Monday, December 06, 2004


The World Trade Organization (WTO) authorized the EU to impose $150 million in trade sanctions against the US, because of the Byrd Amendment. This law sends anti-dumping duties directly to the US industry, and thus offers great incentive for companies to file anti-dumping suits. To the benefit of the import community, it is expected that the Byrd Amendment will soon be amended.

The dollar continues to slide to record lows against the euro, and the current exchange of 1.34 is pushing up pricing on many imported items. Virtually every business article over the past few weeks predicts a weaker dollar. Keep in mind that since the market is already priced for the worst - when everyone says it can only go one way - that’s often when it doesn't. In the Far East, tremendous international pressure is building for China to allow its currency to appreciate against the dollar (it’s currently fixed). If that happens, other Asian currency will certainly follow suit.

After pricing went up too far, too fast, weaker demand and improved fishing are pushing down tuna pricing. Skipjack is reportedly being traded at about $850/mton, and some packers are bidding lower. However, as we approach the holiday season, pricing often spikes upward temporarily as the fisherman tie up their boats for several weeks, and plants perform their annual maintenance. Yellowfin is following along with skipjack. Tongol is steady. Albacore, after falling several dollars over the past few months, might start heading up again as raw material prices are increasing (currently $2450-2500/mton)
The federal Centers for Disease Control and Prevention (CDC) published a new study confirming that mercury levels from fish consumption for women and young children in the U.S. are well below any level of concern.

A larger expected April new pack overseas could bring some price pressure to the pineapple market. Unfortunately, the possibility of an El Nino related draught still hangs overhead.

Both Spanish and Chinese packers are getting higher prices in the market as compared to last year - required they say to cover increased costs for overhead, cans and freight. In the case of Spanish, the further increase in the value of the euro makes sales to the U.S. almost impossible. Chinese packers in Zhejiang, the largest mandarin province, expect 25% less output due to labor and capital shortages. Chinese packers are also very concerned that their currency, the Renminbi, could appreciate 20% if the Chinese government allows some release from the current fixed exchange. Such an action would raise Chinese pricing by an equal percentage. For all of the above reasons, Chinese packers are in no hurry to conclude long-term sales.
It looks like 2004 will end up being a record year for Chinese packers, as every major market increased their buying volume (the US was up 12%).

Overall, a weaker crop in Spain combines with a stronger crop in most other exporting countries. Total quantity should be about equal to last year. Extra virgin pricing in euro should fall soon as new crop comes in, but changing currency could push up dollar pricing. Pure olive oil should show some good euro price declines because of the anticipated large amount of “lampante” that will be available. Recently, the prices for pure and extra virgin have remained close, but for the new crop we should see a wider spread. Pomace, on the other hand, could remain relatively firm. Packers are producing less pomace because they are more efficiently getting the oil from the olive through a second squeezing and refining process called “remolito”. The remaining pomace is being used for energy production. Tunisia will have little pomace this year because of a short crop of only 80,000 tons. It looks like pomace production for the long term will not be as plentiful as in the past. Pomace prices may still decline in January/February, since the cartels pushed it up much too much last year, however the fall might not be as much as desired.

Initial new pack indications are up 15% in euros compared to last year ­ and significantly more in dollar terms. It’s still too early to predict final increase in pricing that might be accepted in the market.

Market remains steady to weak, as new pack approaches.

Several large South American packers are defaulting on their contracts (as they've done every crop since they started packing several years ago). Actual raw material quantities are much less than projected, and packers over-committed. However, as the industry grows, the total quantities being shipped are still much greater than in past years. For Spanish packers, the U.S. duty has been lowered by about 1% on cans/brine and about 3% on marinated. Unfortunately, the losses in the dollar have more than neutralized these savings. Note Peru is always duty-free, per their trade agreement with the U.S.

With Greek and Chinese packers sold out, Argentina is luckily expecting an excellent Southern Hemisphere crop, up 10% from last year and 44% from two years ago. Given the Greek crop failure of 2003, Argentinean farmers were able to force an increase in raw material cost from $150/mton to $285/mton. This year, they’re negotiating to force raw material costs down to the $160-200/mton range.

Supply shortages in Brazil are pushing up pricing.