- François-Xavier Branthôme
Production is down and industrial costs are up
The ANICAV's end-of-season conclusions indicate that the year has been disappointing. According to figures published by the main Italian processors' association, the 2018 tomato season ended with production results of 4.65 million tonnes processed, which is a 11.5% decrease compared to 2017(*). In the South Central region, with only 2.2 million tonnes of tomatoes processed, operations decreased by 12.7% compared to last year, while in the Northern region, final processing results were at approximately 2.5 million tonnes (-10.2% compared to last year).
The ANICAV explained that the drop in Italy's production figures is due both to a decrease in planted surfaces and to difficulties linked to weather conditions that considerably affected agricultural yields. This is why a number of processing companies encountered major supply difficulties in the South Central region. According to local Italian press sources, the level of operations dropped 30% in the Apulia region, particularly for factories that process cherry tomatoes, both round varieties and/or oblong ones ("datterini"). This type of fruit, which was produced in excessive quantities last year and was not sufficiently profitable, has been set aside this year, and replaced by traditional varieties, both round and oblong.
According to the words of a processor at the end of the harvest, ”Nowadays, processing companies are facing hard times. They are desperately looking for the product. They turn to the fresh sector, willing to pay more for the product – if only they can find it. I think we need better planning and we need to respect the contracts signed during the pre-campaign. It would be extremely useful for everyone: farmers would have a sure revenue and industry would not have to spend more money than usual on products that are generally easy to find."
In a meager consolation for the Italian industry, results of the 2018 season must be considered in the context of a global slowdown, which has led to a noticeable reduction in volumes both in Europe (-15%) and in other major production regions, with an overall drop in worldwide volumes of slightly more than 9% this year. Spain and Portugal particularly decreased the levels of their operations, by 16% and 26%, while Chinese volumes dropped by approximately 39%.
The decrease in agricultural yields was compounded by a deterioration in industrial production yields for finished products aimed at end consumers, with a drop of approximately 20% compared to the previous year, due to the need to use greater quantities of raw materials in order to achieve the necessary quality standards. This requirement has had a significant impact on the production costs of processors, which were already affected by other cost increases.
The ANICAV has pointed out that this deterioration in yields will lead to a further squeeze on profit margins for companies, margins that were already smaller than they should have been in the context of pre-season agreements signed as usual with the large retail chains. With regard to the market for finished products, relationships between processors and retail distributors are always marked by an imbalance to the benefit of retailers who, because they are so concentrated, remain an essential and unavoidable outlet, and therefore put increasing pressure on suppliers by using what has been called "unfair trade practices". For the ANICAV, who was commenting on these practices on its website (#AnicavDiceNo) last August, the current context is such that companies will have a lot of trouble absorbing their losses. One of the perverse effects of the pressure exerted by retail chains will be to allow the "justification of illegal employment conditions and underpaid workers, while ignoring (or pretending to ignore) the employments rules of our industry."
Good results on foreign markets
Tomato processing is a strategic sector for the Italian food industry, both in terms of the quantities processed and of the volumes exported. In 2018, Italy ranked in second place worldwide among tomato processing countries, right behind the United States. Italian processing accounted for 13.6% of the world's production and 49% of European operations, and it generated more than EUR 3.15 billion in turnover, of which close on EUR 1.1 billion from exports. Despite the decline of Italy's domestic consumption, the country maintains a major focus on export markets, which makes it the world's biggest exporter of the tomato industry.
During the first semester of 2018 (ISTAT data), exports increased by 11.2% in volume and 7.69% in value, with a largely active trade balance. The exports of Conserve Italia, which can be considered as an excellent indicator of this new trade pattern, really took off during the last marketing year: foreign sales of tomato products increased by 9.8%, and this Italian brand has indicated that it benefited greatly from the impetus of organic products. Conserve Italia ended the 2017/2018 year with a positive result thanks to the good performances of Cirio tomato products (+10%) and of the "well-being" and organic ranges of Valfrutta (+30%). According to the results presented at a shareholders' meeting on 26 October, the group's turnover increased by EUR 8 million (+1.5%) thanks to the good performance on foreign markets (despite the difficulties linked to Brexit) (see also our article about the results of Conserve Italia in 2017/2018).
Some complementary data
For further details about the results and the quantity and quality targets of the Italian industry, you can attend an event organized by the ANICAV, "Il Filo Rosso del Pomodoro", which will be held in Naples next 30 November: