Required Report - public distribution

**Date:** 6/1/2006

**GAIN Report Number:** PO6006

PO0000

**Iberian Peninsula**

**Tomatoes and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Stephen Hammond

U.S. Embassy

**Prepared by:**

Leonor Ramos

Lesley Taulman

**Report Highlights:**

Stocks of Iberian Peninsula (IP) tomato paste are at record levels, most
accumulated in Spain, because Spanish exports dropped to record low
levels in Marketing Year (MY) 2004/05. MY 2005/06 exports appear to have
rebounded and and we forecast that 2006/07 exports continue strong, even
while Spanish producers cut area planted in response to subsidy
reductions resulting from over-quota production in recent years. Planted
area could be off by as much as 20 percent Calendar Year (CY) 2006 vs.
2005 as a result of the subsidy reductions. (LR20LT30SH2)

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Madrid \[SP1\]

\[SP\]

####### TABLE OF CONTENTS

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

[Fresh Tomatoes -- Spain and Portugal
4](#fresh-tomatoes-spain-and-portugal)

[Production, Supply & Distribution Tables
4](#production-supply-distribution-tables)

[Production 5](#production)

[Trade 6](#trade)

[Trade Matrices 6](#trade-matrices)

[Policy 8](#policy)

[Canned Tomatoes \-- Spain 9](#canned-tomatoes----spain)

[Production, Supply & Distribution Table
9](#production-supply-distribution-table)

[Trade 10](#trade-1)

[Trade Matrices 10](#trade-matrices-1)

[Tomato Paste, 28-30% TSS B -- Spain and Portugal
11](#tomato-paste-28-30-tss-b-spain-and-portugal)

[Production, Supply & Distribution Tables
11](#production-supply-distribution-tables-1)

[Production 12](#production-1)

[Trade 12](#trade-2)

[Trade Matrices 12](#trade-matrices-2)

[Source: Global Trade Atlas. Data is reported in net weight basis,
28-30% TSS.
14](#source-global-trade-atlas.-data-is-reported-in-net-weight-basis-28-30-tss.)

[Policy 14](#policy-1)

[Publicly-Funded Horizontal Policy
15](#publicly-funded-horizontal-policy)

[Spain 15](#spain)

# Executive Summary

Until, and even after the European Commission (EC) revises the fruit and
vegetable common policy, we expect Iberian processed tomato production
to decline, while exports will likely remain strong until the excess
stocks have been sold into the world market. Fresh tomato production
during CY 2006 will likely decrease in Spain and Portugal, Europe's
2^nd^ and 3^rd^ largest tomato producers, respectively. The reduction
will be in response to diminishing subsidies, calculated annually using
a three-year moving average that includes a penalty factor for any and
all years that producers exceed the national annual production quota.
Spanish producers have, until now, been on the front side of this
three-year sliding average, which perversely stimulated over-quota
production. Now, however, they are feeling the results, as the moving
average factors in their over-quota production and decreases the subsidy
levels available to them.

The EC appears to target reform implementation for MY 2008, but it is
unclear at this moment how the tomato sector will fare within the sector
reform discussions. The EC is now in discussions with EU Member State
producer organizations on the revision of the fruit and vegetables
policy. While the Spanish tomato, tomato products producers may prefer
tweaking the current system to their advantage, they appear to be in a
vulnerable negotiating position and my ultimately need to adjust to
partial subsidy decoupling and the single farm payment that have become
so prevalent in the EC's reform packages to this point. Should the
reform occur along these lines, it seems likely that Iberian processing
tomato production would soon thereafter, and exports somewhat later,
rationalize to become profitable under new rules.

