Required Report - public distribution

**Date:** 12/15/2003

**GAIN Report Number:** IT3028

IT3028

**Italy**

**Tomatoes and Products**

**Semi-Annual**

**2003**

**Approved by:**

![](media/image1.wmf)Lisa Hardy Bass

U.S. Embassy

**Prepared by:**

Alberto Menghini

**Report Highlights:**

2002 was the worst harvest in recent memory for Italian tomato producers
both in terms of quality and volume. In 2003 there was a partial
recovery in planted area and yield per hectare, which increased
significantly compared to the previous year. The quality of production
is considered to be generally good. Nevertheless, heat and drought in
the late spring of 2003 led to a decrease in the overall value of
tomatoes available for fresh consumption as well as to a decrease in
peeled tomato production due to abnormalities in size and color.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Semi-Annual Report

Rome \[IT1\]

\[IT\]

Table of Contents

[**Situation and Outlook 3**](#situation-and-outlook)

[Fresh tomato production 3](#fresh-tomato-production)

[Processing 4](#processing)

[Trade and Stocks 4](#trade-and-stocks)

[Consumption 4](#consumption)

[Future outolook 4](#future-outolook)

[PSD TABLES 6](#psd-tables)

[Fresh Tomatoes 6](#fresh-tomatoes)

[Canned Tomatoes 7](#canned-tomatoes)

[Tomato Paste 8](#tomato-paste)

[Tomato Sauce 9](#tomato-sauce)

# Situation and Outlook

# Fresh tomato production

Despite the fact that 2002 was the worst harvest in recent memory (both
in terms of quality and volume), Italy is still the biggest tomato
producer in EU and is the world's second largest producer after the U.S.

According to Italian tomato producers, there has been a partial recovery
in 2003. Planted area and yield per hectare have increased significantly
compared to the previous year. The quality of production is considered
to be generally good. Nevertheless, heat and drought in the late spring
of 2003 led to a decrease the overall value of tomatoes available for
fresh consumption, as well as to a decrease in peeled tomato production
due to abnormalities in size and color.

As far as product for fresh consumption is concerned, the hot
temperatures led to the early ripening of tomatoes and subsequently to
the oversupply in the early months of the season. This was followed by a
shortage (especially of green tomato varieties often used for salads)
between August and October. Sicilian cherry tomatoes (Pachino), which
recently received a Product of Geographic Indication (PGI) designation,
were affected by a virosis (TYLCV) that cut August and September
production by almost 50 percent, forcing farmers to replant for later
production.

Volumes of tomato for industrial processing are 20 percent higher than
2002, but still below expectations. In compliance with the tomato common
market organization, producers subscribe to contracts through their
organizations with processing industries at the beginning of the
campaign, usually by 15^th^ February of each year. This is done in order
to get EU payments for the year. Every EU country is entitled to a
production quota, so that any above quota production results in a
reduction of the farmer payment per ton. The quota for Italy is set at
4.35 million ton of fresh product.

The scarce production in 2002 caused a reduction of the stocks and
pushed farmers to increase acreage by 8 percent to 81 million hectares
with the purpose of rebuilding stocks for 2003. Most of the production
is concentrated in two northern regions (Emilia Romagna 34 percent,
Lombardia 8.4 percent) and one southern region (Puglia 32 percent).

Round varieties for sauce and paste processing covered about 70 percent
of the planted area, whereas Roma type and cherry varieties for canned
tomato accounted for the rest.

According to the Mediterranean International Association of the
Processing Tomato (Amitom), production yields and quality have been
generally good in the North, except for sunburn that reduced the yield
of whole tomatoes destined for canning. In the South, the harvest
started early (mid-July) and yields were below standard. Due to sunburn,
southern production was good for paste, but not ideal for canned
tomatoes.

The overall volume produced for industrial processing (5.266 million
ton) in 2003 was lower than the volume contracted in February of 2003
(6.7 million ton), but significantly higher than the EU allowed quota.
The main reason for this is that producers often set contracts at a
higher volume than what they really believe they will produce in order
to ensure production rights so that they have the flexibility to decide
whether or not to use them.

As far as the EU quota is concerned, it is possible that above quota
production in one country can be compensated by below quota production
of other member countries without incurring any reduction in the payment
per ton of delivered product. According to some of the farmer unions,
there is a general expectation that there will be no reduction to the
€34.5 premium per ton of delivered product to Italian producers.

A recent ISMEA survey on tomato production in Italy identifies scarcity
of water resources as the main limiting factor, especially as streams,
rivers and wells dry up in summer.

## Processing

Official data for 2003 has not yet been released since industrial plants
completed operations around middle November. Despite the fact that
processed production is far below the 6.7 million ton contracted in
February, tomato processors are generally optimistic about volumes and
quality of production for the year.

Production varies a lot across regions. In Southern regions, the
processing plants are generally small (processing on average around 19
tons of fresh product per year), most are located in Campania, and half
of their production capacity is used for peeled tomatoes. These
processing plants are generally within the range of a few hundred
kilometers from the producing areas, and therefore tomatoes have to be
transported by truck from the field to the processing plant.

Due to the elevated temperatures, the unexpected flow of product in July
became problematic for many processing plants, as they were not
structured to handle to three shift days, and logistically, there were
not enough trucks available.

As a result, southern production for 2003 was generally good in volume
of processed product compared to previous years, but still lagged behind
initial expectations.

In the northern regions, where processing plants are generally bigger,
2003 was a good year for tomatoes, especially as volumes were just
slightly below expectations, and the delivered product had generally a
good Brix degree.

## 

## Trade and Stocks

After 2002, Italian stocks of all processed products were down
significantly, and so a significant part of the 2003 production will
probably be used to rebuild inventories. However, international trade,
particularly exports, is not likely to be adversely affected since
overall output for most products was higher.

Farmer unions have expressed concern about tomato paste imports from
China, that have been growing rapidly in the last two years, due to the
perceived quality and low price. It is likely that cheaper Chinese paste
is mixed with Italian paste for different food preparations, without
indicating this practice in the labeling.

# Consumption

Domestic consumption of fresh and processed tomatoes is generally
stable. The Italian market can be considered a mature market, as
tomatoes are among the basic ingredients of the traditional Italian
diet.

Fresh tomato consumption may face limited fluctuations on the basis of
supply and consumer prices, especially for green varieties typically
used for salads, as they are increasingly also used in ready to eat
mixes.

## 

# Future outolook

It is not yet clear whether Italian tomato producers will be affected by
the June EU farm policy (CAP) reform. According to the official
juridical texts, farmers would be prohibited to shift from other
products to horticultural products, unless the Italian Government
decides to implement the so called "regionalization plan". In this case,
farmers would get a predefined premium per hectare calculated on a
regional basis and would be allowed to produce any crop, including
horticultural ones.

This option would lead to increased competition and, most likely, to a
tomato acreage increase also outside the traditional growing areas.

Future developments of tomato production in Italy will be highly
dependent on the availability of water; this may be contingent on the
modernization of irrigation plants and on optimized water resource
management.

# PSD TABLES

## Fresh Tomatoes

![](media/image2.wmf)

## Canned Tomatoes

![](media/image3.wmf)

## Tomato Paste

![](media/image4.wmf)

## Tomato Sauce

![](media/image5.wmf)