Required Report - public distribution

**Date:** 5/23/2005

**GAIN Report Number:** PO5012

PO0000

**Iberian Peninsula**

**Tomatoes and Products**

**Annual**

**2005**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

Leonor Ramos

**Report Highlights:**

We are forecasting that Iberian Peninsula processed tomato products
exports will reach record levels during marketing year (MY) 2005/06
(July/June), due to the industry's need to reduce stocks. However, in
subsequent years, we expect exports to tend lower as the processing
industry adjusts to reform of the Common Agricultural Policy (CAP) and
changes in market access resulting from trade agreements. (LR34PM5SH6).

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Madrid \[SP1\]

\[PO\]

####### TABLE OF CONTENTS

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

[Commodity Name: Fresh Tomatoes 4](#commodity-name-fresh-tomatoes)

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

[Production 5](#production)

[Trade 7](#trade)

[Commodity Name: Canned Tomatoes 10](#commodity-name-canned-tomatoes)

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

[Production 10](#production-1)

[Consumption 10](#consumption)

[Policy 10](#policy)

[Commodity Name: Tomato Paste, 28-30% TSS B
12](#commodity-name-tomato-paste-28-30-tss-b)

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

[Production 13](#production-2)

[Consumption 14](#consumption-1)

[Trade 14](#trade-1)

[Stocks 17](#stocks)

[Policy 17](#policy-1)

# Executive Summary

-   Processed tomato products exports will reach record levels during MY
    2005/06, as the industry is lowering prices drastically to bring
    down stocks of finished product.

-   By 2010, the European Union (EU) will implement its free-trade
    agreement with Maghreb countries, which will boost competition in
    the tomato products market. In the international market, China's
    future role as either exporter or importer, and demand trends for
    consuming industries, including fast food, will also be determining
    for the Iberian Peninsula producers and exporters.

-   By 2007, the EU will revise completely its current processing fruit
    and vegetables common policy, and will likely introduce subsidy
    decoupling. This will encourage the less competitive producers to
    leave, and the sector overall to re-structure. At farm level,
    changing EU policies will tend to discourage production over the
    medium-term.

-   In the medium term, tomato processing on the Iberian Peninsula could
    be down some twenty to thirty percent relative to current levels.
    The current market surplus of processed tomato products will force
    the industry to re-structure, close down less competitive factories,
    and lower outputs.

# Commodity Name: Fresh Tomatoes

## Production, Supply & Distribution Tables

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

  **Country**          **Spain**                                                   

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

                       2003         Revised     2004        Estimate    2005       Forecast

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

  **Market Year                     01-2003                 01-2003                01-2003
  Begin**                                                                          

  Plnt For Fresh       32,200       39,700      32,300      32,700      0          30,000
  Consump                                                                          

  Plnt For Processing  32,300       32,300      35,800      37,200      0          37,100

  TOTAL Area Planted   64,500       72,000      68,100      69,900      0          67,100

  Harv. For Fresh      32,200       39,700      32,300      32,700      0          30,000
  Cons.                                                                            

  Harv. For Processing 32,300       32,300      35,800      37,200      0          37,100

  TOTAL Area Harvested 64,500       72,000      68,100      69,900      0          67,100

  Fresh Sale           2,200,300    2,299,000   2,210,000   2,274,800   0          1,900,000
  Production                                                                       

  Processing           1,711,000    1,713,346   2,220,000   1,902,393   0          1,850,000
  Production                                                                       

  TOTAL Production     3,911,300    4,012,346   4,430,000   4,177,193   0          3,750,000

  TOTAL SUPPLY         3,911,300    4,012,346   4,430,000   4,177,193   0          3,750,000
  -------------------- ------------ ----------- ----------- ----------- ---------- -----------

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

  **Country**         **Portugal**                                                

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

                      2003           Revised    2004       Estimate    2005       Forecast

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

  **Market Year                      01-2003               01-2004                01-2005
  Begin**                                                                         

  Plnt For Fresh      1,500          1,550      0          1,550       0          1,500
  Consump                                                                         

  Plnt For Processing 12,474         12,474     0          15,134      0          14,878

  TOTAL Area Planted  13,974         14,024     0          16,684      0          16,378

  Harv. For Fresh     1,500          1,550      0          1,550       0          1,500
  Cons.                                                                           

  Harv. For           12,474         12,474     0          15,134      0          14,878
  Processing                                                                      

