It will cost almost $17 more per ton to grow processing tomatoes in California next season than the average price growers received for their 2008 crop last year, according to Mike Montna, president of the California Tomato Growers Association.
The 2008 price of $70 per ton was 11 percent over the year before. It was set long before planting season and growers were happy with the near record price.
However, prices to growers must go up substantially for the 2009 crop for processors to get product, Montna reported to the recent 27th Annual Agribusiness Management Conference in Fresno recently.
Breakeven in 2009 is based on a fully loaded production cost of $3,400 per acre based on an average of just below 40 tons per acre, Montna said. Breakeven will be almost $87 per ton in 2009.
Ironically, prices substantially higher than last season will not generate more acreage and tonnage for 2009 as the industry faces the perfect storm.
Worldwide demand is increasing at a healthy 2 percent to 3 percent per year, which translates to a tonnage demand increase of 700,000 to 1 million tons for a product that can be grown only in a few areas worldwide, like California. California produces roughly 98 percent of the U.S. processing tomatoes.
Although California's 2008 crop was the third largest in history (11.7 million tons) and the average yield of 42 tons per acre was a record, demand for processed tomato products remains strong.
Export demand improved by nearly 200 percent in 2008 due to a combination of the weak U.S. dollar and smaller tomato crops in the Mediterranean countries and the unpredictability of China's production.
Demand also increased from non-traditional markets like Italy, Africa and Latin America.
Also, imports into the U.S. were much lower this year where demand for tomato products continue to grow. Domestic markets have seen a double digit increase over the past 12 years.
Worldwide inventories are tight for both paste and peeled tomato products.
However, the 2009 acreage will likely drop at any price because water levels in California's reservoirs are the lowest they have been since 1977. Growers are gravely concerned about their water supplies for 2009. Whatever growers received will be allocated to permanent crops first, if they have them. For row crops, growers will plant only acreage based on realistic, early season surface water supply projections.
No one will plant with expectations of possible additional summer water supplies because of the court cases restricting pumping through the Delta to protect fish.
Montna says growers are investing in wells to use groundwater rather than surface supplies. “This will not solve the problem, but may prevent a complete disaster,” he says.
The crop also will be down because areas of San Joaquin and Yolo counties are “overtomatoed,” which increases the incidence of disease and pests and ultimately affects yields.
The suspension of the state Curly Top Virus spray program to prevent vectoring insects from moving from native habitat to tomato fields also could reduce tomato yields.
“Bottom line: The processing tomato industry in California has a bright future, if it can get adequate water supplies and pay growers competitive prices,” concludes Montna.