Fresh Tomato Industry
Processing Tomato Industry
The United States is one of the world's leading producers of tomatoes, second only to China. Fresh and processed tomatoes account for more than $2 billion in annual farm cash receipts.
The U.S. fresh- and processing-tomato industries target different markets, which is not true in many other tomato-producing countries. Characteristics of the two industries in the United States are the following:
- Tomato varieties are bred specifically to serve the requirements of either the fresh or the processing markets. Processing requires varieties that contain a higher percentage of soluble solids (averaging 5 percent to 9 percent) to make tomato paste efficiently, for example.
- Most tomatoes grown for processing are produced under contract between growers and processing firms. Fresh tomatoes are produced and sold largely on the open market.
- Processing tomatoes, which accounted for 89 percent of all tomatoes produced in 2008, are machine-harvested while fresh-market tomatoes are hand-picked.
- Fresh-market tomato prices are typically higher and more variable than processing because of larger production costs and greater market uncertainty.
Fresh Tomato Industry
Commercial Acreage. Fresh-market tomatoes are produced in every State in the Nation, with commercial-scale production in about 20 States. National fresh-market tomato acreage has been trending lower over the past several decades. California and Florida each produce fresh-market tomatoes on 30,000-40,000 acres--almost two-thirds of total U.S. fresh-tomato acreage (a share that has not changed much since the 1960s). Ohio, Virginia, Georgia, and Tennessee round out the top six in terms of area planted.
Production. U.S. fresh field-grown tomato production has trended higher over the past several decades with the most substantial growth occurring during the 1980s. As they have for decades, Florida and California annually account for two-thirds to three-fourths of all commercially produced fresh-market tomatoes in the United States. Including processing, Florida is the second-largest tomato-producing State; except for 2008, it has been first in producing fresh-market tomatoes for decades. Florida's season, October to June, has the greatest production in April and May and again in November to January.
California is the leading producer of all tomatoes in the United States, accounting for 96 percent of U.S. processing tomato output and one-third of the fresh crop. Fresh-market tomatoes are produced across the State in each season except winter. California's share of national fresh-market output has remained between 25 and 37 percent since the 1980s. Other major fresh-market tomato-producing States (in order of importance) include Virginia, Georgia, Ohio, Tennessee, North Carolina, New Jersey, and Michigan.
Seasonality of Supply. Commercial fresh-market tomato shipments peak in the spring when Florida's volume is highest and California and various southeastern States begin to ship tomatoes. Commercial volume is smallest and prices are lowest in August to September because of the availability of local tomatoes. Fresh-market tomatoes are available year-round in the United States because imports supplement tomatoes grown in Florida and in scattered greenhouses in the winter. Florida's winter crop is largely shipped to markets in the East, while the bulk of Mexico's crop is shipped to western States.
Market Structure. Supermarkets carry many varieties of fresh tomatoes. Besides displays of the standard field-grown round tomatoes, shoppers find plum (Roma) tomatoes, grape and cherry tomatoes, and an array of greenhouse and hydroponic tomatoes in most areas of the country. Some greenhouse/hydroponic tomatoes (which were initially imported from places like the Netherlands) are marketed "on vine" (in clusters) to convey the appearance of freshness to consumers.
Domestic producers have recognized opportunity in this market niche. As a result, new or expanded greenhouse/hydroponic operations in several States have begun production over the last several years. (Domestic hothouse vegetables, however, are not included in official USDA annual production estimates, but allowances are made for them in ERS consumption statistics.)
Some estimates suggest that the U.S. fresh-tomato market is about evenly divided between foodservice and retail consumer sales. However, in terms of total consumption from all sources, about 70 percent is consumed at home, with 30 percent consumed away from home, according to a mid-1990s USDA food intake survey (the most recent survey with this breakout).
Prices. Statistical analysis suggests that the retail price of field-grown tomatoes is linked directly to the shipping-point price. Changes in the U.S. shipping-point price for tomatoes change retail prices for that month and the next month. Retail tomato prices include marketing costs such as wages, transportation, containers, advertising, fuel and power, and rent.
On average, the shipping-point price for fresh field-grown tomatoes averages about one-fourth of the retail value. This share has declined during the past three decades, averaging 37 percent in the 1980s, 31 percent in the 1990s, and 28 percent the first decade of the 2000s. Shipping-point prices for field-grown tomatoes have frequently been under pressure since the mid-1990s, largely because of increased imports and competition with hothouse products.
Trade. International trade is an important component of the U.S. fresh-market tomato industry. Imports account for about one-third of U.S. tomato consumption, up from one-fifth in the early 1990s. The percentage of U.S. fresh-tomato supply that is exported has slipped to about 6 percent this decade after having been a relatively constant 7 percent since the 1980s.
Over the past decade, greenhouse/hydroponic products have made significant inroads into the U.S. fresh-tomato retail market. Imports from Canada's hothouse tomato industry peaked in 2005, but have weakened with rising competition from Mexico. Mexico has invested heavily in protected culture of vegetables, resulting in a larger share of the U.S. import market. Mexico now accounts for 71 percent of the U.S. import market for greenhouse tomatoes, while Canada's share has been reduced by half to 27 percent.
