Italian Tomato Paste Prices Rise as Surging Production Costs Cripple Industry

Italian tomato paste export prices could rise to USD 1,225/mt in Feb-22, a 4% MoM increase due to the inflation of overhead costs of production, rising fuel, and raw material costs. Prices rose from USD 1072/mt in Feb-21 to over USD 1225/mt in Feb-22, a 14% YoY increase, and prices look set to remain elevated throughout 2022.

About 11% of Italy's total industrial energy consumption is absorbed by the food sector. Therefore, the impact of rising energy costs is quite significant. Over the past year, gas prices rose by more than 700%, and methane costs have tripled. Production and fuel costs are rising, with most fertilizers rising by over 14% and diesel prices increasing by 50%. Raw material prices have reached the highest levels in a decade. Due to these factors, YoY energy prices for Italian farms have skyrocketed by 120%, causing tomato processing companies to reduce or suspend their production life cycle. The rising energy and raw material costs could be passed down to the retail sector, which would trickle down to consumers. The impact of rising diesel and gas prices has a snowball effect in the industry as 85% of Italian goods are transported by road. Retail prices for fresh tomatoes and tomato puree in supermarkets and hypermarkets are rising significantly and look to remain elevated for the remainder of the year.

Sea freight costs have also surged and could shrink export margins as space on ships has become limited, and containers scarce. The tomato sector is waiting to conclude a framework agreement between producers and manufacturers. This agreement will outline the sector price of tomatoes to be awarded to growers, helping companies plan and shielding the sector from rising production costs. The delay in finalizing the agreement has slowed down the production of tomato paste, pulps, purees, and sauces causing some tightness in supplies and worry for end-users across Europe.