USA: apparent consumption continues to drop

20/07/2017 - François-Xavier Branthôme - Read in french
US inventories as of 1 June: +10% compared to 2016!
Last 28 June, the CLFP (California League of Food Producers – previously California League of Food Processors) published the figures for estimated US inventories as of 1 June.
The quantities of tomato products physically present in the warehouses of US processors (including a proportion that has already been sold) amounted at that date to slightly less than 7 million metric tonnes (mT), just under 7.7 million short tonnes (sT). This inventory, which each year at the same date represents the overall result of US operators for the previous marketing year, is particularly significant this season. Beyond setting a new record, it indicates a further notable slowdown in domestic consumption and in the export operations of the US over the past 12 months. On 1 June last year, US inventories of tomato products (expressed in farm weight equivalent) already reached an impressive level (6.33 million mT), a 39% increase compared to the inventory of June 2015. As of 1 June 2017, the US industry is still feeling the effects of the decline in competitiveness of its products, with a new 10% increase of the volumes available compared to last year.
The short period of improvement at the end of the year, which had allowed the apparent disappearance rate to improve by a few points (5.7%), has now been forgotten. Over the past 12 months, apparent disappearance (domestic and foreign) declined yet again, losing more than 2% compared to June 2016. From June 2016 to June 2017, 12.5 million sT (11.3 million mT) were absorbed by consumption and export shipments (against 12.79 million the previous year), whereas the US industry processed 13.2 million sT (11.96 million mT).

Yet despite what could be expected in the current commercial context, the situation as of 1 June 2017 also presents a number of positive points, particularly concerning the overall makeup of sales volumes (12.5 million sT) achieved throughout the marketing year. Firstly, total sales of tomato paste, both intended for remanufacture by other processors and for exporting to foreign markets, were virtually stable throughout the marketing year, with volumes amounting to 8.24 million mT in 2016-2017, against 8.24 million mT in 2015-2016 (-0.26%). In the absence of an increase that would have represented a turnaround in trade dynamics, this stability implies that the dip in tomato product sales (from 12.8 million sT / 11.6 million mT to 12.5 million sT / 11.3 million mT) can be attributed to categories or segments other than paste (the spearhead product of the US industry), whose results indeed fell from 3.34 million mT sold between June 2015 and June 2016 to 3.1 million mT sold from June 2016 to June 2017 (-7%).
According to figures published by the CLFP, total stocks of paste as of 1 June 2017 can be estimated at 5.57 million mT, of which more than two thirds are paste "for sale".

Secondly, June to June figures for paste sales reveal that the volumes distributed in the paste for sale segment – part of which is intended for the export market – progressed by almost 4.9%, from 6.9 million mT in 2015-2016 to 7.24 million mT from June 2016 to June 2017. Recent figures for export sales show, however, that trade at the beginning of the year confirmed a major slump (-26% for the period running January to April), which tends to indicate that the domestic market could have absorbed a considerable share of the tonnage available in this industry segment. On the other hand, the volumes "gained" in the "paste for sale" segment (+335 000 mT) virtually match the volumes of sales that the paste for remanufacture segment "lost" over the last marketing year (-360 000 mT). Indeed, sales of "paste for remanufacture" dropped by more than 7% compared to June 2016, leaving inventories as of 1 June this year at 1.8 million mT (1.98 million sT).

In summary, average monthly sales for the marketing year 2016/2017 have not allowed the US industry to distribute more than about 1.04 million sT (945 000 mT) of raw tomatoes per month, which is the lowest level recorded since June 2012.
In consequence, the level of inventories in June 2017 also sets a new record in terms of surplus materials, estimated at approximately 4.1 million mT (4.5 million sT). From this perspective, the recent months of the marketing year have not led to any improvement in the prospects resulting from the market situations of December 2016 and March 2017. At the current rate of apparent disappearance, available volumes as of 1 June this year are likely to cover supply requirements until January 2018. As of 1 June, this surplus amounts to the equivalent of slightly more than 12.5 kg of raw tomato (27.6 pounds) per person, an increase compared to the situation in June 2016 (10.6 kg).

That said, the annual rate of apparent disappearance as recorded just a few weeks off the start of the current season seems to indicate that this year's harvest could begin to offer a solution to the problems that the US industry has been facing in terms of its inventories. Barring any further decline, the current rate of apparent disappearance should lead to the absorption of approximately 11.96 million mT (13.19 million sT) during the 2017/2018 marketing year, which is 1.26 million mT (1.385 million sT) more than what US operators intend to process this season. In this case, inventories could drop, along with surplus volumes, which would alleviate at least some of the pressures that are affecting the markets.

Some complementary data

Evolution of the components of US apparent consumption
Financial circumstances (USD currency exchange rate), as well as economic and commercial circumstances (international competition) have evolved in recent years in such a way as to cause an obstruction to the domestic consumption supply targets assigned to export operations. The volumes exported and consumed within the country decreased slightly, from 11.6 million mT to 11.3 million mT.

Sources: California League of Food Producers, Tomato Statistics Report, 28 June 2017

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