Academic journal article Agricultural Economics Review

Development and Trade Competitiveness of the Italian Tomato Sector

Academic journal article Agricultural Economics Review

Development and Trade Competitiveness of the Italian Tomato Sector

Article excerpt

1. Introduction

After potato, tomato is the second most important herbaceous crop in the world. Though grown worldwide regardless of end use, its chief areas of cultivation are in Asia, the Americas and the Mediterranean basin (Dorais et al., 2008). In the two-year period 2010-2011 world production of tomato for direct consumption and for processing amounted to almost 156 million tons, showing a growth of about 5.3% against the previous two-year period, perfectly in line with the average growth recorded over the whole decade. Since the early 1990s world production has doubled (FAOSTAT, 2011). Tomato products constitute one of the main made-in-Italy agrifood businesses and have an undeniable symbolic value. The tomato processing sector and its products have historically played a strategic role in the context of Italy's fruit and vegetable industry due both to the demand for raw materials from the agricultural sector and to the employment generated by the tomato processing industry (Bazzani and Canavari, 2013). Moreover, the high propensity to export the various end products has long reduced the structural deficit of Italy's agri-food balance of trade (Lombardi and Verneau, 2010). In recent years, the whole tomato processing supply chain in Italy has experienced profound re- structuring triggered by the reform of the Common Market Organisation (CMO), accompanied by increasingly fierce price competition resulting from several emerging countries competing with Italy on foreign markets (Lombardi et al., 2013). Thanks to an aggressive trade policy focussing on low production costs and appreciable acceleration in production, China and India have become established as the world's chief tomato producers (respectively 30.5% and 9.5%), overtaking the USA. The trend shown by the two Asian countries signals a strong export flow towards Western Europe in the field of semi-finished products (Sodano, 2005). Yet, as will be shown below, the current emerging market share does not give cause for concern except as regards the dynamism of international trade and the ability of countries that are traditional producers and exporters to anticipate market dynamics.

This paper describes and analyses the main changes under way in the international trade in the tomato and its derivatives and the dynamics of the competitiveness of Italian exports. It focuses chiefly on market dynamics in the European Union, insofar as it is the chosen area of trade for Italian production, and investigates whether Italy has been able to react to the radical changes affecting the sector and the market for tomato and its derivatives. Specifically, it assesses Italy's performance in terms of maintaining its traditionally dominant position within international trade dynamics. Further, Italian export flows are studied in order to ascertain whether they are consistent with changes operating in the international demand structure.

Comparison of Italian trade dynamics with those of other European countries affords insights into the current scenario in the market for fresh and processed tomatoes. For this purpose the changes in Italian trading performance are highlighted by using detailed indexes of market shares for the main categories of processed tomato with a view to evaluating the dynamics of the main retail markets for Italian products and their degree of penetration on the chief European markets.

The sources used in this study were the FAO and Comext-Eurostat databases. Analysis of trade flows was carried out by considering five aggregated product categories, starting with those that are least processed (fresh and refrigerated tomatoes) and ending up with those of higher added value (Ketchup and other sauces), thereby exhausting the whole range of "red derivatives".

Our results appear to show that in Italy there has been both geographical and product diversification. However, Italy's trade performance shows shortcomings in anticipating, or keeping pace with, the general market situation, failing to intercept the demand from specific markets. …

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