WORLD HORTICULTURAL TRADE AND U.S. EXPORT OPPORTUNITIES

U.S. exports of horticultural products to all countries in December reached $787.7 million, up 1 percent from the same month a year earlier. Six out of 15 categories of horticultural exports registered increases. Categories with the most significant increases in December were miscellaneous products (up $37.2 million or 22 percent); dried fruit (up $3.3 million or 11 percent); and wine (up $2.2 million or 10 percent). The categories with the most significant decreases were fresh non-citrus fruit (down $16.4 million or 17 percent); fruit and vegetable juices (down $8.9 million or 17 percent) and fresh vegetables (down 6.4 million or 7 percent). During the first 3 months (October-December) of fiscal year (FY) 1997, the total value of U.S. horticultural exports was $2.78 billion -- 6 percent above the same period last year.

U.S. exporters are utilizing the GSM-102 program to help penetrate a number of horticultural markets around the world. As of February 7, 1997, U.S. exporters have used the GSM program to help finance $800,000 of dried fruit to the Andean Region and $800,000 of canned fruit, fresh fruit, canned vegetables and frozen vegetables to Russia.

The GSM-102 program makes available financing for the sales of U.S. agricultural commodities overseas. USDA does not provide financing, but guarantees payments due from foreign banks. USDA typically guarantees 98 percent of the principal and a portion of the interest. The GSM-102 program covers credit terms from 90 days to three years. Under the program, once a firm sale exists, the qualified U.S. exporter applies for a payment guarantee before the date of export. The U.S. exporter pays a fee calculated on the dollar amount guaranteed, based on a schedule of rates applicable to different lengths of credit periods. The CCC-approved foreign bank issues a dollar-denominated, irrevocable letter of credit in favor of the U.S. exporter, ordinarily advised or confirmed by the financial institution in the United States agreeing to extend credit to the foreign bank. The U.S. exporter may negotiate an arrangement to be paid as exports occur by assigning the U.S. financial institution the right to proceeds that may become payable under the guarantee, and later presenting required documents to that financial institution. Such documents normally include a copy of the export report. If a foreign bank fails to make any payment as agreed, the exporter or the assignee may file a claim with USDA for the amounts due and covered by the guarantee. USDA will pay the U.S. bank and will take on the responsibility of collecting the overdue amount from the foreign bank.

The following table presents FY 1997 allocations by country and product along with registrations through February 7, 1997, for various horticultural commodities and products. Repayment terms vary under the program, from 90 days to 3 years. Cautionary information for use of the accompanying table: The table reflects only exporter applications for guarantees that have been entered into the GSM 102 computerized system. At any given time, exporter applications are in process, and not all of those received have been entered into the system. Moreover, all applications are initially entered into the system on a provisional basis until price reviews have been completed, the guarantee fee has been received, and the written guarantee has been issued. Thus, some applications now in the system may in the future be removed, and the commodity balances correspondingly increased. For details on terms and authorizations, see the footnotes to the table.

Note: The GSM will consider requests to establish a GSM-102 program for a country or region or amend an authorized program to include horticultural commodities and products which are currently not eligible. (For further information on the GSM-102 program for horticultural commodities, contact Yvette Wedderburn Bomersheim, 202-720-9903).

The new Supplier Credit Guarantee Program (SCGP) is unique because it covers short-term financing extended directly by U.S. exporters to foreign buyers and requires that the importers sign a promissory note in case of default on the CCC-backed payment guarantee. The SCGP emphasizes high-value and value-added products, but may include commodities or products that also have been programmed under the GSM-102 program.

Note: The GSM will consider requests to establish a SCGP for a country or region or amend an authorized program to include horticultural commodities and products which are currently not eligible. (For further information on the SCGP for horticultural commodities, contact Yvette Wedderburn Bomersheim, 202-720-9903).

Taiwan has granted Chile 1996/97 import quotas of 71,428 cartons of plums, and 73,170 cartons of table grapes, while increasing the apple quota from 473,684 cartons in 1995/96 to 657,894 cartons. The value of the plum, table grape and apple quotas is estimated at $18.5 million according to the Ministry of Agriculture. The Government of Chile fully expects the trade to fill the quotas in 1996/97 thereby raising the value of fruit exports to Taiwan to $20 million.

Fresh fruits continue to be the largest component of U.S. horticultural exports to Taiwan. In calendar year 1996, U.S. fresh fruit exports to Taiwan were valued at $176 million. Apple shipments, at $79 million, accounted for 45 percent of the value of all fruit exported to Taiwan in 1996. Apple imports from the United States and Canada are not subject to quotas.

USDA on January 31, 1997, published a final rule that lifted the long-standing ban on imports of Mexican fresh avocados. This ban had been in place to protect the California avocado growing areas from pests present in Mexican growing areas. After a review of the current situation, public comments, and the development of strict standards to be met for imports from Mexico, USDA determined that the United States can safely import Mexican avocados under certain conditions. The imports would be allowed in only 19 Northeastern States and the District of Columbia between November and February of each year, when pests are less likely to survive. In addition, only approved Mexican growing areas will be permitted to export and there will be a series of mandatory inspections by USDA's Animal and Plant Health Inspection Service (APHIS) during the growing, packing, and shipping processes.

In 1995/96 the United States imported over 21,000 tons of avocados, primarily from Chile and the Dominican Republic. U.S. production of avocados that year was 172,590 tons. Mexican officials estimate that they may be able to export 5,000 to 20,000 tons to the United States in the upcoming 1997/98 marketing year.

The EU Commission's Standing Committee for Plant Health is considering new technical import requirements for third country citrus. Recently, the EU lifted protected zone status for Greece and Italy, which restricted (for Greece, banned) imports from third countries. Now those countries reportedly are spurring the initiative to impose stringent new technical-based requirements on imported citrus EU-wide. USDA officials are responding to this developing issue.

Grapefruit accounts for the bulk of U.S. citrus exports to the EU, with Florida supplying most of the product shipped. In FY 1996, U.S. grapefruit exports to the EU totaled 138,387 metric tons, with a value of more than $61 million. Led by the markets of France and the Netherlands, the EU collectively ranks second only to Japan as a market for U.S. grapefruit.

USDA and Government of Mexico officials met on February 19 to formalize a technical agreement that will permit access to Mexico for sweet cherries produced in Washington, Oregon, and California. Exports are expected to commence with the coming shipping season, with some industry contacts forecasting eventual sales in the range of $10-15 million dollars annually. Overall, U.S. sweet cherry exports to all destinations were valued at $123 million in CY 1996, with Japan being the principal market, accounting for 65 percent of that total.

The recent USDA decision on Mexican avocados, and now the cherry market opening, has removed two high profile issues from the two countries' trade agendas. Nevertheless, a number of technical issues, which either preclude or constrain U.S. access to Mexico, remain outstanding. For example, Mexico continues to maintain technically-based import bans on Florida and Arizona citrus. The existing apple export work plan effectively precludes access for certain U.S. supplying states, in large part due to the costly oversight/inspection requirements.

Apple production by the world's leading producing countries in marketing year 1996/97 is forecast at a record 42.3 million tons, 9 percent above last year's output. China accounts for three-quarters of the increase in world apple production in 1996/97. Apple crops also are larger in Italy, Germany, Poland, and Chile. On the other hand, apple production in the United States, New Zealand, and South Africa, as well as in Belgium and the Netherlands, is down in 1996/97. Apple exports in 1996/97 are forecast at 4.5 million tons, practically unchanged from 1995/96 shipments. Smaller crops in some EU countries and New Zealand have reduced export prospects in 1996/97. U.S. apple exports in 1996/97, however, are expected to increase 20 percent to 675,000 tons. Larger exportable supplies from western states and strong demand from leading costumers have improved overall U.S. export prospects in 1996/97. The United States has reached several technical agreements with foreign countries, which are expected to result in improved access to important markets in 1996/97.

Northern Hemisphere 1996/97 apple production and export forecasts revised up

The major apple producing countries in the Northern Hemisphere are now expected to harvest a record 37.9 million tons in marketing year (MY) 1996/97, 9 percent above last season's output. Increased production prospects in major apple producing countries such as China, Italy, and Germany are expected to more than offset smaller apple crops in the United States and France. China, the world's leading apple producer, accounts for about 40 percent of Northern Hemisphere apple output. In comparison, the United States and principal European Union (EU) countries combined account for another 35 percent.

The 1996/97 U.S. apple production is revised down to 4.7 million tons compared to 4.8 million tons forecast in November (for details, see the November 1996 issue of World Horticultural Trade & U.S. Export Opportunities). Production in the western states is forecast up, particularly in the states of Washington and California. Output in the central and eastern states is forecast down as a result of unfavorable weather conditions across much of the region. Washington State and California normally account for more than half of total U.S. annual apple production.

