A combination of strong process tomato product inventories and a projected increase in this year's tomato crop likely will hold prices for products such as pizza and pasta sauces steady throughout 2003.
According to the California League of Food Processors (CLFP), as of Dec. 1, 2002, inventories of process tomato products (canned tomatoes, sauces and paste) are 14.6 percent above prior-year levels. (CLFP estimates of the total U.S. process tomato supply are based on voluntary processor reporting. Participating processors handle more than 91 percent of total U.S. tonnage of process tomatoes.)
A Jan. 31 CLFP report also stated initial contracts for process tomatoes would result in a crop of 10.9 million tons, which is 1 percent larger than last year.
According to Jack Snyder, head of field and grower relations for the California Tomato Growers Association (CTGA), the news may be good for pizzeria operators, but not for growers. Process tomato product demand is flat and processing giant Del Monte, posted a low bid of $49 per ton of tomatoes, well below the $52 per ton the CTGA proposed for its grower members.
"We're not sure where the price is going to end up, but what Del Monte's offer did is define the range," said Snyder, adding that Del Monte's price was 50 cents below the price paid to growers last year. "We'd like to get more, but with demand where it is, who knows what will happen."
Following a Feb. 4 meeting of CTGA's board of directors, the association published a statement calling Del Monte's bid "illogical." The low offer, the statement said, ignores increased costs of essentials like petroleum, fertilizers, pesticides, workers' compensation and insurance premiums.
The statement also accused California processors of aggressively building inventories to drive down finished product prices.
Chris Rufer, founder of Morningstar Packing, in Woodland, Calif., called Del Monte's bid a fair one.
"Tomatoes are the best alternative crop other than farm programs," said Rufer, referring to heavily government-subsidized crops such as cotton and rice. Growers of those, he said, receive more funding from government than it costs to produce the crop. "So with non-government programs, if you want to look at what you put in the ground as far as cost, and then what you get as revenue, as far as last year's ($49.50 per-ton) price, that makes it a very good crop relative to the others."
"We're not sure where the price is going to end up, but what Del Monte's offer did is define the range. We'd like to get more, but with demand where it is, who knows what will happen." Jack Snyder, head of field and grower relations for the California Tomato Growers Association
Greg Pruett, managing partner for Ingomar Packing in Los Banos, Calif., said his company posted a $50 per-ton bid in December.
"We decided back then that that was a fair price," said Pruett. "There was some hesitancy among the growers to accept a price below $50 because of the alternative of growing cotton. So we wanted to make sure we were able to contract with the growers we wanted."
Given the current imbalance between inventories and demand, Snyder and Rufer said they were perplexed that processors contracted for a larger crop than last year's.
Pruett, however, said the 10.9 million ton figure was requested before processors learned how much process tomato products remain in inventory. He now expects processors will reduce their requests.
"I am aware a number of cuts have been made from that 10.9 million-ton estimate," Pruett said. "How much? It's too early to tell, but some reduction has been made."
Blame it on El Niño
Looming water shortages in California could affect tomato growers in the state's midsection if more snow doesn't fall in the Sierra Nevada Mountain range in the eastern half of the state.
According to Pruett, the snow pack in the mountains was 150 percent of normal at the beginning of January, but it since has dwindled to half that.
This is crucial to farmland which lies west of the mountains. As the snow pack melts, the Sacramento and San Joaquin Rivers collect and carry the water to a large delta near Stockton, Calif. From there, two canals pump it to farmland and cities.
"To date, the reservoirs are a little higher than last year," Rufer said. "So right now there's no big water concern."
Pruett agreed, but said future crops could be in question.
"A bigger concern is that if it doesn't snow more this winter, the water levels will be drawn down in the reservoirs and become more of an issue for '04," Pruett said.
The dry weather appears to be the work of the meteorological whipping boy better known as El Niño. This year's change in the usual precipitation pattern has sent rain to areas such as Los Angeles, rather than over the Sierra Nevada Mountains.
Two wet weeks at the end of 2002 boosted hopes an El Niño year might end a three-year drought in the West. But that since has changed to a warm and dry start to 2003 in an area where, according to Pruett, only 11 inches of rain fall each year.
"Rain makes somewhat of a difference, but what really matters is snow in the Sierra Nevadas," he said. "The tomatoes here grow in what is almost a dessert. So what falls from the sky doesn't affect them that much."