  TOTAL Area          13,974         14,024     0          16,684      0          16,378
  Harvested                                                                       

  Fresh Sale          160,000        98,646     0          98,650      0          95,000
  Production                                                                      

  Processing          894,094        894,093    0          1,171,066   0          1,050,000
  Production                                                                      

  TOTAL Production    1,054,094      992,739    0          1,269,716   0          1,145,000

  TOTAL SUPPLY        1,054,094      992,739    0          1,269,716   0          1,145,000
  ------------------- -------------- ---------- ---------- ----------- ---------- -----------

## Production

[Production in Spain]{.underline}:

-   Spanish total MY 2005/06 tomato production will be down relative to
    previous year levels.

-   The Spanish official statistics show a 9.4 percent reduction in
    early tomato area (for consumption in fresh), which is harvested
    from January to May. Average yield was down 1 percent.

-   Official Spanish statistics show a marginal reduction in calendar
    year (CY) 2005 tomato areas.

-   Areas and Outputs for CY 2003 and CY 2004 fresh tomato production
    are from the MAPYA statistical bulletin (the *Avances*). Processing
    tomato production in MY 2003/04 and MY 2004/05 was obtained from
    MAPYA. Production forecast for MY 2005/06 was made based on official
    area estimate and producer information.

-   Total industry contracted output for MY 2005/06 is higher than
    product delivered to the industry in MY 2004/05. However, actual
    production should be lower due to the effects of the drought.

-   Farmer enthusiasm with tomato production is surprisingly high for a
    drought year and is reportedly being boosted by policy changes
    underway in the EU. Reportedly there are concerns among growers that
    the current crop year could be the last to influence the level of
    future EU-set de-coupled subsidies.

Spain: Processing Tomato Production

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

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

  Production        2,356,739         1,902,393         2,256,560
  ----------------- ----------------- ----------------- -----------------

Source: Spanish producers association. Units: Tons

-   There are some signs the sector is becoming more integrated along
    the lines of the Iberian Peninsula rather than by nation. In MY
    2004/05, a producer organization (PO) from Extremadura integrated,
    along with five Portuguese POs the first trans-national producer
    association on the Iberian Peninsula (Produland).

-   Spanish production grew considerably over the previous past two
    years, causing the producers to surpass the EU-assigned quota.

-   The sector in Spain is absorbing the surplus problems generated by
    the entry into production of three large new POs in Extremadura in
    recent years. When a Spanish tomato factory contracts with a
    Portuguese PO, it benefits from lower prices, as Portuguese farmers
    continue to receive full EU subsidy.

-   Tomato production remains very profitable in Extremadura and
    Andalusia, as improvements in mechanization, new varieties and
    technology used are raising yields and productivities.

The introduction of new CAP in MY 2006/07 in Spain will make more areas
available to tomato production, namely from cotton. However, due to
current surplus stocks of finished products, and world competition the
total Spanish processing tomato area will tend to be down in the future.

###### Production in Portugal

-   Production data for CY 2003 and CY 2004 reflects official statistics
    published from INE, and information collected from the national
    guarantee institute (INGA). The difference in the 2003 number
    results from new information from the national statistics office.

-   Total MY 2004/05 processing tomato production was obtained from
    INGA. It is slightly higher than the level of total tomato
    production processed by the industry, as some of the local
    production is processed in Spain.

-   We expect the MY 2005/06 tomato output to come under the 2005
    industry contracted area (see below) due to the effects of the
    drought.

Portugal: Processing Tomato production. Units: Tons

  ---------- ----------- ----------- ----------- ----------- ----------- -----------
             2004/5 (\*)                         2005/6                  
                                                 (\*\*)                  

             To be       To be       Total       To be       To be       Total
             Processed   Processed               Processed   Processed   
             in Portugal in Spain                in Portugal in Spain    

  Tom. Paste 988,803     159,736     1,148,539   975,824     195,530     1,171,354

  Other      22,527      0           22,527      19,550      0           19,550

             1,011,330   159,736     1,171,066   995,374     195,530     1,190,904
  ---------- ----------- ----------- ----------- ----------- ----------- -----------

Source: INGA. (\*) Actual tomato used in processing. (\*\*) Tomato
contracted for 2005/06.

