Monday, January 03, 2005


DATE: Jan 3, 2005

While taking a catastrophic human toll, the earthquake and giant tsunami that caused devastation in the Far East does not at this moment appear to have had any significant impact on the tuna or canned fruit/vegetable markets. We’ve experienced only some minor shipping delays on our cashew nuts from certain Indian ports. Generally, shipping companies in the Far East have gone out of the way to announce that its business as usual, with no boat/port damage or scheduling delays caused by this disaster.

Dollar dipped again to new record lows against the euro over the past few weeks, even after U.S. interest rates were raised.

As stated above, the tsunami does not appear to have caused damage in the tuna market. While some smaller packers predict that Indian Ocean fish catch will be affected, market prices have not risen over the past week. The market however is slow - as usual between Christmas and Chinese New Year. The true impact will only be known over the next few weeks as activity returns to normal. Many plants are currently performing annual maintenance. All species of raw material are relatively stable at this moment. Skipjack is trading abound $750/mton, and will finish 2004 almost 40% less costly than it was at it’s recent peak in early September.

Thailand finished 2004 up in shipments to the U.S., while both Indonesia and Philippines finished down. Overall Thai imports were about 40% higher than they were just three years ago. South Africa virtually fell off the charts due to high ocean freight and a very strong local currency vs the dollar (even stronger than the euro).

Directly quoted from one of the leading Italian olive oil exporters: “Last year was a good one for Spain, the major producer, and only a fair one for several of the countries outside the common market. For Italy and Greece, last year was not good at all. This left Spain the ability to control the market to a large extent with their large production and the buyers with little choice. We thought a few months ago that this would change this year, but it has not and the situation is even worse this year. Spain has a much smaller crop this year (approx. 900,000 metric tons) and the crop in Tunisia and Morocco is very small leaving them in control again. We expect some fair production in Italy and Greece, but the costs there are very high. Turkey has oil and so does Syria, but the buyers from Italy and Spain are they’re buying already, propping up the prices and running after them to get the oil shipped. The end result is that Spain will have a lot of control over the market again, however, this year there will differences. One of the differences this year is that the major buyers do not have much inventory left from the old crop and they are looking to buy as soon as possible. It is well known that the biggest buyers are anxious to buy, and the sellers (large co-ops in Spain) have enough money to sit and wait for the market to increase with the high demand. They are in a great position at this time. The sellers in the producing countries outside of the common market like Syria, Turkey, Tunisia, Egypt are getting the signs from the buyers that they are anxious to buy and get shipment, so they are testing the markets and increasing prices every day. This is a real tough situation.”

Latest forecasts have new crop raw material costs increasing (based in euros) by about 13% for queens (larger green olives typically sized 80-160), 10% for manzanillas (smaller green olives typically sized 240-400), and 8% for hojis (typically used for ripe production). The fall in the dollar vs the euro will further increase olive pricing over the changes in raw material costs.

As new pack begins, market continues steady to weak.

Peach processing in Argentina just began last week, slightly ahead of schedule. Packers are confident that unless weather turns unfavorable, they will easily reach their production targets. With Greece and China sold out, the market can use a good Argentinean crop. Interestingly, Thailand has taken the lead as the largest exporter of peaches to the U.S., even though they don’t grow any raw material of their own. The peaches are coming to the U.S. packed in small plastic cups, while the raw material used by the Thai’s is coming from China, Greece and ironically, even the U.S. itself.

A terrible U.S. domestic crop leaves world supply short about 140,000 mtons. Mexico is shipping to the U.S., but also from a poor crop. Chile is just starting its Southern Hemisphere crop and the largest plant there (originally owned by ConAgra; currently controlled by Rema) expects to increase shipments to the U.S. this year.

In early December, Senecca Foods filed with the SEC their intention to close two U.S. vegetable plants. Thailand expects to continue increasing exports to the U.S.

After hurricanes ripped through Florida this year, both Israeli and Turkish grapefruit prices have shot up to their highest price levels in more than a decade (after dipping to historic lows last year). The USDA forecasts Turkish production at 110,000 mtons, 19% below last year. In Israel, raw material availability is good (USDA predicts up 2%), but competition between packers has drastically pushed up raw material costs.

Brazilian prices for corned beef have been forced up significantly over the past month, as the industry faces some of its highest ever raw material costs.