Required Report - public distribution

**Date:** 5/13/2004

**GAIN Report Number:** PO4010

PO9999

**Portugal**

**Tomatoes and Products**

**Annual Report**

**2004**

**Approved by:**

![](media/image1.wmf)Lloyd Fleck

U.S. Embassy

**Prepared by:**

Maria do Monte Gomes

**Report Highlights:**

Portugal\'s tomato production reached 1.01 million tons in MY 03/04, a
two percent improvement over last year's poor crop; about 84 percent of
this amount was sold for processing. The output of 159,467 tons would
have been even higher, but high temperatures during the summer harvest
period destroyed around 100,000 tons of fresh tomatoes for processing.
Total exports in MY 03/04 are expected to increase by two percent to
around 120,000 tons.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Madrid \[SP1\]

\[PO\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 4](#production)

[Consumption 5](#consumption)

[Trade 5](#trade)

[Stocks 5](#stocks)

[Policy 5](#policy)

[Marketing 6](#marketing)

[PS&D, Fresh Tomatoes 7](#__RefHeading___Toc72549412)

[PS&D, Tomato Paste 7](#psd-tomato-paste)

[Trade Matrix, Tomato Paste 8](#trade-matrix-tomato-paste)

# Executive Summary

Portugal's tomato production for Marketing Year (MY) 04/05 (July-June)
is forecast to increase 33 percent from MY03/04 when yields were down
due to abnormally high temperatures that affected Portugal (and most of
Europe) from late July through mid-August. Total production is forecast
at 1.35 million tons (metric); over 88 percent (1.2 million tons) will
likely be processed. Production for fresh consumption is expected to
remain near MY2003/04 levels.

In MY03/04, production for processing of tomato products is estimated to
have been 857,674 tons, 18 percent below the production quota level of
1.05 tons allotted to Portugal under the EU's new threshold regime.

Production of processed tomato products in MY04/05 is forecast to
increase 13 percent from the MY03/04 production of 159,467 tons,
consisting mainly of tomato paste. In MY03/04, diced tomato production
was estimated at 4,444 tons and tomato juice production at 9,756 tons;
there was no production of whole peeled tomatoes. MY04/05 production of
these products is expected to be similar to MY03/04 levels.

Portugal\'s MY04/05 exports of tomato paste are forecast at 130,000
tons. The main export market continues to be the rest of the European
Union (EU), followed by Japan. Exports in MY03/04 are estimated to
increase by two percent from 117,446 tons in MY02/03.

Since Portugal is self‑sufficient in both fresh tomatoes and tomato
products \-- and is in fact a substantial exporter of tomato paste \--
there are few opportunities for U.S. exports of these products.

# Production

Seeding normally takes place in mid‑April to May. This year's seeding
(2004) is running smoothly with mild weather and almost no rain.

Total production for MY04/05 is forecast to increase 33 percent to 1.35
million tons, of which 88 percent, or around 1.2 million tons, is
expected to go to processing. Area planted and production for fresh
consumption are both expected to be similar to the previous year.
\[Note: Data in the PS&D Table for tomatoes for fresh consumption are
based on information provided by the National Statistics Institute. Area
data for tomatoes for processing in MY03/04 is updated, based on actual
figures from the National Intervention and Guarantee Institute (INGA),
reflecting declared area for that period.\]

Farmers initially thought that the MY 03/04 crop would be an
exceptionally large one. However, the abnormally high temperatures that
affected Portugal (and most of Europe) from late July through mid-August
destroyed around 100,000 tons of fresh tomatoes for processing.
Processors report that the low output of processed tomato products
(estimated at 145,267 tons) is also due to problems with deliveries from
producers. Some producers were afraid of increased loses during the
summer and shipped tomatoes of different maturities in the same
container. Processors report that this has caused a decline in
industrial yields and affected the color of the final product.

