Thursday, December 22, 2005


DATE: Dec 22, 2005

Finally, both houses of Congress have passed measures to repeal the Byrd Amendment. This is a very significant development that should lesson the use of anti-dumping duties as an anti-trade protectionist measure. The President is firmly in favor of repealing the Byrd Amendment (in fact the Vice President cast the deciding vote in the 50-50 Senate tie), so passage is virtually assured. The Byrd Amendment directs collected anti-dumping duties back to the U.S. petitioners and their lawyers, thus creating incentive and funding for anti-dumping actions. This practice has been ruled illegal by the World Trade Organization several times over the past few years, but the U.S. Senate has always ignored the Court’s ruling. Now, without the Byrd Amendment, the financial incentive is lost for the lawyers and we should see a dramatic decline in future anti-dumping initiatives. In a compromise measure, the Byrd Amendment duty payouts don’t actually stop until late in 2007, however, most importantly, for new cases the deterrent is now in place.

After reaching very high levels last month, the dollar has recently lost several percent in value against the euro.

It looks like skipjack raw material may have bottomed out over the past few weeks at $730-760. Packers are already withdrawing their lower offers and predicting $100+ higher levels by Jan/Feb 2006. However, with the usual Christmas fishing slowdown in place, this is a bad time to predict market moves. The bidder’s market however does seem to be over for now. Yellowfin remains steady in its spread to skipjack. Tongol remains flat overall, while albacore continues to firm, albeit at a slower rate of increase than over the past two months.

Packers are already complaining about big problems trying to fill new pack contracts. While initially it was hoped that the poor start to the season would improve, it has actually worsened. The so called “official price,” which used to have the effect of setting a beginning price for negotiation, is now a thing of the past. Packers that are offering at all are starting off well above the official price. The cause is cold weather and typhoons that cut 30% of the mandarin crop in Zhejiang province, the countries most important province for mandarins. Hunan, the fourth largest mandarin province has lost 20% of it’s crop, while the rest of the country, including the important Fujian province, is expected to be about even with last year. Overall, the raw material situation, combined with general firmness in sugar, energy and currency, are creating the worst mandarin climate since more than 10 years ago. Spain will not bring relief as their crop is even worse than China’s. Spanish growers are expecting 3.8 million kilos, as compared to 9 million in a normal year, and as a result, they’re priced out of the market.

Most Spanish packers are still trying to delay offering new crop until the last possible minute. With pricing up significantly this year, packers are afraid to be the first to offer at the higher levels – especially on ripe where the increases are most dramatic.

While the market overseas has steadied at historically high levels, adulterated product being sold in the U.S. market at 30% below the overseas prices is causing much attention. The problem has lately become so rampant that the government is increasing its testing. One large producer and a large importer have already been forced to recall adulterated oil, as reported last month in the Food Institute trade magazine. As pricing has been firm for over 6 months already, be careful of cheap olive oil offers – they’re most likely not olive oil at all, but rather mislabeled, ridiculously expensive seed oils.

Situation is becoming very difficult as South American producers have run significantly short of expected quantities and are now defaulting on contracts. Spain unfortunately has not had a good winter crop and is not in a good position to make up the shortfall.

The much needed winter rains are helping Thailand’s current pineapple crop, and good tonnage now is helping to make up for the weak 2005 summer crop. Packers are hoping raw material continues to come in strong through the end of December, but historically fruit tonnage begins to drop by mid/end December. What’s really needed now is a good summer crop in 2006 to help restore a more normal pineapple market.

Latest figures show total world processed tomato production for 2005 down 17.4%, with the two largest producers, the U.S. and Italy down 21.6% and 20.3% respectively.

This year’s crop remains one of the worst on record. Pricing is firm. While imports are not yet a material source of supply, the new season should bring an increase in imported tonnage.

The new season has just begun. Due to early growing period draughts, fruit is expected to be small in size and about 40% below last year’s tonnage. Raw material cost is up about 10% from last year, but final cost for canning is still unknown as most of the fruit is currently supplying the fresh market.