# Fresh Tomatoes -- Spain and Portugal

## Production, Supply & Distribution Tables

+-------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**     |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | **Sp  |       |       |       |       |       |
|                   | ain** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | #     |       |       |       | (HA   |       |
|                   | ##### |       |       |       | )(MT) |       |
|                   |  Fres |       |       |       |       |       |
|                   | h Tom |       |       |       |       |       |
|                   | atoes |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | 2004  |       | 2005  |       | 2006  |       |
|                   | (Rev  |       | (Esti |       | (Fore |       |
|                   | ised) |       | mate) |       | cast) |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | USDA  | Post  | USDA  | Post  | USDA  | Post  |
|                   | Off   | Est   | Off   | Est   | Off   | Est   |
|                   | icial | imate | icial | imate | icial | imate |
|                   | \[    | \[    | \[    | \[    | \[    | \[    |
|                   | Old\] | New\] | Old\] | New\] | Old\] | New\] |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Market Year     | 01    |       | 01    |       | 01    |       |
| Begin**           | /2004 |       | /2005 |       | /2006 |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Plnt For Fresh    | 3     | 2     | 3     | 2     | 0     | 2     |
| Consump           | 2,700 | 4,937 | 0,000 | 5,194 |       | 3,218 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Plnt For          | 3     | 3     | 3     | 3     | 0     | 3     |
| Processing        | 7,200 | 7,228 | 7,100 | 9,662 |       | 1,348 |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Area        | 6     | 6     | 6     | 6     | 0     | 5     |
| Planted           | 9,900 | 2,165 | 7,100 | 4,856 |       | 4,566 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Harv. For Fresh   | 3     | 2     | 3     | 2     | 0     | 2     |
| Cons.             | 2,700 | 4,937 | 0,000 | 5,194 |       | 3,218 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Harv. For         | 3     | 3     | 3     | 3     | 0     | 3     |
| Processing        | 7,200 | 7,228 | 7,100 | 9,662 |       | 1,348 |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Area        | 6     | 6     | 6     | 6     | 0     | 5     |
| Harvested         | 9,900 | 2,165 | 7,100 | 4,856 |       | 4,566 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Fresh Sale        | 2,27  | 1,70  | 1,90  | 1,38  | 0     | 1,50  |
| Production        | 4,800 | 6,800 | 0,000 | 5,600 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Processing        | 1,90  | 2,16  | 1,85  | 2,61  | 0     | 2,00  |
| Production        | 2,393 | 7,000 | 0,000 | 1,200 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Production  | 4,17  | 3,87  | 3,75  | 3,99  | 0     | 3,50  |
|                   | 7,193 | 3,800 | 0,000 | 6,800 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 4,17  | 3,87  | 3,75  | 3,99  | 0     | 3,50  |
|                   | 7,193 | 3,800 | 0,000 | 6,800 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+

+------------------+---------+-------+-------+-------+------+-------+
| **PSD Table**    |         |       |       |       |      |       |
+------------------+---------+-------+-------+-------+------+-------+
| **Country**      | **Por   |       |       |       |      |       |
|                  | tugal** |       |       |       |      |       |
+------------------+---------+-------+-------+-------+------+-------+
| **Commodity**    | ######  |       |       |       | (HA) |       |
|                  | Fresh T |       |       |       | (MT) |       |
|                  | omatoes |       |       |       |      |       |
+------------------+---------+-------+-------+-------+------+-------+
|                  | 2004    | Re    | 2005  | Est   | 2006 | For   |
|                  |         | vised |       | imate |      | ecast |
+------------------+---------+-------+-------+-------+------+-------+
|                  | USDA    | Post  | USDA  | Post  | USDA | Post  |
|                  |         |       | Off   | Est   | Offi | Est   |
|                  | O       | Est   | icial | imate | cial | imate |
|                  | fficial | imate | \[    |       | \[O  |       |
|                  |         |       | Old\] | \[    | ld\] | \[    |
|                  | \[Old\] | \[    |       | New\] |      | New\] |
|                  |         | New\] |       |       |      |       |
+------------------+---------+-------+-------+-------+------+-------+
| **Market Year    |         | 01    |       | 01    |      | 01    |
| Begin**          |         | -2004 |       | -2005 |      | -2006 |
+------------------+---------+-------+-------+-------+------+-------+
| Plnt For Fresh   | 1,550   | 1,550 | 1,500 | 1,500 | 0    | 1,490 |
| Consump          |         |       |       |       |      |       |
+------------------+---------+-------+-------+-------+------+-------+
| Plnt For         | 15,134  | 1     | 1     | 1     | 0    | 1     |
| Processing       |         | 5,134 | 4,878 | 5,133 |      | 5,000 |
+------------------+---------+-------+-------+-------+------+-------+
| TOTAL Area       | 16,684  | 1     | 1     | 1     | 0    | 1     |
| Planted          |         | 6,684 | 6,378 | 6,633 |      | 6,490 |
+------------------+---------+-------+-------+-------+------+-------+
| Harv. For Fresh  | 1,550   | 1,550 | 1,500 | 1,500 | 0    | 1,490 |
| Cons.            |         |       |       |       |      |       |
+------------------+---------+-------+-------+-------+------+-------+
| Harv. For        | 15,134  | 1     | 1     | 1     | 0    | 1     |
| Processing       |         | 5,134 | 4,878 | 5,133 |      | 5,000 |
+------------------+---------+-------+-------+-------+------+-------+
| TOTAL Area       | 16,684  | 1     | 1     | 1     | 0    | 1     |
| Harvested        |         | 6,684 | 6,378 | 6,633 |      | 6,490 |
+------------------+---------+-------+-------+-------+------+-------+
| Fresh Sale       | 98,650  | 9     | 9     | 9     | 0    | 9     |
| Production       |         | 8,650 | 5,000 | 5,000 |      | 4,800 |
+------------------+---------+-------+-------+-------+------+-------+
| Processing       | 1,      | 1,17  | 1,05  | 1,20  | 0    | 1,17  |
| Production       | 171,066 | 1,066 | 0,000 | 2,121 |      | 0,000 |
+------------------+---------+-------+-------+-------+------+-------+
| TOTAL Production | 1,      | 1,26  | 1,14  | 1,29  | 0    | 1,26  |
|                  | 269,716 | 9,716 | 5,000 | 7,121 |      | 4,800 |
+------------------+---------+-------+-------+-------+------+-------+
| TOTAL SUPPLY     | 1,      | 1,26  | 1,14  | 1,29  | 0    | 1,26  |
|                  | 269,716 | 9,716 | 5,000 | 7,121 |      | 4,800 |
+------------------+---------+-------+-------+-------+------+-------+

## Production

**Spain**

Spanish processing and fresh tomato CY-2006 outputs will come
significantly under CY-2005 levels, due to sizeable reductions in seeded
areas.

According to the Spanish Ministry of Agriculture (MAPYA), CY-2006
processing tomato areas are 21 percent under CY-2005 levels, due to the
effects of the subsidy penalties derived from the overshooting of the
national production quota in previous years (see also under Policy). The
reduction affects particularly the *Extremadura* and *Andalucia*
provinces.

Also according to MAPYA, CY-2006 fresh tomato areas are down 8 percent
from CY-2005 levels. This is primarily due to the discouraging effects
of low producer prices.

Below please find summary table with Spanish CY-2004 and CY-2005
contracted and delivered tomatoes, and quantities contracted in CY-2006.
Final product delivery differs from contracted quantities for a number
of reasons. There is tomato processed without subsidy. Note that, under
current EU legislation, contracted areas are liable to be adjusted by a
maximum of 30% by September, if yields are higher than expected, and the
industry is willing to take the extra product.

Spain: Processing Tomato Production, contracted and Delivered

  ------------ ------------ --------------- ---------------- --------------- ----------------
               **2004**                     **2005**                         **2006**

               Contracted   **Delivered**   **Contracted**   **Delivered**   **Contracted**

  Production   2,356,739    2,038,817       2,256,560        2,792,164       1,803,139
  ------------ ------------ --------------- ---------------- --------------- ----------------

Source: Spanish producers association. Units: Tons

MY 2004/05 and 2005/06 fresh and processing tomato outputs in the PSD
are official data. We estimated tomato outputs for MY 2006/07.

**Portugal**

Portuguese total processing tomato production will also decline in
2006/07. According to official sources, total industry contracts in 2006
have been reduced due to the discouraging effects of the financial
penalties associated to the quota overshooting in 2005/06.

Fresh tomato outputs will also be down in CY-2006 from CY-2005 levels,
due to the effects of depressed producer prices.

Portugal: Processing Tomato Production, contracted and Delivered

+---------+----------+------------+----------+---------+------------+
|         | **2004** |            | **2005** |         | **2006**   |
+---------+----------+------------+----------+---------+------------+
|         | **Cont   | **D        | **Cont   | **Deli  | **Co       |
|         | racted** | elivered** | racted** | vered** | ntracted** |
+---------+----------+------------+----------+---------+------------+
| Pro     | 1        | 1,171,066  | 1        | 1,      | 1,115,795  |
| duction | ,261,115 |            | ,268,904 | 202,121 | (\*\*\*)   |
|         |          | (\*)       |          | (\*\*)  |            |
+---------+----------+------------+----------+---------+------------+

(\*) Includes 159,736 MT of tomatoes processed in Spain; (\*\*) Includes
204,100 MT processed in Spain. (\*\*\*) Includes 106,650 MT contracted
to be processed in Spain.

## Trade

Spanish and Portuguese fresh tomatoes trade exchanges take place
primarily with other EU countries.

