Monday, October 17, 2005


DATE: Oct 17, 2005

The USA and Thailand successfully completed their fifth round of free trade agreement (FTA) negotiations, with the next round scheduled for November. Both countries expect the negotiations to be completed by early 2006. Tuna and shrimp are still two of the most important Thai exports on the list.

Rising petroleum costs continue to play havoc for packers throughout the world. As an example, the price of PET resin used to make PET plastic jars has reportedly gone up by 90% over the past few months.

No major changes.

The recent weakness in light meat tuna appears to be slowing. As expected last month, raw material pricing for skipjack reached a low point of about $840/mton, after peaking at just over $1,000/mton two months ago. Now, a slowdown in fishing has steadied the decline, with talk that the market could firm again. Yellowfin has hesitantly tracked skipjack through the changes. Tongol, remains tight, but better than the drastic shortage of a few months ago. Albacore catch, on the other hand, continues to get worse, continuing a trend experienced so far all year.

As Northern Hemisphere packers are completing their packs, Southern Hemisphere packers are analyzing prospects. In the north, the California League of Food Processors reported total deliveries at 480,885 tons, down 10% from last season, and reportedly of lower than average quality. According to “Peach Fuzz,” it’s the second lowest yield in 20 years. Accurate figures are not available for China, but expectations were that the crop was slightly down on last year. Spain processed 164,000 mtons, up 7% from 2004, while Greece processed 270,000 mtons, about the same as in 2004, but quality is reported to be exceptionally good. Most importantly, last year’s Greek harvest came after the disastrous crop failure of 2003 and a totally empty pipeline. This year, with the second consecutive normal crop, most of the large Greek packers have once again turned their attention to exports. In the Southern Hemisphere, the two largest South African packers have just merged, but a very strong currency will make exports to the US difficult to achieve. In Chile and Argentina, prospects look brighter. While initial expectations are for decent crops, their first priority is exports to other Southern Hemisphere countries and Mexico, where they have a duty advantage. Once those outlets are full, they’ll turn their attention to the US. For now, Greece is proving again to be a formidable source.

Trying to predict the size of the new olive crop in Spain is still anyone’s guess. Because of this year’s very dry weather, the crop will most likely be worse than last years, but speculation at the Anuga foodshow on how much worse varied widely. Estimates of expected price increases ranged from 3% to 20%, with some packers predicting shortages on queens, others on ripes – while others saying there would be no shortages at all. The situation should be much clearer in a few weeks time.

The olive oil market has become a speculators dream over the past few weeks, as pricing skyrockets without proportional cause. Prices have recently climbed 40% and more as the large coops withdrew from selling raw material. Talk at the Anuga foodshow was that last year’s pack was much lower than reported. Because the EU olive oil subsidy ends this season, there was tremendous incentive last year for the farmers to report inflated figures. The result might be that the expected substantial carryover is not really there. [ is a very interesting Spanish website used by the Spanish olive farmers/refiners to track the pricing they can achieve for their raw material. The site is in Spanish (sorry). Once you get to the site, click on: “graficos evolucion,” then click on: “annual.” The red dots on the resulting graph show the pricing of base olive oil raw material for the past year. As you can see, it has skyrocketed – almost doubling in a short time]. As with olives, the market should become much clearer over the next few weeks.

The Chinese packers, after meeting the week before Anuga, established their “proposed minimum export prices,” at levels about 20% higher than last year. The cause is a combination of events: recent devastating typhoons, higher costs for energy, cans, cartons, and freight, along with the recent appreciation of the Chinese currency. Supply and demand will dictate the final prices, and while prices will likely be up from last season, it will probably not rise nearly as much as the “minimum” prices dictate.

While expectations this spring were for relief to come with the winter crop, raw material has remained persistently firm and even climbing recently as the winter crop began. Several new Far East packers are competing for fruit, resulting in raw material increasing from 4.5 to over 7 baht/kilo, the highest level in 15 years. Combined with increases in ocean freight, energy, etc, pineapple is expected to remain firm going into 2006.

With the pack complete in Italy, packers have settled on final prices that range, depending on the packer, anywhere from a few percent below last year to a few percent above. Overall, the market should settle to a price level slightly below that of last year.

Florida’s production of 12.8 million boxes of citrus is the lowest the state has seen since 1938. After the hurricanes of 2004/5, Florida lost 38% of its oranges and 68% of its grapefruit. In addition, canker forced the removal of 2.1 million trees, or twice the total number of grapefruit trees in Texas. Trees destroyed/replanted after being lost to canker won’t bear fruit for at least 5 years. While Southern Hemisphere producers are sold out until new crop (several months away), overseas Northern Hemisphere producers, such as Israel, had reasonable crops – but strong world demand has forced up the pricing.

Production of domestic cherries are reported down anywhere from 40-60%. Product with stems is especially tight, with production down 50-70%. Exacerbating the problem are the past weather conditions in the Gulf and the price increase on plastic containers due to oil production short falls. This situation could continue into 2006, and is not expected to improve with the next harvest in June. Price of raw material is fluctuating on a weekly basis and product availability is an issue. Imported product is an option, but is still priced higher than domestic.

The size of the current US crop is still uncertain, with estimates ranging from 230,000 to 270,000 tons.