Monday, November 26, 2007


On Nov 8, the U.S. House of Representatives passed the US-Peru Trade Promotion Agreement (TPA) by a wide margin, with 109 Democrats joining 176 Republicans voting in favor of the deal. Senate approval is expected any day now.

The recommended action plan presented on Nov 7th to President Bush proposes many new stringent import requirements, including mandatory certification by foreign governments or accredited third parties, a “Good Importer Program”, increased penalties and bond amounts including forfeiture of assets and proceeds, and increased FDA presence overseas.

On Nov 19, in a rare move, the U.S. ITC ruled against the domestic U.S. paper industry’s request for protection from imports and threw out the antidumping duties on Chinese paper that had been authorized by the Bush administration earlier this year. Along with the repeal of the Byrd amendment last year, maybe the tide is finally turning on antidumping actions.

The once almighty dollar continues to lose strength against virtually all major currencies, hitting another record low against the euro this month after losing an unbelievable 70% over the past few years. Even the state-controlled Chinese Yuan gained almost 3.5% against the dollar over the past 6 months ago. The Indian Rupee now exchanges 39.18 to a dollar vs. 44.21 in the beginning of the year. The Thai Baht is now at 31.57 vs 35.2587 in the beginning of the year. The situation is getting so bad that even European Central Bank President Trichet described the euro’s recent ascent as “brutal” and not welcome. Just keep one thing in mind – when the market appears to have no place to go but one direction, it often does just the opposite (think housing prices, tech stocks, etc). I wouldn’t be surprised to see a firmer dollar a year from now vs the euro, though probably not against the Asian currencies.

The tuna market has been relatively stable lately. Catching has been extremely poor in the Indian Ocean esp. for French / Spanish fleets (average catch per boat of less than 10mt/day). In contrast, catching in the Western Pacific and Maldives is better (30mt/day). Generally, flow has been scarce, with packers bidding $1400/mton and large fish suppliers offering about $1450/mton. Yellowfin is steady at $2100/mton. Tongol remains very scarce as monsoons are hitting the local fishing grounds. Albacore, still trading at very low price levels ($2250/mton), represents the current bargain of the tuna world, but is expected to firm soon.

In order to prevent widespread catching of small or juvenile tuna that would cause the collapse of tuna stocks, the Philippines’ Bureau of Fisheries and Aquatic Resources has recently proposed a minimum mesh size of three inches on nets used to catch tuna, and making it illegal to trade in small tuna.

The best way to summarize the tuna market of 2007 would be the “perfect storm.” Concurrently, we suffered through: (1) El Nino caused fish to disappear (they swim deeper because of water temperature changes), (2) Currency: significant devaluation in the dollar vs most overseas currencies including the Thai Baht, (3) Tremendous increase in the single largest cost in fishing: fuel for the fishing boats, and (4) Growing worldwide demand from emerging economies (Russia, etc).

Market remains firm with winter crop pineapple raw material trading over 6.50 baht/kilo. Supply of choice product is especially limited. The auctioning off of Maui pineapple’s canning machinery ended with one of the largest Thai packers buying much of the equipment. Tropical fruit availability should improve over the next few months, but backlogs are lengthy.

The 2007/2008 crop is in progress with no major setbacks. It is still reported to be a normal crop. However, while raw material remains relatively unchanged vs. last year, this year's pricing should be slightly higher due to the RMB's appreciation against the dollar and the rising costs of tinplate and labor in China.

Chinese mushroom season started about two weeks ago and early indications are that the crop will be better than last year's very short crop. However, the current U.S. antidumping suit has left only two to three packers that can ship to the U.S. India is also reporting an improvement in their production as they have hopefully overcome the compost issues that cut production in 2007. With the market quite empty though, it will be a while before the demand/supply equation can be balanced. While long term prospects are brightening, there is still no immediate short term relief in site in terms of the tight supply situation, and new anti-dumping rulings remain an unpredictable wildcard.

Greece is reporting a normal crop so far - the crop is still underway. New crop pricing will be more definite around early December. Turkish kalamata-style on the other hand, has been affected by drought. Combined with the weakening of the dollar against the Turkish lira, prices are expected to increase about 15-20%

In a significant showing of the poor prospects for the Italian tomato crop this year, Italy has emerged as the world’s single largest importer of Chinese tomato paste, as YTD imports there have doubled in 2007 (to 75,409 mtons) compared to 2006.

As the Southern Hemisphere heads toward their summer season, Argentina is reporting a frost in the San Juan and Mendoza regions, while Australia is facing a significant water shortage where drought has forced many growers to pull trees.

The Spanish olive crop is shaping up as follows: Manzanillas – good total volume of about 198,000 mtons expected, but with a lot of sub-prime goods because of increased use of mechanical harvesting. Queens – volume expected to come in 16% below last year, at 22,000 mtons, with pricing to the farmers significantly higher. Hojiblanca (primarily used for ripe) – volume will be higher than last year, but fruit calibration (sizing) smaller. Hoji pricing paid to farmers in euros is lower than last year. However, the dollar has weakened about 15% since the start of the last crop, so dollar pricing will be higher on all varieties. In Argentina, the southern hemisphere crop is still months off, but a severe frost has packers predicting yield will decline about 30/40% compared to last year, but sizing should be larger.

The last few weeks has seen some firming in the market. Most packers feel that this is an artificial increase and is not reflective of the new crop which is projected to be good.