REMA FOODS IMPORT MARKET FLASH Aug 26, 2008
Finally, basic commodity prices have started turning around. Oil, corn, soybeans have all fallen. The Department of Agriculture is now forecasting the second largest corn harvest on record.
The Wall Street Journal’s editorial page summed it up: “Byrd’s Bad Idea is Back.” Senator Byrd (D., W.Va) is reportedly trying to reinstate the Byrd Amendment, which directed anti-dumping tariff money to the U.S. companies filing cases rather than the Treasury. As of 2007, some $1.9 billion was handed out and for several years, more than half went to just five companies. After the World Trade Organization (WTO) ruled the law illegal and authorized other countries to impose retaliatory tariffs on American exports, Congress finally repealed it. As the Journal points out, a revived Byrd Amendment “would trigger more retaliation, and at a time when exports are the main source of U.S. growth.”
A bipartisan group of House lawmakers want the Homeland Security Department to delay a cargo security rule from taking effect, saying it would likely disrupt the balance between security and commerce.
The proposed rule would require importers to submit 10 new categories of data on cargo containers before they are shipped to the United States by sea. Customs could put the rule into effect as early as November.
A California bill imposing a $30-per-TEU statewide fee on all containers moving through the ports of Long Beach, Los Angeles and Oakland is now headed to Gov. Arnold Schwarzenegger’s desk for a signature, following a 22-9 concurrence vote in the state Senate. Schwarzenegger has already indicated he supports the bill and is expected to sign it. The Ports Investment Bill (SB974) is projected to raise $400 million to $500 million a year.
USDA issued an interim rule for the mandatory country of origin labeling (COOL) program that will become effective on Sept. 30. The rule covers muscle cuts and ground beef (including veal), lamb, chicken, goat, pork; perishable agricultural commodities (fresh and frozen fruits and vegetables); macadamia nuts; pecans; ginseng; and peanuts - as required by the 2002 and 2008 Farm Bills. USDA implemented the COOL program for fish and shellfish covered commodities in October 2004. Commodities covered under COOL must be labeled at retail to indicate their country of origin. However, they are excluded from mandatory COOL if they are an ingredient in a processed food item.
The Food Safety Modernization Act written about in prior market flashes has now been officially introduced by Sen. Judd Gregg (R-NH) and Sen. Dick Durbin (D-IL) and co-sponsored by Sens. Tom Harkin (D-IA), Chris Dodd (D-CT), Richard Burr (R-NC) and Lamar Alexander (R-TN). Although it's unlikely any food safety legislation will pass this year, this bill has the best chance in being passed, and if not, will most likely be the base of any legislation introduced next year.
U.S. Customs & Border Protection (CBP) issued a General Notice in the August 7, 2008 Federal Register requiring all maritime containers arriving on or after October 15, 2008 to be sealed with a seal meeting or exceeding certain standards for strength and durability so as to prevent accidental breakage, early deterioration (due to weather conditions, chemical action, etc.) or undetectable tampering under normal usage. Each seal must also be clearly marked with a unique identification number.
This year, China has for the first time become a net IMPORTER of food, in value terms, with a deficit of US$5.78 billion on its trade in agricultural products in January-June 2008. The main agricultural imports are grains and cereals, soybeans and edible oils. China is still the world’s second largest overall exporter after Germany.
The US Dollar has been showing signs of improvement against the euro. It has gained several percent since last July. Current exchange rate is hovering around 1.46 to 1.49 euro compared to about 1.57-1.59 a month ago.
Slower demand along with a better than average seasonal kinkai catch (17,500 mtons) have stabilized the skipjack market with raw material holding around $1940-1990/mton (kinkai is a dark, oily fish not normally shipped to the U.S., but its supply has an impact on overall light tuna supply and thus price). After a long string of steady increases, the market has now gone six weeks without any firming, and some slight easing may even be in sight. The big question is which will pick up first: demand or the catch. With the kinkai season coming to a close, fish traders believe the relief seen now will be short lived. Catch is stable but already at lower than normal levels: Taiwanese boats are catching an average 21 mtons/day; Korea 20 and Japan 19. South American packers, short for fish, are importing supply from the Far East at over $2,000/mton. Yellowfin and tongol remain very tight, especially the better grades (high end tongol now costs more than low end albacore). After stagnating much of last year, albacore has firmed to $2850/mton, up from $2680 a month ago.
PINEAPPLE and TROPICAL FRUIT SALAD (TFS)
As Thailand’s summer crop is coming to an end and raw material becomes tighter, prices have increased to about 7.5-8.0 baht/kg, up from about 4.0-5.0 in the beginning of the crop. The smaller winter crop is expected to start around early October, but at this point it is still too early to predict the outcome as much is dependent on weather. China is undergoing a similar situation as Thailand. Indonesia, which suffered through severe flooding last year, is hoping to recover by October. Meanwhile, demand for pineapple for non-traditional export countries such as Russia and other Eastern European countries have significantly increased. Thus far in 2008, government statistics show pineapple import tonnage into the U.S. is up 5%, while the corresponding dollar value is up 26%. The major national brands are pulling back on holiday promotions and bids, and are now allocating to some customers, claiming shortages will last well into 2009.
The supply situation seems to have considerably improved compared to last year’s shortages. China is reported to have quantities available in brine pack, but no fresh pack remains. India is the main source of fresh pack mushrooms at the moment.
