Tuesday, December 16, 2008

Dollar vs Euro (past three months)

Monday, December 15, 2008


The US Department of Homeland Security’s new “10+2 Rule” for importers has cleared the White House and goes into effect on January 26, 2009. The rule requires importers to electronically transmit an Importer Security Filing (ISF) 24 hours before goods are loaded in the overseas port. Required information is extensive and goes so far as to identify where and by whom the goods were stuffed into the container. The process almost doubles the cost of entering product into the U.S. and heavily fines the importer for any errors. 10+2 holds the importer legally responsible for the accuracy and timeliness of the ISF, even for data beyond the importer’s control.

USFDA officially opened offices in Beijing, Guangzhou and Shanghai. In addition to China, FDA is planning to build a presence in India, Europe, Latin America and the Middle East. With these offices, the FDA will be in a better position to work more closely with manufacturers and share better manufacturing practices to further ensure food safety.

The Food and Drug Administration (FDA) is urging the government to amend its advisory that women and children should limit how much fish they eat, saying that the benefits of seafood outweigh the health risks and that most people should eat more fish, even if it contains mercury.

At this moment, the large tinplate manufacturers believe the concept of supply and demand does not apply to them. The reported global economic slowdown that has caused major commodity prices to tumble, including steel, is not yet affecting the price of tinplate. Tin manufacturers have announced 30-50% price increases for January 2009. Packers want to resist the increase, but given the near monopoly status of the large can makers, it appears to be a losing battle (for now at least).

The U.S. Trade Representative is considering adding products to the list of European products subject to increased tariffs as a result of World Trade Organization rulings against the European Union's ban on hormone-treated beef. Mustard already carries a 100% penalty tariff resulting from this dispute.

After reaching highs not seen since 2006, the dollar has tumbled a bit this past week. Above this report is an updated graph of the dollar/euro recent performance over the past three months (displayed as the value of the dollar in euros, so a higher figure represents a stronger dollar).

Raw material prices continue to fall: Skipjack is down further to $1200/mton and there is talk of another significant drop on the horizon.. Yellowfin is trading normally at about $400 over skipjack. Tongol is relatively tight. Albacore remains stubbornly strong at $2450. One would expect Albacore demand to fall in the current economic climate, and skipjack, a traditional counter-recession protein to hold up well – exactly the opposite of what has been happening with pricing over the past month. Time will tell. According to government statistics, tuna imports for the first nine months of 2008 are up 3% in pounds and up 31% in dollar value. Supermarket dollar sales this year are running at a five year record and given the tough economy and declining tuna costs, it’s expected that unit sales will pick up in 2009 as consumers traditionally search for value proteins. According to the Philippine fisherman’s association, piracy is quickly becoming a significant factor in tuna fishing. Fishermen have petitioned the government there for permission to carry firearms.

For the first nine months of 2008, pineapple imports are up 1.1% in cases and up 25.3% in value. As Thailand’s winter season intake peaked, and raw material prices came down to a more reasonable level of 3.7-4.0 baht/kg (from a high of about 6.00 baht/kg), demand from Russia tumbled along with the raw material prices. As the winter raw material peak is always short, packers claim the low price level won’t last. