Thursday, September 25, 2008


Packers around the world are worried about the events on Wall Street - concerned that credit will get tighter and the dollar will get weaker.

FDA is proposing that imported food that is refused entry into the U.S. would have to be labeled as such. It is proposed that labels stating “UNITED STATES: REFUSED ENTRY” be permanently affixed and prominently displayed on the shipping packages, as well as any documents accompanying such food (including electronic documents). The hope is that this will be a deterrent for companies that tend to “port shop”, whereby products rejected in one port are redirected to other ports for entry.

The Federation des Aliments Conserves warns that the price of empty cans will rise by 12-15% over the next few months and another 15-30% in 2009. The cost of the tinplate raw material has gone up 50% since January due to strong demand for iron ore in China, India and Russia.

On December 31, 2008, both the Generalized System of Preferences (GSP) and the Andean Trade Preference Act (ATPA) are scheduled to expire if Congress does not renew the acts. Currently, legislation is before Congress to renew them but it remains to be seen if action to pass the renewal legislation will occur. Both of these acts provide duty free benefits to imports of merchandise from developing beneficiary countries (GSP) and from Peru, Columbia, Bolivia and Ecuador (ATPA).

Hurricane Ike forced the temporary closure of the port of Houston. Some steamship lines declared Force Majeure and rerouted cargo bound for Houston to other ports such as New Orleans. Customs offices had been closed until last week due to power and/or water supply issues, although Customs was manually processing hot shipments at the airport. Most operations are now running but backlogs exist.

The dollar has spent the past month on a roller coaster, ending down a bit from its recent highs. After falling a couple of months ago to a low of 1.59 dollars/euro, the dollar shot up to a peak of 1.39, before falling last week to 1.49 given the meltdown on Wall Street. The dollar closed most recently at 1.46 to the euro. Overall, we’re back to where we were about 7 months ago. A graph of the dollar/euro for the past year can be found on this site, above this post (displayed as the value of the dollar in euros, so a higher figure represents a stronger dollar).

As predicted, lack of demand has caused skipjack pricing to ease – it’s now trading around $1820-1860/mton. Catch is reasonable at average 22 mton/boat/day, but with the lower pricing, demand is picking up so the future direction of raw material is less clear. Yellowfin is running at $2200/mton, down from $2400 and the yellowfin/skipjack ratio has increased in recent weeks. Tongol is running at 53 baht/kilo. Albacore cost is continuing to climb, which at $2900, is up more than 10% over the past two months. After months of price convergence for all the various grades of tuna, markets are now returning more to normal with spreads widening between light and white tunas. For Thai factories, the U.S. is still the largest buyer worldwide (44,000 mton Jan-June 2008), while Egypt has jumped to the second largest position market (at 22,000 mtons). In Indonesia, ownership of one of that country’s largest factories has changed hands, with 10 investors from the Philippines (80%) and Indonesia (20%) taking over.

Thai winter crop is on-going but not looking very promising. Opening prices for raw material have reached 8.00-8.50 baht/kg, while normal price level should be around 5.00-6.00 baht. Furthermore, while weather is normal at the moment, the threat of rains and floods remain during this crop season. Demand for pineapple continues very strong globally and the shortage of tinplate has caused packers to run behind in their delivery schedules. It is reported that the large national brands in the U.S. market are now on allocation, and buyers are scrambling to make up the difference with private label. Clearer prices for the winter crop will be available in October. Overall, the pineapple market in 2009 is shaping up to be even worse than in 2008.

All eyes are on China as the new crop approaches. It appears that brine pack raw material from the previous crop is still readily available, forcing pricing down over the past few months. According to sources, growers are demanding high prices for new crop raw material but packers are not giving in because of their inventory position. India is reporting stable supply.

Italy’s crop is finalizing better than the dire early season predictions. Still, at 4.6 million mtons, the crop is considerably shorter than last year, and the nationally agreed upon raw material pricing is 60% higher than last year. On top of this, the tinplate prices have continued to rise and are even expected to increase further in 2009. The US dollar’s strengthening against the euro has alleviated some of the price increase, but in general, this year’s price in dollars is predicted to be 10-12% higher than last year.

California crop finished better than initial estimates, but still 14% less than 2007 (70,000 tons less). Yields per acre also declined and canned inventories are expected to be tight. Greece is expecting an excellent crop, but most of their product is destined for Europe and South America. China’s final crop is still uncertain, but initial expectations point to a good season and a good competitive position for Chinese peaches in the U.S. market.

Chinese pear crop is just starting and is expected to be normal.

