Monday, July 28, 2008


As the current labor contract ended July 1, 2008, the Pacific Maritime Association, which represents 71 cargo carriers, terminal operators and stevedores, and the International Longshore and Warehouse Union, representing 26,000 union members serving 29 West Coast ports, have been negotiating actively since March. While initially a quick and amicable negotiation was expected, the situation has become heated over the past two weeks. Southern California marine terminal operators are now reporting that union dockworkers have engaged in "work to rule" actions at the Long Beach-Los Angeles port complex, the nation's busiest port. Operators estimated that the slowdown actions are trimming up to two hours per shift from actual work time and reducing terminal productivity by 20 to 30 percent. An aggressive offensive by the PMA to achieve contract concessions during the 2002 contract negotiations, further exacerbated by a union "work to rules" slowdown, resulted in a 10-day PMA lockout of ILWU workers that cost the national economy upwards of $1 billion per day in losses. listed West Coast longshoreman in its list of the “Ten most overpaid jobs in the U.S.”

The upcoming Olympics in China are apparently having a greater affect on Chinese exports than originally expected. In order to clear the air of smog, the government has halted production at many plants (excluding those working around the clock to prepare for the Olympic Games). The shutdown continues until both the main Olympic and Paralympic Games (for handicapped athletes) conclude on September 17. According to Business Week, factories that consume a total of 13 gigawatts of electricity could be taken off-line – the equivalent of nearly half of Mexico’s total industrial capacity. In Beijing, drivers are now only permitted into the city on certain days based on an even/odd license plate rule (resulting in executives buying two cars to cover both license plate designations)

Every year, the US government analyzes the GSP duty free designation given to many imported products. When imports of an item from a particular country increase over a threshold, or become more than 50% of US imports, the duty free classification can be lost resulting in higher selling prices. The President has the ability to waive the change under various conditions. For the major food items covered in this report, there were no significant changes this year. A full list can be viewed at:

The 2007 per capita seafood consumption figures have been released and it shows that U.S. consumers are eating much the same top 10 items as recent years. Consumption of tilapia and salmon increased the most from last year. Overall, Americans ate 16.3 pounds of seafood in 2007, down from 16.5 in 2006. The top ten items (with per capita consumption) are: shrimp (4.10 lbs), canned tuna (2.70), salmon (2.36), pollack (1.73), tilapia (1.14), catfish (0.88), crab (0.68), cod (0.47), clams (0.45) and flatfish (0.32).

USA Today reported that FDA may loosen restrictions imposed last year on Chinese seafood processors, following recent FDA inspections/audits of 13 Chinese seafood processors, including some of China's largest. Impressed with their findings, FDA will decide within weeks on whether to relax the restrictions. If this happens, the FDA will rely more on Chinese certifications.

In Argentina, the long drawn out protest/strikes staged by farmers have finally come to an end as the government rescinded the export tax increase that was levied in March 2008.

Unfortunately, with U.S. banks reporting ever worsening financials, the dollar has resumed its tumble and is once again approaching its record low against the euro, at about 1.58.

Skipjack raw material costs may have peaked as packers’ expectations for $2000+ fish has not materialized. Highest levels remain stuck at $1980/mton in Asia, but about $300 lower in Ecuador. Ecuador however has decided to stop fishing for 42 days for its annual eastern Pacific fishing ban. Packers still predict a firm market through the end of the year, but market demand has been weak at the current levels, and any improvement in catch could bring about a decline in pricing. Major storms for the Philippines now in their monsoon/typhoon season have been playing havoc with local supply. Catching by Japanese boats slowed down to 18 tons per boat per day in the Western Pacific, while their Taiwanese and Korean counterparts recorded only 12 tons of tuna per boat daily. French and Spanish boats continued to anticipate poor catching in the Indian Ocean, providing less than 10 tons per boat/day. Daily catch in the whole Maldives showed no sign of improvement, reporting 100 tons of materials. Supply of the seasonal kinkai fish is expected to be less than half compared to a normal year (kinkai is a dark, oily fish not normally shipped to the U.S., but its supply has an impact on overall supply and thus price. Be aware of very low offers as thry could be kinkai). Skipjack-yellowfin ratios are running 92:8 in Western Pacific; 85:15 in Indian Ocean. It’s reported that tuna boat owners' associations in China, Japan, South Korea and Taiwan collectively grounded their fleets last week due to increasing gas prices. Yellowfin is trading in Bangkok at $2350, in Japan/Korea at $2500, and in Spain at $2900. Albacore is trading in Bangkok at $2680. Chinese exports of canned tuna for the first half of 2008 soared to 16,193 mtons, up from 10,827 in 2007 and only 2,281 in 2005. While impressive, the figures are still minuscule compared to Thailand which exported 211,980 mtons in the same period. Finally, the deal for Starkist to be sold by Del Monte to Dongwon, a South Korean company, was completed at $363 million.

The largest national brand in the U.S. is pulling back on holiday promotions and bids, and is now allocating to some customers, claiming shortages that are expected to last well into 2009. Thailand, Indonesia and Malaysia all report having very little raw material available for processing. This situation, coupled with rising production costs continue to push up prices. China is still a few months away from its new crop season which begins in October.

The market is weakening slightly as China offers its brine pack mushrooms. India is reporting regular production but might have to cut pricing to compete. Holland seems to have recovered from their compost problems of last year; however the euro/dollar exchange rate makes Dutch mushrooms uncompetitive.

