Monday, June 26, 2006


DATE: June 26, 2006

A recent decision by the Department of Commerce in an anti-dumping (AD) case involving Chinese candles could mean trouble for the food industry. After the department previously ruled that certain candles were not subject to AD duty, they recently changed their mind and are charging importers at the higher rate for goods brought in RETROACTIVE to February 2005. This willingness to retroactively expand the scope of AD assessments could have significant implications for a wide range of imported products.

The Andean Trade Preference Act (ATPA) is currently set to expire on January 1, 2007 (the Generalized System of Preferences is scheduled to expire at the same time). The ATPA provides for duty-free, or dramatically reduced duties, on a wide array of U.S. imports from Bolivia, Colombia, Ecuador and Peru. At this time, prospects for renewal or extension of the ATPA are questionable. If the program indeed terminates, it is likely that the U.S. duty rates will revert to “normal trade relations” (NTR) rates.

The United States and Vietnam signed a bilateral trade pact that removes one of the last barriers to that country’s accession to the World Trade Organization (WTO). Because U.S. imports from Vietnam already receive “normal trade relations” duty status under a mechanism that must be renewed annually, this act will not have any immediate impact on U.S. import duties for most products. However, conclusion of a trade agreement with the United States paves the way for Vietnam to receive NTR duty status on a permanent basis, without the necessity for annual renewal, and also completes a process necessary for that country to join the WTO. These actions could open the door down the line for duty reductions.

After dropping sharply for two months, the dollar has stabilized against the euro.

All varieties are relatively firm at this moment. This often is the case after the worldwide tuna conference (which occurred in June) when the overseas fisherman have had their chance to commiserate together. Skipjack is reported at $1000/mton, but finished goods selling prices overseas seem to based more on expectations of $1100+ fish. Yellowfin is now over $1675 and fish traders are predicting $2000. Tongol is steady. Albacore is steady at relatively strong levels.

Unfortunately the weak dollar and the overall tight world market have Greek packers vigorously pushing up their new pack indications. It’s still a bit too early to gauge opening levels in this year’s difficult world market. China is now expecting growth of 10% in their peach exports this year, though total tonnage is much smaller than that of Greece, and Chinese packers have still not announced new crop pricing. Southern hemisphere producers such as Chile, Argentina, Australia and South Africa do not have high hopes for the coming season (winter crop). The best opportunities to make up for the shortages expected in California still lay with Greece and China.

Production is good, and pricing in Thai baht has fallen. The strong Thai baht however has kept U.S. pricing relatively steady, with some opportunities for cheaper pricing on lower grades. Current market is probably at the low point for this season.

With China now defaulting and out of the picture, other sources continue to push up price levels in a seller’s market. India is currently the principal supplier of any significant volume to the U.S. market.

Tomato paste pricing is firm. California’s harvest is estimated at 10-10.8 million short tons, below initial estimates. China on the other hand is expecting an average crop of about 4 million metric tons (4.4 short tons). Chilean production estimates show 2006 output smaller than last year’s.

Market remains weak, especially for olive oil, as packers prepare for a large 2007 crop with the market coming off record high pricing reached earlier this year. The “cartel” mentality of the large Spanish coops is now working against them as reduced demand pushes down pricing. Further price weakening is probable.

Spanish raw material is especially tight as the new fishing season has started off very poorly. The President of the Fisherman’s Association in Bayonne and St Jean De Luz labeled the new season in Spain and France “disastrous.” Spanish and French exports of canned anchovies have been relatively flat over the past three years, while the much larger export volume from Morocco have fallen about 25%.

A good crop in Peru is offsetting a terrible crop in China, but since Chinese production is generally much larger, overall world production is down.

Crop is off to a good start in Spain. Pricing in euro should be roughly the same as last year, although if our currency stays weak, dollar pricing could be a bit higher. In Turkey, pricing in dollars is expected to remain the same as last season.

Uncertainty on the season has Chinese packers delaying new crop offers. While the season has officially started, continuous rain has left raw material costing 50% more than at the beginning of the last season.