Monday, February 28, 2005


DATE: Feb 28, 2005

The United States Trade Representative notified the World Trade Organization of its intent to impose retaliatory tariffs on certain European products, in a disagreement over the EU’s new rice import policy. Last year, the EU raised import tariffs on brown rice from the levels it agreed to previously. These duty increases, which could be effective as early as March 1, could affect many items, including Kalamata olives, Marinated artichokes, Safron, and Greek peaches. A complete list of affected items and penalty duty rates is posted below (Feb 1). It is hoped that the dispute will be settled or the deadline extended. Just last week, the EU’s new agricultural commissioner Mariann Fischer Boel announced that a deal had been reached, but the U.S. trade office quickly denied that.

England is currently experiencing its largest ever food recall, due to Worcester sauce contaminated with a banned carcinogen. Several manufacturing firms have already folded as a result. The situation overseas highlights the importance of dealing with large suppliers with the financial wherewithal to withstand recalls.

After firming for the first time in months against the euro, the dollar’s rally fizzled out and the currency lost ground over the past few weeks. On the other side of the world, China's central bank reports that it will maintain a "basically stable" exchange rate for its currency, the yuan, in 2005, even amid foreign pressure to raise its value.

Raw material pricing is shooting up again, reminiscent of the steep increases experienced last year. Catch is very poor, especially in the Western Pacific (the tsunami affected Indian Ocean is reporting normal catches). Packers are reporting $850-900/mton, up from less than $700 six weeks ago. See the posting below (Jan 30) for a graph of skipjack raw material. Yellowfin in Thailand is firming even more drastically than skipjack. Albacore is also following suit: a lack of albacore raw material forced StarKist to shut its American Samoa plant for a week, idling 2,700 workers.
The Ecuadorian trade minister is pushing for duty free status on canned tuna from Ecuador (pouch is already duty free, but still more expensive than from the Far East, even with the duty advantage).

The pineapple crop usually improves as we go into the April summer season, but packers this year are worried that quantities will be less than last year due to a lack of rainfall in Thailand and possible El Nino effects. The rainy season ended early in 2004, and there has been virtually no rainfall since October. This contrasts starkly with 2003, when heavy rains caused flooding in the plantations. To the retail market, we’ve heard that Del Monte has recently withdrawn. Over the past few years, improved crops have not driven down pricing because world demand has steadily increased to absorb the higher production levels. For example, while Thailand shipped to the U.S. 84,000 tons in 2002, they shipped 117,000 tons in 2004. If the 2005 season proves short, this increasing demand could push up pricing.

China continues to dominate the mandarin orange market, at the expense of the Spanish producers. Chinese shipments to the U.S. last year reached 130,000 tons, more than double the 62,000 tons shipped just three years ago. Raw material in China continues on a firm trend, and factories are trying to hold off purchasing at this level in hopes the cost will decline or that they can delay some shipments to the next season.

Same story as last month - still no relief in sight, with pricing continuing to firm.

The Greek industry is up in arms given the recent threat of having their duty increased from 17% to 55%, due to pending rice dispute between the U.S. and the E.U.

Market has already come down quite a bit as new season olives start shipping. Some farmers are starting to withdraw however as they believe speculation is pushing down pricing too much. In the meantime, the new lower prices are bringing relief to a market that’s been overpriced for the past two seasons.

With Florida experiencing its worst crop since the 1930’s, overseas packers are trying to ramp up production to meet the global demand, but overseas canning is still limited by raw material, the supply of which can not be easily increased on short notice. In Florida, in fact, it is expected that it may take many years for the situation to improve, as canker (a bacterial disease that causes premature leaf and fruit drop) has spread and many farmers are choosing not to replace damaged trees.

The recent frost in Spain has caused extensive damage to their sweet pepper crop. Fresh market buyers, who are willing to pay a premium, are snapping up the relatively small quantities of good raw material, leaving little for processing. Turkey continues to ship and expand their market share.

Thailand continues to dramatically increase its exports of canned sweet corn. For 2004, Thailand exported 96,000 tons worldwide, up from 26,000 tons 4 years ago. To the U.S., Thailand exported 5,000 tons last year, up from a negligible 281 tons 4 years ago.

Even with prices down considerably over the past year, production continues to climb, so market could stay a bit longer at these low and attractive (for buyers) prices.