Voluntary Report - public distribution

**Date:** 5/31/2007

**GAIN Report Number:** CH7040

**China, Peoples Republic of**

**Tomatoes and Products**

**Annual**

**2007**

**Approved by:**

![](media/image1.wmf)Maurice House

U.S. Embassy

**Prepared by:**

Jorge Sanchez and Zhang Lei

**Report Highlights:**

China's fresh tomato production is forecast to reach 37.2 metric tons
(MT) in MY 2007/08, and processing tomato production is expected to
reach a record 5.2 million tons. China's tomato paste exports are
forecast at 650,000 tons in MY2007/08. Low stocks accounted for the
slight decline in exports from the estimated 675,000 tons in MY2006/07.
Russia replaced Italy as the largest buyer of China's tomato paste as a
result of new Italian customs regulations discouraging tomato paste
imports.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Beijing \[CH1\]

\[CH\]

Table of Contents

[**Executive Summary 3**](#executive-summary)

[Production 3](#production)

[Trade 4](#trade)

[Consumption 6](#consumption)

[Marketing 7](#marketing)

[Statistics Tables 9](#statistics-tables)

[Table 1 Fresh Tomatoes PS&D Table 9](#table-1-fresh-tomatoes-psd-table)

[Table 2 Tomato paste PSD table 10](#table-2-tomato-paste-psd-table)

#   {#section .unnumbered}

# Executive Summary

China's fresh tomato production is forecast at 37.2 tons (MT) in MY
2007/08 (July-June), a slight increase from the previous year in
response to growth in processing tomatoes production, which is expected
to reach a record 5.2 million tons. In the next two to three years Inner
Mongolia's processing tomato acreage will expand facilitating larger
regional production.

In MY2007/08, China's tomato paste exports are forecast at 650,000 tons.
Low stocks accounted for the slight decline in exports from the
estimated 675,000 tons in MY2006/07. In 2006, Russia replaced Italy as
the largest buyer of China's tomato paste as a result of new Italian
customs regulations discouraging tomato paste imports.

# 

# Production

While processing tomato production will increase steadily in the next
two to three years due to strong demand and expanding acreage in Inner
Mongolia, production for tomatoes for fresh consumption will not vary
significantly from the previous years. China's total tomato production
is forecast at 37.2 million tons, up two percent from an estimated 36.5
million tons in MY2006/07. This is mainly attributed to increases in the
processing tomato production sector. Tomato production for fresh
consumption is forecast at 32 million tons in MY2007/08, and processing
tomato production is forecast at 5.2 million tons, of which, 4.6 million
tons account for tomato paste production. Tomato paste production is
forecast at 750,000 tons in MY2007/08, a 5-percent increase from the
previous year fueled by favorable prices in Xinjiang and greater
availability of processing material as a result of expanded acreage in
Inner Mongolia.

China's tomato acreage is forecast at 845,000 hectares in MY2007/08,
about 5,000 hectares more than the estimated 840,000 hectares in
MY2006/07. Fresh tomatoes are produced in all Chinese provinces, with
Shandong, Xinjiang, Hebei and Henan being the top tomato-producing
provinces. These four provinces account for over half of China's total
production. The top processing tomato-producing provinces are Xinjiang,
Inner Mongolia and Gansu provinces and contribute over 90 percent of
total processing tomato production.

Industry sources indicate that processing tomato acreage in Inner
Mongolia will expand steadily in the coming years, driven mostly by
strong world demand for processed tomatoes, andparticularly for paste.
Since 2005, some of the major Chinese tomato paste producers have begun
expanding production in Inner Mongolia due to Inner Mongolia's proximity
to Tianjin port (Northern China), where 85 percent of China's tomato
past is exported through. This trend has taken advantage of reduced
transportation costs as it holds cost and time advantages over Xinjiang
production. A further advantage in Inner Mongolia's' processing tomato
production is the rich soil as it is highly favorable for processing
tomato planting. Information obtained during a crop survey for this
report revealed that Inner Mongolian tomatoes contain soluble solids at
higher levels than Xinjiang tomatoes. These more efficient conversion
ratios make Inner Mongolian tomatoes more suitable for processing.
Industry sources have indicated that five tons of Inner Mongolian
tomatoes can produce up to one ton of tomato paste (tomato soluble
solids 28-30 percent), while it takes at least six tons of fresh
Xinjiang tomatoes to produce the same amount of paste.

Availability of tomatoes for processing limits China's tomato paste
production. According to industry statistics, currently, there are 67
tomato paste processors in China, 40 located in Xinjiang, 19 located in
Inner Mongolia, and the other 8 located in Gansu Province. The 67
factories' annual producing capacity amounts to approximately one
million tons of paste and require six to seven million tons of fresh
tomatoes. However, China's total paste tomato production is well below
capacity at around 4-4.5 million tons.

Tomatoes for processing are planted in April and harvested in July.
Tomato paste is produced during mid July to mid September. Market
intelligence shows that new U.S. tomato varieties that have been
recently introduced in Xinjiang have prolonged the harvest season and
increased the utilization of processing equipment. China's processing
tomatoes are priced at US\$35-45/ton, significantly lower than the other
major producing countries. Unlike other food processing industries,
China's tomato paste production is highly concentrated with the top
three Xinjiang-based processors producing over 80 percent of China's
total tomato paste. The top two producers are publicly listed companies.

Industry sources indicate that tomato soluble solids (TSS) of 28-30
percent account for about 60 percent of China's total tomato paste
production, and TSS 36-38 percent account for the other 40 percent.
Paste is usually packed in an aseptic bag with a steel drum or a wooden
bin. Normally, bulk packed tomato paste is the primary material used for
the manufacturing of other tomato products, such as small canned tomato
paste, tomato sauce, ketchup, and tomato powder. Generally speaking,
about 80 percent of China's bulk packed paste production is directly
exported; 10 percent is reprocessed into low dense paste, small packages
for export, and 10 percent is reprocessed for domestic consumption.
However, in the future, more bulk packed-tomato paste is expected to go
to deep-processing factories and converted into value-added products
with higher returns to producers. In addition, China's industry has
realized that low-value products (mainly high dense and bulk packed
tomato paste) exports are unsustainable, and not suitable for the
industry's long-term development.

Chinese governments encourage the development tomato processing
industry. In January 2007, the Ministry of Agriculture (MOA) of China
released the "11^th^ Five-Year Plan for Agricultural Products Processing
Industry", which lists developing tomato processing industry as one of
the priorities of fruit and vegetable processing industries. The Plan is
that Inner Mongolia, Xinjiang, Gansu and Ningxia should develop the
tomato paste industry in China. Some of the provisions of this new
policy give tomato factories favorable tax and administrative
preferences.

# Trade

China's tomato paste (H.S. code 20029010) exports are forecast at
650,000 tons in MY2007/08, a 4-percent decline from the estimated
675,000 tons in MY2006/2007.

Between the months of July 2006 to March 2007, China exported 553,138
tons of tomato paste, a 20-percent increase from the same period of the
previous marketing year, mainly attributed to tight supplies in the
international market. In 2006, the world's top tomato paste producers:
United States, Italy, and Spain all suffered poor harvests due to
unfavorable weather conditions. The reduced supplies in traditional
producing markets led to tight world supplies and higher prices. China's
average tomato paste export price during July 2006 to March 2007 reached
US\$580/ton, a 12-percent increase from the same period of the previous
marketing year. The chart below shows August-December prices in
2004-2006.

![](media/image3.wmf)

Post forecasts China's exports will slow down in MY2007/08 mainly
because the international paste supply is expected to recover this year.
Additionally, China's paste stocks have almost been exhausted after the
production decline in MY2005/06, and export-boom in MY2006/07.

China's tomato paste trade continues year-round. The months of heaviest
flow are October to December, after the harvest season. The chart below
describes China's tomato paste exports by month.

![](media/image5.wmf)

Russia replaced Italy as the largest buyer of China's tomato paste in
2006, mainly because of Italy's new regulations limit China's tomato
paste imports (please refer
[CH6024](http://www.fas.usda.gov/gainfiles/200606/146198012.pdf) for
more information on Italy's new policies). However, driven by strong
demand from Italy's re-processing industry, China's tomato paste exports
to Italy sharply increased in the first quarter of 2007, up 150 percent
compared to the same period in 2006. The table below lists China's top
buyers of tomato paste in 2006.

  ----------------- ------------ ------------- ------------- -------------
  **Countries**     **2004**     **2005**      **2006**      **05/06
                                                             change**

  Russia            48,644       73,194        82,097        12%

  Italy             95,856       95,354        63,159        -34%

  Japan             33,245       43,089        47,446        10%

  United Arab       22,496       35,552        36,530        3%
  Emirates                                                   

  Ghana             9,931        50,031        35,959        -28%

  Saudi Arabia      10,586       20,826        24,744        19%

  Algeria           5,839        10,337        20,972        103%

  United States     744          1,131         9,445         735%
  ----------------- ------------ ------------- ------------- -------------

China is also a tomato paste importer, about 200-300 tons annually, of
which, more than 80 percent is imported from the United States. Although
small in quantity, there are opportunities for U.S. exporters to expand
niche markets as China's domestic tomato and tomato products consumption
is expected to double by 2010. Expatriates and Chinese residing in major
cities with higher incomes or who have been exposed to the West either
through education, travel or the media are also major consumers of U.S.
tomato paste.

China's fresh tomato exports will not vary significantly in the next
several years, remaining stable at around 82,000 tons. Considering 36
million tons are produced domestically, exports are relatively small.
Post believes this can be attributed to two major factors: residue
issues and low packing technology. China does not allow access to fresh
tomato imports.

China completed its WTO accession tariff reductions for tomatoes and
tomato products in 2005. There are no changes in the tomato and tomato
products' tariff schedule.

+---------+---------------------------------+--------+-------+---------+
| *       |                                 |        |       |         |
| *Tomato |                                 |        |       |         |
| and     |                                 |        |       |         |
| Tomato  |                                 |        |       |         |
| P       |                                 |        |       |         |
| roducts |                                 |        |       |         |
| Import  |                                 |        |       |         |
| Tariff  |                                 |        |       |         |
| and VAT |                                 |        |       |         |
| Rates   |                                 |        |       |         |
| for     |                                 |        |       |         |
| 2007**  |                                 |        |       |         |
+---------+---------------------------------+--------+-------+---------+
| **H.S.  | ######### Description           | **Ta   | **    | *       |
| Code**  |                                 | riff** | VAT** | *Export |
|         |                                 |        |       | Dra     |
|         |                                 |        |       | wback** |
+---------+---------------------------------+--------+-------+---------+
| 070200  | Tomatoes, fresh or chilled      | 13     | 13    | 5       |
+---------+---------------------------------+--------+-------+---------+
| 2       | Tomatoes, prepared or           | 19     | 17    | 13      |
| 0021010 | preserved, whole or in pieces   |        |       |         |
|         | in airtight containers          |        |       |         |
+---------+---------------------------------+--------+-------+---------+
| 2       | Tomatoes, prepared or           | 25     | 17    | 13      |
| 0021090 | preserved, whole or in pieces,  |        |       |         |
|         | other                           |        |       |         |
+---------+---------------------------------+--------+-------+---------+
| 2       | Tomatoes, prepared or           | 20     | 17    | 13      |
| 0029010 | preserved, paste, in airtight   |        |       |         |
|         | containers                      |        |       |         |
+---------+---------------------------------+--------+-------+---------+
| 2       | Tomatoes, Prepared or           | 18     | 17    | 13      |
| 0029090 | Preserved, Other                |        |       |         |
+---------+---------------------------------+--------+-------+---------+
| 2       | Tomato ketchup and other tomato | 15     | 17    | 13      |
| 1032000 | sauces                          |        |       |         |
+---------+---------------------------------+--------+-------+---------+