It’s still at least a month before good estimates will be available from China with regard to new crop raw material; however it is a certainty that tinplate, labor, and similar expenses are up this year in China.

Chile and the U.S. are in negotiations to speed up the removal of duty on Chilean exports of artichokes to the U.S. The U.S. Trade Representative's office is preparing to submit to Congress a report outlining the proposed changes. Congress will then have 60 days to review the proposal.

Spain is now expecting a mixed crop with initial estimates differing by olive variety. The manzanilla crop (normally used for green olives) has begun and early indications point to a good crop; however sizing of the fruit may be a bit smaller than average. For queens (large green olives), crop is predicted to be 30-40% worse than last year, with a lack of carryover from last year’s bad queen crop. For hojiblanca olives (mainly used for ripe olives and olive oil), outlook is good; but the hoji crop comes in last and doesn’t begin until October.

Olive oil prices have started coming down due to the improved exchange rate between the dollar and the euro. Positive crop forecasts are also affecting current offers, even though new product is not yet available.

Pepper prices from Turkey have leveled off a bit. This year’s opening crop prices started about 30% higher than last year due to initial predictions of strong demand from pepper paste producers and a short crop. The crop however came in better than expected, the pepper paste producers are not buying up all the production, and the dollar has strengthened against the Turkish Lira. Peru’s production is also on-going and is not experiencing any shortfalls.

As European packers continue to consolidate, Bonduelle of France is buying the Belgium canner La Corbeille. La Corbeille, with sales of $102 million, packs vegetables in cans and glass jars.

Initial indications point to a good crop in Peru this season. The harvest is expected to start earlier than usual.

While it’s a bit early to make predictions, insufficient rainfall is expected to reduce the crop around 10% compared to last year. In addition, picking, processing and labor costs are up while carry-over stocks from last year are minimal

Landings of blue swimming crab continue to improve in the major producing countries, and prices have eased slightly. Demand however remains high and although gasoline prices have dropped, cost of bait and supplies as well as labor wages have remained strong. Tin plate shortages are causing severe disruptions to the pack, as packers are unable to source the lithographed cans commonly used for crabmeat production. Even with all the difficulties, the outlook is brighter for foreign packers than those in the U.S.: last Tuesday the Chesapeake Bay blue crab fishery was declared a federal disaster, opening the door to possible loans and financial aid from the government. Congress, however, still must approve funds for the ailing players in the domestic crabmeat market.

SHRIMP (frozen)
By the end of August, the conventional summer aquaculture crop of Black Tiger shrimp has come to an end in India and Vietnam. India experienced a 40% fall in the harvest quantity as compared to the same period in 2007, while the crop in Vietnam is down about 20%. Estimates for the winter crop in both countries are projected substantially lower compared to earlier years. Slow demand from the U.S. market however has so far prevented pricing from going up. Vannamei (white) medium to small sizes (31/40 and smaller headless equivalent sizes) are in heavy demand and prices have increased on these sizes. Farmers will be targeting these smaller sizes for the next harvest causing the supply of larger sizes to decrease in early November.

SCALLOPS (frozen)
Recent landings have yielded primarily 10/20 and 20/30 count per lb. U/10 landings have been light causing prices to rise. Overall a 10 day trip has been yielding 15,000 to 20,000 lbs. The ETAA (Elephant Trunk Access Area) is currently closed until October 31 to protect sea turtle migration through the area, but will re-open November 1 with approximately 100 trips remaining that will take in approximately 1.8 million lbs.

TILAPIA (frozen)
Farmers are harvesting early in order to take advantage of the current high raw material prices, causing better availability of smaller 2/3 oz and 3/5 oz fillets. Extremely high demand caused by customers trying to restore inventory levels is expected to keep prices high until summer 2009. While farmers predict that higher input costs as well as increasing world wide demand will prevent prices from ever returning to the very low levels of 2006/2007, long term supply and demand will determine the final outcome.

SALMON (frozen)
Poor supply coupled with strong demand from Russia, Europe and Asia has pushed prices up of over a dollar per pound as compared to just eight weeks ago.

Prices overseas are up, and offer levels in the U.S. are expected to soon follow suit. Lab testing for all Chinese processors will continue until notice is given by the FDA for exempt factories. Supply is expected to be steady through the winter and into next year. Imported product will continue to represent the better deal over domestic fish, as domestic catfish farmers deal with the cost of fishmeal that has risen from $800 to $1800/ton over the past year (blame the rising costs of corn, soy and wheat). Domestic prices continue to rise as multiple farming areas in the U.S. are closed down.