Monday, October 02, 2006


DATE: Oct 2, 2006

Thailand experienced a coup a week ago as the military ousted the Prime Minister while he was in New York planning to speak at the U.N. As far as coups go, this one was quite peaceful, and aside from schools being closed for a day, daily life in Thailand remains much unchanged. At this point, no business interruptions are expected.

GSP, which provides for duty free access in the U.S. for many imported products such as Turkish roasted peppers, was expected to lapse this year with Congress not renewing the provision. Last week however, Rep. Thomas, the chairman of the House Ways and Means Committee introduced a bill extending GSP for two years. The next day, in a last minute development, the GSP bill was pulled off the calendar right before Congress was to recess for the mid-term elections. It is hoped now that GSP will be acted on during the “lame-duck” session that will be conducted after the November elections. While the “lame-duck” session is scheduled to begin on November 13, the outcome of the elections will likely determine how long the session will continue, and how much work will actually get done during that period. The general feeling is that the session will go on longer, and cover more ground, if the Republicans keep control of both the House and Senate.

The Peru Trade Promotion Agreement and the extension of the Andean Trade Preferences Act (ATPA) are in the same predicament as GSP and hopefully Congress will act on one or both before December 31.

Relatively steady Dollar/Euro exchange over the past month. Following Treasury Secretary Henry Paulson’s trip to China, the Chinese government has already sharply stepped up the appreciation of their currency, up about 1% in September (note higher Chinese yuan, lower dollar, equals more expensive imports).

Skipjack relatively steady in the $935-965/mton range. Yellowfin on the other hand, continues to firm. The percentage caught of yellowfin vs skipjack (they're caught together) has been running 6% vs the usual 25%. At the same time, demand is very strong especially from Japan, because of the lack of bluefin tuna. Tongol is also firm at 45 - 47 Baht/kg. Albacore is steady.

A significant reduction in new plantings has led to lower volume estimates for pineapple production in Thailand for next year. Thailand has often in the past fallen subject to the boom/bust mentality that causes farmers to increase plantings when prices are high, which results in lower pricing after the 16 month growing cycle - to the point that low pricing leads the farmers not to replant – thus starting the whole cycle anew. This time however, there are expectations that the lesser plantings may be longstanding as farmers are switching pineapple production to sugarcane for production of ethanol (biofuel). Ethanol demand in Thailand is increasing sharply, and Thailand domestic production currently only covers about 30% of domestic demand. As a result the Thai government will be offering incentives for farmers to grow crops for ethanol, making cheap pineapple a likely target.

The situation in Italy continues to worsen. From a normal crop of 5.5 million mtons, the forecast has been reduced from 5.3 mm to 4.8 mm to 4.2 mm and the latest, 4.0 million mtons. Latest news is continued rain – not good for the crop.

World outlook for Northern Hemisphere peaches appears gloomy. While Greece production is only 5% off from last year, the key problem upsetting the world demand/supply balance is the California harvest, now expected to be down 26% compared to last year. Sharply higher U.S. demand caused by the poor domestic crop, along with a weaker dollar vs the euro as compared to a year ago have European peach pricing up significantly, and the market continuing to firm. Several Greek plants have already announced that they have not been able to pack enough #10’s to fulfill their contracted obligations.

In these final months before the new crop begins, given the tight market all year, shortages have erupted for most “special specs,” while commodity specs remain firm with pricing expected to continue firming until the new crop. China, the world’s major supplier, defaulted early in the year on much of what was contracted, while India and Indonesia tried to make up most of the difference over the balance of the year.

California is forecasting 50,000 short tons this year, down 65% from last year, and the single worst crop in over 24 years. In Spain, the full crop is expected to finish in the 400-445,000 mton range, a bit under last year, but short about 100,000 from the 2004/2005 season. Total Spanish forecasts by variety are: Manzanilla 140.000 tons, Hojiblancas 145,000, Queens 18.000, Carrasqueñas 50.000, Cacereñas 40.000 and others 7.000. The manzanilla crop (usually used for green olives) is almost complete, while the hojiblanca crop (usually used for ripe olives) has just begun. The median manzanilla field price paid to farmers so far this season is 0.81 euro/kilo as compared to 0.66 last season. As a result, green olive prices are expected to increase. For ripe, raw material costs should be steady, while a firm euro will put pricing about flat to slightly up compared to last year. Worldwide, total harvests are estimated to run about 123,000 mtons below last season – a drop of about 14%.

No change in the outlook, which remains good as we head towards the new pack. New crop expected price levels have weakened as a result.

Posturing has begun between the Spaniards and Chinese with regard to the new crop just a few months away. Expect the situation to become a bit clearer in a few weeks at the SIAL world food show in Paris.

Sunkist Growers filed an antidumping duty petition on imports of lemon juice from Mexico and Argentina. Expect pricing to firm. The scope of the investigation will include lemon juice, with or without addition of preservatives, sugar or other sweeteners, regardless of the GPL (grams per liter) of citric acid, level of concentration, brix level, brix/acid ratio, pulp content, clarity, grade, horticulture method (e.g., organic or not), processed form (e.g., frozen or not-from-concentrate), FDA standard of identity, the size of the container in which packed or method of packing or end use.