(Source: China Customs)

# 

# Consumption

China's fresh tomato per capita consumption is around 55 lbs (25
kilograms). The second and third quarters are the peak season for fresh
tomato consumption, when open field tomatoes are both available and
low-priced. Chinese consume fresh tomatoes both as a vegetable and as a
fruit. Fruit tomatoes usually have a combination of sweetness and
tartness. Fruit tomatoes are better looking, smooth, round, and a
pinkish color. Vegetable tomatoes are usually higher in acid than fruit
tomatoes. Industry sources indicate that more cooking tomatoes will be
consumed in the future, as advised by nutrition experts. Some negative
media reports indicated that farmers use excessive chemicals on tomatoes
to accelerate the ripening process. In China, people in the north
consume more fresh tomatoes than the south, mainly because of dietary
habits.

![](media/image7.wmf)

> (Source: Ministry of Agriculture of China)

China's per capita consumption of processed tomato products is extremely
low -- less than 0.2 lbs (0.1 kilograms). This is mainly because of
Chinese's dietary preferences. Post estimates China consumed about
90,000 tons of processed tomato products in 2006. Industry expects a
steady increase in China's domestic processed tomato products
consumption with more and more people recognizing the healthy function
of tomato products, and studies suggest that processed tomatoes provide
more lycopene than fresh tomatoes. For example, a half-cup of tomato
sauce, has as much lycopene as five medium-sized fresh tomatoes. Market
intelligence shows that Tianjin, Beijing, Xi'an (Shaanxi Province) and
Shanghai have the highest per capita paste consumption in China. The
local industry believes that domestic consumption of processed tomato
products will reach 180,000 tons by 2010. Post forecasts consumption of
tomato ketchup and tomato sauce will increase faster than other tomato
products with the rapid development of the fast food sector. In
addition, market intelligences indicate that more and more Chinese
people include ketchup in their breakfast.

# 

# Marketing

When marketing to China, there are three major steps U.S. exporters and
traders should take: 1) educate Chinese consumers on the health
functions of tomato and tomato products; 2) provide seminars explaining
how to include tomato products in daily menus; and 3) improve on
presentation and packaging designs. The largest consuming entity of
tomato products in China is the foreign fast food restaurant industry,
such as fast food restaurants; followed by star hotels and family
kitchens.

Processed tomato products are marketed for their health function
properties. Studies show tomato products contain high lycopene, which
has been proved to be effective antioxidant, and believed to the reduced
chances of contracting cancer. Tomatoes are also believed to contain
important anti-aging properties that are also favored by
health-conscious consumers. Fresh tomato is one of the most important
vegetables in Chinese people's menu, and Chinese has long history of
consuming fresh tomatoes. However, not many Chinese consumers have
realized the processed tomato products contain equally properties as
fresh tomatoes. With red color, sweet and acid taste, tomato paste can
easily be incorporated into Chinese diets.

There are other niche markets for other tomato products in China.
Although tomato juice is not as popular as orange or apple juice among
China consumers, its consumption in big cities is increasing steadily
because more consumers are knowledgeable about its health function, and
it is an important ingredient in cocktails and mixed vegetable juices.
Tomato powder is usually used as condiment ingredient and a red dye.

The U.S. tomato products cannot compete with Chinese tomato products in
price, but in quality and reputation. Therefore, U.S. tomato products
are most competitive in high-end consumer markets, such as star hotels
and restaurants, bars, western supermarkets, and value-added food
processing sectors.

