Monday, June 23, 2008


Effective 15 October 2008, U.S. Customs and Border Protection (CBP) will require all containers in-transit to the U.S. to be secured with a high-security bolt seal. Importers are responsible for ensuring their containers are sealed according to regulations. Although this is a new regulation, it is not a new industry practice, as virtually all maritime cargo containers entering the U.S. are already secured with a high-security bolt seal as mandated by C-TPAT.

Truckers around the world are causing havoc as they strike to protest the high cost of fuel. While this obviously did nothing to lower the cost of fuel, strikes in Spain, France and Greece halted virtually all commerce for several days. Argentina likewise is suffering from an agriculture strike as farmers protest an export grains tax increase of more than 10% levied in March.

China is busily preparing for the upcoming Olympics. This has affected some factories as they have been ordered to stop production in order to minimize air pollution. Stricter inspections at the ports are also causing delays in shipments.

For some canned vegetables, imports will be a welcome help in alleviating the Midwest flood induced shortages that are expected for 2008 and even 2009. Major vegetable for canning states such as Wisconsin, Indiana and Illinois have been severely affected. Grain corn and soybean supplies look to be historically tight going forward.

Greenpeace released a report titled "Carting Away the Oceans: How Grocery Stores are Emptying the Seas" ranking retailers according to their sustainable seafood purchasing policies. While Wegmans and Ahold scored the highest, the report generally gave failing grades to the entire retail sector. The National Fisheries Institute called the report misleading and alarmist.

The latest government statistics show wholesale food prices are up 6.3% for the Jan-May 2008 period.

The dollar has temporarily stabilized with no significant movement over the past month.

Skipjack raw material continues to break records with sales occurring at $1950/mton and packers talking about $2000. Amazingly, skipjack pricing today is higher than albacore pricing was just last year. Catch in the Western Pacific is averaging 37mt/day/boat; Indian Ocean only 10mt/day/boat (20%YF mix), and Maldives only 100mt/day total. The yellowfin percentage of the catch (vs skipjack) has been declining and prices are climbing accordingly. Tongol, a species caught locally off Thailand and Indonesia, is almost nonexistent. Albacore, which months ago dipped to a recent low point in price has started to firm (now at $2650/mton) but still represents good value compared to light tuna. The 2008 World Tuna Conference just finished up in Bangkok with much discussion given to sustainability and the data showing that (1) skipjack, which makes up the majority of tuna caught worldwide, and albacore are sustainable and able to grow further to meet growing world demand, while (2) yellowfin is not at this moment overfished but needs to be watched, but (3) bluefin is already overfished and not sustainable unless drastic action is taken. Given the strong worldwide demand and the increased cost of key factors such as oil/gasoline, the director of Infofish in his speech summarized: “the term ‘cheap tuna’ is a thing of the past.” In the branded world, it looks like a deal may be imminent for Starkist to be sold by Del Monte to a South Korean company.

Pineapple raw material has just hit a record high price of 7.5 baht/kilo. Tinplate is short, and with the current season coming to an end, some packers in the major producing countries are reporting late raw material receipts are down 80% from the expected volumes. Overall, packers and the industry in general are bracing for a very tough 2008. China, a relative newcomer in the pineapple industry, had a record year last year shipping 80,900 mtons as compared to about 64,000 mtons last year. At 37,200 mtons, the U.S. was the largest customer. Unfortunately, compared to established sources like Thailand, Indonesia and the Philippines, the Chinese production, while rising, is still minimal.

According to the National Agricultural Statistics Service (NASS) and USDA, U.S. tart cherry production is forecast at 177 million pounds, 30 percent below the 2007 production and 33 percent below the production in 2006. Michigan, the largest producing State, expects a crop of 135 million pounds, down 30 percent from the 2007 crop and 29 percent below 2006. Multiple spring freezes and wet weather during pollination hampered fruit set in the northwest and west central regions. However, growers in the southwest region were more optimistic about the crop potential. U.S. sweet cherry production is forecasted at 249,580 tons, down 23 percent from 2007 and 15 percent below 2006. Note picking starts now – processing is still about 6 weeks away.

USDA released its 2008 California crop estimate at 10.6 million tons, 2% below last year. Growers and processors at the World Tomato Congress (held this year in Toronto) however, believe the estimate is too high, and 9.6 million tons is a more likely outcome. Chief concerns are water and labor. Another talked about topic at the Congress was the EU’s Common Agricultural Policy (CAP), which will phase out all tomato subsidies between now and 2011 and turn instead to government income support per acre. The new support structure is estimated to cause production to decline by 10.1% over the next 6 years. Meanwhile, global demand is growing and is expected to increase by about 1 million tons per year with world consumption reaching 39 million tons by 2010. China, now the second largest world producer after the U.S., is growing its production by 15% per year and is the source most likely to fill unmet worldwide demand.

The California Canning Peach Association is projecting a 2008 peach crop of 377,900 short tons, down 23% from 2007. Average yield is projected to be down 19% from last year. China is still quiet about its peach prospects, but initial reports point to a good production with opening prices about 5-10% higher than last year. Greece is expecting a very good season, but strong demand and a weak dollar might price them considerably higher than last year. With most Greek packers now sending their lower end peaches to the puree line, the majority of their canned product will be high choice/fancy quality with very little production of irregulars. China, on the other hand, should be competitive throughout the line and could be in a position to offer relief to the shortage in California. In South America, only about 2% of the Argentinean and Chilean crop went to the U.S. – the vast majority was exported to other South American countries such as Mexico, Peru, Brazil and Columbia.

While it’s still early in the season, Peru suffered flooding last month which damaged some of the crops. Spain is reporting a short crop as farmers, worried about aggressive competition from Peru and Chile, did not plant extensively. To make matters worse, demand in the Spanish fresh and IQF market are strong. Turkey seems to have more acreage planted this year; but strong demand for IQF peppers and pepper paste in Europe will leave less available for canning. The best case scenario seems to be that prices will be the same as last year.

While most U.S. saffron is imported from Spain, the world market is actually dominated by Iran. After the Iranian government several years ago started buying saffron at high prices and selling directly to exporters, the market has now skyrocketed to $2800/kg. To put this unbelievable increase into perspective, the market was only $400 just three years ago.

The Florida Dept of Citrus (FDOC) put aside $20 million, a third of its 2008/9 budget, to finance research on “greening,” a disease that’s been labeled the most serious problem ever seen in Florida. In South Florida, infection rates in some groves have already hit 60%.

Blue swimming crab continues to rise in price, with shortages most apparent in claw meat. Packers are not projecting any improvement in the immediate future. Meanwhile the Chesapeake Blue Crab Harvest is off to a good start.

SHRIMP (frozen)
A decline in tiger pricing is bringing excellent value and opportunity to the sector, especially compared to the relatively high price of white shrimp. In India, value added black tiger shrimp is shipped mainly from the Province of Andhra Pradesh (North of Chennai on the South East Coast of India). First crop harvest began there about one month ago and arrivals compared to 2007 are down by about 30%.

SCALLOPS (frozen)
Prices have been strong over the last month as the volume has dropped off on per day production. Most of the boats have been fishing in the open bottom area (Channel and Mid Atlantic region). Minimal catches of the 10/20 and 20/30 sizes along with higher summer demand should push pricing higher in late June and early July.

Steady to rising demand though 2008 and into 2009 Lenten season is expected. Imported tilapia is very short while rising feed and fuel cost is creating a burden for domestic U.S. catfish farmers, causing domestic farms to downsize and/or possibly shut down. Taken together with the strengthening Chinese currency, packers are looking for higher prices in the near term future.