Florida and Mexico historically compete for the U.S. winter and early spring market. Imports from Mexico tend to peak in the winter when southern Florida is the predominant U.S. producer. Florida tomatoes then dominate the market during the spring as Mexican production seasonally declines. Mexico remains the primary source of U.S. tomato imports and has rebuilt market share lost earlier this decade by shifting more heavily into greenhouse/hydroponic products. Greenhouse tomatoes, in fact, have taken a greater share of the U.S. fresh-market tomato industry. About three-fourths of U.S. fresh tomato exports are shipped to Canada, with exports to Mexico a distant second. A small volume is also exported to Japan--a market that was closed to U.S. shippers by phytosanitary restrictions (tobacco blue mold) from 1951 until 1997.
The U.S. Department of Commerce suspended an antidumping investigation involving fresh-market tomatoes from Mexico, by negotiated agreement, on November 1, 1996. The agreement set a minimum price (called the reference price) that covers the majority of fresh-market tomatoes imported from Mexico. The agreement's intent is to ensure there is no undercutting or suppressing of fresh-market tomato prices in the United States. Fresh-market tomatoes cannot enter the United States at less than the established reference price. Later amendments clarified and expanded original provisions. The tomato season is now split into two periods--each with a separate reference price. California and Baja, Mexico, are covered from July 1 to October 22 ($4.30 per 25-pound box), while Florida and Sinaloa, Mexico, are covered from October 23 to June 30 with a higher floor price ($5.42 per 25-pound box). The latter floor price was put into effect upon review/renewal of the suspension agreement on January 22, 2008.
Per Capita Use. In terms of consumption, the tomato is the Nation's fourth most popular fresh-market vegetable behind potatoes, lettuce, and onions. Although stabilizing in the first decade of the 2000s, annual average fresh-market tomato consumption remains well above that of the previous decade. Over the past few decades, per capita use of tomatoes has been on the rise as a result of the enduring popularity of salads, salad bars, and bacon-lettuce-tomato (BLT) and submarine (sub) sandwiches. Perhaps of greater importance has been the introduction of improved tomato varieties, heightened consumer interest in a wider range of tomatoes (such as hothouse tomatoes, grape tomatoes, and specialty/heirloom varieties), a surge of new immigrants who eat vegetable-intensive diets, and expanding national emphasis on health and nutrition.
Processing Tomato Industry
Commercial Acreage. Over the past several decades, the processing-tomato industry has been moving westward. California accounts for about 94 percent of the area harvested for processing tomatoes in the United States--up from 87 percent in 1990 and 79 percent in 1980. Texas, Utah, Illinois, Virginia, and Delaware once harvested thousands of acres, but today they have little or none.
Production. California has long been the primary source of U.S. processed-tomato products. By itself, California leads the world in the production of processing tomatoes. Harvest of the California processing-tomato crop is most active August to September. About 96 percent of U.S. processing tomatoes are grown and processed in California, with Indiana, Ohio, and Michigan accounting for most of the remaining production.
Market Structure. Growers contract with processors to process red-ripe tomatoes. Although many firms manufacture pulp-based products, such as stewed and diced tomatoes, most initial processing is by firms that manufacture tomato paste, a raw ingredient. Paste is manufactured and packed in bulk containers--large bags set into boxes and barrels--and stored for use up to 18 months later. This raw ingredient is distributed under contract or sold to remanufacturing firms that add water, spices, etc. to make retail and foodservice packs of soups, sauces, catsup, and paste.
In the past, many firms made paste and also remanufactured this paste into other products. The industry appears to be polarizing, with several firms specializing in the manufacture of bulk industrial paste and others specializing in the remanufacture of industrial paste into consumer products. Several California firms are also producing various dried and dehydrated tomato products, such as whole dried tomatoes and tomato powder.
Trade. Exports are becoming an important component of the U.S. tomato-processing industry. During the early 1990s, the United States became a net exporter of processed tomato products and has remained so. About 8 percent of processed-tomato product supply was exported from 2000-08, up from 5 percent during the 1990s and 1 percent during the 1980s. Top U.S. export markets include Canada (which takes about half of all volume), Mexico, Japan, South Korea, and Italy. Generally, tomato sauces account for the largest share of exports, followed by paste, catsup, and canned whole products.
About 6 percent of the tomato products consumed by Americans today are imported. During the 1990s, imports averaged about 4 percent of consumption, down from 7 percent during the 1980s. In most years, Canada has been the largest exporter to the United States, accounting for more than 40 percent of imported processed-tomato products--mostly catsup. Other important sources of tomato products are Italy, Mexico, China, and Israel. In years with short crops, tomato paste can account for a significant share of import volume. However, sauces and catsup are usually the top tomato-product imports.
Per Capita Use. Americans consume three-fourths of their tomatoes in processed form. U.S. consumption of processed tomatoes began a steady climb that accelerated in the late 1980s with the rising popularity of pizza, pasta, and salsa. ERS estimates suggest the largest processed use of tomatoes is in sauces (35 percent), followed by paste (18 percent), canned whole tomato products (17 percent), and catsup and juice (each about 15 percent). ERS estimates suggest that about one-third of all processed-tomato products are purchased away from home at various foodservice outlets (pizza parlors, for example).