Roughly 80 percent of total Portuguese tomato production is in the
\"Ribatejo e Oeste\" and the \"Algarve\" areas. Until a few years ago,
most of the tomatoes for processing were produced on small (5‑10 ha)
units. This farm size now represents 10 percent of the total production
and has been replaced by modern farms of twenty or more hectares, which
allocate one-third of its area to tomato production using the most
modern technology. This new type of farm accounts for 70 percent of the
total tomato production. However, the structure of the industry is
changing, as an estimated 20 percent of the tomato production is grown
on even larger farms. Incentives from tomato processors have encouraged
cereal producers, particularly corn growers, to shift to production of
processing tomatoes on farms ranging from 10 to 90 hectares with new
direct‑seeding technologies. These farms are all irrigated. While the
lower cost of rural labor is one advantage that the Portuguese sector
enjoys as compared to other EU countries, costs of other inputs are much
higher than in the rest of the EU. Higher land costs seriously hurt the
sector.

**Tomato Use and Output by the Processing Industry (Metric Tons)**

  -------------- --------------- --------------- --------------- ---------------
                 **2002/2003**                   **2003/2004**   

                 **Fresh**       **Processed**   **Fresh**       **Processed**

  Paste          810,889         137,249         830,755         145,267

  Whole Peeled   0               0               0               0

  Other          9,340           3,902           6,549           4,444

  Juice          14,480          12,306          20,370          9,756

  **Total**      **834,237**     **153,457**     **857,674**     159,467
  -------------- --------------- --------------- --------------- ---------------

Source: National Intervention and Guarantee Institute (INGA).

**Tomato Contracted by the Processing Industry**

**Metric Tons**

  ------------------------------------- ---------------------------------
  **2004/2005**                         

  Paste                                 1,166,271

  Other Products                        33,450

  TOTAL                                 1,199,721
  ------------------------------------- ---------------------------------

# Consumption

Processed tomato products are not an important part of Portuguese
cuisine so there is no significant direct consumption of tomato paste in
Portugal. Data for domestic consumption in the PSD table includes 20,000
tons (Post estimate) of paste transformed into tomato powder (which is
all channeled for export) and other tomato products (mainly pizza
sauce).

# Trade

Portuguese exports of tomato paste in MY 02/03 are estimated at 117,446
tons, ten percent below MY 01/02. The main export market continues to be
the rest of the European Union (EU), followed by Japan. Sales to the
United States are minimal, accounting for only 111 tons of total exports
in MY 02/03. Total exports in MY 03/04 are expected to increase by two
percent to around 120,000 tons.

Exports from China continue to worry the Portuguese industry. China
exported about 50,000 tons of tomato paste to the EU during this period.
Although quality is reportedly not very good, Portuguese processors know
that Chinese producers adapt quickly and will likely be producing a
better quality product in the near future. With this competition in
mind, Portuguese processors are already looking for alternative products
to replace tomato paste. The EU Commission is also reportedly worried
about this new source of product.

# Stocks

Stocks of tomato paste have decreased to an estimated 1,000 tons in MY
03/04. Stocks are expected to be maintained at this level in MY 04/05.

# Policy

In MY2001/02, the EU implemented a new threshold regime for tomatoes
(which replaced the old quota system). Portugal's maximum threshold,
1.05 million tons, is considered by the industry to be a little over
what the country can actually produce in a normal year. As a result,
processors are happy with this new regime, since they now know in
advance what their final costs will be and thus are able to negotiate
with producers at international market prices.

Under this new threshold regime for processed tomato products, Portugal
is allowed to produce up to 1.05 million tons of fresh tomato
equivalent. The regime is more flexible than its predecessor, since it
places no restrictions on the type or quantity of each processed tomato
product produced (except that it has to be a type of product that was
included under the previous quota regime). The subsidy for tomatoes,
€34.50/ton, is paid directly to the producer organizations for the
quantity of raw material produced. If a member state exceeds its
national threshold limit, aid will only be paid up to its threshold
limit. However, if there are one or more member states that do not use
their total national thresholds, their unused aid will be transferred,
uniformly, to the member states that overrun theirs.

Producers, however, have been adapting quickly to the new regime.
Although the Portuguese sector is still very fragmented (there are
currently 34 producer organizations), the top 7 are responsible for 50
percent of total production and one of these is responsible for 15
percent. As a result of this rapid adaptation, an Association of
Producer Organizations -- Produland -- has been formed to start
operating during the 2004/2005 campaign. Produland already has six
members and it is expected that other producer organizations will join
the association. However, the overall number of producer organizations
is still too high. Reportedly, twenty producer organizations would be
enough to handle the tomato sector in Portugal. Therefore, it is
expected that the number of producer organizations will continue to
decrease as smaller organizations merge with larger ones.

