Sunday, September 16, 2007

Dollar vs Euro


The past month has seen more than its share of natural disasters: In PERU, the recent 7.9 magnitude earthquake reportedly did not affect the major crops, however, some shipments have been delayed as affected factory workers deal with rebuilding their homes. In GREECE, fires are ravaging, but the fires are in the South, while Kalamata production is in the north and should be unaffected. In INDONESIA, an 8.4 magnitude earthquake struck last week, but so far so no major repercussions have been felt in the tuna or pineapple markets (markets that are already very tight).

Ocean freight - A General Rate Increase (GRI) from European Ports to the US was just announced, becoming effective October 1, 2007. Freight increases range from $400 to $750 per 20’ container.

Bad news in the currency markets as the dollar sank further, bottoming at the record all-time low against the euro. A graph of the past 30 days can be found above.

It’s hoped that the skipjack market may have peaked, with skipjack in the $1500-1575/mton range after trading over $1600 last month. Indian Ocean fishing, which should be seasonally strong right now, is weaker than expected. With the market short and most of the Far East cold storage warehouses empty, fisherman are holding back as much as possible to keep their record high pricing intact. With demand strong in Ecuador, and skipjack trading there at $1625/mton, all surplus raw material is going there (especially the Western Pacific catch). Official figures were just released by the Indian Ocean Tuna Commission showing that Jan-Apr 2007 Indian Ocean catch was the worst in 11 years. Yellowfin remains firm at about $2125, with albacore steady at $2325. Tongol, which is locally caught in Thailand and Indonesia, is still very tight but now going into season.

Ramadan has begun and is causing even more delays in production. Raw material situation continues to be very tight. The leading US brand recently wrote to the trade: “Pineapple and Papaya supplies are tight due to heavy rains slowing the growing and harvesting of fruit. Fruit costs are increasing against limited supplies and steadily increasing worldwide demand.” They don’t expect increased capacity until 2008.

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

In Greece, while the total peach crop has come in at almost 500,000 mtons (the best in six years), only 285,000 mtons went to canning, with canned output falling compared to last season. The cause of the drop in canned product is an increase in puree production as several plants built new puree lines this year, along with a concentration by the industry on packing more high choice product. China had an average crop, with new crop pricing up slightly due to currency and input cost increases. In California, growers are experiencing the best yield/acre in seven years.

In China, the crop is still a few months away and it’s too early to make any accurate predictions.

So far, the weather in Spain has been cooperating with mild temperatures and adequate rainfall. Prices have not been published as of yet, but harvesting is expected to commence next week. Packers are reporting a good crop on some varieties, especially ripe/hoji olives and to a lesser extant, manzanillas. Outlook on queens (large green olives) however is worse than last year. Continued weakness of the dollar against the euro is also certain to influence pricing. California's 2007 olive crop forecast is currently estimated at 110 thousand tons, but with no carryover from last year's crop, packers there are predicting strong prices for the 2007 crop.

Prices have been firming over the past couple of weeks mainly because of the euro/dollar exchange rate. For the new season shipping early next year, the crop prediction remains good. Current crop forecasts are as follows:
• Italy: 450.000 tons
• Spain: 1.250.000 tons
• Greece: 300.000 tons
• Syria: 110.000 tons
• Tunisia: 250.000 tons
• Turkey: 90.000 tons
• Morocco: 60.000 tons
Total is 2.510.000 mtons plus a carryover of 100.000 mtons = 2.610.000 mtons total availability. Production should be substantial, but growth in consumption has been very strong, especially from non-traditional markets such as China, Japan, Korea, and the Middle East. This and the currency could have a defining impact on final pricing.

As the kalamata stocks dwindle down, pricing is trending upwards. New crop is expected to be average. Pricing indications should be available next month

The extreme heat last summer and dry weather in April, followed by cold weather in May has affected the lowest level in the mollusk family - achatine snails were virtually unavailable until about 2-3 weeks ago. The Helix and Burgundy snail harvest is 50% less plentiful than last year.

Spain, Greece and Turkey are experiencing poor pepper crops (affecting all peppers including pepperoncini).

Italy is still expecting a worse crop than last year, while California is expecting a huge crop with the National Agricultural Statistics Service estimating contracted production at 12.0 million tons, up 20% from last season, and possibly the best crop since 1999.

Chinese crop is reportedly similar to last year, while California is reporting a good crop this year with Bartlett pears estimated up by 11% from last year and other pear varieties running at 5% above last year.

According to the USDA, sweet corn production in the USA is down 7% compared to last year. With the European market closed to Thailand because of a recent antidumping ruling, Asian packers may soon be able to make inroads into the US market.