from South Italy for canned peeled tomatoes and paste, passata in tetrapaks when Cabanon ( and Louis Martin are leading the game in Ketchups and cooked sauces. Crop 2003 forecast : Snow and cold weather affect coming crops in several areas! Italy : As said above, analyst now forecast 2003 crop between 5.4 and 5.8 millions MT., well below the contract intentions which stands almost 1 million MT. higher. One should wait for more news from the field before a more reliable estimate is given. Snows and very low temperatures have badly affected very beginners, the very early plants according to Parma sources. No losses volume can be given at this stage but these negative conditions will not allow a very long crop as expected by farmers. The situation is South Italy is reported normal so far. Spain : local conditions have been very favourable so far in Extramadura and Navarra. 4

5 Some Spanish processors have contracted fresh tomatoes with Portuguese OPs (producers organisation) in larger quantities than in previous years; that shows the new competition for fresh materials after the arrival of 3 cooperatives (Acorex, Tomate del Guadiana and Agro Conserveros Extremenios) in the processing industry. As said on our cover, unconfirmed sources have informed us about financing difficulties faced by Acorex, the new factory in the Badajoz area; we have not been able to verify this information. As for Italy, one should wait some more weeks to confirm the significant increase red in the contracts figures; total contracted volume stand at 1.8 millions; the volume contracted with Portuguese Ops does not account in this total. Greece : Because of the postponement of the limit date for contract signature between farmers and processors, the Greek situation remains quite unclear. Prices of raw materials remain overall stable with an increase never exceeding 2 %. The drop in planted areas in the North (Serres area) should be compensated by small increases in the Central region near Domokos. That should take Greece to a total volume around 1 Million MT. as previously announced. Snows in North Greece and global cold temperatures in the country will at least delay the beginning of the crop, no good news in the current stock situation. Portugal : Local conditions are favourable up to now; estimates for 2003 crop based on contracts still stand at 1.07 millions MT. That volume includes the quantities grown in Portugal but to be processed in Spain, up to MT. according to some local sources France : No new information available. USA : High inventories confirmed! CLFP ( figures as of March 1 st. show US inventories above 7 millions short tons (6.37 millions metric tons), 15 % higher than in 2002 at same period; that volume represents almost 8 months of current consumption (monthly disappearance over the last 9 months). One good news though is a recovery of the consumption, up 5.5 % from last crop again according to CLFP data from June 2002 till March According to unconfirmed sources, prices concluded at a Heinz auction for a volume equivalent to tons of fresh tomatoes (in replacement of volumes previously processed at Stockton factory recently closed) were below 25 cents a pound (550 US $ or 515 Euros per MT. of 30/32 paste, cost of packaging not included). This is almost 20 % below prices for a similar contract made few years ago! This information, if true, confirms the pressure on prices mentioned in our previous report and lead to speculation on the financial health of some Californian packers. Available in the Industry News heading of our homepage and soon in the Economic Information folder : A breakdown of California tomato paste capacity in 2002, factory per factory. 5

6 Crop 2003 forecast : no problem so far! TURKEY : Delays expected in the South! With some companies still holding stocks of paste, mostly in cans, Turkey, together with Iran, is the most competitive origin at the moment. You can find offers from this origin in our Tomato Trading Board (TTB). Also available in the TTB, various demands for paste, diced tomatoes and pizza sauces. Local processors fear some new tension on the financial markets following the crisis in Iraq. Interest rates for export loans have recently gone up to 7-8 % (from 5 %) which directly affects the competitiveness of local companies. On the other hand, Turkish packers start to look at Iraq as a new potential market in the near future; many obstacles will need to be overcome before such business can resume after more than 10 years of interruption. The domestic market has expreienced a welcome recovery in the past 2 months and local players now expect limited carry over stocks in canned products. It should be the same for aseptic paste as current stocks are quite limited crop prices are fluctuating according to market news and Euro / US $ exchange rate. At this stage, aseptic 28/30 % in new drums is offered around 650 US $ (610 Euros) per MT. FOB; 36/38 % stands around 750 US $ (700 Euros) per MT. and diced tomatoes at 400 US $ (370 Euros) per MT. Negotiations with Japan and Middle East are reported going well at the moment but volumes of sales remain limited so far. The demand by Turkey to increase the duty free quota for diced tomatoes exports to Europe has been officially rejected, meaning all imports will have to pay 14.4 % duty till January That situation may force Turkish processors to reduce their price for EU customers. Available in the Economic Information folder : A breakdown of Turkish production in 2002, company per company. Crop 2003 forecast : Cold weather! Very low temperatures, even well below 0 C at night, and snow as south as Izmir area will delay plantings in most regions. Hopes for very early tomatoes are probably gone. Latest estimates still stand between 1.4 and 1.5 millions MT. of fresh tomatoes when accounting raw materials for paste and diced as well as for sun dried tomatoes. We should have a better view of the situation 3 weeks from now. One important correction needs to be made : the price for fresh tomatoes indicated in our last report, Turkish Liras, is wrong. The actual price negotiated with farmers is rather Turkish liras, 45 US $ at today s rate. Based on an expected exchange rate around 2 millions TL per US $ by year s end (1.65 millions today), the cost of 28/30 % is higher that we indicated close to 500 US $ (

7 Euros) per MT., making Turkish processors more competitive than European ones; cost of production in Europe for aseptic 28/30 % goes between 510 and 570 Euros per MT. according to 2002 figures. CHINA : Europeans processors taking action against China? China is definitely empty and no buyer should expect any new significant volume to be shipped before next crop by end of August when the first goods reach Tianjin port if no delays occur in the harvesting (see below). Talking about 2003 crop, and despite the expected great increase in production (see below), the 2 major processors are very confident to sell their total production without difficulties. Traditional markets such as South Italy (up to MT. of paste according to some estimates), Russia (up to MT.), Middle East (probably up to MT.) and Asia (up to MT including Japan) could indeed absorb the bulk of the production. Significant volumes have been already sold. Price of 36/38 % CB is said to be above 520 US $ (485 Euros) per MT. FOB Tianjin but confidential information reveal sales made below the 500 US $ official limit Do not hesitate to question us for more details! But the picture does not look so bright for Chinese processors : first, European processors, especially in Italy, are quite eager to block Chinese products as much as possible. No easy trade barrier can be established since China joined the WTO; the only possible way to stop or rather slow Chinese sales to EU would be to prove that Chinese paste does not fully respect the EU regulations; according to our information, that will not be easy but Chinese processors should be very careful on the quality of the goods to be shipped to Europe! Second and more surprising, Chinese paste sales may suffer from the deadly SARS pneumonia virus. Reports from Japan seem to indicate that buyers there start to be cautious about Chinese origin goods. Supposed increased demand for Turkish textiles, preferred to Chinese ones for the same reason, in very recent days, seem to show the same trend Although perfectly irrational (the virus can only survive at best a few hours outside the human body according to World Health Organisation), such elements should be taken into consideration in the Western world! Chinese sources are not confirming such a problem at this stage. We shall keep you posted. Available in the Economic Information folder : A breakdown of Chinese production in 2002, company per company. Crop 2003 forecast : still uncertain volume! The late seeding because of wet soils and the low temperatures in the past weeks (with many frosts) will lead to a delay of 10 to 12 days according to local specialists. The volume of the 2003 crop is still very uncertain! With more than 20 new lines installed, China has increased its production capacity by more than 25 %! Will that turn into 7

8 the same increase in actual production? The Chinese Canning Association has now reduce its initial forecast from MT. (4.1 millions fresh tomatoes according to our calculation rule) of paste down to MT. (3.6 millions fresh) at maximum and possibly MT. (3.3 millions fresh), between + 35 % and + 50 % compared to MT. in 2002 according to Tomatoland estimates. Forecast can also be made by adding individual expected productions : between 180 and MT. for Tunhe ( and Chalkis ( (145 and 110 in 2002), MT. for Tianye ( MT. for the rest of Xinjiang, 20 to MT. each for Gansu and Inner Mongolia make a total between MT. and MT. of paste for Although it is way too early to make good forecast, one could expect China to process at least MT. of paste next crop, more than MT. above 2002 volume! Middle East : Everybody waiting for the end of the war in Irak! Business is currently quite as most players prefer to deal on a day-to-day basis till the situation in Irak is settled down. One interesting element is the very strong demand for food for Irak humanitarian aid; at this stage, it only concerns basic foodstuffs but no tomato products yet according to packers in Dubai. Local buyers have already contracted significant volumes with China for 2003 crop. As local packers mix Chinese and Turkish materials to obtain the right product ( China brings colour and Turkey aroma as described by a large industrial), they also enter negotiations with Turkey at the moment : price indications are quite low, especially for pre-financed products (with full payment in May-June), below 650 US $ (610 Euros) for 36/38% aseptic paste! Offers for regular contracts are similar to the ones mentioned above by Turkish processors, close to 750 US $ per MT. FOB Izmir. On the selling side, Iran, still holding significant stocks in aseptic bags and cans, are giving very aggressive prices to buyers abroad. 36/38 % paste below 650 US $ (610 Euros) seems now achievable. Dasht Neshat company has informed us that they are currently installing a filling machine for 2 to 5 Kg. stand up pouches; products should be available shortly; do not hesitate to contact us for inquiries. South Italian processors of canned peeled tomatoes are experiencing some great difficulties in their exports to Saudi Arabia since the beginning of the year. Volumes have dropped by 60 % as unexpected competition from Taiwan (!) is undercutting high Italian prices. Crop 2003 forecast : no information yet! 8