# Statistics Tables

## 

## Table 1 Fresh Tomatoes PS&D Table

<table style="width:100%;">
<colgroup>
<col style="width: 14%" />
<col style="width: 7%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 7%" />
<col style="width: 11%" />
<col style="width: 10%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><strong>PSD Table</strong></td>
</tr>
<tr class="even">
<td><p id="country" class="heading">Country</p></td>
<td colspan="9"><strong>China, Peoples Republic of</strong></td>
</tr>
<tr class="odd">
<td><strong>Commodity</strong></td>
<td colspan="6"><strong>Fresh Tomatoes</strong></td>
<td colspan="3">(HA)(MT)</td>
</tr>
<tr class="even">
<td></td>
<td colspan="3">2005 Revised</td>
<td colspan="3">2006 Estimate</td>
<td colspan="3">2007 Forecast</td>
</tr>
<tr class="odd">
<td></td>
<td><p>USDA</p>
<p>Official</p></td>
<td><p>Post</p>
<p>Estimate</p></td>
<td><p>Post</p>
<p>Estimate</p>
<p>New</p></td>
<td><p>USDA</p>
<p>Official</p></td>
<td><p>Post</p>
<p>Estimate</p></td>
<td><p>Post</p>
<p>Estimate</p>
<p>New</p></td>
<td><p>USDA</p>
<p>Official</p></td>
<td><p>Post</p>
<p>Estimate</p></td>
<td><p>Post</p>
<p>Estimate</p>
<p>New</p></td>
</tr>
<tr class="even">
<td><strong>Market Year Begin</strong></td>
<td></td>
<td>07/2005</td>
<td>07/2005</td>
<td></td>
<td>07/2006</td>
<td>07/2006</td>
<td></td>
<td>07/2007</td>
<td>07/2007</td>
</tr>
<tr class="odd">
<td>Plant For Fresh Consump</td>
<td>0</td>
<td>729500</td>
<td>752100</td>
<td>0</td>
<td>766000</td>
<td>767000</td>
<td>0</td>
<td>0</td>
<td>768000</td>
</tr>
<tr class="even">
<td>Plant For Processing</td>
<td>0</td>
<td>58500</td>
<td>60500</td>
<td>0</td>
<td>73000</td>
<td>73000</td>
<td>0</td>
<td>0</td>
<td>77000</td>
</tr>
<tr class="odd">
<td>Total Area Planted</td>
<td>0</td>
<td>788000</td>
<td>812600</td>
<td>0</td>
<td>839000</td>
<td>840000</td>
<td>0</td>
<td>0</td>
<td>845000</td>
</tr>
<tr class="even">
<td>Harv. For Fresh Cons.</td>
<td>0</td>
<td>729500</td>
<td>752100</td>
<td>0</td>
<td>766000</td>
<td>767000</td>
<td>0</td>
<td>0</td>
<td>768000</td>
</tr>
<tr class="odd">
<td>Harv. For Processing</td>
<td>0</td>
<td>58500</td>
<td>60500</td>
<td>0</td>
<td>83000</td>
<td>73000</td>
<td>0</td>
<td>0</td>
<td>77000</td>
</tr>
<tr class="even">
<td>Total Area Harvested</td>
<td>0</td>
<td>788000</td>
<td>812600</td>
<td>0</td>
<td>849000</td>
<td>840000</td>
<td>0</td>
<td>0</td>
<td>845000</td>
</tr>
<tr class="odd">
<td>Fresh Sale Production</td>
<td>0</td>
<td>29800000</td>
<td>32065000</td>
<td>0</td>
<td>32550000</td>
<td>31700000</td>
<td>0</td>
<td>0</td>
<td>32000000</td>
</tr>
<tr class="even">
<td>Processing Production</td>
<td>0</td>
<td>3380000</td>
<td>3500000</td>
<td>0</td>
<td>3900000</td>
<td>4800000</td>
<td>0</td>
<td>0</td>
<td>5200000</td>
</tr>
<tr class="odd">
<td>Total Production</td>
<td>0</td>
<td>33180000</td>
<td>35565000</td>
<td>0</td>
<td>36450000</td>
<td>36500000</td>
<td>0</td>
<td>0</td>
<td>37200000</td>
</tr>
<tr class="even">
<td>Total Supply</td>
<td>0</td>
<td>33180000</td>
<td>35565000</td>
<td>0</td>
<td>36450000</td>
<td>36500000</td>
<td>0</td>
<td>0</td>
<td>37200000</td>
</tr>
</tbody>
</table>

