Monday, November 21, 2005


DATE: Nov 21, 2005

The House of Representatives successfully passed a repeal of the Byrd Amendment. The fight now moves to the Senate, where the battle will be tougher. [The Byrd Amendment directs collected anti-dumping duties back to the U.S. petitioners and their lawyers, thus creating incentive and funding for anti-dumpiing actions. This practice has been ruled illegal by the World Trade Organization].

The dollar recently hit a two year high against the euro, topping out at about 1.16 dollars per euro.

[Note a graph showing skipjack raw material costs from 1987-2005 can be found directly above this post]. Skipjack raw material cost has been fairly steady since dipping recently down to $840/mton. Given higher fuel costs, the generally accepted “breakeven” market price for fishermen is now $800, up from $700 before the fuel run-up. As such, with demand weak, tuna had a ways to fall when it was recently trading at over $1000. Now in the low 800’s, there’s not nearly as much downside. Yellowfin is generally tracking skipjack. Tongol has remained flat, not yet trading down given the current situation of strong demand with weak/flat supply. Albacore on the other hand remains on fire – with pricing up again several dollars over the past month, and packers allocating containers. Separately, the Indian government is making an effort to build up its small tuna catching fleet, offering incentives for fishermen to convert shrimp trawlers to tuna long-liners.

New pack mandarins will most certainly go up in price, the full extent of which is not yet established. Many factors are contributing to this increase, including: poor weather and typhoons, raw material output is down 35% in Zhejiang and 20% in Hunan and Hubei provinces; Raw material cost is up about 40% to RMB1.5/k in Zhejiang and RMB1.0/k in Hunan and Hubei; Sugar, cans and transportation costs are up, and the Chinese currency was appreciated by 2.4% (appreciation makes imports more expensive in dollar terms).

Latest projections for new crop: Manzanillas – Crop size is down 40% from last year and draught has increased the oil content of the olives. Given the high price of oil, farmers are diverting the limited crop to the oil market. Sizing is small with an average crop size of 300/320 compared to 280/300 last season. Queens – good crop, tonnage is almost the same as last year. Hojiblancas (most commonly used for ripe) – Tonnage is down, but the full extent is not yet established. More importantly, Hoji is the variety most used for olive oil, and the recent very high prices of oil have pushed up the Hoji field price paid to farmers by 25-30% compared to last season.

The market remains astronomically high, with pricing on some varieties already 40% higher than previously established record highs. As speculative fever pushed costs to such heights, pricing has recently started to level off. However, poor tonnage in Spain, the main source of raw material, may prevent pricing from falling much, and could even push pricing up further.

Checking the Jan-Sept import statistics for 2005 compared to 2004, Thailand is the main supplier to the U.S. with 173 million pounds, the Philippines is second with 147mm lbs, and Indonesia is third with a much smaller 82mm lbs. Import tonnage from all three regions is up, with Thailand up the greatest percentage, at 18.5%. In the U.S., reduced volume led Maui Pineapple to announce a 3rd quarter operating loss of $2.5 million in their pineapple division (as compared to a significant profit in their property development division).

Once again, the U.S. has returned to being a net importer of peaches this year, as currencies and overseas stock situation return more to normal. Interesting trends can be seen looking at the YTD imports for the past three years. For the 2002/2003 season, imports from Greece were 7,100 mtons which fell to 1,900 mtons for 2003/2004 (with the crop failure), only to recover in 2004/2005 to 6,600 mtons, with higher quantities expected for this 2005/2006 season. From China, a new export industry has developed over the past few years, capitalizing on the Greek troubles two years ago. Imports grew from almost nothing to 1,100 mton in 2002/2003, then 3,000 mtons in 2003/2004 and finally 5,400 mtons in 2004/2005. Thailand has interestingly joined the list of top three exporters to the U.S., but the tonnage is made up entirely of plastic fruit cups repacked in Thailand from peaches imported from third countries (mainly China and Greece).

It’s expected that imports will continue to play an increasingly important role in fulfilling U.S. demand. The Florida Department of Citrus predicted that the Florida grapefruit industry will never recover to the production levels it enjoyed prior to the 2004 hurricanes. The latest storm, Wilma, will account for a loss of $180 million of Florida’s citrus crop, including nearly half the state’s grapefruit crop.

Raisin imports from Chile increased by 35% this year to 8,710 mtons, up from 6,470 mtons the prior year.

Latest estimates for the 2005 Italian tomato crop point to a 30% production drop to around 4.5-5.0 million mtons. Pricing however is stable given the full market resulting from a very large crop last season and the gains made by the dollar against the euro this year.