Sunday, July 22, 2007


An eight-month extension was granted for the Andean Trade Preferences Act (ATPA) affecting Bolivia, Colombia, Ecuador and Peru. Most important for canned food imports is Peru, which can now continue shipping duty-free artichokes and asparagus to the U.S. Before this temporary extension expires, it is widely expected that the official Peruvian Free Trade Agreement (FTA) will be finalized and signed into law, making the duty free treatment permanent.

President Bush last week established a high level government panel to recommend steps to guarantee the safety of food and other products imported into the U.S. In addition, Senate Majority Whip Richard Durbin (IL) introduced a bill in the Senate aiming to (1) collect user fees for imports, (2) dedicate part of these funds to research on contaminant resting technologies and (3) require FDA to establish an Imported Food Certification Program.

FDA this month put all farm-raised catfish, basa, shrimp, dace, and eel from China on automatic detention, meaning all containers are FDA released for sale in the U.S. only after lab testing proves their safety. Ironically, the order means the Chinese seafood will be among safest in the marketplace as it will undergo 100%, rather than random, testing.

On July 9, the International Herald Tribune published a front page lead article entitled “In China’s safety woes, echoes of U.S. history – Scandals brought shame, then reform.” It appears the Chinese government is starting to crack down, with CIQ (“Chinese FDA”) instituting stricter controls and imposing more stringent testing on export shipments. Large importers and Chinese producers generally applaud the moves as serious importers and exporters already have many such controls in place and value a safe supply chain. In the headlines recently was an article about China shutting down 180 substandard plants – it should be noted that not a single one of those facilities had more than 10 employees nor a license to export to the U.S.

The dollar has again weakened significantly against most world currencies, with the loss in value accelerating over the past few weeks. Over the past few months, the dollar has weakened 7% against the euro, 10% against the Indian rupee, and 15% against the Thai baht. In fact, against the baht, the dollar plunged an unbelievable 10% in just the past 30 days. Graphs of the dollar vs these three currencies can be found on this site above this report.

Catching remains poor in all three catching areas (Maldives, Western and Indian Ocean). Skipjack price continues to climb, hitting $1475/mton in Thailand and $1560 in Ecuador/Mexico. Several large Thai plants have been idled for lack of raw material. Packers are starting to throw around talk of $1600/mton on skipjack in the very near future. Near term, there’s no relief in sight as Ecuador's territorial waters will be closed for 1.5 months starting in August, forcing packers there to get their tuna supplies from the Western Pacific – in direct competition with Far East packers. With limited stocks and closed factories, fisherman are playing cat-and-mouse with the factories, trying to extract maximum value from the plants that most need raw material. Yellowfin is virtually unavailable with all supplies going to Europe at prices higher than albacore. Tongol is also firm due to heavy monsoons in Indonesia. Albacore remains steady at $2300/mt, but could start to climb soon. In Europe, strong demand immediately filled the single duty quota which opens on July 1 each year - it was oversubscribed and filled on the first day.

10% free-fall in the value of the dollar against the Thai baht (-15% over the past few months) is further pushing up pineapple pricing. Thailand is in between seasons - crop was short and the overall worldwide demand has gone up due to increased popularity of this fruit in Russia and other Eastern European countries. Indonesia is still suffering from the effects of the massive floods that affected the region earlier this year. Chinese crop is very short causing raw material prices increases of as much as 40% from initial opening prices. South African plantations are being forced to leave their pineapple to rot in the fields after cadmium contamination was detected (caused by contaminated zinc fertilizer). While currency concerns have kept the two remaining South African factories out of the U.S. market, they were major suppliers to Europe, and this problem will put added pressure on Far East suppliers to make up for the shortfall.

FRUIT COCKTAIL/MIX (California style)
Imported product is still available to cover the current shortfall of domestic U.S. production.

Outlook in Greece remains good for the 2007 season but currency woes have so far stymied the possibility of decreased pricing. . In China, statistics show Jan-May peach exports to the U.S. almost quadrupled, from 4,458 mtons last year to 15,164 this year. Current Chinese peach crop is underway and indications predict a normal crop; however, a significant quantity of the harvest is getting diverted to the Chinese domestic market. California crop looks goods with an estimated 482,540 tons, although “Peach Fuzz” reports growers are looking for a raw material price increase over last year’s $276/ton due to labor cost increases. Growers also predict increased use of machine harvesting, but fruit damage is still a problem with this type of harvesting.

Supply situation remains tight. India is the only significant source of product at the moment given additional anti-dumping woes for the largest Chinese packers. The drastic fall in the value of the dollar against the rupee, has packers claiming for immediate price relief so as to prevent anti-dumping action by the U.S. government. For the next season’s pack, it is too early to predict anything from China - more information will be available in October. Europe has also reported a short crop.

While it’s too early for a clear prediction, all indications point to a very good olive crop. Prices are stable at this point. Only movement in pricing right now is due to the euro-dollar exchange rate.

The duty free status of Peru has been extended for another 8 months. South American crop has just begun and forecasts point toward a normal crop. Chilean crop is 6 to 8 weeks delayed due to unusually cold weather, but crop is still expected to be normal. Spain had a relatively short season; however, in spite of this, there appears to be some inventory left over due to the poor euro/dollar exchange and the duty hurdle. Spanish product however is significantly more expensive than that from South America.

Crop is predicted to be short due to the unusual heat in Europe and cold in South America. Raw material prices are on the up-climb

Harvesting has just begun in Italy, where farmers are experiencing problems with water and “Peronopera” disease (which at least can be sprayed against, comparing favorably to the yellow leaf curl afflicting some U.S. fields). China, one of the global leaders in paste production is significantly expanding production capacity, importing new state of the art production lines. It is expected Chinese output could double over the next three years. Italy is currently the number one importer of tomato paste from China.

Turkey was initially reporting a good crop, however there are fears that this may not materialize due the hot weather. Additionally, the Turkish lira has appreciated about 20% against the dollar in the last 6 months. Greece is reporting a normal crop, the only increase expected is from the euro

While production has recovered from the poor storm damaged seasons of several years ago, GFS demand has still not recovered, resulting in rising inventory levels. Worse yet is a new British report linking grapefruit consumption to increased risk of breast cancer. As the U.K. is traditionally the largest GFS market, this is sure to cut demand further.

Market is projected to be very tight. Turkey & Morocco have started their harvest and early estimates are that the crop will be significantly less than last year with raw material pricing coming in about 15% higher.