Total Northern Hemisphere apple exports in 1996/97 are revised slightly up to 3.3 million tons. Smaller crops in some EU countries, specially those in France and Belgium, have decreased overall EU export prospects in 1996/97. U.S. apple exports, however, are forecast to increase 20 percent in 1996/97 to 675,000 tons. Larger exportable supplies from northwestern states and decreased apple crops in major competitor countries have improved overall U.S. export prospects in 1996/97. The United States has also reached several technical agreements, which are expected to result in increased access to important markets. The EU and the United States account for more than 80 percent of annual Northern Hemisphere apple exports. Intra-EU trade accounts for about 85 percent of EU apple exports.

U.S. apple exports are forecast to recover in 1996/97. Shipments from the United States are forecast at 675,000 tons, 20 percent above exports in 1995/96 and close to the record 697,829 tons exported in 1994/95. A larger crop in Washington state and likely strong demand in leading markets have improved U.S. apple export expectations in 1996/97. Asian countries will continue to lead the U.S. export performance for apples in 1996/97. Canada, Mexico, and Brazil are also forecast to be major destinations.

From July to December 1996 (MY 1996/97), apple exports to Taiwan, the U.S. major market, totaled 75,557 tons, 22 percent above shipments the same period in 1995. Apple exports to Taiwan are expected to continue to grow in 1996/97. Ample supplies of U.S. Fuji combined with the recent recovery of Taiwan's economy will keep exports strong to this country. By surpassing Granny Smith production, Fuji apples now rank as Washington state's third largest variety following Red and Golden Delicious apples. Fuji is still the most popular variety for Chinese tastes.

In November 1996, South Africa announced it will extend diplomatic recognition to mainland China. The Taiwan government has since announced retaliatory measures against South Africa. This news has not yet affected the apple import quota assigned to South Africa, which remains at 1,200 tons per year. However, Taiwan has increased Chile's apple import quotas from about 8,600 tons in 1995/96 to approximately 12,000 tons in 1996/97. Taiwan's apple imports from the United States and Canada are not subject to quotas.

Although a recovery of Mexico's economy could translate into improved exports of U.S. apples, inspection procedures limit trade

A steady economic recovery and a lower inflation rate is expected in Mexico during 1997. This should translate into improved consumer purchasing power for better quality apples. Consequently, Mexican imports of U.S. apples in 1996/97 are expected to be about 3 percent above the previous season's shipments. From July to December 1996, U.S. apple exports to Mexico reached 20,262 tons, 2 percent ahead of shipments the same period in 1995. Reportedly, U.S. apple prices are good and demand has been sustained.

However, U.S. exports to Mexico are hampered by a costly and problematic inspection program (work plan), which limits imports to apples from the Pacific Northwest states. Despite approval for 8 additional states, only Washington, Oregon, and Idaho are participating in the export program because the costs of maintaining Mexican inspectors are prohibitive for the other states. Before exporting apples to Mexico, U.S. counties must be certified by the Mexican government. Before shipment is allowed, apples must be held in cold storage at zero degrees Celsius for 40 days or at 3.3 degrees Celsius for 90 days. Cold chambers must be certified by the State Departments of Agriculture and Mexican authorities.

Although Canada continues to be the third largest destination for U.S. apples, Fuji produced in the United States are prohibited from being shipped to Canada due to that country's import requirements for watercore. Watercore is the accumulation of sugar in the vascular bundles around the core of an apple. Although less than desirable for storage purposes in most apple varieties, watercore is, reportedly, a natural and often desirable attribute in Fuji.

Specifically, Canadian import requirements dictate that apples must meet U.S. Condition Standards for Export. Current U.S. condition standards for apples require that not more than five percent of the apples in any lot be "damaged" by watercore. While the application of this requirement may be waived for the export of Fuji apples to most foreign customers, it serves as a regulatory barrier to trade with Canada. In response, the U.S. industry has requested a waiver from the Agricultural Marketing Service of the U.S. tolerance for the presence of watercore in Fuji.

U.S. apple exports to Brazil have increased dramatically in recent years due mainly to the elimination of import barriers and an overall improvement on the Brazilian economy. For example, U.S. apple exports to Brazil 1995/96 totaled 13,207 tons, valued at almost $6 million, moving Brazil to tenth place among major U.S. apple customers. This figure is compared to 384 tons, valued at $212,925 four seasons earlier (1991/92).

Recent (July 1996) agreements for the entry of U.S. apples into Brazil and access to supplier financing, under the USDA GSM-102 credit guarantee program, will continue to boost U.S. exports to Brazil in 1996/97. From July to December 1996, apple exports to Brazil totaled 15,172 tons, more than 30 percent above shipments during the same period in 1995. Brazilian importers used the GSM-102 credit guarantee program for the first time in November 1996. Moreover, market promotion efforts under the USDA Market Access Program (MAP) will continue to assist in developing the Brazilian market.

The Brazilian market is becoming less seasonal with apples available in supermarkets year around at fairly stable prices. Apples have had an image of being a luxury fruit, mostly for the upper income groups or to be consumed during special occasions. This is changing, with the overall price and income stability brought about by the economic stabilization program launched in mid-1994.

Although China's apple supplies will remain strong, U.S. apple sales will continue in the Chinese market

China is the world's largest apple producer. China's 1996/97 apple crop is forecast at 16.7 million tons, up 19 percent from 1995/96, and almost double the amount produced 4 seasons ago. The major production provinces for apples are Shandong, Shaanxi, Henan, Liaoning and Hebei.

On average China exports about 100,000 tons of apples every year. The majority of China's apple exports go to Russia and East Asian countries with large urban populations. A smaller percentage of China's apple exports go to other neighbor countries, such as Uzbekstan and Kazakhstan.

Although China is a surplus producer, it still imports some apples to meet demand for variety and higher quality fruits. China's apple imports are mainly from the United States, Canada, and New Zealand. According to China's Customs General Administration, China imported about 7,000 tons of fresh apples, valued at about $2 million, from the United States in 1995/96. This figure accounted for almost 50 percent of the total Chinese apple imports last season. However, China's apple imports likely are underestimated due to the undocumented trade through Hong Kong.

While many U.S. fresh fruits are still prohibited by the Chinese government, due to concerns over Mediterranean Fruit Fly, China permits the importation of fresh Red and Golden Delicious apples only from Washington, Oregon, and Idaho. China's Animal and Plant Quarantine Service (CAPQ) refuses to approve the additional varieties of U.S. Fuji, Gala, Granny Smith, Rome, Jonagold, and Braeburn apples for importation, citing its belief that these varieties pose a significantly higher risk than Red Delicious and Golden Delicious of transmitting fireblight. The next technical bilateral meeting between CAPQ and the USDA's Animal and Plant Health Inspection Service (APHIS) is tentatively planned for April 1997 in China. Nevertheless, U.S. apple sales to China will continue in most of the affluent Chinese cities, such as Shanghai, Guangzhou, and Shenzhen. The current add valorem duty is 40 percent plus an additional value added tax of 13 percent.

To keep abreast with the constant increase in China's standard of living, more and more apple imports are needed and will become popular with Chinese consumers. This tremendous change also gives rise to problems. One big worry at the moment is the situation where many apple vendors are passing their apples off as name brand imports or superfine with false labels and fake packaging. Chinese consumers are disappointed because a certain number of fruits put on the market recently are just stacks of local produce with fake labels.

Apple production and trade in Southern Hemisphere countries will remain strong in 1996/97

Apple production in selected countries of the Southern Hemisphere in 1996/97 (harvest early in 1997) is forecast at a record 4.3 million tons. All Southern Hemisphere countries, except New Zealand and South Africa, are forecast to have increased output in 1996/97.

Apple exports from the Southern Hemisphere in 1996/97 are forecast at 1.2 million tons, slightly higher than shipments in 1995/96. Ample exportable supplies in Chile, Argentina, and South Africa will lead Southern Hemisphere apple exports in 1996/97.

Chilean apple production and, consequently exports, are forecast to increase again in 1996/97. In the absence of mandatory quality controls, Chilean fruit exporters have concentrated their efforts on promotional campaigns, diversifying export markets, and trade liberalization. In recent years, Chile has signed free trade agreements with Mexico, Colombia, Venezuela, and Ecuador. Chile has also made progress in establishing phytosanitary agreements and protocols with several countries including Japan, South Korea, Hong Kong, China, the Philippines, Malaysia, and New Zealand.

The most promising market in the near future appears to be Japan. The lack of quarantine or fumigation treatment would save time and money for Chilean fruit exporters shipping to Asia. In addition to Japan, the industry hopes to gain full access in 1997 to China, South Korea and Taiwan, among other Asian countries. Although red apple varieties currently account for about two-thirds of Chilean exports, new varieties like Fuji are increasing their share while traditional varieties are losing ground.

In 1995/96, Chilean apple exports increased slightly, when compared to a year earlier, as a result of a strong export demand, a good-quality harvest, and stricter export quality controls, particularly for shipments to Europe. Apple sales in 1995/96 also expanded to Latin American markets. However, in spite of a higher volume of exports in 1995/96, economic returns to growers continued to suffer from a continual strengthening of the Chilean peso, which has increased production costs.