Portugal: The Processing Tomato Sector in Numbers

+-------+----------+-----------+--------------+----------+-----------+
| Year  | Num.     | Area (ha) | Raw Material | Average  | National  |
|       | P        |           |              | Price    | P         |
|       | roducers |           | Produced     | (€/Ton)  | roduction |
|       |          |           | (Ton)        |          | Quota     |
|       |          |           |              |          | (Ton)     |
+-------+----------+-----------+--------------+----------+-----------+
| 20    | 1,271    | 11,725    | 917,069      | 80.79    | 1,050,000 |
| 01/02 |          |           |              |          |           |
+-------+----------+-----------+--------------+----------+-----------+
| 20    | 998      | 11,851    | 834,334      | 79.39    | 1,050,000 |
| 02/03 |          |           |              |          |           |
+-------+----------+-----------+--------------+----------+-----------+
| 20    | 868      | 12,474    | 894,093      | 80.34    | 1,050,000 |
| 03/04 |          |           |              |          |           |
+-------+----------+-----------+--------------+----------+-----------+
| 20    | 817      | 14,026    | 1,171,066    | 79.99    | 1,050,000 |
| 04/05 |          |           |              |          |           |
+-------+----------+-----------+--------------+----------+-----------+
| 20    | \-       | 14,878    | 1,050,000    | \-       | 1,050,000 |
| 05/06 |          | (1)       | (2)          |          |           |
+-------+----------+-----------+--------------+----------+-----------+

Source: INGA. (1) Contracted area; (2) Forecast.

-   The bulk of the Portuguese tomato crop is produced in the
    "Ribatejo-e-Oeste" region under irrigation.

-   The implementation of CAP Reform in Portugal during the current year
    encouraged large corn farmers to shift into tomato production in
    2004/05. These farmers could be concerned with improving "historic
    rights" when the EU implements a new regime based on subsidy
    de-coupling.

-   Further, "historic rights" for grains had already been set (as
    average of CY 2000, CY 2001 and CY 2002 subsidy payments).

-   The sector is restructuring, with a small farmers replaced by
    larger, more efficient ones.

-   Some productions costs in Portugal are lower than in other EU
    producing countries.

-   Producer sources report that prices plus subsidies received by
    farmers amount to roughly 8 Eurocents/kg. The current surplus
    problem in international processed tomato markets is making the
    industry more demanding in terms of quality. Consequently, it is
    implementing a very rigorous penalty system for below-standard
    products.

## Trade

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

  **Country**          Spain                               

  **Commodity**        Fresh Tomatoes                      

  Time Period          Calendar Year  Units:               Metric Tons

  Imports for:         2003                                **2004**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Portugal             49,746         Portugal             67,407

  France               3,982          Germany              10,951

  Netherlands          3,933          Netherlands          6,235

  Belgium              2,748          Belgium              3,435

  Other EU-25          1,703          France               2,982

  Morocco              7,200          Other EU-25          542

  Turkey               96             Morocco              8,483

                                      Romania              181

                                                           

                                                           

  Total for Others     69,408                              100,216

  Others not Listed    43                                  23

  Grand Total          69,451                              100,239
  -------------------- -------------- -------------------- --------------

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

  **Country**          Spain                               

  **Commodity**        Fresh Tomatoes                      

  Time Period          Calendar Year  Units:               Metric Tons

  Exports for:         2003                                **2004**

  U.S.                 3,640          U.S.                 2,786

  Others                              Others               

  Germany              243,009        Germany              243,792

  U.K.                 193,412        U.K.                 207,076

  Netherlands          167,982        Netherlands          181,902

  France               151,663        France               159,665

  Czech Republic       29,165         Italy                31,025

  Portugal             24,650         Czech Republic       27,150

  Italy                23,670         Poland               26,339

  Poland               23,455         Portugal             24,816

  Other EU-25          74,481         Other EU-25          87,238

  Russia               8,412          Russia               8,520

  Total for Others     939,899                             997,523

  Others not Listed    21,569                              22,641

  Grand Total          965,108                             1,022,950
  -------------------- -------------- -------------------- --------------

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

  **Country**          Portugal                            

  **Commodity**        Fresh Tomatoes                      

  Time Period          Calendar Year  Units:               Metric Tons

  Imports for:         2003                                **2004**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Spain                32,596         Spain                24,244

  Germany              3,066          Germany              3,316

  Other EU             127            Other EU             163

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     35,789                              27,723

