REMA FOODS IMPORT MARKET FLASH Aug 28, 2006
REMA FOODS IMPORT MARKET FLASH Tel: 201-947-1000
DATE: Aug 28, 2006
The pension reform bill recently signed by President Bush included several added provisions beneficial to imports, including AFI’s (Association of Food Industries) request for duty eliminations/reductions on capers and pepperoncini. Duty changes begin September 2. While capers imported in bulk and repacked in the U.S. (much of U.S. consumption) were always duty free, now capers packed fresh at origin will also be duty free. On pepperoncini, while Turkish product was always duty free, Greek origin product will be charged only 2.2% duty instead of the prior 9.6%.
Unfortunately, the same pension bill also included a provision requiring cash deposits to cover estimated antidumping (AD) and countervailing duties (CVD) on imports from new shippers of product subject to an AD or CVD order.
In repercussions from the London airline bombing plot, U.S. Customs and Border Protection (CBP) announced that due to the current heightened state of alert, “the importing public may experience some delays in the processing and release of their cargo.“
Lastly, the long lead time of imports require safety stock, and rising interest rates have raised the cost of those stocks. After raising interest rates 25 basis points at each and every meeting for the past few years, taking Fed Funds from 1% to 5.25%, the Fed this month, for the first time in years, finally left rates unchanged.
Slight weakening of the dollar (meaning higher costs on imports) over the past month. Dollar/Euro rate is currently at 1.28.
The activist group Greenpeace has taken up a fight with tuna fisherman trying to prevent overfishing of yellowfin and bigeye tuna species. The group is arguing for an immediate 50% reduction in catch levels of these two species in the Western and Central Pacific Oceans in order to safeguard their future sustainability.
Interestingly, the 12 month moving average price for Bangkok skipjack remained in a relatively narrow band of $820-920/mton since mid 2004. Yet, with fuel comprising more than 50% of the cost of fishing (possibly more than any other food commodity), the breakeven cost of fishing has gone up by about $200/mton since fuel pricing began to soar. At this point, skipjack is trading at $970 and packers predict it will break through $1000 momentarily and then stay firm for the near term future. Yellowfin, currently the tightest of all the tuna species has firmed from $1100/mton in 2005 to $1675 today, a 50% increase. After continued firmness over the past year, albacore appears to be leveling off at $2650/mton.
The U.S. industry predicts the California crop will amount to at most 348,000 tons, a fall of 28% from last year, and the smallest crop in more than 20 years. The Food Institute reports that 6/10 selling prices have increased 10%-15% within the last two months. Overseas, China is raising pricing, though some bargains still exist – unfortunately reliability in delivery is not strong. In Greece, crop projections are still good, but slightly weaker than a month ago. Due to the strong worldwide demand, however, Greek packers have opened offers at about $3.00 higher pricing than last year.
Market is still very tight. India is the only game in town and is quite overbooked. China is not expected to resume shipments again until November/December. New crop in China is only being planted now, so it is too early to make any reliable forecasts.
Extreme heat (46 days of 100+ degrees) is taking its toll on the California crop, and experts say the harvest will have to run well into October to recover volumes lost early in the season. In Italy, early indications from packers show that prices might be higher for this year’s crop. While the crop is slightly delayed, if the weather continues to be favorable as it is right now, crop might still be OK. However, if it turns cold too soon, crop will be affected. Generally, packers are expecting an approximate 30% drop in production compared to last year.
While pricing is still a bit weak on pomace, extra virgin prices have stabilized (some packers have even raised offers recently, especially on higher end grades). Expectation remains for the new crop to be a good one, and for pricing to fall further towards the end of the year. At this moment, some holders of very low quality oil are dropping prices earlier in hopes of clearing out poor quality goods before general market prices fall. Expect the spread between high and low quality oils to grow over the new few months, then tighten again when the new crop becomes available and large quality refiners have product at new crop pricing.
U.S. factory California Olive Growers has closed, with the plant’s olive and tomato lines scheduled to be auctioned off. The company was originally formed when a farmer’s cooperative took over the Oberti Olives brand following the bankruptcy of Tri Valley Growers in 2000.
No significant change over the past month in the Far East. In South Africa, the largest packer announced that cheap Thai product and the strong Rand (currency) will force it to abandon most offers until the end of the year.
As noted above in the Trade/politics section – the duty on Greek pepperoncini has been reduced from 9.6% to 2.2% (of FOB origin value). Turkish was always duty free and continues as such.
The recent trend of farmers away from baby corn farming and moving to higher value crops, coupled with heavy rain and flooding has created a severe shortage of raw material. As a result, the cost of raw material has firmed drastically and virtually every factory is behind on shipments.