Thursday, May 22, 2008


With everyone starting to think “green,” a recent study shows that imports can actually have a lower carbon footprint than domestic product. The New York Times ran a cover article entitled “The Environmental Cost of Shipping Groceries All Over the World.” The article showed that the carbon footprint of a bottle of red wine in New York was significantly lower for a European wine as compared to a California wine (1371gm vs 2514gm), mainly due to the vastly lower pollution produced shipping a container across the Atlantic as compared to driving a truck across the United States.

China has experienced a devastating earthquake. While tragic for the loss of life, initial indications are that given the region that was hit, it is not expected to have a major effect on food exports.

Most steamship lines finalized their rate increases at $500 to $700 increase per container, depending on the vessel route.

Rep. John Dingell (D-MI) circulated a draft bill whose main provisions address the following: Registration of food facilities and importers, food safety plans, certification program, laboratories, mandatory notification and recall, civil fines, and country of origin labeling.

As usual, when the dollar has no place to go but down… goes up. After reaching a record low point of 1.60 last month, the dollar firmed up recently to 1.55, but has unfortunately traded off a bit over the past couple of days (higher number represents a firmer euro, weaker dollar). While the dollar is still significantly down for the year, many on Wall Street are now predicting a firming dollar through the rest of the year.

Higher tuna costs are about to change what you buy in the supermarket: the long established 6oz tuna can will soon be switching to 5oz, with Starkist leading the way. With traders wondering how high it can go, skipjack pricing is breaking through yet another record peak as raw material traders offer at $1800/mton. While western Pacific catching is improving for Taiwanese, Korean and US fleets, the Indian Ocean catch is poor and catching has declined in the Maldives. Strong worldwide demand, higher fuel/oil costs and weak catch are having the greatest impact. Oil, now the single greatest cost component of tuna, is over $130. Domestic production continues to fall as Starkist announced layoffs in American Samoa because of a minimum wage increase (Note: Del Monte is still trying to sell their StarKist division). Yellowfin raw material is up significantly, offered at $2500/mton vs $2350 last month. Due to heavy monsoons, tongol is virtually nonexistent and higher qualities are now trading above the price of albacore. Albacore is up $50 to $2450/mton and still represents the best bargain in the tuna world. Import statistics confirm that most buyers agree and are promoting albacore instead of light tunas. Thai albacore shipments to the U.S. for the first three months of 2008 are up 49.5%, while Thai light tuna shipments for the same period are down 32.3%.

In Thailand, the continued tinplate shortage and the lack of coated cans is severely affecting production. Raw material prices are trading at 5.00-6.00 Baht/kg. As a lower cost fruit, pineapple is one of the fruits most affected by surging worldwide demand from newly emerging markets such as Russia and the Middle East. In China, the domestic demand has been very strong, leaving very little raw material available for canning. As a result, China’s prices have gone up 35% from last year.

While pineapple and tropical fruit pricing normally move in concert, the current environment is seeing firm pineapple pricing concurrent with weaker tropical fruit pricing. The cause is papaya – while a severe shortage last year caused TFS prices to rise faster than pineapple, the much better crop this year has helped to offset increases due to pineapple and tinplate.

As the fear of severe shortage has died down, prices have stabilized at levels slightly lower than last year. India, while still behind in shipments, continues to ship some quantities regularly. China’s season is over so availability of fresh pack mushrooms is now limited. It is reported however that a normal quantity of brine pack will be available for the year, as it appears the earlier freeze did not materially hurt the crop.

Maple syrup production has been experiencing a shortfall for the past two years. The 2008 season is expected to end with approximately 55 million pounds - 30 % below normal production, while demand for maple syrup is reported to be over 100 million pounds. Needless to say, the available product is being sold at a steep premium

Unusually cold weather for a few days in April has badly affected the peach crop in California. Early assessments show that some orchards were damaged by as much as 30-35%. It is widely believed that the 2008 crop will be down at least 25% from last year and may be close to the 355,000 tons delivered in 2006. Overseas suppliers are gearing up for the expected stronger U.S. demand. China is only about to begin its season, more will be known next month. Greece is reporting a good crop season but currency will determine competitiveness.

While for many years South American prices have been trading at levels well below those from Spain, we’re starting to see convergence as Spanish price fall while South American prices rise. Spain just finished a very good season, and while euro FOB prices are down significantly, the fall is muted by the currency impact of the euro/dollar conversion. The Peruvian season will be commencing soon and initial indications there point to a very short crop and higher pricing than last season. One of the largest producers was forced to shut one of its two plants because of the earthquake that hit Peru last August. Chile is also about to begin its season and has reported a significant decrease in total acreage dedicated to artichoke planting. While exports are expected to be off 50%, the U.S. International Trade Commission (ITC) might soon propose duty free status for Chilean artichokes (currently a 8.7% duty is imposed on Chilean artichokes, while Peru is already duty-free, and Spain has a 13.8% duty rate in the U.S.).

As the rice shortage continues, India will limit the export of Basmati rice by imposing a rice export tax; a compromise solution reached against demands by some for a total ban on exports. The price of Jasmine rice has soared 30 % in just the past few weeks.

Blue swimming crab continues to be extremely short, with pricing up substantially from the beginning of the year (up over 50% on some items). Landings in the major producing countries remain poor but are expected to improve soon. Still, it will take some time for market supply to recover. Packers are quick to point out that prices are not expected to return all the way down to the old levels because of the severe appreciation of the Far East currencies against the dollar and the higher cost of oil.

TILAPIA (frozen)
Because of the freeze earlier this year, the Food and Agriculture Organization projects that Tilapia production in China may be down 80% compared to last year. The Guangxi province suffered the most damage, while the other two main tilapia producing provinces, Hainan and Guangdong in Southeast China, were not as badly affected. The group forecasts a tight market for the next 8 to 12 months.

SHRIMP (frozen)
The price advantage of white (vannamei) shrimp over Black Tigers continues to erode as white pricing goes up while tiger pricing goes down. In fact, farm level pricing for black tigers in some countries is reportedly at a record low, and according to the Financial Express, some farmers are questioning whether to bother seeding their farms. Shrimp shipments to the United States during the first three months of 2008 totaled 123.8 million kilograms, a 2 percent drop from the same period last year. According to the regional trade advisor for the European Commission for Indonesia, U.S. trade officials have officially warned their Indonesian counterparts they must ensure shrimp isn't transshipped through Indonesia to avoid antidumping tariffs. The union group, the AFL-CIO American Center for International Labor Solidarity issued a report entitled “The True Cost of Shrimp” that alleges abuse of shrimp processing plant workers in Thailand and Bangladesh. Producers, especially those in Thailand, vehemently deny the accuracy of the report.

SALMON (frozen)
As an Infectious Salmon Anemia (ISA) outbreak in Chile has killed millions of salmon, production is down and plants continue to forecast higher prices and rougher times ahead. The New York Times ran an article last month about ISA, accusing the Chilean farmers of using antibiotics, but several weeks later the paper issued a “correction.” The stock market pricing for the main publicly traded salmon company was up on the news, and the salmon industry has called the article “nothing more than a smear attack against the industry.”