A lack of mandatory, uniform quality standards for exported fruit is a major concern among Chilean apple exporters

For several years now, Chilean producers and exporters have attempted to implement a mandatory quality control program. However, despite a joint government/private sector proposal to institute mandatory quality control measures for Chilean fresh fruit, elements opposed to the bill continue to halt passage of any legislation. The industry, fearful of government intervention in Chilean commerce, would like to fashion a program that would be controlled by the private sector but sanctioned by the Government. Nevertheless, the fruit sector will maintain the voluntary fruit export quality program for apples, table grapes, stone fruit, and kiwis shipped to the United States and Europe in 1996/97. Nearly 80 percent of Chile's exports to these two markets are under the auspices of this quality program. The voluntary minimum standards for 1996/97 are similar than those of the previous season. The growers and exporters have agreed to limit the quality control only to maturity of the fruit. There are no requirements for the size of the fruit or volumes exported.

The 1995/96 New Zealand apple crop reached a record 547,200 tons. Climatic conditions over the 1995/96 season were generally well suited to quality apple production. Consequently, apple exports in 1995/96 totaled a record 433,000 tons, slightly above the previous record, set in 1994/95.

Discovery of mealy bugs in the Hawkes Bay was a concern at the beginning of the 1995/96 export season for fruit destined for the U.S. market. The findings disrupted fruit movements and cold storage capacity was tight. Moreover, on May 2, 1996, Mediterranean Fruit Fly was identified in suburban Auckland. Over a period of several days following the medfly detection, many of New Zealand's important trading partners imposed exclusion zones of varying radius around the initial find site. The exclusion zones ranged from zero (EU) to the whole of the North Island (China). However, the effect on New Zealand's apple exports was insignificant as it did not encompass the commercial growing regions or shipping ports. All trading partners are expected to have lifted their import restrictions. However, China has decided not to lift its import ban until May 2, 1997, which is one year from the date of discovery.

The 1996/97 New Zealand apple crop has suffered a major setback after repeated hailstorms over all growing areas. Total apple production is forecast to decline 12 percent and export volumes could be down 16 percent in 1996/97. Some entire orchards have been written off in successive hailstorms which swept through the New Zealand apple growing areas in Nelson, Hawkes Bay, and Christchurch in November and December, 1996. Few orchards were untouched, and large volumes of damaged fruit are being processed for juice operations.

The government has announced a modest package designed to help fruit growers, including direct financial assistance for hail damage. Local assistance includes Taskforce Green (subsidized labor) help for growers who have lost more than half of their crop; social services assistance for orchardists unable to meet living costs; and grants of several thousand dollars for urgent technical advice.

Apple exports in New Zealand are controlled by the Apple and Pear Marketing Board (APMB), a statutory monopoly. However, APMB has been under intense pressure in recent months to exercise its authority to grant export permits. Recently, APMB made modest changes to the structure of its Export Permit Committee in an effort to demonstrate fairness to potential apple exporters. The committee has been reduced from six members to five, with the Board chairman stepping down from his role as committee chairman. There have been, however, calls by several independent exporters for a judicial review of the Board's export permit process. Reportedly, some independent exporters have consistently had export permits denied or only been granted a fraction of the volume requested by the Export Permit Committee.

South Africa exports apples to many countries around the world, with the EU ranking as the main market. Apple exports in 1995/96 declined 7 percent due to the poor quality of the crop, the lateness of the season, that resulted in larger volumes being exported by air, improved local prices for red apple varieties, relatively high exports from competing Southern Hemisphere suppliers, and the ability of Northern Hemisphere marketeers to keep their products on the retail shelves for a longer period than usual at low prices. All these factors, coupled with the removal of the General Export Incentive Scheme, made South Africa's apple exports difficult during 1996. South African agricultural policy makers have proposed phasing out of Marketing Boards and single channel marketing schemes. This would adversely affect UNIFRUCO, which has a virtual monopoly on South African fruit exports.

South Africa is expanding its marketing ventures to the Far East and to former Soviet Union countries, with Russia, now its third largest European apple market, holding great potential. South Africa is increasingly entering the Sub-Saharan African market, with considerable amounts exported to Angola, Kenya, Mauritius, Zambia, and Zimbabwe. Despite this, the EU is still the most important overseas market for South African apples, with Britain and Belgium dominating with 37 percent and 19 percent, respectively.

(For further information on supply, distribution, and trade, contact Samuel Rosa at 202-720-6086. For information on production, contact Kelly Stzelecki at 202-720-6791.)

Pear production in the world's leading producing countries in 1996/97 is forecast at 5.95 million metric tons, up 3 percent from 1995/96. World pear exports in 1996/97 are expected to approximate the previous year's level. However, the Northern Hemisphere export forecast was reduced 4 percent to 695,000 tons based on reductions in the United States and the EU pear crops. The U.S. pear export forecast for 1996/97 is reduced 15 percent due to smaller exportable supplies and stronger demand for processing. Pear exports from Southern Hemisphere countries in 1996/97, on the other hand, are forecast at 545,800 tons, up 7 percent from 1995/96 shipments. Exports from Argentina, the leading exporter in the Southern Hemisphere, Chile, and South Africa are expected to expand in 1996/97.

World pear production in 1996/97 is forecast at 5.95 million metric tons, up 3 percent from 1995/96. Pear production in major producing countries of the Northern Hemisphere in 1996/97 is forecast at 4.69 million tons, down slightly from the November forecast (see November issue of World Horticultural Trade & U.S. Export Opportunities). The downturn from November mainly reflects a reduction in European output, especially in France and Spain. The Southern Hemisphere pear crop for the 1996/97 season (crop harvested in early-1997) is forecast at 1.26 million tons, 7 percent above the 1995/96 output. Increased production prospects in Argentina, Chile, and South Africa will likely more than offset reduced crops in Australia and New Zealand.

World pear exports in 1996/97 are forecast at 1.24 million tons, practically unchanged from the 1.25 million tons exported last season. Increased Southern Hemisphere pear exports are expected to nearly offset reduced Northern Hemisphere shipments. Northern Hemisphere pear exports in 1996/97 are forecast at 695,140 tons, down 6 percent from last season due to reduced output in leading European Union (EU) exporting countries and the United States. The EU and the United States combined normally account for more than 90 percent of Northern Hemisphere pear exports. Intra-EU trade accounts for most of the EU pear exports.

Pear exports from Southern Hemisphere countries in 1996/97 are forecast at 545,800 tons, up 7 percent from 1995/96 shipments. Exports from Argentina, the leading exporter in the Southern Hemisphere, are forecast to increase to 250,000 tons, as favorable weather has improved overall pear production and supplies. Pear exports from Chile, the second largest supplier in the Southern Hemisphere, are also forecast to increase in 1996/97.

U.S. pear exports in 1996/97 have been revised down to 115,000 tons, 20 percent below last season's record shipments. Decreased production in the states of Washington and Oregon, major U.S. pear exporters, combined with improved domestic prices for processing pears, have reduced overall U.S. export prospects in 1996/97. From July to December 1996, U.S. pear exports reached 83,860 tons, down 10 percent from shipments the same period in 1995.

U.S. pear exports reached a record 143,313 tons in 1995/96, valued at $82.6 million. Sales to Canada, the largest U.S. market, expanded from $27.4 million in 1994/95 to $31.6 million in 1995/96. However, sales to Mexico, the second largest market, fell from $22.1 million in 1994/95 to $14.4 million in 1995/96 as imports in the first half of the marketing year were adversely affected by the December 1994 peso devaluation. Sales to Brazil, the third largest U.S. market, more than doubled from $4.0 million in 1994/95 to $9.5 million in 1995/96. Taiwan has also been a consistent growth market as well as being the 4th-leading market for U.S. pears. Exports in 1995/96 totaled 11,438 tons valued at $5 million, up 33 percent and 29 percent, respectively.

(For further information on supply, distribution, and trade, contact Samuel Rosa at 202-720-6086. For information on production, contact Kelly Stzelecki at 202-720-6791.)

The world kiwifruit situation is characterized by bipolar production, with the harvest in the Northern Hemisphere (October-November) generally complementing supplies harvested in the Southern Hemisphere (April-June). Kiwifruit production and trade in 11 major producing countries have increased dramatically over the past decade, especially in the European Union (EU). By the beginning of the 1990s, production had far outpaced demand from the importing countries. This situation led to considerable vine-pulling and generally slower growth in planted area. In 1993/94 world production dropped from 954,300 tons to 887,720 tons. This year, world production finally surpassed the 1992/93 level, reaching 984,469 tons. The world area planted to kiwifruit continues to decline, dropping 4 percent from last year's level. Increases in world kiwifruit production combined with improved storage facilities and technology (e.g., controlled atmosphere storage) have allowed sales in the Northern and Southern Hemispheres to overlap, leading to downward price pressure. While devastating to many farmers, the lower level of prices has probably helped boost kiwifruit consumption around the world. World exports increased for the third year in a row. Last year exports from New Zealand exceeded those from Italy for the first time since 1991/92. This year exports from each of these countries are estimated at 230,000 tons.

Kiwifruit production in 11 countries in 1996/97 is forecast at 984,469 tons, 5 percent above last year's level. Exports in 1996/97 may reach 635,750 tons, up about 3 percent from the previous year. Exports are expected to increase from all exporting countries except the United States and France. Exports for the United States are expected to be down due to a smaller harvest. Italy and New Zealand are the world's largest exporters of kiwifruit, accounting for 36 percent of selected country 1996/97 forecast exports. Chile is the third largest shipper, accounting for 19 percent.

The European Union (EU) is the world's most important kiwifruit growing region. Italy accounts for 70 percent of EU production. The EU greatly facilitated conversion of crop land to kiwifruit in the 1980s through widespread subsidies. Although most subsidies have reportedly been eliminated, their impact continues. Estimated production in 1996/97 for the 5 major EU producing countries is 478,500 tons, about 17 times the level estimated for the United States this season.

Italy accounts for more than half of total production from selected Northern Hemisphere countries in 1996/97. The 1996 crop is estimated at 330,000 tons, an increase of 14 percent from the previous year's output, due to excellent weather conditions. Area planted to kiwifruit has stabilized at 19,500 hectares, concentrated in the regions of Lazio (6,000 hectares), Emilia-Romaga (4,500 hectares), and Piedmont (4,500 hectares).

Kiwifruit consumption increased to about 120,000 tons due to higher supplies and lower prices

Kiwifruit consumption in Italy closely parallels production and prices. In general, the domestic market is very price-sensitive. The average per capita consumption is 1.8-2.0 kg. According to the Italian Kiwifruit Producers Association (CIK), almost all kiwifruit are sold on the fresh fruit market, but 20 percent of the population is not familiar with the fruit. Generally, EU quality standards of kiwis do not apply to the domestic market. Consequently, most low quality fruit is sold at the street markets at low prices. There is very little further processing, although small quantities are diverted to confectioners and frozen fruit juice manufacturers.

Domestic consumption should be much higher than last year as there is an increase of about 26,000 tons of fruit available from domestic production. Prices, across the board from farm to export, are about 200 to 300 lira/kg, or 15 percent lower than last year.

Italian kiwifruit exports are forecast at 230,000 tons in 1996/97, up 6 percent from last year's shipments. The following table shows Italy's meteoric rise as a producer with only limited exportable surplus of kiwifruit in the mid-1980s.

Italy's primary export markets are other EU countries. In 1995, shipments to EU destinations accounted for about 89 percent of total exports. Prospects remain good for shipments to EU markets during the peak Northern Hemisphere shipment period.

Despite its dominant position in export markets, Italy is also an importer of kiwifruit during the off season from May through October. Italy imported 21,000 tons of kiwifruit in 1995/96, and is expected to take about the same quantity in the current marketing year. Chile and New Zealand are the major suppliers of imported kiwifruit to Italy. In view of the bipolar production season, Chile and New Zealand will remain the primary beneficiaries of import demand from Italy. However, in coming years the length of season for domestic fruit could be affected by technological advances in controlled atmosphere storage and forced maturation.

France is the EU's second largest kiwifruit producer, harvesting an estimated 77,000 tons in 1996/97. Although total production this year is about the same as last season, commercial production is 3,000 tons greater than last season's level. Much of the growth in total production over the last few years has been in the non-commercial sector. French kiwi production is described as not particularly profitable. French Customs data show that the country is a net importer of kiwifruit, taking 44 and 23 percent from New Zealand and Italy respectively.

France's main export markets are Spain and Germany which account for 30 and 20 percent of total exports. Taiwan is France's third largest country export market. Shipments doubled to Taiwan last season to more than 2,000 tons.

Production in 1996/97 is estimated at 50,000 tons, up 9,350 tons from last year due to abundant rainfall and relatively mild temperatures. This year's crop is described as "very good", consists of large sized fruit, and is of better quality than last year's crop.

Kiwifruit production is centered in Western and Central Macedonia, particularly in the district of Pieria, which accounts for 1,900 hectares. Acreage is expected to remain at current levels of around 4,000 hectares. Nevertheless, because existing acreage has not reached full maturity, future harvests could reach 60,000 tons or more.

The cold storage facility in Karitsa-Pellas doubled its capacity to total 5,000 tons. A new facility in Karyotisa-Pellas with a capacity of 5,000 tons is in operation for the first time this season, and another cooperative facility of 2,000 tons is presently under construction at Agios Spyridon- Artas.

Greek kiwifruit exports in 1996/97 are projected to increase by about 2,000 tons to total 22,000 tons. Export data from January through September 1996 indicate that about 75 percent of Greek kiwifruit exports were shipped to EU member states, the balance went to markets in Eastern Europe.

Prices of domestically produced kiwifruit are lower than last year. Last year the price in the central Athens market ranged between 180 and 400 drs/kg compared to 200 to 250 drs/kg this season.

Greece imports only small quantities of kiwifruit, usually during July-September when locally produced kiwifruit are not available. Imports are forecast to reach about 1,000 tons in 1996/97. The import duty on kiwifruit from non-EU countries is generally 10.6 percent ad valorem. An 8 percent VAT is applied to the total CIF value plus import duties.

The Government of Greece, through regulation 2328/91, does not encourage new kiwi plantings. However it does provide assistance for improvements in established orchards. Currently there are no price supports for kiwifruit, and no subsidized producer credit is available.

Production in 1996/97 is expected to decline again, for the fourth straight year, due to continued unfavorable growing conditions. This year's crop is expected to be down three percent from last year's level which was four percent off the 1994/95 level. Almost all of the area planted is now bearing fruit. In the long run, area expansion is not anticipated due to price competition from other EU suppliers and because consumers have a wider choice of other tropical and semi-tropical fruits.

Consumer purchases of kiwifruit are influenced by prices and supplies of other fruit (apples in winter, bananas in summer). Appearance of fruit is reportedly an important factor influencing consumer purchases. Portugal is a net importer of kiwifruit and, in the coming year, is expected to purchase 9,100 tons primarily from Italy, France, and New Zealand in the current year.

Opportunities for U.S. exports to Portugal are not promising due to stiff competition from EU suppliers and the smaller U.S. crop.

Most kiwifruit is marketed through five companies, Frutas Douro ao Minho, Sokiwi, Kiwi-Iberica, Kiwisol and Kiwicoop. These companies are the main distributors of domestic production and deal directly with retailers, wholesalers and importers. They establish prices in accordance with supply and demand. Retailing is increasingly dominated by the super and hypermarkets, which account for almost 35 percent of all kiwifruit sold in Portugal.

Spain's area planted to kiwfruit decreased to 760 hectares in 1996/97, down from the high of 954 hectares in 1994/95. No increases are expected in the next few years. Galacia and Asturias (northwestern Spain) are the primary production areas, accounting for about 57 percent of total planted area. Most of the production units are small farms averaging between .5 and 1 hectare.

The decline in growing area is attributed to a switch to grape production for wine. Unless kiwifruit grower prices improve, there could be some pulling of kiwifruit vines in areas of mixed production (kiwifruit/grapes) and replanting with grapes. Wine grapes reportedly offer growers better returns than kiwifruit at current prices.

Last year's production fell nearly 3,000 tons to 8,332 tons. This year's crop, however, is forecast at 13,000 tons, up 56 percent due to ideal growing conditions.

Spain is primarily an importer of kiwifruit. Imports in 1996/97 are forecast at 50,000 tons, down 9 percent. Italy and France are the primary suppliers of kiwifruit to Spain, followed by New Zealand and Chile. Local kiwifruit are marketed by only a few Galicia-based firms, mainly from November through February. Imports from Italy and France usually take place November through May, while fruit from Chile and New Zealand typically arrive June through December. Imports from Chile receive preferential GSP duty treatment and do not have to pay the higher duty levied upon other countries. Although a ban on U.S. fresh fruit was lifted in mid-1993, prospects for U.S. kiwifruit in this market are limited given strong competition from low-price EU neighbors, the duty preferences received by other suppliers, and the fact that southern hemisphere fruit is available immediately before the U.S. fruit is harvested, enabling Spanish importers to build up temporary stocks.

Domestic production continues to decline and imports increase as lack of competitiveness erodes market share

Kiwifruit production in Japan for 1996/97 is estimated at 42,900 tons, a 12 percent decline from the previous year, due in large part to a continued reduction in area. Plantings declined in each of the last five years. During this period domestic production dropped from 53,800 tons.

The area decline was triggered by continued saturation of the kiwifruit market due to stagnant consumer demand and the decreasing competitiveness of local product relative to imports.

Japan is forecast to import 48,000 tons of kiwifruit in 1996/97, up from the preceding year by nearly 5,000 tons in response to lower domestic supplies. Imports come primarily from New Zealand, in large part due to its complementary season and proximity. New Zealand currently enjoys a 90 percent share of the import market. Interest in U.S. kiwifruit is usually limited, as it competes directly with local Japanese production. According to industry sources, Japan's future consumption of kiwifruit is not likely to exceed 100,000 tons.

The Tokyo wholesale price for domestic fruit in December 1996 was 245 yen/kg and 330 for New Zealand product. Popular sizes are 36 to 39 per tray.

Domestic production of kiwifruit in 1996 is estimated at 13,000 tons, up seven percent from the previous year. A larger crop was produced on about the same area under production as last year. The quality of this year's crop is poor, and is expected to reduce the commercial value for the local market. The size of the fruit is smaller and it contains a high moisture level. The ratio of large sized fruit (above 100 gram/piece) is expected to be 20 percent compared to 30-40 percent in normal years. This year's growing cycle is described as low temperatures during the flowering and pollination period followed by dry weather during the growing season and wet weather during the harvest. All of this leads to fast maturation and soft fruit flesh.

Since 1990, consumption has increased by more than ten percent annually, rising from 6,000 tons to a projected 18,000 tons in 1996. Korean per capita consumption is estimated at 400 grams. The Seoul metropolitan area accounts for about 60 percent of total fresh consumption. Ten percent of the domestically produced fruit is processed into juice and products for use in the bakery and confectionery sector. Virtually all of the imported fruit is consumed fresh.

Kiwifruit imports for 1995/96 increased to 6,300 tons, up 22 percent from the previous year. Shipments from the United States decreased by 27 percent due to a good harvest of local fruits. Imports from New Zealand increase by 57 percent due to the improved distributional channel. Major fruit importers anticipate that kiwifruit imports for 1996/97 will increase by 20 percent to 7,500 tons. The increase may largely come from New Zealand kiwifruit imports with U.S. kiwifruit remaining at the same level. The tariff for fresh kiwifruit is 48.5 percent for 1997, imposed on CIF value, and will be reduced by 0.5 percent per year through 2004 when the tariff will be bound at 45 percent.

A new challenge is expected in the Korean market. Imports of Chilean kiwifruit have been prohibited by the Plant Protection Act due to Mediterranean fruit fly. However, the Korean government is considering permitting imports of kiwifruit from Chile on the condition that the fruit is subject to a cold treatment conducted by a cooperative inspection between visiting Korean officials and local officials. Importers expect to handle about 2,000 tons of Chilean kiwifruit this year. Chilean kiwifruit directly competes with New Zealand fruit during Korean off-season.

New Zealand dominates the imported kiwifruit market because at present it is Korea's only off-season source of kiwifruit. In 1995/96, New Zealand kiwifruits accounted for 75 percent of total imported fruits, while United States supplied the rest. New Zealand's market share has improved from 58 percent in 1995 to 75 percent in 1996. This is largely because the import channel for New Zealand kiwifruit has changed from sole agent (Hyundai Ag.) to multiple agents (three including Hyundai, Korean Kiwifruit Association, and Sooil Commerce Co.), which developed as a result of the Korean government's ban on private business monopolies. The competition among those three importers led to dumping sales, affecting prices of both local and imported fruits. While consumers' demand for higher fruit quality also continues to grow in the market, New Zealand fruit is preferred among retail consumers due to its large size, skin color, consistent shape, flesh firmness, and neat package (carton tray). However, there is minimal taste difference between domestic and imported fruits since they are from the same 'Hayward' cultivar.

U.S. kiwifruit is disadvantaged in terms of seasonal opportunity, in that it is higher priced and competes directly with local products. Imports of U.S. kiwifruit in 1995/96 decreased by 27 percent from the previous year, largely because of the abundant local harvest. U.S. kiwifruits must also compete against a national campaign for buying local agricultural products, unsubstantiated food safety scares by local consumer groups against imported food products, and restrictive import inspection procedures.

The U.S. commercial kiwifruit industry is based around Gridley in Butte County and in Tulare County in central California. Kiwifruit production in 1996/97 was 27,669 tons, a 20-percent decline from the previous year. This year's decline is due to lack of sufficient chilling hours between January and February. Normally kiwifruit require about 1,000 hours of temperatures under 45 degrees. Last year the California plantings received only 650 hours. As a result erratic flowering occurred. The plants require a consistent bud break for both the male and female plants in order to pollinate and achieve a high fruit set. As this did not happen, both the size of the crop and the size of the fruit were smaller than normal. This year's crop averaged the second smallest sized fruit, (at 39 with plenty of 42's) in the last ten years. U.S. producers typically ship small sized fruit to Canada, medium sized fruit to domestic markets, and large sized fruit to Asian markets.

Total U.S. exports of kiwifruit during 1995/96 reached 5,315 tons, a decrease of about 44 percent from the previous year. The value of exports in 1995/96 was approximately $7.4 million, well below the previous season's level of $13 million. Among the major markets for U.S. kiwifruit are Canada and Korea, which collectively accounted for slightly more than 73 percent of total U.S. exports in 1995/96. U.S. exports to Taiwan declined 63 percent to 509 tons. In Taiwan U.S. kiwifruit competes against lower priced French kiwifruit which continues to be valued around $2 per tray below U.S. kiwifruit.

The Korean market is the key success story for the United States. Exports which had grown almost 10 fold over the past five years, doubled from the 1993/94 level to total 2,659 tons valued at $4.3 million in 1994/95. Last year U.S. shipments declined to 1,572 tons due to a sizable quantity of competitively priced domestic fruit. The California Kiwifruit Commission has used MAP funds to increase consumer advertising, distribute point of sale materials, and maintain public relations.

Exports to Canada dropped 42 percent in 1995/96 to 2,339 tons. Exports hit $2.9 million in 1995/96, down $1.9 million from the previous year. The California Kiwifruit Commission (CKC) has been working in Canada to overcome competition from Italian, Greek, and French kiwifruit imports. Last year, promotional activities included consumer promotions, trade shows and trade related activities. Nevertheless, last year the Commission faced one of its toughest battles in Canada. Since 1989, lower priced Italian, Greek and French fruit has flooded California's traditional markets in eastern and central Canada. And now, Chilean fruit is proving tough competition in the western markets. In the last two years U.S. shippers had a one and one half month shipping window to the eastern and central Canadian markets. This year however, U.S. exports to Canada declined in part because of the total collapse of the eastern Canadian market but also as a result of the lower U.S. crop.

Imports usually begin in April and end in October when the U.S. crop is harvested. However, improved cold storage technology in major supplying countries has greatly extended the shipping season. This has caused concern in producing countries, as there is some possibility for pressuring prices downward when old-crop imports compete with new-crop domestic fruit. Chile has emerged as the leading supplier of kiwifruit to the U.S. market since the anti-dumping action against New Zealand was implemented in 1992. The following table shows the development of U.S. imports over the past five years. Italy, historically the world's largest producer and exporter, has established a small but expanding market in the United States. Italy's kiwifruit competes directly with U.S. domestic production, as imports begin arriving in November.

According to U.S. Census data, the average value of imported Italian kiwifruit was $0.81 per kilogram during the 1995/96 season. In contrast, the average import value of New Zealand kiwifruit was $1.10 per kilogram and the average for Chilean fruit was $0.58 per kilogram.

The U.S. Commerce Department's determination of injury to the U.S. domestic kiwifruit industry from imports of New Zealand kiwifruit led to the imposition of a 98.6 percent anti-dumping duty in May 1992. However, since that date the margin has been reduced several times and is now set at 3.5 percent.

The U.S. Customs Service requires a cash deposit or bond equal to the dumping margin on all imports of kiwifruit from New Zealand.

The Southern Hemisphere kiwifruit industry is centered in New Zealand and Chile. Australia, by comparison, is a very small kiwifruit producer. Collectively, these suppliers account for about 422,400 tons or 43 percent of world production. Production in the Southern hemisphere increased 1.5 percent while the area planted dropped 5 percent.

New Zealand continues to be the dominant supplier in the Southern Hemisphere

Kiwifruit production for 1996/97 is forecast to increase one percent to 260,000 tons. This crop is among the largest on record and is due in part to experiencing the best growing season in the last four years. The improved crop is also the result of more intensive management focusing on pollination, thinning, and canopy development. The profile of the crop is described as having larger fruit and improved quality.

This crop was produced on 10,211 hectares compared to 16,000 hectares bearing fruit in 1989. The overall area planted to kiwifruit is expected to remain stable for the next few years.

The Kiwifruit Marketing Board's policies continue to address expanding world production and declining prices

With world production increasing and prices declining the Kiwifruit Marketing Board has sought to improve quality and reduce production. The Kiwifruit Marketing Board (KMB) has employed two strategies designed to limit the volume of fruit marketed: 1) the grower-financed vine pull scheme; and, 2) crop management policy. The KMB's crop management policy emphasizes production (packed volume) targets that are based on demand from export markets. Packhouses are responsible for determining which grower's fruit not to pick, or which fruit to pick and then store in field bins. The KMB then pays these selected growers the net amount (after picking and packaging costs) it pays to other growers.

The Board is considering the idea of marketing kiwifruit throughout the year under the "Zespri" label. The idea is to control sales channels and run 12 month promotional and merchandising programs. This concept however is controversial because to do it would require sourcing kiwifruit from other countries outside the 7 month New Zealand season. Necessarily the "Zespri" brand could not have country of origin designation. Nevertheless the Board believes that this plan would net New Zealand growers greater returns.

Historically, New Zealand is the second largest exporter of kiwifruit after Italy. Last year however, New Zealand's exports exceeded Italy's by 11,000 tons and this year they may be equal to Italy's exports.

Since 1989 the KMB has exercised control over export sales to all markets except Australia, which usually takes Grade II kiwifruit. Export trade is dominated by shipments to EU countries, with smaller amounts going to Japan, Canada and Taiwan. Collectively, the four largest markets account for about 85 percent of total exports. Exports in 1996/97 are forecast at 230,000 tons, up about one percent from last year's record of 227,000 tons.

New Zealand holds over thirty percent of the international kiwifruit market. Exports to Asian markets started strongly despite competition from Chilean fruit and disruptions from Class II fruit reexported from Australia at lower prices than Class I fruit.

Kiwifruit production in Chile in 1995/96 reached a record 153,000 tons up more than 6 percent from 1994/95. Production for 1996/97 is forecast at a record of 157,000 tons, up 3 percent. Planted area is expected to stabilize at the current level of 8,400 hectares and production should stabilize at about 157,000 tons. This is a result of general decline in world prices and a consequent negative return experienced by marginal producers over the last 3 years.

About 1,400 hectares of marginal vines were pulled up last year. But, in spite of this, the crop increased due to excellent growing conditions in new areas. Consequently yields have increased from 14.5 tons/hectare in 1995 to nearly 16 tons in 1996 as the new vineyards begin to reach full-bearing maturity.

Chile is primarily a kiwifruit exporter, with about 80 percent of total commercial production entering export channels. Shipments in 1996/97 are forecast at 122,000 tons, an increase of 3 percent.

Chile's major markets are the EU, the United States, Argentina and Brazil. Traditionally, Chile's export efforts have focused on the EU, although demand is now somewhat diminished as domestic EU production continues to flourish. However, shipments to the United States have expanded rapidly, partly in response to the competitive advantage provided Chile by U.S. anti-dumping duties assessed against New Zealand. Indeed, the United States is now the single largest destination for Chilean kiwifruit. Chile's export season runs from the last week in March through September. According to Chilean data, shipments to the U.S. reached 33,527 tons in 1996 compared to 20,642 tons in 1993.

Australian kiwifruit production in 1995/96 reached 6,000 tons, up 33 percent from the previous year's drought-reduced crop. This season's crop is forecast at 5,400 tons. The decline from last year's level is due to cool weather during the end of December which has affected the size of the fruit.

Production of kiwifruit expanded rapidly in Australia in the 1980's, from 500 tons in 1982/83 to 9,500 tons in 1987/88. However, this expansion led to a serious oversupply situation and plummeting prices. Several large operations pulled vines and ceased production in 1989, resulting in a 46-percent decline in planted area. Since 1988/89, planted area declined from 1,128 hectares to about 450 hectares.

Production, however, increased due to higher yields from maturing vines. Very few new plantings have taken place in the last few years, and now the bearing area accounts for 92 percent of the total area planted. Australian kiwifruit production is concentrated in the states of Victoria, New South Wales, and Queensland. Kiwifruit are harvested from March through May.

Australia imports more than three times as much kiwifruit as it produces. Domestic consumption is slowly increasing and has reached 23,000 tons. Imports are running around 18,000 tons. Imports will continue to be strong as consumers have linked fruit size to quality. This means that undersized Australian fruit which reflects unfavorable soil and growing conditions does not compare well with the imported product. New Zealand continues to dominate the imported kiwifruit market.

Australia exports small amounts of kiwifruit, with 1,000 tons forecast in 1996/97. While Australia has limited early season advantage over New Zealand, prospects for kiwifruit exports are dampened by strong competition from countries such as Chile and the EU producer countries. A lack of direct shipping routes to potential Southeast Asian markets (e.g., Singapore) adds costs and hampers development of regional export markets. Thus, Australia is likely to remain a low-volume exporter.

For further information on supply, distribution, and trade, contact Robert Knapp, 202-720-4620. For information on production, contact Kelly Kirby Strzelecki at 202-720-6791.

Canned tomato and tomato paste production in selected countries in 1996/97 reached record levels, totaling 2.1 and 1.4 million tons, up 25 and 5 percent from the previous season, respectively. The increase in canned and paste production is due mainly to the larger supply of Italian tomatoes being delivered to processors--triggered by increased planted area, favorable weather and favorable market prices in marketing year 1995/96. Tomato paste production in Spain and Portugal also increased significantly during the same period. EU processors of tomato paste accounted for almost all of the increase in tomato paste production in selected countries in 1996/97. With the exception of Chile, tomato paste production in 1996/97 declined in Turkey, Mexico, Brazil and Greece. Exports of canned tomatoes in 1996/97 are forecast at 863,000 tons, up about 10 percent from last season, due mostly to an expected sharp rise in production in Italy. Although tomato paste exports in 1996/97 are forecast to be down slightly, exports from 5 of the 9 selected countries are forecast to increase.

The revised 1996 production estimate for processing tomatoes in 11 major producing countries is 21.96 million metric tons, down slightly from an earlier estimate of 22.1 million tons, but up about 3 percent from the previous year. This upturn mainly reflects increases of 12, 20 and 38 percent for processing production in Chile, Italy and Spain, respectively. These increases were partially offset by modest to sizable declines in Brazil, Turkey, Israel, Mexico and Greece.

Production of tomato paste in selected countries, not including the United States, in marketing year 1996/97 is estimated at 1.4 million metric tons, up 5 percent from 1995/96. The EU countries account for 65 percent of total production.

Exports of tomato paste from selected countries in 1996/97 are forecast at 946,000 tons, down about 1 percent from the previous season. Italy, Spain and Turkey are expected to account for most of the increase. In addition, the United States is expected to export about 110,000 tons.

End of season tomato paste stocks in selected countries in 1996/97 are forecast to rise 33 percent from 1995/96, in response to higher production and stock adjustments in Italy and Greece. Moreover, a sizable adjustment of year end stocks was made for Brazil in 1995/96 to accommodate higher production and imports.

Canned tomato production in 1996/97 in 6 major producing countries, not including the United States, is estimated at 2.1 million tons, up 25 percent from 1995/96 and up 13 percent from 1994/95. This increase in production mainly reflects a larger supply of fresh tomatoes sent to processors by Italian producers. Italy accounts for 85 percent of selected country canned tomato output. There are no available statistics for canned production in the United States, but total production is believed to be the largest in the world.

Exports of canned tomatoes in 1996/97 are forecast at 863,000 tons, up 10 percent from 1995/96. Italy is expected to account for most of the increase.

Canned tomato carryover stocks for selected countries are forecast to rebound to 199,000 tons after 3 consecutive years of decline.

Production of tomatoes for processing in the United States in 1996 has been revised upward to 10.35 million tons from 10.28 million tons forecast earlier, and up 1 percent from 1995. The upturn was primarily due to higher yields in California, Michigan, Ohio, Pennsylvania, Indiana and Colorado. Other smaller producing states registered increases as well. California accounted for 92 percent of the United States processing tomato acreage in 1996.

The United States is the world's largest producer of processed tomato products, with tomato concentrates (especially tomato paste, sauces and catsup) accounting for the majority of the products. Statistics for U.S. tomato paste production are not available.

According to the California League of Food Processors, December 1 stocks of processed tomatoes (fresh equivalent) were up 9 percent from the previous year. Because of burdensome supplies, wholesale prices for tomato paste (55 gallon drums) in the first quarter of 1997 weakened to 30 cents per pound from 36 cents per pound in 1996.

Strong domestic and export demand for processed tomato products continues to drive the tomato market. Most of the rising demand since the 1980's is due to increased food service use of tomato products in items such as pizza, pasta and salsa.

U.S. exports of tomato products are currently at a record pace for the first 6 months of 1996/97. During this period, U.S. exports of canned tomatoes totaled 21,000 tons (up 21 percent), tomato paste 61,000 tons (up 31 percent), and tomato sauce 38,000 tons (up 11 percent).

U.S. exports of tomato products in marketing year (July-June) 1995/96, were a record $198 million, up slightly from a year earlier. Canada took the largest share of U.S. tomato products, accounting for about 51 percent of the total value. Other important export markets included Japan, Mexico, Korea, Hong Kong, Taiwan, Italy, Netherlands and the Philippines.

Production of processing tomatoes in Mexico in 1996 has been reduced to 140,000 tons from 174,000 tons forecast earlier. This estimate is down 49 percent from 1995, due to decreased irrigation water availability. Additionally, about 2,200 hectares of tomatoes planted for processing were harvested for fresh consumption, driven by the attractive tomato export market in the United States. Early-season assessment of the 1997 crop, which will be harvested this spring, point to an outturn of 200,000 tons, up 43 percent from 1996, but substantially below an earlier forecast of 245,000 tons. The increase in production in 1997 is based on an expected increase in harvested area.

The bulk of Mexico's processed tomato production is devoted to tomato paste. Tomato paste production in MY 1997/98 (March to February) is forecast to partially rebound to about 30,000 tons, up 43 percent from a lower MY 1996/97 level of 21,000 tons, because of a higher demand for fresh tomatoes for the export market. Prior to last season, Mexico's tomato paste production generally ranged from about 40,000 to 60,000 tons per year.

Seven tomato paste processing plants operate in Mexico. Most are located in the state of Sinaloa, and operate from March to June. These plants are controlled by both Mexican and multi-national firms who produce paste under their own labels and for use in other products such as catsup, sauce, hot sauce, sardines, and other paste products.

The total processing capacity for paste production in Sinaloa is approximately 6,350 tons per day. Most of the tomatoes for processing are contracted by the processors directly with local growers. If additional produce is needed, tomatoes are purchased on the cash market. Tomato paste is made at different concentrations depending on the use: 29, 31, 36 and 44 degrees brix.

Domestic consumption of tomato paste in Mexico in MY 1997/98 is forecast at 10,000 tons, unchanged from 1996/97. Consumption of tomato paste in Mexico is estimated as the residual after subtracting exports and ending stocks from supply, then adding imports as appropriate. Although the domestic market is not very large, it acts as buffer for oversupplies of canned tomato paste.

Production of tomatoes for processing in 1996 has been revised downward to 680,000 tons from an earlier forecast of 1.1 million tons, down 27 percent from 1995, due to higher prices received for fresh market tomatoes, disease problems in some regions which reduced yields, and farmers switching to more profitable crops, such as bananas, guavas, grapes, etc.

Tomatoes are produced in all states of Brazil, mainly for fresh consumption. However, the three most important regions where tomatoes for processing are grown are Sao Paulo, the Sao Francisco River Valley in the Northeast, and the Cerrado regions of the states of Goias and Minas Gerais. In 1996, these regions accounted for 71 percent of all tomato production in Brazil, and virtually all of the tomatoes used for processing.

Planting of tomatoes in Brazil begins in February and ends around June, while harvesting starts in June and runs through October and November.

In Brazil, about 70 to 75 percent of domestic production goes into tomato paste and extract. Production of tomato paste in 1996 is estimated at 73,000 tons, down 27 percent from the 1995 record. Most of the paste is used in further processing into consumer-ready sauces and other such products. Production in 1997 is forecast at 107,000 tons. Production of canned tomatoes in Brazil in 1996 is estimated at 800 tons, down 20 percent from 1995.

In Brazil, indications are that prices for the 1997 crop will be in the general range of those in 1996--US$61.00 per ton in Bahia and Pernambuco and US$71.000 per ton in Sao Paulo. The average farmgate price paid to producers in Goias and Minas Gerais is estimated to be around US$76 per ton in 1997. Under the typical contract, companies provide seeds and other inputs as well as extension and technical assistance to growers. Many growers have difficulties obtaining production loans if they do not already have a contract.

There is potential for large increases in Brazilian consumption of processed tomato products, especially consumer-ready "ethnic" sauces. Consumption patterns are changing in Brazil. People have less time to go shopping for fresh produce, more women are entering the work force, more people are working "9-to-5" type jobs, more people are moving to the cities, and fewer people have time to go home for lunch. In this environment, the demand for tomato products in fast food (pizzas, hot dogs, hamburgers) and consumer-ready products is becoming more and more important.

Tomato paste accounts for most of Brazil's imports of tomato products (imported paste is 28-32 degrees brix) and is further processed in Brazil into consumer-ready sauces and other similar products. The average FOB prices for imported paste in 1994 and 1995 was US$1,010 per metric ton and US$860 per ton, respectively. Approximately, 80 percent of Brazil's tomato product imports come from Chile. The European Union and Argentina account for most of the remaining total.

Production of tomatoes for processing in Chile in 1996 is estimated at 1.0 million tons, up 11 percent from 1995. Harvested area increased 10 percent due to favorable export prices relative to other crops and planting of improved, higher yielding varieties. Production of processing tomatoes in 1997 is forecast at 886,000 tons, down 11 percent from 1996 due to severe drought in major producing regions of the country (La Serena and Talca). Total planted area is forecast to decline 11 percent in 1997. Industry sources forecast that a lower quality product may result since it is undetermined how much water will be available for the planted crops.

Tomatoes for processing are planted from mid-September through early December of each year and harvested from around January 10 through April 15. Frosts are a limiting factor for the planting season.

Chile's output of processing tomatoes has expanded rapidly over the last decade, principally as a result of strong international demand for tomato paste, the introduction of new varieties for industrial purposes, and diminished economic returns for alternative crops.

Chile's processing tomato industry produces mainly tomato paste and canned tomatoes (whole-peeled, diced-peeled and crushed).

The tomato industry in Chile produces mostly 30 to 32 degree brix paste. However, small amounts of product are produced at 28 to 30 brix for the Japanese market.

The current annual installed capacity for processing tomatoes in Chile is about 120,000 to 140,000 tons. There are eight major tomato processing plants in Chile. Only four of the eight major tomato processing plants produce canned tomatoes.

Tomato paste is produced mainly for the export market. Tomato paste production in 1996 in Chile has been reduced from 128,000 to 120,000 tons, but still up 2 percent from 1995, due mostly to an increase in harvested area. The tomato paste industry in Chile has been operating near its production capacity for the last few years as a result of consistent growth in foreign demand. However, a much smaller rate of expansion is expected in coming years due to increased competition from countries with a comparative advantage in tomato production, such as Peru. Iansa, Chile's largest tomato processor, has invested heavily in a processing plant in Peru, and further expansion is proposed. Tomato production in Peru has many advantages over Chile, including an extended production season of 9 months, compared to only 3 months in Chile. Also, Peruvian tomato products are exported duty free into the United States (Andean country preference) and most European countries.

In 1996, tomato paste exports totaled 110,000 tons, accounting for approximately 93 percent of the total paste production. Brazil and Japan accounted for 42 and 16 percent of exports, respectively. Other principal markets include Argentina, Dominican Republic, Guatemala, Honduras, Venezuela, Colombia and Mexico.

The 1996 harvest of tomatoes for processing in the major producing countries of the European Union (EU) is estimated at 7.75 million tons, up 16 percent from 1995 because of significantly larger crops in Italy and Spain. The EU's 1996 minimum grower prices for processing tomatoes, in ECU terms, were unchanged from 1995 at 9.549 ECU per 100 kilograms for tomatoes to be processed into paste, juice, or non-whole products; 15.807 ECU per 100 kilograms for whole San Marzano variety tomatoes; and 12.161 for whole Roma variety tomatoes and tomatoes for producing flakes.

In October 1996, the EU reformed the Common Organization of the Market (COM) for Fruits and Vegetables. The new policy provides greater financing and discretionary authority to producer groups in individual EU member states. All contracts currently entered into with individual processors will have to be signed by producer groups beginning in the year 2002. For tomatoes, the new policy modified the production quota for processing tomatoes for 1997 and 1998. The total EU production quota will rise from 6.651 million tons in 1996 to 6.836 million tons in 1997 and 1998, expanding the quota for tomatoes for paste production and reducing the quota for whole tomatoes for canning. After the 1998/99 year, production quotas will vary and will be recalculated according to historical references of the 3 previous years. The total EU quota will remain the same, while each EU member state quota will vary according to whether or not they fulfilled their quota during the reference years. For example, if a EU Member State under-utilized its quota during a given year, the quota would be reduced for the following year. Minimum grower prices for 1997 have not been set under the reformed COM.

Tomatoes for processing production in Italy in 1996 has been revised upward to 4.15 millions tons from an earlier forecast of 3.55 million tons, due to larger than expected planted and harvested areas, good rainfall during the growing season, and favorable prices received in 1995/96 marketing year.

Area planted to tomatoes for processing in 1996 is currently forecast at 90,000 hectares, up 8 percent from 83,000 hectares estimated earlier.

Approximately 50 percent of tomatoes used for processing production in Italy consist of whole peeled canned tomatoes and grown in the southern part of the country. The San Marzano and similar type varieties are used for this production are harvested exclusively by hand. The remaining tomato processing production areas are located between northern and southern Italy, and consist mostly of the round type varieties that are harvested mechanically.

The bulk of Italy's processing season is concentrated in August and September, but in some years it continues to October.

The EU increased Italy's tomato production quota to 3.47 million tons beginning in 1997 from 3.3 million tons.

Italy's canned tomato product exports to the United States are expected to increase

The United States recently eliminated the 100 percent punitive duty on Italian canned tomato imports into the United States. This duty was originally imposed in response to the EU/U.S. beef hormone dispute. Without the additional duty, Italian tomato product exports to the United States are expected to increase significantly during the 1996/97 marketing year.

Tomato paste production in Italy in 1996 is estimated at 396,000 tons, up 37 percent from an earlier forecast and 32 percent above the previous year. Canned tomato production for the same period has also been revised upward to 1.77 million tons from 1.5 million forecast earlier, and up 30 percent from 1995. Increased production for both paste and canned tomatoes was attributed mainly to increased area harvested, favorable weather conditions during the growing season, and favorable prices during the 1995/96 marketing year.

The trend for tomato sauce production in Italy continues to grow, due to increased consumer preference for convenience foods. In 1996, tomato sauce production is estimated at 43,000 tons, up 2 percent from 1995.

The 1996/97 Italian canned tomato export forecast has been increased to 750,000 tons from 630,000 tons forecast earlier, and up 10 percent from 1995/96. The tomato paste export forecast for 1996/97 has also been revised upward to 300,000 tons from 270,000 tons forecast earlier, and up 19 percent from 1995/96.

Production of tomatoes for processing in Portugal in 1996 is estimated at a record 905,000 tons, up 7 percent from an earlier forecast and up 9 percent from 1995. Tomato paste, which accounts for the bulk of Portugal's processed production, is estimated at 162,000 tons, up 10 percent from an earlier forecast and up 11 percent from the previous year. Production of other tomato products consists mostly of diced tomatoes (peeled or unpeeled), and crushed tomatoes.

Despite early-season concerns about the heavy rains and cold weather that delayed planting of the 1996 crop, yields are considered very good. Crop quality and coloration are reported above average. However, industrial yields are reported to be at around 3 percent below "normal" yields, due to lower average solid content in the tomato crop used for processing.

The 1996 crop year continued to be marked by considerable changes at the farm level. The traditional small "seareiros" (farmers on 5 to 10 hectares) continue to be displaced by larger production units. An estimated 3,000 hectares of all tomato area now consist of larger-scale farms with direct-seeding technologies, using drip irrigation systems and mechanical harvesting. The proportion of large farms is expected to increase in the future because of the need to attain economies of scale.

Exports in 1996 are estimated at 90,000 tons, down 29 percent from an earlier forecast. The primary export market is the EU. Sales of tomato paste to the Middle East and Japan continue to increase.

Production of processing tomatoes in Greece in 1996 is estimated at 1.15 million tons, down 4 percent from both an earlier forecast and the 1995 estimate. Tomato paste production in 1996, which accounts for the bulk of Greek processed tomatoes, has been revised to 182,000 tons (converted to 28-30 percent TSS basis) from 195,000 tons forecast earlier. Other processed tomato products include juice.

Tomato juice and "passata" production figures are included in total paste production since the National Statistical Service reports foreign trade data under the heading of "tomato pastes" in three groups of products a) below 12 percent TSS concentration, b) between 12-30 percent TSS, and c) over 30 percent TSS. In 1996, tomato processing started in Peloponnesos around mid-July and ended about mid-September, while in Macedonia, processing starts on August 1 and ends about the first week of October.

Production of tomatoes for processing in Spain in 1996 is estimated at 1.3 million tons, up 28 percent from an earlier forecast and up 39 percent from 1995. Favorable weather, including abundant rainfall, and higher crop yields were the major factors contributing to the larger production in 1996, despite a 10 percent decline in harvested area.

The severe drought that affected most parts of Spain during the past 5 years is over. The rains that began during the months of November and December of 1995 and continued throughout most of 1996 ended what was a difficult period for some of Spain's tomato producers. About 80 percent of Spain's total tomato crop is irrigated, with some 8,000 hectares grown undercover. The tomato crop for tomato paste processing is grown mainly in Estremadura, while the crop for whole peeled processing is grown in the Ebro River basin, e.g., Navarra, La Rioja and Aragon, Toledo, and Murcia.

According to the U.S. Agricultural Counselor in Madrid, the consumption of tomato products in Spain continues to grow at a steady rate of about 4 to 5 percent each year. The main source of growth is coming from increasing demand for tomato sauces. This recent growth trend is encouraging processors to enlarge their processing capacity.

EU Regulation 1398/96, of July 18, 1996 established a minimum grower price to be paid to Spanish producers during marketing year 1996/97 for processing tomatoes which are the same as those paid to Greek growers shown above. In addition, the minimum price paid to growers for tomato concentrate and juice with a soluble dry weight content of between 4.8 and 5.4 percent is 9.549 ECU's per 100 kilograms; and the minimum price growers paid for tomato flakes with a soluble dry weight content of between 4.8 and 5.4 percent is 12.161 ECU's per 100 kilograms. Consumption of tomato products in Spain continues at a steady growth rate. This is encouraging processing plants to enlarge their processing capacity.

Traditionally, exports of canned tomato products from Spain account for about 20-25 percent of total production, while tomato paste exports account for about 50-60 percent of total production. EU countries purchase the bulk of Spain's tomato product exports.

Production of tomatoes for processing in Turkey in 1996 has been revised upward to 1.8 million tons from 1.7 million tons forecast earlier, but down 12 percent from 1995 due to large carryover stocks. The upswing in production reflects increased planted area by farmers without contracts in expectation of higher returns from tomatoes as opposed to alternative crops, such as cotton and sugar beets. A significant portion of these tomatoes were utilized by small processors. Although the tomato crop was planted two weeks late due to the cool and wet spring weather, improved weather later in the production season extended harvesting through the end of October.

Commercial tomato paste production in 1996 was revised upward to 285,000 tons from 250,000 tons forecast earlier, due also to increased area. However, prior to planting, large processors were relatively cautious in contracting for tomatoes due to large domestic carryover stocks and competition from international producers.

Production capacity for tomato paste has been significantly underutilized over the past several years. However, recently firms have begun to invest in increased capacity in expectation of attractive long-term returns, which are expected to come mainly from exports, rather than domestic demand.

Turkey has an annual tomato paste capacity of 375,000 tons, the second largest in Europe after Italy with a 400,000 ton capacity.

Turkey's tomato paste industry continues to depend on exports. In marketing year 1996/97 exports are forecast at 185,000 tons, up 6 percent from 1995/96. Turkey is trading a significant amount of low quality tomato paste (18 to 20 percent TSS basis) with the former Soviet Union, especially Ukraine. Prices reportedly are as low as US$400.00 per ton, FOB Istanbul, and as much as 50,000 tons could be exported during 1996/97 marketing year. Most of the production is expected to come from the smaller processors. Larger processors are concerned that this low quality tomato paste trade will not only be short term, but will not benefit the reputation of the Turkish tomato paste industry.

In addition, Turkish processors expect to benefit from the approval of the United Nation's "food-for-oil" resolution that allows Iraq to sell petroleum for food. Even though tomato paste is not one of the food items listed, sources expect some exports to take place under the "Other Unidentified" category.

Japan continues to be Turkey's leading export destination, because the Japanese prefer the color and taste of Turkish paste and believe that hand picking improves the quality. Several Japanese firms are in partnership with Turkish processors and the trend to greater Japanese investment in the industry is expected to continue. However, exporters note they have begun to face increasing competition from Chinese exports in the Japanese market. The European Union (EU) and Japan are Turkey's largest markets. Turkish tomato paste prices for 1996/97 are reported to about US$740.00 per ton, CIF, which is slightly below last year.

Turkish processors remain optimistic that ongoing agricultural negotiations with the EU will benefit their industry. Currently, the EU is looking to reduce Turkey's duty-free tomato paste export quota from the existing level of 38,400 tons to 32,000 tons, while Turkey is asking to increase its duty-free access.

Production of processing tomatoes in France in 1996 has been revised downwards to 284,000 tons from 290,000 tons forecast earlier, but up 2 percent from 1995. According to the French Federation of Canning Cooperatives, of the total amount of fresh tomatoes delivered to processors in 1996, 215,000 tons was for tomato paste production, 22,000 for canned whole peeled tomatoes, and 47,000 for other tomatoes specialities. Tomato paste production in 1996 was 37,500 tons, up slightly from 1995. In the EU, France ranks third in canned whole peeled tomato production after Italy and Spain, and ranks fifth after Italy, Greece, Portugal and Spain in tomato paste production.

The EU quota for French production of processed tomatoes in 1997 and 1998 has been reduced to 369,608 tons from 392,406 tons in 1996. The majority of the reduction came from the quota for whole peeled tomatoes for canning, declining from 73,628 tons in 1996 to 51,113 tons in 1997, which France has not traditionally utilized. See European Union section for details.

The EU minimum grower price for French fresh tomatoes intended for the production of canned whole peeled tomatoes and canned tomato paste amounted to US$15.69 per 100 kilogram, and US$12.35 per 100 kilogram in 1996, respectively.

Production of processing tomatoes in 1996 in Israel is estimated at 234,000 tons, down 26 percent from 1995, due to the closing of three processing plants and the subsequent reduction in planted area. In 1996, area planted for processing tomatoes totaled 2,600 hectares, compared to 3,000 hectares the previous year.

In Israel, processed products include: whole and diced peeled tomatoes, tomato paste and puree, tomato juice, ketchup and pizza sauces. Most Israeli tomato processors produce the whole range of tomato products.

Tomato product consumption in Israel accounts for about 80,000 tons annually in raw terms, with the rest going to exports.

For information on trade, please contact Emanuel McNeil at (202) 720-2083. For information on production contact Kelly Strzlecki, Production Estimates and Crop Assessment Division at (202) 720-6791.

U.S. Department of Agriculture
Foreign Agricultural Service
Horticultural and Tropical Products Division
AG Box 1049 Washington, DC 20250-1049
Telephone: 202-720-6590
Fax: 202-720-3799

Frank J. Piason, Director
Robert B. Tisch, Deputy Director for Marketing
Howard R. Wetzel, Deputy Director for Analysis