## 

## Table 2 Tomato paste PSD table

## 

<table>
<colgroup>
<col style="width: 13%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><strong>PSD Table</strong></td>
</tr>
<tr class="even">
<td><strong>Country</strong></td>
<td colspan="9"><strong>China, Peoples Republic of</strong></td>
</tr>
<tr class="odd">
<td><p id="commodity" class="heading">Commodity</p></td>
<td colspan="6"><strong>Tomato Paste,28-30% TSS Basis</strong></td>
<td colspan="3">(MT)(MT, Net Weight)</td>
</tr>
<tr class="even">
<td></td>
<td>2005</td>
<td>Revised</td>
<td></td>
<td>2006</td>
<td>Estimate</td>
<td></td>
<td>2007</td>
<td>Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td><p>USDA</p>
<p>Official</p></td>
<td><p>Post</p>
<p>Estimate</p></td>
<td><p>Post</p>
<p>Estimate</p>
<p>New</p></td>
<td><p>USDA</p>
<p>Official</p></td>
<td><p>Post</p>
<p>Estimate</p></td>
<td><p>Post</p>
<p>Estimate</p>
<p>New</p></td>
<td><p>USDA</p>
<p>Official</p></td>
<td><p>Post</p>
<p>Estimate</p></td>
<td><p>Post</p>
<p>Estimate</p>
<p>New</p></td>
</tr>
<tr class="even">
<td><strong>Market Year Begin</strong></td>
<td></td>
<td>07/2005</td>
<td>07/2005</td>
<td></td>
<td>07/2006</td>
<td>07/2006</td>
<td></td>
<td>07/2007</td>
<td>07/2007</td>
</tr>
<tr class="odd">
<td>Deliv. To Processors</td>
<td>3380000</td>
<td>3380000</td>
<td>3640000</td>
<td>3900000</td>
<td>3900000</td>
<td>4300000</td>
<td>0</td>
<td>0</td>
<td>4600000</td>
</tr>
<tr class="even">
<td>Beginning Stocks</td>
<td>163460</td>
<td>163460</td>
<td>163460</td>
<td>21250</td>
<td>21250</td>
<td>63163</td>
<td>12050</td>
<td>12050</td>
<td>31313</td>
</tr>
<tr class="odd">
<td>Production</td>
<td>520000</td>
<td>520000</td>
<td>560000</td>
<td>600000</td>
<td>600000</td>
<td>715000</td>
<td>0</td>
<td>0</td>
<td>750000</td>
</tr>
<tr class="even">
<td>Imports</td>
<td>790</td>
<td>790</td>
<td>137</td>
<td>800</td>
<td>800</td>
<td>150</td>
<td>0</td>
<td>0</td>
<td>200</td>
</tr>
<tr class="odd">
<td>Total Supply</td>
<td>684250</td>
<td>684250</td>
<td>723597</td>
<td>622050</td>
<td>622050</td>
<td>778313</td>
<td>12050</td>
<td>12050</td>
<td>781513</td>
</tr>
<tr class="even">
<td>Exports</td>
<td>580000</td>
<td>580000</td>
<td>590434</td>
<td>525000</td>
<td>525000</td>
<td>675000</td>
<td>0</td>
<td>0</td>
<td>650000</td>
</tr>
<tr class="odd">
<td>Domestic Consumption</td>
<td>83000</td>
<td>83000</td>
<td>70000</td>
<td>85000</td>
<td>85000</td>
<td>72000</td>
<td>0</td>
<td>0</td>
<td>80000</td>
</tr>
<tr class="even">
<td>Ending Stocks</td>
<td>21250</td>
<td>21250</td>
<td>63163</td>
<td>12050</td>
<td>12050</td>
<td>31313</td>
<td>0</td>
<td>0</td>
<td>51513</td>
</tr>
<tr class="odd">
<td>Total Distribution</td>
<td>684250</td>
<td>684250</td>
<td>723597</td>
<td>622050</td>
<td>622050</td>
<td>778313</td>
<td>12050</td>
<td>12050</td>
<td>781513</td>
</tr>
</tbody>
</table>