California Tomato Processors to Pay 24.3% More for Tomatoes in 2022

Published 2022년 1월 30일

Increasing production costs have resulted in California tomato processors agreeing on contracts with growers for USD 105/ton, a 24.3% rise YoY. Fuel and fertilizer costs are the main drivers pushing production costs up, with the reference price for raw material set at USD 116/mt in 2022, a 24% increase YoY. Weak links in the supply chain and dry weather could also hamper this season’s forecast for tomato processing in California.

Production costs rise

Over the past seven years, production costs have surged. Tomato production rose from USD 3,000 per acre to about USD 4,000 per acre in 2022. However, producers have failed to offset rising production costs, as revenues have been dwindling over the past decade due to diminishing yields. According to the California Tomato Growers Association (CTGA), fuel and fertilizer costs are the main drivers of production costs. The reference price for raw material is USD 116/mt in 2022, a 24% increase YoY and the highest in over a decade.

California tomato processors and the CTGA set the price for 2022 contracts at USD 105/ton in Dec-21, rising by 24.3% YoY from USD 84.50/ton in 2021. Tomato processors and growers have reached an agreement on the price of tomatoes earlier than usual this year due to the increasing production costs. This early agreement helps both parties mitigate their risks, as processors can commit their growers, while growers benefit by knowing how much they will get paid for their produce.

The rising cost of labor is another factor leading to the increase in the production cost of tomatoes. Since Jan-22, overtime for workers has been restricted, as workers are only permitted to work 8 hours a day or 40 hours per week. This has hampered production as the labor pool has dwindled in recent years, and growers cannot work multiple shifts. Multiple shifts aid farming processes such as drip irrigation, which operate throughout the day, requiring workers to rotate.

Tomato production hampered by dry weather and logistical issues

Weak links in the supply chain and dry weather could lower this season's forecast for tomato processing in California. Despite projections that California's tomato processors would contract 11.07 million tons in 2022, the recent dry spell in January could result in a downward revision of this year's crop. A similar situation occurred in 2021, as the drought in California led to growers harvesting less than expected. According to the U.S. Department of Agriculture (USDA), in Jan-21, tomato processors were forecast to contract for 10.97 million mt in 2021. Due to dry weather conditions, this forecast decreased, dropping to 10.52 million mt in May-21, then to 10.07 million mt in August-21, with the final harvest reaching 9.8 million mt, significantly lower than the requirements of both growers and processors.