Tuesday, December 12, 2006

GSP Extended Two Years

In addition to the Peruvian deal, Congress voted to extend GSP for another two years, although with some caveats. We're investigating the caveats right now. They revolve around the handling of "competitive needs limitation (CNL) " waivers.

Monday, December 11, 2006

Duty Free Status extended on Peruvian Artichokes

Good news: Last Friday night into early Saturday at the Senate in Washington, the Peruvian - Andean Trade - Agreement was finally extended for another 6 months. This means Peruvian artichokes will remain duty free for now.

Sunday, December 03, 2006

Dollar Plunges in Value

Saturday, December 02, 2006


DATE: Dec 3, 2006

The GSP (Generalized System of Preferences) duty provision that offers duty free access to many imported items is still scheduled to expire this Dec 31. It is still hoped that GSP will be extended during the lame-duck session set to start this week and a drive is underway by AFI members to contact all members of Congress. Unfortunately, the shift of both chambers from Republican to Democrat control increased the odds that GSP will not be renewed. The Andean Trade Preferences Act (ATPA) is also set to expire and in the same stage of limbo.

In a decision that has implications for all future anti-dumping cases, the U.S. Court of International Trade (CIT) issued a preliminary finding that the capital intensive continuous bonds imposed on importers of shrimp subject to antidumping duties is “contrary to law.” A preliminary injunction has been issued which stops the Customs practice of requiring onerous continuous bond requirements on imports of agricultural and aquacultural products subject to antidumping or countervailing duty orders. The continuous bond requirement was imposed two years ago because millions of dollars in antidumping duties were lost when some “fly-by-night” importers either disappeared or declared bankruptcy by the time the final duty rates were announced by Commerce. A final decision by the CIT in this case is expected sometime in mid or late 2007.

The past month has been devastating for the dollar, with significant weakening against the euro, the British pound and the Japanese yen. [A summary graph of YTD dollar exchange trends is posted at this site]. So far, the year to date change for the dollar/euro has been negative 12.5%. As pointed out on the front business page of the Dec 2 New York Times, U.S. Treasury Secretary Henry Paulson’s official position, like those before him, is of support for a firm dollar. Actions however speak otherwise. A weak dollar currently suits the administration’s goals of making American exports more competitive and spurring an industrial revolution at home.

Last skipjack trades were generally around $920. A month ago, packers sensed weakness in the market and were trying to bid down raw material at $850. The fisherman never accepted, and lately fishing has worsened. The largest packer just predicted $1000 or higher in the near future. This is a dangerous time of the year for the fish to run poorly as good catches are usually needed before the holidays. Once the holidays start (Christmas through Chinese New Year in Feb), fishing often falls off dramatically because the fisherman don’t go out much. If the fish supply is falling off now on Dec 1, we could see a pop in the market for Dec-Feb. Yellowfin is following skipjack. Albacore is relatively steady after falling considerably over the past several months.

As Spanish packers are no longer competitive for the USA market, all attention is focused on China where a picture of the new crop is beginning to emerge. While the mandarin crop itself is excellent, labor shortages are dimming hopes for a good production season. Good weather has brought a large crop with good quality and because Chinese Lunar New Year comes later in 2007, the production season should last an extra 2 weeks. However, since there are 25~30% less seasonal laborers available now as compared to last season, most packers are running only one shift instead of two. While raw material cost is RMB 1.10/kg, as compared to RMB 1.30/kg at the opening last season, other costs are up; empty cans, sugar and bank interest etc. are up about 3~5%. The Chinese RMB has appreciated by 3% already against the dollar (from 8.10 last October to 7.85 presently), and is expected to continue to firm. Most critically, wages for seasonal workers are up 30% compared to last season. Last season’s processing yield was 320 thousand mtons, plus carryover of 30 thousand mtons for a total of 350 thousand mtons (130 thousand m/tons were exported to the USA). This season, total yield is projected at 300 thousand mtons with no carryover.

As is the case on Wall Street, market prices often quickly take into account market expectations. In pineapple, the trade has been speaking for months about impending price increases in 2007 due to bad weather cutting supply, less planting by farmers because of weak raw material pricing, and wholesale conversion of acreage to sugar cane for biofuel production. In addition, it appears several recent developments have pushed the packers to immediately withdraw their offers and reassess this season; (1) Maui Pineapple’s announcement that the last domestic producer has ended production (even though actual shipments were minimal), (2) a slowdown in fruit coming to the factories and (3) the drastic slide in the value of the dollar (down 14% YTD and at an 8 year low against the Thai baht). New prices will emerge over the next few weeks, but it is virtually certain that pricing will be very firm.

New crop Italian prices are up about 15% from last year and appear to have been accepted by the market, as the majority of the crop has been sold. The weak dollar/euro can be expected to further push up pricing as the year progresses. Worldwide tomato for processing output is projected by the WPTC at 30.1 million metric tons, 7.7% lower than last year.

Much of the Northern Hemisphere’s production is now sold out. In China, some standard grade (small) sliced peaches are still available. With the falling dollar/euro, no bargains can be expected from Greece. The next hope for additional supply over the next few months lies in the Southern hemisphere – mainly from Argentina, where supply outlook looks good but worldwide demand is strong.

As we near the new crop in China, the market is currently experiencing the worst old crop mushroom shortage in 20 years. At this moment, India is the only significant shipper to the USA, and demand is outstripping their supply. It’s still uncertain as to how quickly China can catch up with outstanding orders and pent-up demand once the new crop starts– expect the market to remain firm throughout this period, with possible easing later in 2007.

While the continued outlook for olive oil pricing remains weak, and additional price cuts are expected, the olive oil market has temporarily stabilized. This is mainly the result of several factors: (1) the falling dollar/euro, (2) pent up demand, (3) worsening olive crop in Spain and (4) a disastrous explosion/fire in the holding tanks of one of Italy’s premier oil refineries, Umbria Olii, which killed 4 workers and destroyed 300-400 containers of olive oil (the plant and refinery were not destroyed and the firm is expected to recover). This comes after another large oil refiner, Casa Olearia, exited the market after converting their plant to refine bio-fuels.

It’s now well established that the early Manz and Queen crops were disappointing because of drought during the growing season and heavy rain during the picking/harvesting times (exactly the opposite of what’s desired). Yet, up until last month, the Spaniards still had high hopes for their later Hoji crop – used mainly for ripe olives and olive oil. Unfortunately, the Hoji harvest has not lived up to expectations. Combined with the devastating USA crop and the weak dollar/euro, packers are projecting higher prices across the board for 2007.

Shipments from overseas remain delayed as heavy rains have forced down raw material availability. Some packers claim raw material supply is currently down as much as 80%.

Some, but not all, packers are projecting that a 15% increase in the cost of the wine raw material used in the production of balsamic vinegar will push up finished goods cost. The weak dollar however is certain to put pressure on balsamic.

Spanish winter crop has started off well, but main unknown right now is the value of the dollar/euro. In South America, outlook hinges on Congress taking up the GSP and ATPA trade issues. Artichokes from Peru are affected as they will go from duty free to 14.9% duty on Dec 31. Chile, on the other hand is moving in annual steps towards a lower duty rate, until they reach duty free status in 2015. Chile’s duty rate for 2007 will be 9.9%.

A poor crop has packers expecting reduced output, especially for the popular Non-pareil size.

Israel is expecting to have a 10 % increase in crop size this year compared to last year. Turkey on the other hand is experiencing the opposite and raw material pricing is reportedly up by as much as 35% there. This was primarily brought about by the “oversupply” they experienced last year, when much of the fruit was left unpicked on the trees, resulting in fewer blooms this year.