The U.S. imported a record amount of canned peaches last season - 4.21 million cartons. China represented more than half the quantity, with Thailand surprisingly coming in second (while Thailand doesn’t grow peaches, they repack large quantities of peaches in plastic fruit cups destined for the U.S.). In foodservice sizes, thus excluding plastic cups, China’s peaches comprise 92% of current U.S. imports. For the new season, China’s crop is underway and is reportedly good. Costs however are a bit higher due to increased tin plates, labor and general manufacturing costs in China’s overheated economy. Greece is expecting an excellent crop; about 3-5% better than last year, but pricing in dollar terms is still expected to open significantly higher than from China, as has been the case the past few years. Meanwhile, California’s peach crop is underway and it appears that the final harvest may come in better than the forecasted “frost-affected revised estimates,” yet the base price for peach raw material has been set at $321/ton, up from $268/ton last year.
So far in 2008, imports into the U.S. are up 9.3% in tonnage, but up 22% in value. It’s still too early to gauge expectations for new crop.
Unusual weather conditions in Peru have delayed the artichoke crop by 30-40 days. Volume will be significantly reduced and opening prices are up. Spain, on the other hand is expecting an excellent crop, so worldwide supply should be relatively stable. Unfortunately for U.S. customers, Spanish artichokes face a 14.8% duty, while Peru’s artichokes are duty-free.
OLIVE OIL/EDIBLE OILS
Olive oil prices overseas have come down slightly due to the stronger dollar. Soy bean oil prices have fallen significantly on the CBOT with more favorable weather conditions in the Midwest. Argentina’s decision to repeal the increased export tax, which mainly affected soybean exports, has altered the worldwide supply picture.
It’s still a bit early to gauge the European new crop prospects, but early indications are encouraging. In the U.S., the 2008 California crop is forecast at 65,000 tons, down 51% from last year’s crop of 132,500. Lack of rain and erratic temperatures are to blame.
Over the past two years, raw material costs have almost quadrupled as legislative changes in China flipped that country from a net exporter to a net importer overnight. Raw material prices were at $750/mton in 2006, climbing to $1030/mton in 2006, and to $2750/mton this year. Expect higher prices on sesame seeds as well as sesame oil, tahini and other related items.
Argentina, one of the major sources of lemon juice and concentrate, has reported a 40% decrease in production brought about by weather issues. Similar climate disruptions were experienced in Spain, U.S., Italy and Turkey. January through May export figures from Argentina over the past three years show lemon oil exports falling from 1445 mton in 2006, to 1080 in 2007, to only 668 in 2008. The shortage has firmed the market price of lemon juice concentrate to about $5,000/mton for 400gpl.
It’s now becoming clearer that very hot weather in Italy will reduce the early variety yields by about 30%. The major problems are in the North and it’s hoped a good crop in the South could alleviate some of the shortfall. China, on the other hand, is still expecting a relatively good tomato paste crop (no significant quantity of whole tomatoes is exported). In the U.S., a relatively weak dollar and higher profit potential have led U.S. firms to substantially increase exports over last year. In Australia, police seized $440 million worth of ecstasy pills hidden in 3,000 cans of tomatoes, while in the U.S., a federal bribery lawsuit was filed against a U.S. tomato paste processor for allegedly funneling hundreds of thousands of dollars to buyers at companies including Frito Lay, Kraft, Conagra and Heinz.
Landings of blue swimming crab in the major producing countries improved over the past 30 days although the overall market remains very tight. Fuel costs dropped from all time highs but operating costs associated with bait costs and labor as well as overall demand for product have continued to increase the cost of raw material.
Vannamei (white) shrimp has seen prices shoot up roughly 20% since April, as a result of rising production and fuel costs, as well as a concerted effort by the Asian farmers to harvest larger shrimp because of poor profitability in the smaller sizes. As a result price increased and demand fell, while tigers, having fallen in price, became a bargain. Against relatively weak demand, supply of white shrimp is improving and 30-40 through 60-70 count head on shrimp prices have begun to drop slightly. Black Tiger market is steady and prices remain attractive.
U/10 scallops from the Elephant Trunk and Nantucket Lightship have been commanding higher prices from the vessels. The Elephant Trunk area is located southeast of Delaware Bay and is close to 1,565 square nautical miles in size. It contains the highest density of scallops ever recorded in the Northeast region. The Elephant Trunk will be closed for the months of September and October causing scallops to be only caught from the open areas. Boats will be spread out and will have to fish longer to get their catches, causing price increases.
Reports estimate that as much as 80% of the tilapia production in China was affected by the long, intense winter weather. Demand for Chinese tilapia exports has grown from 90,000 mtons in 2004 to 210,000 mtons in 2007. Supply remains extremely short but should continue to improve as the ponds recover.
Farm raised catfish production totaled 45.2 million pounds round weight for the month of June 2008, an increase of 21% from June 2007. Exporters believe higher operating costs, an appreciating Chinese yuan and strong demand will bring about higher pricing by the end of the year. Domestically, the four major producing states in the U.S. had 660,000 broodfish on hand on July 1, down 17% from last year.
The Chilean Fisheries Authority (SERNAPESCA) issued a complete report on the infectious salmon anemia (ISA) problem in Chile, concluding that 11,000 mtons of salmon have been lost as a result of the year-old outbreak. So far this summer, Alaska's wild salmon harvests have fallen short of projections. The overall harvest through Aug. 1 is estimated at 72.8 million fish, below the original forecast of 132.5 million fish. Many predict even the lower figure won’t be reached.