Article: Italian tomato industry under pressure amid Covid-19 pandemic

Read below an article taken from our IEG Vu platform dated 09/04/20.

The global panic-buying has boosted sales of staple foods including tomato products within the retail sector. Tomato processors look with apprehension at demand trends and hope to be able to stretch their stocks just before the start of the 2020 season.

A month after the start of the Covid-19 emergency in Italy, value sales of tomato products had increased by 5% in the month ending March 15 with a peak of 75% in the last week of this period. This corresponds to an increase of EUR12 million (USD13.03 mln). The most purchased tomato product was passata which recorded a 49.6% increase in value, followed by tomato pulp (+41%) and peeled tomatoes (38.3%).

"Orders placed for tomato passata have tripled, while those for all other canned products and ready-made pasta sauce have doubled," a source confirmed with IEG Vu.

Tomato sauce and canned tomatoes are staple ingredients in the Italian culinary tradition served with pasta, stew or as a pizza topping. The lockdown has led to more people making their own egg-pasta and pizza dough, lifting consumption for some of the ingredients used to make them: canned tomato, but also flour, eggs and yeast, with the latest now in short supply in the country.

Sales of tomato products have increased worldwide, Australian vegetable canner SPC Ardmona is running out of tomatoes to can amid panic-buying. The company has ramped up production and is now operating 24 hours a day, but raw tomatoes for processing are in short supply.

Between March 15-21, supermarket sales in the UK shot by 43% after increasing by 22% and 8% respectively in the previous two weeks. Canned food, and in particular canned pasta, meat and fish, were among the most purchased items, all showing triple-digit growth: 226%, 200% and 164%, according to data published by Nielsen. Data released by Tesco revealed that in the busiest week of the month, sales of canned chopped tomato doubled with about 3.3 mln tins sold by the retailing chain across the country.

With an average of 1.5 mln tonnes exported annually, Italy is the world's largest producer of canned tomatoes. It is followed by Spain which exports one-tenth the volume of Italy, while the third-largest, the US, exports 71,500 tonnes. Italian tomato processors have recently started to ration their supplies and for the same reason, promotional sales have been put on hold as stocks in the country are low.

The reasons behind low stocks and rationing

Italy harvested 4.65 mln tonnes in 2018, -11% compared with 5.2 mln tonnes in 2017. The 2019 tomato season was challenging and closed at 4.9 mln tonnes, lower than the average of 5.1 mln tonnes harvested in the country before 2018. Last year, the north of Italy was battered by unusual abundant rain, hail and a decline in temperatures in spring, delaying transplanting and postponing the end of the season to October. The south of Italy, the canned tomato hub, harvested 2.4 mln tonnes in 2019. The fruit quality was very good, colour was poor and there were lots of green tomatoes harvested which reduced factory yields by 5-6% compared with 2018. The industrial losses resulted in a contraction of raw material suitable for processing in a period when the country had record-low stock levels.

The tomato industry is usually able to retain stocks until October of the following season. All tomato harvested and processed is then usually stored and deliveries for the new contracts starts between October and November. This year, processors agreed that all stocks will be gone just before the start of the season with some claiming that arriving at the end of June will be a struggle. The main scope of the rationing is to spread the available volumes in order to be able to resupply supermarkets until July-August, when the new season will kick off.

"This year, we might not be able to have that usual break in deliveries and start to ship new crop product as it becomes available," a source told IEG Vu. Stockpiling has caused a sharp increase in supermarket sales, while demand in the foodservice sector is nil with some operators struggling to pay their orders.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.