Articles
PERFORMANCE IN THE NORTH AMERICAN TOMATO PROCESSING INDUSTRY: IMPLICATIONS FOR FUTURE TRADE AND DEVELOPMENT
Article number
340_24
Pages
187 – 196
Language
Abstract
An activity analysis model was developed to assess market performance and interregional competition in the United States processing tomato industry.
The model objective was to maximize allocative efficiency in the U.S. markets for four consumer tomato products (canned tomatoes, juice, catsup, and sauces), under alternative tomato paste supply and consumer product demand scenarios.
The results suggested that the larger paste manufacturing firms in the industry exert a significant influence on consumer product processor profits and supply competition for tomato paste.
This influence in part explains the existence of highly predictable supply/price/profit cycles in the domestic processing tomato industry, with significant implications for future performance and trade worldwide.
Expanded domestic demand for consumer tomato products was found to generate increased profits industry-wide and economic pressure for processing capacity expansion.
Such conditions also resulted in increased competition among domestic and foreign suppliers of tomato paste, and created pressure for vertical coordination between paste and consumer product suppliers.
Decreased tomato paste prices were found to generate higher profits only for consumer product processors throughout the industry, and to discourage supply competition in tomato paste.
Assuming that domestic demand for consumer products continues to expand at its current rate, these findings conclude that future industry performance and supply competition will be dictated by net effective paste prices below $990 per metric ton.
Pricing strategies at these levels generate optimum industry profits and performance for both direct manufacturers of consumer tomato products, as well as, remanufacturers of paste into consumer products.
Competition among both domestic and foreign suppliers of tomato paste in the U.S. marketplace will tend to increase, and result in greater reliance upon long-term relationships between paste sellers and buyers.
The model objective was to maximize allocative efficiency in the U.S. markets for four consumer tomato products (canned tomatoes, juice, catsup, and sauces), under alternative tomato paste supply and consumer product demand scenarios.
The results suggested that the larger paste manufacturing firms in the industry exert a significant influence on consumer product processor profits and supply competition for tomato paste.
This influence in part explains the existence of highly predictable supply/price/profit cycles in the domestic processing tomato industry, with significant implications for future performance and trade worldwide.
Expanded domestic demand for consumer tomato products was found to generate increased profits industry-wide and economic pressure for processing capacity expansion.
Such conditions also resulted in increased competition among domestic and foreign suppliers of tomato paste, and created pressure for vertical coordination between paste and consumer product suppliers.
Decreased tomato paste prices were found to generate higher profits only for consumer product processors throughout the industry, and to discourage supply competition in tomato paste.
Assuming that domestic demand for consumer products continues to expand at its current rate, these findings conclude that future industry performance and supply competition will be dictated by net effective paste prices below $990 per metric ton.
Pricing strategies at these levels generate optimum industry profits and performance for both direct manufacturers of consumer tomato products, as well as, remanufacturers of paste into consumer products.
Competition among both domestic and foreign suppliers of tomato paste in the U.S. marketplace will tend to increase, and result in greater reliance upon long-term relationships between paste sellers and buyers.
Authors
Filipe A. Ravara, Glenn H. Sullivan
Keywords
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