In recent years, third country tomato exports into Iberia have been
climbing, consisting basically in fresh Moroccan tomatoes, which are
shipped under a preferential trade agreement with the EU. In CY 2006,
total level of imports of Moroccan tomatoes should peak. The local trade
reports that Moroccan tomato exports into the EU in May 2006 more than
doubled May 2005 levels. CY-2006 total Moroccan shipments into the EU
will eventually be restrained by import quotas set up under the
Agreement.

Under the EU preferential trade Agreement with Morocco, Moroccan
exporters can ship tomatoes into the EU at a reduced entry price of €
46.1/100 Kg, whereas regular entry price for third country imports is €
112.6/100 Kg. Recently steeping imports from Morocco were reportedly
made at € 39.3/100 Kg. This triggered a reaction from the Spanish trade
association (FEPEX), which has requested suspension of Moroccan tomato
imports by the EU.

### Trade Matrices 

  -------------------- -------------- -------------------- --------------
  **Import Trade                                           
  Matrix**                                                 

  **Country**          Spain                               

  **Commodity**        Fresh Tomatoes                      

  Time Period          Jan-Dec        Units:               Metric Tons

  Imports for:         2004                                **2005**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Portugal             67,324         Portugal             41,287

  Germany              10,932         Netherlands          8,928

  Netherlands          7,598          France               3,476

  Belgium              3,545          Belgium              2,885

  Other EU-25          4,054          Other EU-25          1,756

  Morocco              8,594          Morocco              13,840

                                                           

                                                           

                                                           

                                                           

  Total for Others     102,047                             72,172

  Others not Listed    204                                 182

  Grand Total          102,251                             72,354
  -------------------- -------------- -------------------- --------------

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

  **Country**          Spain                               

  **Commodity**        Fresh Tomatoes                      

  Time Period          Jan-Dec        Units:               Metric Tons

  Exports for:         2004                                **2005**

  U.S.                 2,785          U.S.                 506

  Others                              Others               

  Germany              246,867        Germany              198,893

  U.K.                 208,414        U.K.                 183,845

  Netherlands          183,358        Netherlands          170,609

  France               163,096        France               147,217

  Italy                32,351         Italy                38,998

  Czech Republic       27,693         Poland               29,841

  Poland               26,420         Czech Republic       25,374

  Portugal             25,392         Portugal             22,423

  Other EU-25          88,334         Other EU-25          83,940

  Russia               8,520          Russia               8,261

  Total for Others     1,010,445                           909,401

  Others not Listed    22,746                              14,000

  Grand Total          1,035,976                           923,907
  -------------------- -------------- -------------------- --------------

  -------------------- -------------- -------------------- --------------
  **Import Trade                                           
  Matrix**                                                 

  **Country**          Portugal                            

  **Commodity**        Fresh Tomatoes                      

  Time Period          Jan/Dec        Units:               Metric Tons

  Imports for:         2004                                **2005**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Spain                24,244         Spain                21,595

  Germany              3,316          Germany              3,687

  Other EU-25          162            Other EU-25          603

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     27,722                              25,885

  Others not Listed    0                                   0

  Grand Total          27,722                              25,885
  -------------------- -------------- -------------------- --------------

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

  **Country**          Portugal                            

  **Commodity**        Fresh Tomatoes                      

  Time Period          Jan/Dec        Units:               Metric Tons

  Exports for:         2004                                **2005**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Spain                44,580         Spain                49,880

  U.K.                 1,296          U.K.                 1,736

  Other EU-25          4              Other EU-25          124

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     45,880                              51,740

  Others not Listed    16                                  46

  Grand Total          45,896                              51,786
  -------------------- -------------- -------------------- --------------

Source: Global Trade Atlas.

## 

## Policy

Iberian fresh tomato production benefits from measures instituted under
the EU common fresh fruit and vegetables policy. This policy consists
primarily in investment incentives and programs to finance the activity
of producer organizations that carry out intervention and marketing
activities. The EU is reforming its fruit and vegetables policy during
the second semester in 2006 (see under Policy \-- Processed tomatoes).

