Monday, April 30, 2007


The beginnings of a China/U.S. trade war may be brewing. The U.S. filed two complaints against China with the World Trade Organization accusing China of tolerating widespread copyright violations and limiting the importation of books, music and video to state-owned companies. President Bush also initiated an antidumping action on Chinese coated paper. In response, China expressed “deep regret and dissatisfaction.” Meanwhile data shows China is becoming less dependent on the U.S., as exports from China to the U.S., expressed as a percentage of China’s total exports, fell every year since 2000.

Moderate weakening of the dollar against most major currencies over the past month.

Thailand is considering initiating the process of requesting duty free access for their tuna exports to the U.S. Current duty on the majority of imported tuna is 12.5%.
Skipjack raw material pricing this month hit a three year peak, and packers expect pricing could remain firm for another few months as El Nino is blamed for poor fish landings. Raw material is trading at $1100 in Thailand, and supposedly as much as $1200 for the Andean packers that have duty free access to Europe and can afford to pay a higher price. Several packers are now estimating that the long term trading range in the Far East for 2007 will run between $950 and $1200. The yellowfin/ skpjack percentage in the catch is currently about 30% yellowfin, considerably higher than usual. While the smaller skipjack percentage is causing additional tightness in the skipjack market, a high yellowfin percentage normally increases availability and lowers the cost of yellowfin. At this moment however, demand for yellowfin from European packers is extremely high, causing the fishermen to segregate the yellowfin from their catches and send this raw material directly to Europe, where the current price at over $2000/mton is significantly higher than the $1750/mton bid in Thailand. Albacore is steady at $2300, up from $2175 in February.

Final figures are starting to emerge on the Thai summer (April) crop. The 2007 supply is now expected to come in at 1.5 million tons, 40% below that of 2006, and lower even than the 1.7 million tons projected just a month ago. The primary cause is lack of rainfall and diversion of the planting areas for production of sugar for biofuels. Measurements of rainfall show an average 90% decrease for the first quarter of 2007, with the Rayong growing areas showing a dramatic 95% rainfall reduction. Quality is also down as much fruit was dried and burnt by the sun. In Indonesia, farmers went 115 days without any rainfall in the autumn of 2006 (due to El Nino), only to be flooded out by torrential rains a few months later. Unfortunately, demand increased concurrently due to Maui’s exit from the market and the general shortages of other cheap fruits products (especially from U.S. packers; i.e. fruit cocktail, etc). Couple the severe shortage in supply with the increased demand, and expect 2007 to be one of the toughest years ever in the pineapple market. Furthermore, the US government declined two months ago to revoke the anti-dumping duties currently in place (even though there’s no more domestic industry to protect). As a result packers are legally not allowed to “dump,” and for this reason THEY ARE INCREASING PRICES ON EVEN PREVIOUSLY CONCLUDED CONTRACTS. They claim that if old prices are not canceled and renegotiated, they’ll be retroactively charged prohibitive anti-dumping duties on these shipments, and be expelled from the U.S. market for future shipments, based on these same prohibitive duties. With the tremendous consolidation of pineapple packers that resulted from the antidumping order begun in 1995, options are limited to changing prices or exiting the pineapple market. Lastly, to add insult to injury, the Thai currency has fallen 12% against the dollar since a year ago.

With the tight pineapple market and virtual disappearance of red papaya, tropical fruit salad availability is severely limited. Even the largest branded seller in the market is short of product, with customers either out of stock or put on allocation.

In deciduous fruit cocktail, imported product, while limited, is actually helping to alleviate the shortage in the U.S., as domestic U.S. packers are mostly sold out and even defaulting on contracts.

In Greece, the crop looks promising, no freeze was experienced and all indications are for a good 2007 crop. Reports from California also point to a good crop, but a late freeze in the Southern U.S. has reportedly wiped out considerable quantities of peaches in North Carolina, Alabama and Georgia. The USDA reported that the index of prices received by fruit and tree nut growers reached record highs this January and February, but this was due mainly to high prices on California oranges and lemons.

After Chinese mushroom packers in March demanded renegotiation of their pending contracts, the Indian industry followed suit in April, effectively raising the price for all leading sources of canned mushrooms worldwide. Like pineapple, mushrooms are also imported under an anti-dumping duty order, and packers are legally prevented from “dumping” mushrooms in the U.S. market. For this reason, mushrooms packers are also INCREASING PRICES ON EVEN PREVIOUSLY CONCLUDED CONTRACTS. Officially the Chinese point to a lack of raw material while the Indians blame the appreciation of their currency, higher interest rates and an increase in the price of wheat straw, the main raw material for compost.

While some are predicting a better Italian crop this year over last year, others are saying contracted area is down. With conflicting reports thrown around, it’s obviously too early to make accurate predictions.

Initial reports on artichoke production show Spain expecting to produce about 80,000 mtons for processing (down from a normal 100,000), Peru is at around 60,000 mtons, and Chile at around 35,000 mtons.

Events amongst European corn buyers could have an effect on the U.S. industry. The French corn packers recently persuaded the EU to charge an anti-dumping duty on Thai kernel corn, the principal origin imported into Europe. As a result, U.S. corn has become more competitive in the U.K. than both Thai and even French corn, and it’s expected that the U.K. may significantly increase their imports of U.S. and Canadian corn, adding demand from an unexpected source.

FDA announced a large recall of imported Italian olives. This has NO affect on the traditional California/Spanish style ripe and green olives. The affected olives are Cerignola, Nocerella and Castelvetrano type olives manufactured by Charlie Brown di Rutigliano & Figli S.r.l, of Bari, Italy. The brands affected are Borrelli, Flora, Roland, Cento, Dal Raccolto, Bonta di Puglia, Corrado's and Vantia.