The tomato season is just over and the official report we have got from WPTC is recording a global production equivalent to 41,254,000 tons of fresh tomatoes that is only 3.4% more than last year.
Final quantities for the main world producers are the following (quantity in mt):
– California 13,018,000
– China 5,600,000
– Italy 5,300,000
– Spain 3,050,000
– Turkey 2,700,000
– Portugal 1,660,000
– Iran 1,350,000
– Brazil 1,300,000
– Tunisia 920,000
– Chile 850,000
Considering a global consumption recorded close to 39 millions tons fresh tomatoes equivalent and that we started the production this year with very little carryover, the market price should remain reasonably firm. On the other hands we notice some recent slow-down in the requirements above all in some countries in Africa facing serious problems in connection to the devaluation of their local currency. We believe this is only a short term problem.
From the supplier side main driving factor is the financial stress which is affecting many of them and above all those located in China where the domestic consumption is only representing about 20% of this year production.
As already mentioning in our last report of April, the lack of trust and reliability is limiting the chance of the Chinese to sell abroad important volumes before the start of the season. So now most of the quantity packed is still for sale and unfortunately many of the small-medium players are forced to finance their crop through private institutions which are lending money at an interest rate which may go up to 24% per year !
Under these conditions it is very difficult for them to keep the price to a reasonable level because very soon they must start paying the fresh tomatoes, the packaging, and so on.
Looking at the other main producing areas we can shortly comment:
EUROPE
Most of the production is used for the domestic consumption and thanks to the stronger Dollar more pre-season contracts have been concluded also towards customers inside and outside Europe traditionally sourcing from California and China. Quantity available for sale is very limited.
CALIFORNIA
Same as above, most of the production is used internally + quantities which are traditionally going to countries where preferential duty is granted. For sure some volume is still available for sale but generally speaking the financial position of all producers in this part of this world is very strong as well as interest rate paid is very low. Consequently chances to see major drop in selling prices is quite remote.
So from now on China is the real and only important source of supply for the global needs and today we are recording prices for 36/38% FOB TIANJIN somewhere between USD 800 to 850/mt while pre-season contracts were all concluded around USD 920-950.
What is very important to remember is that the Chinese production costs crop 2015 are probably ranging to levels which are very close to the today market price and consequently it is possible that many sales will be concluded below cost.
Selling below cost may force Chinese to reduce their production crop 2016 ?
Strong Dollar and a permanent situation of serious draught will suggest California to reduce their volume crop 2016 ?
Too early to answer to the above questions ……
Keep in touch