# Canned Tomatoes \-- Spain

## Production, Supply & Distribution Table

+-------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**     |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | **Sp  |       |       |       |       |       |
|                   | ain** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | ###   |       |       | (MT   |       |       |
|                   | ### T |       |       | )(MT, |       |       |
|                   | omato |       |       | Net   |       |       |
|                   | es, C |       |       | We    |       |       |
|                   | anned |       |       | ight) |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | 2004  |       | 2005  |       | 2006  |       |
|                   | (Rev  |       | (Esti |       | (Fore |       |
|                   | ised) |       | mate) |       | cast) |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | USDA  | Post  | USDA  | Post  | USDA  | Post  |
|                   | Off   | Est   | Off   | Est   | Off   | Est   |
|                   | icial | imate | icial | imate | icial | imate |
|                   | \[    |       | \[    |       | \[    |       |
|                   | Old\] | \[    | Old\] | \[    | Old\] | \[    |
|                   |       | New\] |       | New\] |       | New\] |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Market Year     | 07    |       | 07    |       | 07    |       |
| Begin**           | /2004 |       | /2005 |       | /2006 |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Deliv. To         | 23    | 31    | 19    | 35    | 0     | 30    |
| Processors        | 7,352 | 2,605 | 5,000 | 6,719 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks  | 563   | 563   | 3     | 6     | 0     | 12    |
|                   |       |       | 9,170 | 8,080 |       | 2,563 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Production        | 18    | 24    | 16    | 27    | 0     | 23    |
|                   | 9,607 | 7,680 | 2,500 | 1,483 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Imports           | 4,000 | 1     | 4,000 | 3,000 | 0     | 3,000 |
|                   |       | 4,726 |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 19    | 26    | 20    | 34    | 0     | 35    |
|                   | 4,170 | 2,969 | 5,670 | 2,563 |       | 5,563 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Exports           | 6     | 5     | 8     | 7     | 0     | 8     |
|                   | 5,000 | 4,889 | 0,000 | 0,000 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Domestic          | 9     | 14    | 11    | 15    | 0     | 16    |
| Consumption       | 0,000 | 0,000 | 0,000 | 0,000 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks     | 3     | 6     | 1     | 12    | 0     | 11    |
|                   | 9,170 | 8,080 | 5,670 | 2,563 |       | 5,563 |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL             | 19    | 26    | 20    | 34    | 0     | 35    |
| DISTRIBUTION      | 4,170 | 2,969 | 5,670 | 2,563 |       | 5,563 |
+-------------------+-------+-------+-------+-------+-------+-------+

Note to PSD Table: MY 2004 and 2005 fresh tomato deliveries and canned
tomato outputs were provided by MAPYA. We estimated tomato deliveries
and canned tomato outputs for MY 2006. MY 2004 trade is from the Global
Trade Atlas. We have estimated trade for the remaining years.

## Trade

### Trade Matrices

  -------------------- -------------- -------------------- --------------
  **Import Trade                                           
  Matrix**                                                 

  **Country**          Spain                               

  **Commodity**        Tomatoes,                           
                       Canned                              

  Time Period          July/June      Units:               Metric Tons

  Imports for:         2003                                **2004**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Italy                1,824          Portugal             9,957

  Portugal             806            Italy                4,206

  Other EU-25          982            Other EU-25          471

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     3,612                               14,634

  Others not Listed    19                                  92

  Grand Total          3,631                               14,726
  -------------------- -------------- -------------------- --------------

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

  **Country**          Spain                               

  **Commodity**        Tomatoes,                           
                       Canned                              

  Time Period          July/June      Units:               Metric Tons

  Exports for:         2003                                **2004**

  U.S.                 1,154          U.S.                 1,073

  Others                              Others               

  France               21,416         France               18,933

  U.K.                 8,646          U.K.                 13,114

  Portugal             4,354          Germany              6,775

  Germany              3,726          Portugal             4,935

  Italy                3,477          Luxembourg           1,932

  Other EU-25          4,153          Netherlands          1,794

  Canada               1,569          Other EU-25          3,420

  Venezuela            379            Canada               1,058

  Saudi Arabia         361            Philippines          430

  Philippines          210            Saudi Arabia         261

  Total for Others     48,291                              52,652

  Others not Listed    1,796                               1,164

  Grand Total          51,241                              54,889
  -------------------- -------------- -------------------- --------------

Source: Global Trade Atlas. Data is reported in net weight basis.

