Monday, August 27, 2007


After several high profile issues, the Chinese government appointed Vice Price Minister Wu Ti to head a cabinet level committee to improve food safety. After her predecessor was executed several months ago, one would expect serious action and it appears this is happening. Food packers are reporting that CIQ (the Chinese “FDA”) is now requiring mandatory inspection for every export shipment destined for the U.S.

A West Coast (LA) port strike was narrowly averted when the port management and the unions reached a last minute agreement on July 26th.

Given the current instability in the financial markets, the currency markets have been relatively calm of late – after severe weakening of the dollar earlier this year.

At this moment, there’s still no relief in sight for light tuna, as raw material costs continue to break through old record highs. Skipjack has reportedly been sold to a cannery in Thailand for $1675/mton, up 75% from $950 at the start of this year. Many factories are shut or running at minimal capacity for lack of fish. Virtually all packers are behind on contracts. While light tunas have firmed, albacore has come down in price since last year. For maybe the first time in history, yellowfin and albacore (white tuna) raw materials are now trading at almost the same price – about $2200 of YF, $2350 on albacore – making white tuna an excellent value at this moment. Indonesia suffered an earthquake a few weeks ago, but so far fishing has not been materially affected.

No major change from last month; situation is still very tight. Overseas plants are running at partial capacity, due to lack of raw material, and are behind on contracts. With Maui Pineapple ceasing production of canned pineapple as of June 30, The Thai Food Processors’ Association filed a request for a changed circumstances review of the antidumping duty order on canned pineapple because there is no more domestic canned pineapple. The petition asks the Department of Commerce to revoke the antidumping duty order. Chinese plants have almost universally oversold their limited production and shipments are few and far between from China. In South Africa, the last two remaining packers, Summerpride and Collondale, are planning to merge and possibly move their new factory about 100 miles to be closer to the pineapple fields.

FRUIT COCKTAIL/MIX (California style)
Imported product is still available to cover the current 2006 shortfall of domestic U.S. production.

California is reporting a good crop with the highest yields seen since 2000 (17.3 tons/acre). As of now, the only possible problem this year might be undersized fruit. Both Greece and China are on track for good/normal crops – better assessments should be available next month.

Final duty determinations for mushrooms have been published: the largest Chinese factory was slapped with a 19.02 % anti-dumping duty rate. A couple of smaller Chinese packers were given a 0% duty rate, which bodes well for the new season beginning in Dec/Jan. The general China rate for companies not individually reviewed is set at 198.63%. India’s major exporter also achieved a 0% duty rate, but has been hampered by low compost output. Supply remains tight as packers try to keep up with very heavy worldwide demand.

While still early, initial indications point to a good crop for most Spanish olives, with the exception of Queens. For Queen olives (large green), the crop will be shorter than last year and in some areas they will not collect even the 50% of the amount harvested last year. For Manzanilla (usually used for small green) and Hojiblancas (most commonly used for ripe olives and olive oil), the crop will be slightly bigger than last year, but not as big as was anticipated two months ago. Because it appears that the olive fat yield will be higher than last year, it’s believed more olives may go for oil production, rather than table olives.

Turkish crop is unusually delayed due to drought – water is currently being rationed to consumers leaving very little to almost nothing for farm irrigation. Crop volume is expected to come in at only half of preseason estimates. Spain is faced with an almost 30% increase in raw material cost due to the high demand in the fresh market. China is experimenting with pepper production but available volume is not yet significant.

In Italy, high end-July temperatures have left estimates for the new season pointing to a smaller crop than was predicted just weeks ago. Yields are running at 60 mtons/ha, compared to 67 normally. Total crop is expected to come in at about 3.8 - 4.2 million mtons. It’s said that packers are already paying farmers higher prices (75 euro/mton) than originally contracted (60 euro/mton). Situation is even worse for Sundried tomatoes: extreme heat and drought conditions have contributed to an increase in raw material pricing by about 30-40%. With regard to tomato paste production, the U.S. crop is doing well - yields are above expectations and the crop is predicted to come in at 11-12 million tons.

Thai packers have traditionally found little success selling their kernel corn in the U.S. However, with the European market closed to Thailand via the recent antidumping ruling, a large European packer (Bonduelle) acquiring a large North American exporter (Aliments Carriere in Canada), and the growing U.S. demand for corn derived ethanol may point to increased future interest in the U.S. market for imported kernel corn.

Morocco is experiencing good fishing this season after several years of dwindling catches.

Market remains firm after experiencing significant price increases earlier in the year. The new season doesn’t begin until the end of the year.