Tomatoes are about to cost a heap more
Tomato sauce is feeling the squeeze and ketchup can’t catch up.
California grows more than 90 percent of Americans’ canned tomatoes and a third of the world’s. Ongoing drought in the state has hurt the planting and harvesting of many summer crops, but waterhungry “processing tomatoes” are caught up in a particularly treacherous swirl of problems that experts say will spur prices to surge far more than they already have.
The drought threatens to imperil some of Americans’ favorite ingredients — pizza sauce, marinara, tomato paste, stewed tomatoes and ketchup all hang in the balance. And this comes not long after a bizarre, and completely unrelated, shortage of pizza sauce and individual ketchup packets during the height of the fooddelivery-crazed pandemic.
This also comes on top of already steep increases in the price of fruits and vegetables, which have been rising since the coronavirus pandemic was declared last year.
For tomatoes, higher prices could start taking hold soon if not already,
said Wells Fargo’s chief agricultural economist Michael Swanson.
“If you’re a producer or a canner and see these problems coming, why would you not raise prices now in anticipation?” he said.
In a normal year, Aaron Barcellos, a farmer in Firebaugh, Calif., grows 2,200 acres of processing tomatoes. This year he’s decided to drop to 900 acres on his farm.,. He’s left the remaining acres unplanted, choosing to focus all of his precious water on almonds, pistachios and olives grown on trellises — crops that command higher prices.
He said many growers have made the decision to use their limited water on permanent crops — such as trees and grape vines — choosing to forgo annuals such as tomatoes, onions and garlic.,
This year’s shortage of processing tomatoes has been a long time in the making. Farmers already were planting fewer tomatoes. From 2015 to 2019, fewer countries were importing American tomatoes, partly because the dollar was strong, which made U.S. canned tomato products more expensive. This created an oversupply of California tomatoes, said Rob Neenan, chief executive of the California League of Food Producers.
Processors cut back their orders and farmers grew fewer acres. Inventory at the beginning of 2020 was low and supplies had tightened up worldwide.
And then the pandemic hit. Cue the tomato hoarding.
Prices were already on the rise. In April, processing tomatoes worldwide were 7 percent more expensive than during three previous seasons, according to the World Processing Tomato Council. And before this summer’s heat wave struck, the California Tomato Growers Association had negotiated a price on behalf of farmers with the tomato processors that is 5.6 percent higher than last growing season, because farmers’ expenses are rising.
“Tomato processors have very expensive facilities that can only do one thing. If they don’t want to be out of business, they will have to bid up tomatoes rather than leave facilities idle,” said Swanson, the agricultural economist.
Those price increases are expected to be passed along to the big companies that contract with processors, agricultural experts say. Companies that have deep ties to tomatoes have yet to signal price increases. Kraft Heinz declined to comment about pricing for this story, as did Campbell Soup, which uses about 2 billion pounds of tomatoes annually for its iconic soup, V8 beverages and Prego and Pace sauces.
James Sherwood of the Morning Star Company, one of the largest tomato processors, said it’s hard to predict how high prices could go. He said higher prices are not just due to the drought but also increasing costs for fertilizer, labor and natural gas. And next year looks even grimmer.
“We have lower inventories right now and a water crisis,” Sherwood said, “and for next year, there are farmers making decisions about crops based on their allocation of water. The reservoirs are tremendously, historically low right now and that’s concerning.”
Greg Pruett, chief executive of Ingomar Packing Company in Los Banos, a partnership of four growers, says the situation is going to be significantly worse next year.
California’s State Water Resources Control Board last week released an order that would cut farmers off from turning to rivers and streams in the Sacramento and San Joaquin river watersheds, removing yet another source of water in an extreme drought year.
“Growers will have the worst water situation ever by the end of this growing season,” Pruett said.
Bottom line, he says: If the drought continues and the water table dips significantly, many growers may not plant tomatoes next year.