# Tomato Paste, 28-30% TSS B -- Spain and Portugal

## Production, Supply & Distribution Tables

+-------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**     |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | **Sp  |       |       |       |       |       |
|                   | ain** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | **T   |       |       |       | (MT   |       |
|                   | omato |       |       |       | )(MT, |       |
|                   | Pa    |       |       |       | Net   |       |
|                   | ste,2 |       |       |       | We    |       |
|                   | 8-30% |       |       |       | ight) |       |
|                   | TSS   |       |       |       |       |       |
|                   | Ba    |       |       |       |       |       |
|                   | sis** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | 2004  |       | 2005  |       | 2006  |       |
|                   | (Rev  |       | (Esti |       | (Fore |       |
|                   | ised) |       | mate) |       | cast) |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | USDA  | Post  | USDA  | Post  | USDA  | Post  |
|                   | Off   | Est   | Off   | Est   | Off   | Est   |
|                   | icial | imate | icial | imate | icial | imate |
|                   | \[    |       | \[    |       | \[    |       |
|                   | Old\] | \[    | Old\] | \[    | Old\] | \[    |
|                   |       | New\] |       | New\] |       | New\] |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Market Year     | 07    |       | 07    |       | 07    |       |
| Begin**           | /2004 |       | /2005 |       | /2006 |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Deliv. To         | 1,74  | 1,74  | 1,60  | 2,23  | 0     | 1,70  |
| Processors        | 6,205 | 6,205 | 0,000 | 9,327 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks  | 1     | 1     | 5     | 8     | 0     | 15    |
|                   | 6,127 | 6,127 | 6,122 | 0,868 |       | 7,177 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Production        | 32    | 32    | 30    | 41    | 0     | 31    |
|                   | 6,995 | 6,995 | 0,000 | 4,309 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Imports           | 1     | 1     | 1     | 1     | 0     | 1     |
|                   | 3,000 | 2,396 | 0,000 | 2,000 |       | 2,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 35    | 35    | 36    | 50    | 0     | 47    |
|                   | 6,122 | 5,518 | 6,122 | 7,177 |       | 9,177 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Exports           | 16    | 11    | 18    | 18    | 0     | 20    |
|                   | 0,000 | 9,650 | 0,000 | 0,000 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Domestic          | 14    | 15    | 14    | 17    | 0     | 18    |
| Consumption       | 0,000 | 5,000 | 5,000 | 0,000 |       | 0,000 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks     | 5     | 8     | 4     | 15    | 0     | 9     |
|                   | 6,122 | 0,868 | 1,122 | 7,177 |       | 9,177 |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL             | 35    | 35    | 36    | 50    | 0     | 47    |
| DISTRIBUTION      | 6,122 | 5,518 | 6,122 | 7,177 |       | 9,177 |
+-------------------+-------+-------+-------+-------+-------+-------+

+-------------------+---------+-------+-------+-------+-------+-------+
| **PSD Table**     |         |       |       |       |       |       |
+-------------------+---------+-------+-------+-------+-------+-------+
| **Country**       | **Por   |       |       |       |       |       |
|                   | tugal** |       |       |       |       |       |
+-------------------+---------+-------+-------+-------+-------+-------+
| **Commodity**     | *       |       |       |       | (MT   |       |
|                   | *Tomato |       |       |       | )(MT, |       |
|                   | Paste   |       |       |       | Net   |       |
|                   | ,28-30% |       |       |       | We    |       |
|                   | TSS     |       |       |       | ight) |       |
|                   | Basis** |       |       |       |       |       |
+-------------------+---------+-------+-------+-------+-------+-------+
|                   | 2004    |       | 2005  |       | (2006 |       |
|                   | (R      |       | (Esti |       | Fore  |       |
|                   | evised) |       | mate) |       | cast) |       |
+-------------------+---------+-------+-------+-------+-------+-------+
|                   | USDA    | Post  | USDA  | Post  | USDA  | Post  |
|                   |         | Est   | Off   | Est   | Off   | Est   |
|                   | O       | imate | icial | imate | icial | imate |
|                   | fficial |       | \[    |       | \[    |       |
|                   |         | \[    | Old\] | \[    | Old\] | \[    |
|                   | \[Old\] | New\] |       | New\] |       | New\] |
+-------------------+---------+-------+-------+-------+-------+-------+
| **Market Year     | 07/2004 |       | 07    |       | 07    |       |
| Begin**           |         |       | /2005 |       | /2006 |       |
+-------------------+---------+-------+-------+-------+-------+-------+
| Deliv. To         | 988,803 | 98    | 85    | 98    | 0     | 95    |
| Processors        |         | 8,803 | 0,000 | 1,170 |       | 0,000 |
+-------------------+---------+-------+-------+-------+-------+-------+
| Beginning Stocks  | 1,174   | 1,174 | 2     | 4,836 | 0     | 3,620 |
|                   |         |       | 2,809 |       |       |       |
+-------------------+---------+-------+-------+-------+-------+-------+
| Production        | 165,635 | 16    | 14    | 17    | 0     | 16    |
|                   |         | 5,635 | 5,000 | 3,284 |       | 0,000 |
+-------------------+---------+-------+-------+-------+-------+-------+
| Imports           | 1,000   | 2,327 | 600   | 2,500 | 0     | 3,000 |
+-------------------+---------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 167,809 | 16    | 16    | 18    | 0     | 16    |
|                   |         | 9,136 | 8,409 | 0,620 |       | 6,620 |
+-------------------+---------+-------+-------+-------+-------+-------+
| Exports           | 115,000 | 12    | 12    | 13    | 0     | 12    |
|                   |         | 4,300 | 5,000 | 5,000 |       | 0,000 |
+-------------------+---------+-------+-------+-------+-------+-------+
| Domestic          | 30,000  | 4     | 3     | 4     | 0     | 4     |
| Consumption       |         | 0,000 | 2,500 | 2,000 |       | 4,000 |
+-------------------+---------+-------+-------+-------+-------+-------+
| Ending Stocks     | 22,809  | 4,836 | 1     | 3,620 | 0     | 2,620 |
|                   |         |       | 0,909 |       |       |       |
+-------------------+---------+-------+-------+-------+-------+-------+
| TOTAL             | 167,809 | 16    | 16    | 18    | 0     | 16    |
| DISTRIBUTION      |         | 9,136 | 8,409 | 0,620 |       | 6,620 |
+-------------------+---------+-------+-------+-------+-------+-------+