Italy’s early Northern harvest will be at least 10% lower than original estimates, while rain and humidity reduced yield by over 20%. Combined with what they call “extreme” production cost increases, some packers are floating talk of a 40+% price increase. It’s still too early to judge though, as later varieties could still alleviate the early crop shortage. At this point, anything could still happen.

The California Clingstone crop is forecast at 380,000 short tons, down 24% from last season. The California Canning Peach Association (CCPA) ratified its 2008 price agreement with Del Monte Foods setting a base price for peaches at $321/ton, up from $268/ton last year. Greece is expecting 285,000 metric tons (314,000 short tons) this year, close to last year’s number. The Greek price to the farmers is averaging euro 0.27/kg compared to euro 0.24/kg last year, and of course the dollar is significantly weaker this year compared to last. China remains the best hope for the U.S. market.

Chinese pear exports surged dramatically last year to 61,073 mtons, up from between 22,714 and 16,079 mtons over the past four years. The U.S. was by far the largest customer, and China is now by far the leading pear exporter worldwide.

Spain ended its season shorter than forecasted with some packers withdrawing offers midstream. Turkey is expecting a normal crop, but opening prices are about 15-20 % higher than last year's pricing, mainly due to rising production costs and the weakening of the dollar against the Turkish Lira.

Heavy rains in the north have led to a disease that has drastically cut Peru's production of jalapenos this year by 80% compared to last season.

As with other peppers, Turkey is expecting a normal crop but this year’s prices are up due to the appreciation of the Turkish Lira and higher production costs. Although Greece is also reporting a normal crop, the euro is 18% stronger now than in the same period last year.

Coming from the 2007 crop, it is reported that raw material available for the manufacturing of pomace was extremely short. This is due to several factors:
- As refineries become more efficient, there is less oil left behind for further processing.
- With rising fuel costs, some have found rendering of pits for fuel a more profitable option.
- Tinplate cost has increased about 20% and freight rates from Italy have increased $400-600/TEU.
- Lastly, the euro has strengthened against the dollar.
Domestic oil prices have come down slightly in the last week, with the Soybean contract on the Chicago Board of Trade down a few cents.

Prices remain firm and are not expected to soften any time soon. New crop won’t be available until October.

Florida’s orange crop has rebounded and is up 32% in volume compared to last year. The grapefruit crop at 26.6 million boxes is about even with last year’s 26.5.

Hot temperatures have negatively affected landings of blue swimming crab in the major producing countries. Rising fuel costs have caused fishermen to catch in shallow areas resulting in smaller crabs. The crab landing has slightly improved but the prices continue to rise. Domestically the Chesapeake crab processors are struggling with strict new regulations designed to protect dwindling crab production in the Chesapeake Bay, which according to Virginia and Maryland fisheries managers has seen stock drop 70% since 1990 due to overfishing and water pollution.

Black Tiger prices remain attractive and shifts in buying are being recognized in the industry as White Shrimp prices continue to remain relatively high. The US Dept of Commerce issued final results of the antidumping duty margins in the administrative review of frozen warm water shrimp from India covering the period February 1, 2006 through January 31, 2007. The final results for the major Indian exporters are all minimal, ranging from 0.35% to 1.69%. In Thailand, antidumping rates are generally between 2.29 and 6.82%, and the industry projects shrimp production will be 430,000 mtons this year, a drop from 470,000 mtons last year. The World Trade Organization (WTO) ruled in favor of Thailand and against the U.S. Continuous Bond requirement for shrimp, which could force the government to return $360 million in bonding fees covering Thai shrimp alone. In a positive step, FDA is using the shrimp-farming industry as a test case with the goal of drafting guidance for third-party certification programs to ensure imports meet FDA requirements.

According to Chile’s Directorate of Fisheries (SERNAPESCA), the Infectious Salmon Anemia (ISA) epidemic has reached its peak and the number of infected farms is expected to decline over the next few months. SERNAPESCA has enacted stricter measures to prevent the spread of ISA, including requiring all ova producers, mainly from Norway and Scotland, to undertake a full check of their brood stock and to certify that their ova are not infected. In the meantime, with production declining, pricing is firm. In the U.S., a fire destroyed the only processing plant in Chignik Bay (one of Trident Seafood’s plants).

Prices continue to be strong. The boats that are fishing in the open areas (Channel and Mid Atlantic region) are catching 10/20 and 20/30 and the prices are beginning to climb. Additional boats will fish in the open areas in the next 30-60 days.

Supply remains extremely short. Even with demand and per capita consumption on the rise, imports have dropped 9.4% for the first five months of 2008 due to the freeze related supply disruption from China earlier this year.

Look for possible increases in new season pricing towards the latter part of the year due to higher operating costs and exchange rate appreciation of the Chinese Yuan. 2/3 and 7/9 sizes are short at this time. According to the New York Times, the soaring cost of soybean and corn feed have forced many domestic U.S. catfish farmers in the South to drain their ponds. Compared to that of beef and pork production, feed is a larger share of the cost to raise catfish (more than half). For example, Dillard & Company, which last year raised 11 million fish, will raise none this year, calculating that they lost 33% on each catfish they sold. Imports of catfish and pangasius into the U.S. rose 30% in volume for the first five months of 2008 as compared to 2007. Interestingly, worldwide Vietnamese pangasius exports are projected to surpass 500,000 mtons this year, generating over $1.2 billion. Sales in the U.S. are limited by stringent anti-dumping measures put in effect to protect domestic catfish farmers.