  Others not Listed    0                                   0

  Grand Total          35,789                              27,723
  -------------------- -------------- -------------------- --------------

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

  **Country**          Portugal                            

  **Commodity**        Fresh Tomatoes                      

  Time Period          Calendar Year  Units:               Metric Tons

  Exports for:         2003                                **2004**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Spain                41,288         Spain                44,580

  U.K.                 1,119          U.K.                 1,296

  France               8              France               4

  Cape Verde           28             Cape Verde           14

  Angola               7              Angola               1

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     42,450                              45,895

  Others not Listed    0                                   0

  Grand Total          42,450                              45,895
  -------------------- -------------- -------------------- --------------

Source: Global Trade Atlas.

# Commodity Name: Canned Tomatoes

## Production, Supply & Distribution Table

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

  **Country**          **Spain**                                                 

  **Commodity**        **Tomatoes,                                    (MT)(MT,   
                       Canned**                                       Net        
                                                                      Weight)    

                       2003          Revised    2004       Estimate   2005       Forecast

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

  **Market Year                      07-2003               07-2004               07-2005
  Begin**                                                                        

  Deliv. To Processors 215,000       159,038    200,000    237,352    0          195,000

  Beginning Stocks     596           596        4,596      563        0          39,170

  Production           179,000       127,309    166,000    189,607    0          162,500

  Imports              2,000         3,522      2,000      4,000      0          4,000

  TOTAL SUPPLY         181,596       131,427    172,596    194,170    0          205,670

  Exports              68,000        53,364     60,000     65,000     0          80,000

  Domestic Consumption 109,000       77,500     109,000    90,000     0          110,000

  Ending Stocks        4,596         563        3,596      39,170     0          15,670

  TOTAL DISTRIBUTION   181,596       131,427    172,596    194,170    0          205,670
  -------------------- ------------- ---------- ---------- ---------- ---------- ----------

# Production

-   Product delivery to processors, and outputs for MY 2003/04 and MY
    2004/05 were provided by the Spanish Ministry of Agriculture
    (MAPYA);

-   The higher 2004/05 canned tomatoes production was primarily due to
    diced peeled tomatoes, which totaled 153,126 Tons in MY 2004/05 (net
    weight), up from 121,151 Tons in MY 2003/04. Diced whole tomatoes
    totaled 26,377 Tons in MY 2004/05, up from 1,935 Tons in MY 2003/04.

-   Canned tomatoes production grew in MY 2004/05 in association with
    the higher crop output.

-   In MY 2005/06, we expect canned tomatoes to come down, due to a
    reduction in agricultural outputs.

# Consumption

-   Spanish canned tomato consumption grew during 2004/05, favored by
    eating trends and the convenience of use of diced tomatoes. For more
    details, please check Tomato Paste section in report.

# Policy

-   Canned tomato production is subject to dispositions contained in the
    EU Common Market Organization (CMO) for processing fruit and
    vegetables. For a summary of most important mechanisms, please check
    Tomato Paste section in report.

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

  **Country**          Spain                               

  **Commodity**        Tomatoes,                           
                       Canned                              

  Time Period          July/June      Units:               Metric Tons

  Imports for:         2002                                **2003**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Italy                887            Italy                1809

  Germany              349            Portugal             711

  Portugal             240            France               614

  U.K.                 106            Germany              351

  Other EU-25          31             Other EU-25          17

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     1613                                3502

  Others not Listed    24                                  20

  Grand Total          1637                                3522
  -------------------- -------------- -------------------- --------------

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

  **Country**          Spain                               

  **Commodity**        Tomatoes,                           
                       Canned                              

  Time Period          July/June      Units:               Metric Tons

  Exports for:         2002                                **2003**

  U.S.                 1907           U.S.                 1153

  Others                              Others               

  France               25799          France               21383

  U.K.                 7865           U.K.                 8670

  Italy                5466           Portugal             4284

  Portugal             4810           Germany              3807

  Germany              4668           Italy                3641

  Other EU-25          4469           Other EU-25          4164

  Canada               1665           Canada               1569

  Venezuela            615            Venezuela            378

                                                           

                                                           

  Total for Others     55357                               47896

  Others not Listed    2641                                4315

  Grand Total          59905                               53364
  -------------------- -------------- -------------------- --------------