## Production

Iberian MY 2006/07 processed tomato outputs will suffer a significant
reduction from 2005/06 levels, due to severe subsidy penalties set by
Brussels. Even so, according to local producer sources, subsidy
penalties may reach as much as 60% in 2007/08 (see also Policy).

In Spain farmer sources report major area reductions in key tomato
Autonomies, by as much as 25% in Andalucia.

In Portugal, processed tomato product outputs will suffer a smaller
reduction.

MY 2004 and 2005 fresh tomato deliveries and tomato paste outputs are
official data. We have estimated tomato deliveries and tomato paste
outputs for MY 2006.

## Trade

Intra-EU market destinations for Spanish stocks of processed tomatoes
are South Italian re-packers, while outside EU market destinations
include Russia, Central and Eastern Europe, and perhaps Southeast Asia
and South America. These stocks will be sold for low prices as
processors attempt to clear 2005 stocks.

The overlap of stocks has been identified as a problem as processors
report price confusion and the risk of fraud in terms of labeling of
season.

### Trade Matrices

  -------------------- -------------- -------------------- --------------
  **Import Trade                                           
  Matrix**                                                 

  **Country**          Spain                               

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

  Time Period          July/June      Units:               Metric Tons

  Imports for:         2003                                **2004**

  U.S.                 221            U.S.                 0

  Others                              Others               

  Portugal             8,868          Portugal             8,512

  Italy                714            Italy                728

  Other EU-25          1,017          Other EU-25          643

  China                2,233          Israel               2,050

                                      China                486

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     12,832                              12,419

  Others not Listed    984                                 2

  Grand Total          14,037                              12,421
  -------------------- -------------- -------------------- --------------

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

  **Country**          Spain                               

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

  Time Period          July/June      Units:               Metric Tons

  Exports for:         2003                                **2004**

  U.S.                 2,688          U.S.                 2,077

  Others                              Others               

  Germany              29,228         Germany              28,787

  France               26,156         France               27,857

  U.K.                 23,516         U.K.                 18,956

  Other EU             32,679         Other EU-25          32,697

  Japan                3,246          Japan                2,585

  Norway               2,073          Norway               2,474

                                                           

                                                           

                                                           

                                                           

  Total for Others     116,898                             113,356

  Others not Listed    41,667                              4,217

  Grand Total          161,253                             119,650
  -------------------- -------------- -------------------- --------------

## 

## 

## 

  -------------------- -------------- -------------------- --------------
  **Import Trade                                           
  Matrix**                                                 

  **Country**          Portugal                            

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

  Time Period          July/June      Units:               Metric Tons

  Imports for:         2003                                **2004**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Italy                1,001          Italy                1,012

  Spain                305            Spain                304

  Other EU-25          26             Other EU-25          20

  China                251            China                949

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     1,583                               2,285

  Others not Listed    52                                  42

  Grand Total          1,635                               2,327
  -------------------- -------------- -------------------- --------------

