US Industry MovementDespite forecasts of record processing tomato volumes, pricing for California paste is not dropping. Prices are holding at about 46-48 cents per pound for 31% NTSS paste in bins. Processors are unwilling to lower prices for a collection of reasons ranging from steady demand, high input prices, and the uncertainty of a long season.

Growing demand is driving processors to pack more tomatoes. A record volume of product moved through domestic warehouses last marketing year. From June 2008 to 2009, US processors moved 12.3 million fresh equivalent tons to customers according to the California League of Food Processors June 1 stock report. This record disappearance is 11% above the 5-year average and 4% over the prior record of 11.8 million fresh equivalent tons set in 2004/05.

Demand for US processed tomatoes has been trending upward since 2004, and domestic processors feel they have sales contracts for the upcoming large pack, avoiding a surplus.

Paying a record high field price for tomatoes means packers are less likely to pack for open stock. No processor wants to risk having expensive tomato paste sitting unsold in its warehouse. According to Morning Star’s calculations, tomatoes make up 56% of this year’s tomato paste manufacturing costs, up from 46% in 2004.

Strong demand and expensive tomatoes are just part of the story. As California’s industry has learned in recent years, costs can change abruptly during the season as well as the crop outlook.

Packers are concerned that in these unstable economic times, in-season costs could increase. Natural gas and gasoline prices could spike severely during the pack as happened in 2005.

Although the season has started well, packers know that crop conditions could deteriorate during California’s long season. Many things could derail a record-breaking crop as outlined in the previous page.

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