Monday, October 29, 2007


Right now, there’s Senate legislation dealing with food imports and a newly introduced bill in the house targeting food imports. Several committees within the House have held hearings recently to discuss this issue. A cabinet-level panel created in July by the president has issued a preliminary report and is expected to release a final report in November. The major provisions of the bill introduced in the House by John Dingell are: (1) Substantial “per-line-item” import inspection fees, (2) A requirement of FDA certification that the food importer has demonstrated that each item of food was produced under standards that meet or exceed U.S. standards, (3) A requirement for inspection of foreign establishments and certification of those establishments, and (4) Authority to suspend the ability of a food establishment to operate; civil penalties of $10,000 per violation.

More bad news, as the dollar hit another all time low against the euro last week.

Several weeks ago, the high skipjack price finally broke, with improved fishing in both the Western Pacific and the Indian Ocean pushing raw material costs down into the $1400 range. Unfortunately, within a week fishing turned poor again and fishermen were back over $1500 in no time at all. Yellowfin remains firm at about $2125 and is currently only 3% of the light tuna catching reaching Bangkok (vs 20% usually). Albacore is steady at $2325 while Tongol, which is locally caught in Thailand and Indonesia, is mostly unavailable.

Pineapple raw material is trading at Thai Baht 5.70-6.00/kilo as the winter crop now begins. Overall, first half 2007 statistics are showing significantly less pineapple being exported from the major supplying countries. Thailand is expecting 20% less tonnage than last season, and after the damage inflicted by the floods early in 2007, the plantations are expected to recover only towards the middle of next year (barring any aberrant weather). Suffering from El Nino in the end of 2006, Indonesia saw their exports plummet by 57% for the Jan-May period as compared to last year. China, on the other hand, saw exports rise 51% to their main export market, Russia. Chinese quality is definitely improving, but consistency is still not at the levels required by most brands in the U.S. market. Overall, increased demand from Eastern European countries (with less stringent quality requirements) is affecting the total quantities available to the more traditional markets for this commodity such as the US. Tropical fruits remain tight, but here again China is significantly boosting production, but TFS quality still lags significantly behind Thailand. In the U.S., Maui pineapple is finally auctioning off their canning machinery and tinplate this week.

Chinese crop is just starting and actual yields are still to be determined. While Typhoon Wipha hit some of the major growing areas in China, initial reports still indicate a good crop is in store for 2007/2008. New crop opening prices, which should be announced very soon, are expected to be up this year primarily because of the weaker U.S. dollar vs the Chinese RMB (7.5% compared to last year) and tight labor and tinplate in China’s booming economy.

The prohibitive anti-dumping duties imposed on numerous packers have severely limited the factories that are able to export to the United States. For this season, in China, there are 3 factories (with one of them reported to be having serious financial difficulties); in India there’s only one significant player. The prospects of this year’s crop from China will be clearer in about two weeks as harvesting is scheduled to begin early November. Interestingly, even in this tight market with firm pricing, Chinese exports to the U.S. are actually up compared to last year, but poor U.S. production has increased demand here, while demand in Eastern Europe is absolutely exploding. India continues to ship slowly and is saddled with many back orders as compost issues shortened production months ago just as demand increased. The majority of India’s production goes to the U.S. market. Generally, because of the uncertainty in supply, exporters everywhere are selling for relatively prompt shipments only.

Expectations for a disastrous sweet pepper crop in Turkey are coming true, as drought has cut the crop by over 50% compared to last season. There’s virtually no rain, while the Turkish government has diverted most water allocated to the fields to instead go to residential homes. With Spain out-priced, Turkey had become the dominant source for U.S. imports of roasted pepper products, so the current issues will firm the market significantly. South America is developing increased production capabilities, which should bring increased stability in the future, but their crops are not developed enough yet to make a significant dent in this year’s demand.

Italy’s crop is coming in with quantities about 20% less than contracted. Coupled with the weak dollar vs the euro, outlook is not pretty for Italian tomato pricing for the new season.

The extreme heat last summer affected the grape crop. Hence, the price of grape “must”, the primary ingredient in balsamic vinegar, has been increasing. This, coupled with the continued gain on the euro against the dollar, points to increasing balsamic vinegar prices down the road.

The crop has started about 2 weeks ago, opening at a very high level (about 20% higher than last year). However, as steady raw material came in, prices have settled to lower levels. It is hoped that prices will decrease this year after the tremendous run-up last season.

Mustard seeds, which are grown primarily in Canada, are very short. The acreage was drastically reduced by about 40 % as most of the fields were diverted to “Colza”. Colza is now being widely grown for bio-fuel applications. Alternate sources of mustard seeds are now being developed.