# Marketing

Since Portugal is self-sufficient in both fresh tomatoes and tomato
products -- and is in fact a substantial exporter of tomato paste \--
there are few opportunities for U.S. exports of these products.

[]{#__RefHeading___Toc72549412 .anchor}

# PS&D, Fresh Tomatoes

  -------------------- -------------- ---------- ---------- ---------- ---------- ----------
  **PSD Table**                                                                   

  **Country**          **Portugal**                                               

  **Commodity**        **Fresh                                         (HA)(MT)   
                       Tomatoes**                                                 

                       2002           Revised    2003       Estimate   2004       Forecast

                       USDA Official  Post       USDA       Post       USDA       Post
                       \[Old\]        Estimate   Official   Estimate   Official   Estimate
                                      \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]

  **Market Year                       07-2002               07-2003               07-2004
  Begin**                                                                         

  Plnt For Fresh       0              1500       0          1500       0          1500
  Consump                                                                         

  Plnt For Processing  0              11851      0          12466      0          12500

  TOTAL Area Planted   0              13351      0          13966      0          14000

  Harv. For Fresh      0              1500       0          1500       0          1500
  Cons.                                                                           

  Harv. For Processing 0              11851      0          12466      0          12500

  TOTAL Area Harvested 0              13351      0          13966      0          14000

  Fresh Sale           0              160000     0          160000     0          160000
  Production                                                                      

  Processing           0              834709     0          857674     0          1199721
  Production                                                                      

  TOTAL Production     0              994709     0          1017674    0          1359721

  TOTAL SUPPLY         0              994709     0          1017674    0          1359721
  -------------------- -------------- ---------- ---------- ---------- ---------- ----------

# PS&D, Tomato Paste

  -------------------- -------------- ---------- ---------- ---------- ---------- ----------
  **PSD Table**                                                                   

  **Country**          **Portugal**                                               

  **Commodity**        **Tomato                                        (MT)(MT,   
                       Paste,28-30%                                    Net        
                       TSS Basis**                                     Weight)    

                       2002           Revised    2003       Estimate   2004       Forecast

                       USDA Official  Post       USDA       Post       USDA       Post
                       \[Old\]        Estimate   Official   Estimate   Official   Estimate
                                      \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]

  **Market Year                       07-2002               07-2003               07-2004
  Begin**                                                                         

  Deliv. To Processors 810889         810889     1070000    830755     0          1166271

  Beginning Stocks     13500          13500      1000       3000       5000       1000

  Production           137249         137249     165000     145267     0          165000

  Imports              0              0          0          0          0          0

  TOTAL SUPPLY         150749         150749     166000     148267     5000       166000

  Exports              120000         117446     125000     120000     0          130000

  Domestic Consumption 29749          30303      36000      27267      0          35000

  Ending Stocks        1000           3000       5000       1000       0          1000

  TOTAL DISTRIBUTION   150749         150749     166000     148267     0          166000
  -------------------- -------------- ---------- ---------- ---------- ---------- ----------

# Trade Matrix, Tomato Paste

  ---------------------- ----------------- ----------------- ---------------
  **Export Trade                                             
  Matrix**                                                   

  **Country**            Portugal                            

  **Commodity**          Tomato                              
                         Paste,28-30% TSS                    
                         Basis                               

  Time Period            July-June         Units:            Metric Tons

  Exports for:           7/02-6/03                           **7/03-6/04**

  U.S.                   111               U.S.              67

  Others                                   Others            

  United Kingdom         29828             United Kingdom    31754

  Netherlands            15209             Netherlands       18359

  Germany                14697             Germany           5133

  Sweden                 6491              Spain             4426

  Italy                  6347              Ireland           3565

  Spain                  5288              Sweden            2887

  Ireland                5171              France            2661

  Denmark                2943              Denmark           1350

  Other EU-15            6708              Other EU-25       3770

  Japan                  8959              Japan             4390

  Total for Others       101641                              78295

  Others not Listed      15694                               5152

  Grand Total            117446                              83514
  ---------------------- ----------------- ----------------- ---------------