## 

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

  **Country**          Portugal                            

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

  Time Period          July/June      Units:               Metric Tons

  Exports for:         2003                                **2004**

  U.S.                 307            U.S.                 49

  Others                              Others               

  U.K.                 41,901         U.K.                 36,728

  Netherlands          17,132         Netherlands          15,282

  Germany              9,050          Germany              7,911

  France               6,475          Italy                7,375

  Italy                4,204          Spain                6,841

  Spain                4,146          France               6,723

  Other EU             20,184         Other EU             18,623

  Japan                8,169          Japan                11,655

  Switzerland          2,003          Switzerland          5,403

  S. Korea             1,269          S. Korea             1,638

  Total for Others     114,533                             118,179

  Others not Listed    6,384                               6,072

  Grand Total          121,224                             124,300
  -------------------- -------------- -------------------- --------------

## Source: Global Trade Atlas. Data is reported in net weight basis, 28-30% TSS.

## 

## 

## Policy

Processing tomato production is subject to rules and supports laid out
under the Common Agricultural Policy (CAP). Under the fruit and
vegetables common policy, there are EU-set producer subsidies for
outputs within specific EU-set production thresholds. When these
thresholds are surpassed, there are subsidy penalties.

Below, please find current EU-set production thresholds for Spain and
Portugal, as well as producer subsides in effect during MYs 2004/05 and
2005/06.

**EU-Set Production Thresholds For Processing Tomato,**

**Fresh Tomato Basis (Tons)**

+------------+-------------------------------------+------------------+
| *          | **Product**                         | **Production     |
| *Country** |                                     | Thresholds**     |
+------------+-------------------------------------+------------------+
| Spain      | \- Canned whole peeled tomatoes     | 116,612          |
|            |                                     |                  |
|            | \- Other Tomato Products            | 1,126,994        |
|            |                                     |                  |
|            | \- Total processed tomato products  | 1,238,606        |
+------------+-------------------------------------+------------------+
| Portugal   | \- Total processed tomato products  | 1,050,000        |
+------------+-------------------------------------+------------------+
| **TOTAL    |                                     | **8,251,455**    |
| EU**       |                                     |                  |
+------------+-------------------------------------+------------------+

Note: Production threshold is not divided in Portugal.

**EU Subsidies to Processing Tomato Producers (€/MT)**

+--------------+-------------------------+---------------+-------------+
|              |                         | **2004/05**   | **2005/06** |
+--------------+-------------------------+---------------+-------------+
| Spain        | Whole canned Tomatoes   | 34.50         | 34.50       |
|              |                         |               |             |
|              | Other Tomato Products   | 29.36         | 31.29       |
+--------------+-------------------------+---------------+-------------+
| Portugal     |                         | 34.50         | 34.50       |
+--------------+-------------------------+---------------+-------------+

The EU is preparing to revise its processed fruit and vegetables regime
during the second half in CY-2006. According to the EU Commission (EC)
agenda, the reform will be completed by October 2006.

The EC has just put out a document which it has submitted accredited
producer organizations for discussion. Accordingly, key reform options
on the table are: (1) to maintain the status quo; (2) to introduce full
or partial decoupling; (3) to convert current subsidy regime (paid on an
output-base) into an area-related subsidy. Of all options, the most
popular is subsidy decoupling.

The new reform will come to effect in MY 2008/09. The Government of
Spain (GOS) has defended an anticipation of the reform in order to
minimize farmer losses due to subsidy cuts associated to over-production
in recent years. However, according to our sources, the EC will be
inflexible maintaining its calendar. The industry has some concerns over
the Reform, as the introduction of subsidy decoupling will likely create
provisioning problems over the medium-term.

# Publicly-Funded Horizontal Policy

## Spain

Since the drought during the 2004/05 growing season, the Government of
Spain (GOS) has invested in irrigation infrastructure in different areas
of the country. Irrigation installations have taken place in
*Extremadura* and *Andalusia* and may benefit tomato producers in these
regions.

Agricultural Associations that provide support, technical assistance and
training to producers are subsidized by the GOS. These organizations
will likely receive additional funding in the future as a result of the
rural development programs of the EC.

The EC subsidizes the promotion of agricultural products, fresh and
processed, (processed tomatoes) with EC funds within EU countries (EC
94/2002). Funds are designated to spread information about denomination
of origin, ecological production methods, traceabilty, product quality,
safety, and nutritional value. Principal instruments that can be used
are electronic media, specialized press, consumer organizations, point
of sale, written documents and fliers, participation in fairs and
expositions. Financing consists of 50 percent by the EC, 20 percent by
member states, and 30 percent by the sector.

The EC also subsidizes the promotion of agricultural products, fresh and
processed, (fresh and processed tomatoes) in third countries in
accordance with EC 2879/2000. This program allows for similar
promotional activities and methods in third party countries in addition
to market studies and market development.