Tinned tomatoes are insanely cheap. I routinely purchase a 400 gram tin of store brand tomatoes for 60 cents, even though they're imported from Italy. How is that possible? A recent government investigation provides some clues -- and suggests prices might be about to go up.
The Anti-Dumping Commission has been investigating whether or not tinned tomatoes imported from Italy are being "dumped" on the market -- that is, been sold for less than their actual value. That can happen if a national government decides to subsidise farmers directly, meaning they can sell goods for less than cost. The Commission has concluded that this has happened with some tinned tomato imports.
The investigation was launched at the request of SPC Ardmona, which is the dominant local producer of tinned tomatoes. SPC Ardmona has been in the headlines recently over its requests for government assistance to continue operating. (The Federal Government seems disinclined to assist, though it has emerged that many of its claims about excessive worker entitlements weren't actually correct.)
Whatever happens there, the Commission has recommended that tariffs of up to 26.35 per cent be applied to over 100 imported brands in order to restore a competitive market. Those account for more than half of all imported tomatoes. If that happens, then prices for those goods is likely to rise. A final decision won't be made until the end of the month. (Additional tariffs have been applied in the past, but were removed in 2007.)
While it's filled with lots of tedious economic jargon and tortured syntax and some of the juicy detail hasn't been made public, the report does provide a good overview of how the tomato market works. It was based on interviews and requests for information to major exporters and supermarkets, though not everyone co-operated (ALDI was one notable holdout).
In 2013, the total market for tinned tomatoes (include whole tomatoes, diced tomatoes and ones with fancy flavourings added) was 54,000 tonnes. Remarkably, despite the fact that there are more varieties than ever and the prices are lower than they used to be, that was down 8.9 per cent from 2010. No wonder we've seen marketing stunts such as bringing Florence Henderson to Australia to talk up tinned tomatoes:
While you can pick up tinned tomatoes in delis and fruit stores, 82 per cent of sales are through the major supermarket chains: Woolworths, Coles, ALDI and IGA. Those stores sell both their own supermarket brand "private labels"- often in a bargain basement version (Home Brand or Savings) and a more expensive alternative (Select or Coles)-- as well as various imported brands and the Australian SPC Ardmona products.
The super-cheap dumped options have had an effect on prices across the board:
A comparison of weighted average selling prices over the investigation period shows that Italian prepared or preserved tomato retail prices for chopped, diced and whole peeled tomatoes were between 16% and 55% below SPCA's prices. For value added products, the Italian retail prices were below SPCA's prices by approximately 30% to 35%.
You can also see that in this chart, showing the typical prices for various categories across 2013, with the Australian branded product the most expensive:
SPC Ardmona has picked up contracts to produce some of the store-brand versions, but usually for the higher-priced variants. Those contracts typically run for a year, so we might not see an immediate price rise on the imported options even if the tariffs are approved. However, it seems all too likely that we'll see prices go up before the end of 2014:
The Commission considers that purchases of Italian imports at dumped prices have allowed retailers to maintain their reduced shelf prices for generic private label products and provide for a margin of undercutting that is greater than what it otherwise would have been in the absence of dumping.
In other words, if the tariffs eliminate the price benefit of dumping, we can expect the price of every tinned tomato option to go up. Given how cheap the entry-level options are, a rise in price won't be the end of the world for most budgets. However, if you're inclined to stock up, now would be the time.
We're also likely to see a reduction in choice. SPC Ardmona has declined to pitch for some supermarket tenders because it says it's not possible to do so profitably, and the report notes that one Italian exporter has also turned down contracts because the suggested price was less than the cost of production.
One other useful lesson? The report confirms that there's a definite quality difference if you buy diced tomatoes rather than whole ones. Tomatoes are sorted at the processing line; the rattier looking ones are converted to juice, which is used as filler in the diced products.
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