At the end of November 2014 we have published the Tomatoland Market Report and since then we must record important developments mainly in connection to the significant movement of the exchange rate between USD and EURO.

As you know at the time of the above report exchange rate was still around 1 Euro = 1.25 USD but then starting from January 2015 the USD was getting stronger and stronger or if you like the Euro weaker and weaker…. at the point that:

First forecast was suggesting a crop size at 15 millions short tons (14 millions in 2014) or about 13.7 millions metric tons but from one side the position of the water supply has not improved and then more important the above exchange rate movement finally suggested California packers to cut the production forecast more significantly and now the latest news are talking about a crop at 14.2 millions.

They are planning to limit the production and for this reason offering to the growers a fresh tomato price about 10% cheaper than last year. Still difficult to say how much will be the final output but we are moving from a first forecast of an increasing volume down to same as last year or below that.

So first consideration is that global production 2015 will still be larger than 2014 but we are probably already 1.8 – 2.0 millions tons below the first forecast. Let’s say possibly only about 5-7% larger than demand.

Second consideration is that most of the European customers will find more convenient to buy in Europe. Same decision will be taken by other customers based outside Europe which are traditionally not buying in China (for quality or different reasons). So all together we can notice a clear change in the market flow with less volume exported from Califonia and China in favour of an increasing sale from European countries.

For your information on the contrary we are not recording significant changes in comparison with Tomatoland report for the new crops in other major producing areas such as those in Europe and Turkey.

About the market price at this exchange rate level we can expect European prices remain quite firm and on the contrary a weakening position for all those countries linked to the USD currency.
In this respect the producers in California will be able to hold their selling strategy to a reasonable price level simply because there are only few financially strong companies covering the total production whose destination is more than 80% sold in the domestic market and/or inside areas which are protected by preferential duty systems (Canada, Central-South America, …).

More difficult is the position of China exporting about 85% of the production which is split among many producers often small and financially very weak.

Nevertheless we are still at the beginning of the game, planting operation will start soon and only around the end of May a more precise understanding about the final output will be available.

More news available coming soon….