# Commodity Name: Tomato Paste, 28-30% TSS B

## Production, Supply & Distribution Tables

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

  **Country**          **Spain**                                                     

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

                       2003           Revised     2004        Estimate    2005       Forecast

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

  **Market Year                       07-2003                 07-2004                07-2005
  Begin**                                                                            

  Deliv. To Processors 1,343,000      1,368,721   1,800,000   1,746,205   0          1,600,000

  Beginning Stocks     587            587         3,399       16,127      0          56,122

  Production           239,812        255,466     321,428     326,995     0          300,000

  Imports              14,000         13,630      10,000      13,000      0          10,000

  TOTAL SUPPLY         254,399        269,683     334,827     356,122     0          366,122

  Exports              124,000        123,556     160,000     160,000     0          180,000

  Domestic Consumption 127,000        130,000     128,000     140,000     0          145,000

  Ending Stocks        3,399          16,127      46,827      56,122      0          41,122

  TOTAL DISTRIBUTION   254,399        269,683     334,827     356,122     0          366,122
  -------------------- -------------- ----------- ----------- ----------- ---------- -----------

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

  **Country**         **Portugal**                                               

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

                      2003           Revised    2004       Estimate   2005       Forecast

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

  **Market Year                      07-2003               07-2004               07-2005
  Begin**                                                                        

  Deliv. To           83,075         830,755    116,271    988,803    0          850,000
  Processors                                                                     

  Beginning Stocks    3,000          3,000      1,000      1,174      0          22,809

  Production          145,267        145,267    165,000    165,635    0          145,000

  Imports             0              1,635      0          1,000      0          600

  TOTAL SUPPLY        148,267        149,902    166,000    167,809    0          168,409

  Exports             120,000        121,228    130,000    115,000    0          125,000

  Domestic            27,267         27,500     35,000     30,000     0          32,500
  Consumption                                                                    

  Ending Stocks       1,000          1,174      1,000      22,809     0          10,909

  TOTAL DISTRIBUTION  148,267        149,902    166,000    167,809    0          168,409
  ------------------- -------------- ---------- ---------- ---------- ---------- ----------

# Production

[Spain]{.underline}

-   Spanish tomato paste production was up in MY 2004/05, due to the
    interest of producers/ cooperatives to increase activity levels.

```{=html}
<!-- -->
```
-   Tomato paste production will tend to undergo a mild reduction in MY
    2005/06 due to a forecasted decrease in fresh tomato supply.

-   MY 2005/06 will be a very hard year for the Iberian Peninsula tomato
    processors due to a market surplus and high stocks of finished
    products.

-   Tomato paste production will come down in coming few years, as the
    sector will have to adjust activity levels to market needs. Industry
    sources consider that in general terms, the EU tomato industry will
    have to reduce outputs and exports by nearly 30 percent over the
    next few years.

-   This process will also induce an industry re-structure, and force
    out the less competitive factories.

-   Production data for tomato paste for 2004 was provided by FEGA.

[Portugal]{.underline}

-   Portuguese tomato paste production will tend to decline in MY
    2005/06, due to a lower raw material supply.

-   Over the coming few years, tomato output levels will be reduced, as
    the industry will have to reduce activity levels, while farmer
    pressure will tend to diminish for policy reasons (see Policy).

-   In the process of industry re-structure, local tomato factories will
    be reduced from a total of nine in operation at present, to some six
    or seven.

```{=html}
<!-- -->
```
-   Below we provide table with fresh tomato industry use and end
    products, broken down by product type for MY 2003/04 and MY 2004/05.
    Data was supplied by the national guarantee institute (INGA):

Portugal: Processing Tomato Use by the Local Industry (Units: Tons)

+--------------------+-----------+------------+----------+-----------+
|                    | **        |            | **2      |           |
|                    | 2003/04** |            | 004/05** |           |
+--------------------+-----------+------------+----------+-----------+
| **Product          | **Fresh** | **P        | *        | **Pr      |
| Category**         |           | rocessed** | *Fresh** | ocessed** |
+--------------------+-----------+------------+----------+-----------+
| Paste              | 830,755   | 145,267    | 988,802  | 165,635   |
|                    |           |            |          |           |
| Juice              | 20,370    | 9,756      | 17,809   | 8,493     |
|                    |           |            |          |           |
| Canned Tomatoes 1/ | 6,549     | 4,444      | 4,719    | 3,125     |
+--------------------+-----------+------------+----------+-----------+
| TOTAL              | **        | *          | **1,0    | **        |
|                    | 857,674** | *159,467** | 11,330** | 177,253** |
+--------------------+-----------+------------+----------+-----------+

Source: INGA. 1/ Diced.