9 North and West Africa : Tunisia ahead for exports! As indicated in our last report, Tunisian processors are looking to export tomato paste, mainly in cans. Thanks to low costs and plan to compete with Europe and Turkey. AUSTRALIA : drop confirmed! The latest crop estimates ranges between and MT. of fresh tomatoes, down about 20% from initial program. CHILE & Latin America : needs in Brazil? Tomatoland has received inquiries from Brazil for aseptic diced tomatoes. These demands could be the result of the short Australian crop. Crop 2003 forecast : Chile and Argentine final figures soon available Central & Eastern Europe : Slow market! Russia is relying on existing contracts with China and cheap products from Iran, Uzbekistan and South Russia. Local demand is weak and Turkish processors have seen their sales dropping in recent weeks. Tomatoland has received very small inquiries from Poland and Czech Republic. Local buyers start to work on 2003 crop already. Demand for canned products is still growing at a good pace. As stated above, it is too early to properly evaluate the impact of the EU enlargement on the local markets. Crop 2003 forecast : EU enlargement to impact local productions incoming years? Local processors wonder whether the EU enlargement and the establishment of subsidies to be paid to farmers will impact local production. It is obviously too early to answer this question. South East Asia & JAPAN : The SARS virus issue! The growing SARS virus problem start to seriously impact local economies, especially in the countries relying much on tourism. If no solution is found quickly, some analysts predict some effects on the local consumption. OUR CONCLUSIONS : An overall balanced situation in 2003? After expressing some concerns on the quantities of contracted tomatoes worldwide, we now tend to be less worried (from the processors point of view) as the actual situation could be a little different. Except for the USA where building stocks could become quite problematic for local processors, the 2003 world production increase should be around 15 % from 2002; see our updated World Production Estimates in the Economic Information folder for more details. Given the stock situation in all main producing countries (EU, Turkey and China), it is reasonable to think that the market could absorb this production 9

10 increase unless we face a significant drop in consumption next year. This is not the most foreseeable scenario as the new growing markets for tomato products, mainly in Central and Eastern Europe, should compensate the possible drop in Western Europe and in South East Asia. We need to say at this point that this global overlook of the market should not hide possible difficulties for certain processing areas or for some specific items because of great differences in production costs and trade barriers. Last, and also very important, it is quite clear that new climatic troubles like the ones we experienced in 2002 would have severe effects on the supply of tomato products worldwide. Within European Union, prices should remain higher than in 2002 (before the crop) as many processors are facing higher production costs and, more important, can hardly survive at low levels of prices. As said above, the increase observed so far is below 10 % in most cases; this is not enough as we need at least 10 % to recover from our previous losses told us an Italian processor. After so many years of a buyers controlled market, things are not so easy to change. Outside Europe, the pressure of China is much more present but figures given above clearly shows that there is space for other processors as well. Differentiation and good timing will be the key ingredients to compete efficiently with China again this crop. One word about the USA : the local situation is worsening as large inventories now take prices down after a long strong resistance from processors. This crop has also proven the difficulties of US processors to supply tomato products outside their domestic market. We believe that the industry will have to make some adjustments to survive in the coming years. Visit now the new Tomato Trading Board!! Efficiency and savings in sales and supplies!! The Tomatoland Staff 10