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MorningStar: comments on the harvest season and on the outlook for 2023

12/09/2022 - Press release , François-Xavier Branthôme - 2022 Season
Performance of October will be the most crucial factor to the performance of the 2022 tomato crop

Here are Morningstar’s comments on the current season and the market outlook for the coming months presented by Aaron Giampietro in a video:
 “On August 30th, the USDA National Agriculture Statistics Services reported updates to California contracted processing tomato acreage and forecasted paid short tonnage. In January the estimate was 11.07 million metric tonnes (mT, or 12.2 million sT), further reduced in May to 10.6 million mT (11.7 million sT). The newest report released August 30th drops paid tonnage further to 9.52 million mT (10.5 million sT), 14% lower than the January estimate. This lower tonnage is the result of a net decrease of 4,000 hectares (10,000 acres) along with the yield decrease to 105 mT/ha (46.9 sT/acre) from the May report of 112 mT/ha (50 sT/acre).

California has a large percentage of tonnage forecasted in October, covering the late transplanted tomatoes due to spring weather delays. We expect to see a long tail of tapering-down volume in the last months of the season, with the performance of October being the most crucial factor to the performance of the 2022 tomato crop.
Striking weather events around the world will ultimately result in the global crop coming in slightly below 37 million mT, down from 39 million mT last year. In most growing regions like Spain, Italy, China, Tunisia and Algeria, heat, drought and unexpected major rainstorms are causing reductions in processing tomato estimates. Production only means so much as the context of consumption; while consumption will still drive the ending stocks of inventory into 2023 to very low levels, all players in the industry need to watch the quick turning market shifts very closely.

As the world’s largest tomato processor, we have a powerful lens into the market trends via our access to nearly every element of the food distribution supply chain to consumers. The Covid lockdowns in 2020 resulted in a near total shutdown of food service business and a whipsaw demand shift into retail as consumers started loading their pantries with long-lasting food staples. As Covid restrictions eased in 2021, pent up demand for dining out surged through the food service sector. Now midway through 2022 we are watching US consumer sentiment quickly fall over the course of the year; the cost of food and fuel is pressing wallets and decreasing the US personal savings rate from record high levels during the pandemic to reduced levels not seen since the 2008 recession.

As a result of all these ups and downs, the full food supply chain, from store shelves to retail warehouses, is loaded with products across many different market channels. IRI recently reported in an August press release that food retail promotions have increased back to pre-pandemic activity. It appears elasticities have bounced back to high levels due to a full supply chain and higher consumer price sensitivity. With food-service, the pent-up demand for food away from home is fading. Some consumers are eating more at home to save on food costs, and others are showing trade-down behavior to more value-oriented options. These fast-shifting patterns are occurring quicker than the supply chain can react; as a result, we have seen tomato ingredient movement slowing over the last few months versus the same time period last year. We expect the full supply chain to feel the effects of surplus inventory, high cost, soft demand and shifting consumer preferences through to next year. 

As we focus on the 2023 crop, we foresee demand for tomato products resuming a more typical buying pattern, with tomato ingredient movement increasing as the supply chain catches up. We watch these trends to best understand how to supply this efficient and timely distribution of tomato products into the market. Processed tomatoes are deeply ingrained in many global diets and offer wholesome cost-effective food for families and individuals at all income levels.”

The full video is available here

Source: Morning Star (Tomato Bites, September 6, 2022)
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