## Consumption

[Spain]{.underline}

-   Domestic tomato paste consumption will tend to expand gradually in
    the future, in association with the development of specific food
    segments that use processed tomatoes as ingredients. These include
    pasteurized *gaspazo* (a traditional cold soup), a recent innovation
    with great commercial success in Iberian markets, and pizza sauces.

-   Consumption of whole peeled canned tomatoes will tend to continue to
    decline in the future, as the consumers replace this product with
    more convenient crushed and diced tomatoes.

-   The convenience factor will continue to fuel demand for a series of
    tomato-based products. In addition to *gaspazo*, *tomate frito* -- a
    sauce used with pasta and many other products -- is one of the
    fastest growing product segments.

-   Other factors supporting a continuing growth in processed tomato
    consumption include rising numbers of immigrants and tourists, an
    accrued interest in the Mediterranean diet and restaurant business
    trends.

[Portugal]{.underline}

-   Processed tomato consumption has been following trends largely
    similar to Spain's. Processed tomato demand has been favored by
    restaurant business trends, as well as changing eating habits.

## Trade

[Spain]{.underline}

-   Spanish MY 2004/05 tomato paste exports will be higher than in MY
    2003/04 due to the industry need to control stocks of finished
    products.

-   According to the official statistics, during July 2004/January 2005,
    Spanish tomato paste exports went down by 8 percent relative to the
    same period the previous year. However, exports have been increasing
    over the past recent months, due to the implementation of drastic
    price reductions (20 to 30 percent) by the industry.

-   Tomato paste exports should be higher yet in MY 2005/06 through
    continuing low prices, so as to enable the industry to lower stocks.

> [Portugal]{.underline}

-   Portuguese tomato paste exports were down 11 percent during July
    2004/January 2005 relative to the same period in the previous year,
    affected by the surplus in international markets.

-   The local industry has reacted to dropping international market
    prices by lowering its prices as well. Nevertheless, total MY
    2004/05 Portuguese exports should remain below previous year levels,
    forcing the industry to hold exceptionally high stocks.

-   Tomato paste product exports will go up in MY 2005/06, as the
    Portuguese industry will continue to implement a competitive price
    policy, in order to draw down on its stocks of finished products.

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

  **Country**          Spain                               

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

  Time Period          July/June      Units:               Metric Tons

  Imports for:         2002                                **2003**

  U.S.                 576            U.S.                 221

  Others                              Others               

  Portugal             10190          Portugal             8847

  France               712            Germany              318

  Germany              275            France               311

  Other EU-25          314            Other EU-25          718

  China                2670           China                2233

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     14161                               12427

  Others not Listed    354                                 982

  Grand Total          15091                               13630
  -------------------- -------------- -------------------- --------------

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

  **Country**          Spain                               

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

  Time Period          July/June      Units:               Metric Tons

  Exports for:         2002                                **2003**

  U.S.                 4159           U.S.                 2688

  Others                              Others               

  Germany              35140          Germany              29227

  France               26034          France               26156

  U.K.                 17627          U.K.                 23517

  Netherlands          11045          Netherlands          11516

  Italy                8677           Italy                5289

  Other EU-25          13885          Other EU-25          15854

  Japan                2407           Japon                3246

                                                           

                                                           

                                                           

  Total for Others     114815                              114805

  Others not Listed    7509                                6063

  Grand Total          126483                              123556
  -------------------- -------------- -------------------- --------------

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

  **Country**          Portugal                            

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

  Time Period          July/June      Units:               Metric Tons

  Imports for:         2002                                **2003**

  U.S.                 0              U.S.                 0

  Others                              Others               

  Spain                813            Italy                1001

  Italy                419            Spain                304

  Other EU-25          0              Other EU-25          25

  Japan                36             China                251

                                                           

                                                           

                                                           

                                                           

                                                           

                                                           

  Total for Others     1268                                1581

  Others not Listed    0                                   54

  Grand Total          1268                                1635
  -------------------- -------------- -------------------- --------------

