Tuesday, May 29, 2007


Prospects for free trade agreements, currently pending with Peru and Panama, brightened significantly on May 14 when the Bush administration and Democrats reached agreement on labor issues. In China, little progress was made by Treasury Secretary Henry Paulson as China and U.S. met for trade talks. Paulson first announced “we’re on the right trade path with China” but later counseled patience as the Bush administration tries to head off a congressional drive to impose trade sanctions.

The dollar reached an all-time low against the euro on Apr. 27, as weak U.S. economic figures reinforced worries about a widening disparity between growth in Europe and the U.S. The dollar/euro has since held steady for most of May. China recently announced new regulations slightly freeing up the tight allowable trading range for the Chinese yuan against the dollar. Since China first started relaxing its exchange policy in mid 2005, the yuan has firmed 8.1% against the dollar.

Skipjack raw material costs have reached a 10 year high last week, with a Thai packer reportedly paying $1300/mton+. This dramatic firming has costs up from $1100 just a month ago, $970 in December 2006 and $790 at the start of last year (Jan 2006). In the eastern Pacific, we’re now close to the all-time record of $1400/mton. It’s reported that because of El Nino affecting water temperatures, the tuna are diving deep to reach their preferred 23 degrees Celsius zone. At these depths, the fish are not catch-able using the traditional purse seiner tuna vessels, which can only go down 50 meters. The other tuna species are following skipjack’s lead: Yellowfin is up to $1900 from $1750 last month; tongol is 45 Baht/kilo; and albacore is at $2350, up from $2300 last month and $2175 when albacore hit recent lows in February.

As has been reported for each of the past eight months, pineapple has been hit by the perfect storm: currency appreciation, El Nino weather problems, severely reduced crop, competition from biofuel production, and Maui’s exit from the market. Pricing continues to firm dramatically: raw material costs have more than doubled and finished goods pricing has increased 50% causing one of the worst situations on record. Because of the U.S. antidumping case, prices set by packers on previous contracts have all been renegotiated upward. Alternative supply markets such as China hoped to make up some of the Thai and Indo shortages, yet so far hardly any product has actually shipped and raw material is scarce. On the brighter side, a month after the government reaffirmed the validity of the anti-dumping case (done every 5 years in what’s referred to as a “sunset review”), Maui has now finally and officially announced the closing of their pineapple cannery business. As a result, there’s talk of the anti-dumping suit finally being rescinded.

As TFS is primarily packed from pineapple and related fruits, situation is no better than with pineapple. In fact, as red papaya is the shortest of all the Thai fruits, most packers are having great difficulty packing TFS at this moment. A severe shortage is expected to hold until September/October 2007.

In deciduous fruit cocktail, imports are alleviating the shortage in the U.S. where domestic packers are mostly sold out.

Finally a product with some good news: situation is upbeat for new pack peaches. In Greece, the crop should start earlier than usual and packers there are expecting one of the best crops in the past 5 years, with yields hitting 500,000 mtons. USDA is forecasting that the Chinese canned peach production will rise by 15% compared to last season. California is expecting its crop about 13 days earlier than last year but unfortunately North Carolina, Alabama and Georgia experienced a late freeze which will significantly hurt their new season.

Market pricing continues to climb, and because of the U.S. antidumping case, prices set by packers on previous contracts have all been renegotiated upward. The only country currently shipping substantial quantities is India – albeit very slowly. They suffered from production problems (compost issues) two months ago and are still recovering from their prior shortfall. India is expecting to be back to normal quantities towards the end of June. As reported earlier, China’s crop was very short, but more importantly, the leading Chinese packer was just assessed a preliminary 196 % anti dumping rate. They are still trying to appeal, but if unsuccessful, they’ll be effectively locked out of the U.S. market. Holland, Indonesia and Colombia are vastly oversold to other markets and not offering any products.

Spain’s crop just ended - it was a short season but in general, total tonnage is estimated to run about the same as last year. As for South America, the crop will start in a couple of months but early feedback points to a good season. As demonstrated by the chart below, Peru has experienced tremendous growth and has now surpassed Spain as the leading source for the U.S. market. A possible imposition of duties on Peruvian imports might curtail this growth - this will be known by the end of June 2007.

U.S. Imports of Artichokes in Brine in years 2003-2006:
Spain $ 52,306 / $ 50,627 / $ 38,892 / $ 32,252
Peru $ 2,462 / $ 8,947 / $ 16,911 / $ 34,261
Chile $ 3,783 / $ 5,442 / $ 8,074 / $ 9,873
China $ 0 / $ 0 / $ 505 / $ 1,288

The continued shortage of supply in saffron has been forcing further increases; current market prices are about 300 % higher than the levels at the end of last year.

Early indications from Turkey show the crop might be short this year as last year’s very low prices have discouraged farmers from planting this season. It is estimated that the crop output will be about 30% below last year.

Market steady.