Monday, April 04, 2005


DATE: April 4, 2005

The European Union head office said last Thursday it will seek to impose additional sanctions of up to 15 percent on U.S. products to punish Washington for failing to repeal an antidumping duty law (the Byrd Amendment) ruled illegal by the World Trade Organization.

Separately, The World Trade Organization agreed last Monday to rule on the legality of the European Union's customs regulations, which the United States says are a barrier to international trade, trade officials said. Washington claims the EU is failing to respect global trade rules set by the WTO because it has a complex set of customs regulations that vary from country to country in the 25-nation bloc, which amounts to a trade barrier because it makes it harder for foreign companies to enter the European market.

As reported separately since the last market flash, the dispute that threatened duties for March 1 by the US against Europe was settled at the very last moment.

Ocean Freight rates are headed up, primarily due to rising demand and fuel costs. Lines shipping out of Greece just announced increases of $400-500/container effective April 1.

One of President Bush’s closest friends, Representative Rob Portman, has been named to be the next United States Trade Representative.

Imports continue to grow: At $159.1 billion, January’s imports were the largest ever recorded.

Relative stability for the dollar over the past month, with a touch of firmness when the Fed raised interest rates a couple of weeks ago. Current dollar/euro exchange: 1.29.

The US government announced the 2005 quota results – as expected, the quota filled in less than one minute (47 seconds to be exact). As has been the case for most of the past five years, the single-duty quota was basically a non-event, with no benefit gained by any party.

Tuna pricing continues to climb, with skipjack now firmly over $1000/mton. Fishermen and fish traders are not expecting any improvement in the fish catch. Yellowfin has been firming with skipjack (even more so in Thailand). Tongol is just now starting to climb also. Albacore continues its ascent that started last month. While the EU finalizes tuna duty reduction as part of a tsunami relief effort, the US is analyzing such measures in combination with the upcoming Thai Free Trade Agreement. Furthermore, the industry continues to push for duty relief on Thai pouch tuna, as per the duty free treatment afforded to Ecuador.

With Thailand experiencing the worst drought in decades, packers are not optimistic about the prospects for pineapple and tropical fruit. Raw material pricing continues to climb to over THB4.00/kilo. Furthermore, it can be expected that the spread between fancy and standard product will widen as plants take in more lower quality raw material. In tropical fruit, a shortage of papaya is now joined by a shortage in guava.

A bad situation getting much worse. The past month has seen an additional 25-30% cost increase across the board – from pomace to extra virgin, for all the same reasons that have been pushing up oil pricing for the past few months.

Italian packers and farmers have finalized their contracts for the 2005 pack season, with contracts signed for 5.2 million metric tons, about 20% less than last year’s 6.5 million mtons, but similar to the 5.3 million mtons of 2003. With carryover remaining from 2004, no shortages are expected.

China continues to make inroads in becoming a significant player in the global peach market. From only 22,000 cartons exported to the US in 1999, shipments shot up to 238,000 cases in 2003 and then 437,000 cases in 2004. In the Southern Hemisphere, the crop is about complete, but given the state of the euro/dollar currency relationship, Argentinean packers are not optimistic about shipping to the US. Most of their production has gone to retail size cans for the European market.

The farmers’ threat to hold back raw material and push up pricing has proven true. After falling considerably at the start of the new crop this year, kalamata prices are heading north, but are still substantially lower than they were for the past two years.

Big shortage continues on peppers, especially higher quality peppers from Spain. The frost has only made matters worse.

While packers are concerned over the frost, and there still remains the possibility for significant problems with the new crop, so far pricing has not firmed to the levels expected from all the talk. While up from a couple of months ago, pricing is still lower than last year at this time.

After several years of extraordinary growth, Thai sweet kernel corn plants predict drought might cut this season’s pack by as much as 40%. In the meantime, a large tuna investor is making a bid to acquire the largest Thai sweet corn packer.

India continues to expand production, and plan for increased world market share. With the US still the main market for Indian exporters, the large plants are trying to lift mushroom pricing that has fallen steadily over the past year, while at the same time they’re trying not to lose any ground to China. With a large Chinese plant now facing prohibitive anti-dumping duties, India is having some success.