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

  **Country**          Portugal                            

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

  Time Period          July/June      Units:               Metric Tons

  Exports for:         2002                                **2003**

  U.S.                 146            U.S.                 307

  Others                              Others               

  Netherlands          18962          Netherlands          17132

  U.K.                 16815          U.K.                 16743

  Germany              10912          Germany              9050

  Italy                6260           Ireland              6742

  Ireland              4981           France               6475

  France               4256           Spain                4147

  Spain                4096           Denmark              2368

  Denmark              2736           Other EU-25          35374

  Other EU-25          27218          Japan                7895

  Japan                8761                                

  Total for Others     104997                              105926

  Others not Listed    17450                               14995

  Grand Total          122593                              121228
  -------------------- -------------- -------------------- --------------

Source: Global Trade Atlas. Data in the Trade matrices was converted
from gross weight into 28-30 percent solids, net weight, by application
of appropriate conversion rates.

## 

## Stocks

-   End of MY 2004/05 finished product stocks were up in both Spain and
    Portugal due to the surplus in international markets of tomato
    products.

-   Industry stocks will be down over the coming two years, due to
    adequate export policies.

## Policy

-   Processing tomato production is regulated by EU Reg. 2201/96 of the
    Council, which lays out the Common Market Organization (CMO) of
    processing fruit and horticultural products.

-   Processing tomato production was object of a "micro-reform" in 2000.
    As of MY 2001/02, processing production is subject to EU-set
    production thresholds, set by Member State.

-   Under the EU legislation, the Government of Spain (GOS) sub-divided
    the national threshold into sub-quotas in 2003/04.

-   Quotas in effect in Spain and Portugal are the following:

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

**Fresh Tomato Basis (Tons)**

+------------+-------------------------------------+------------------+
| *          | **Product**                         | **Production     |
| *Country** |                                     | Thresholds**     |
+------------+-------------------------------------+------------------+
| Spain      | \- Canned whole peeled tomatoes     | 111,612          |
|            |                                     |                  |
|            | \- 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.

-   Prices are negotiated between the processing industry and the
    producers through Producer Organizations (POs).

-   Producer subsidies are EU-set, being published each year in the EU
    Official Journal. Subsidies reflect market-related factors. When
    average production of any country over the previous three-year
    period surpasses the national quota, producer subsidies are
    penalized.

-   Spain surpassed its quota largely over the past two years.
    Consequently, producer subsidies in Spain were lower than in
    Portugal in MY 2004/05, and will be again lower in MY 2005/06:

-   In Portugal, if quantities contracted for 2005/06 are in fact
    produced, the farmers will undergo a subsidy penalty in MY 2006/07.

**EU Subsidies for Processing Tomato Producers (€/Ton)**

+---------+------------------------+-----------------+-----------------+
|         |                        | **2004/05 (a)** | **2005/06 (b)** |
+---------+------------------------+-----------------+-----------------+
| Spain   | Whole canned tomatoes  | 34.50           | 34.50           |
|         |                        |                 |                 |
|         | Other tomato products  | 29.36           | 31.29           |
+---------+------------------------+-----------------+-----------------+
| P       | All tomato products    | 34.50           | 34.50           |
| ortugal |                        |                 |                 |
+---------+------------------------+-----------------+-----------------+

(a) EU Commission Reg. 177/2004, dated Jan 30, 2004

(b) EU Commission Reg. 170/2005, dated Jan 31, 2005

-   EU subsidy payments to Iberian Peninsula tomato producers are given
    below:

> **EU Subsidy Payments to Iberian**
>
> **Processing Tomato Producers (M €)**

  ------------------- ------------------------- --------------------------
                      **Spain**                 **Portugal**

  2002/03             49.37                     28.8

  2003/04             50.02                     30.8

  2004/05             \-                        40.4
  ------------------- ------------------------- --------------------------

Source: EU Commission

-   The EU is revising its processing tomato policy again this year.
    However, contrary to earlier expectations, it has moved away from
    the idea of introducing some form of de-coupling. Only minor changes
    will be made.

-   In 2007, the EU should revise its processing fruit and vegetables
    policy in harmony with the principles approved under the so-called
    "CAP Reform," introducing subsidy de-coupling.

-   When the EU introduces subsidy de-coupling, less competitive
    producers will abandon the activity, and the sector will
    re-structure. Total production will tend to decline from current
    levels.

-   The entry into force of the free-trade agreement between the EU and
    the Maghreb countries in 2010 will lead to higher imports of
    processed tomato products and additional constraints for the sector.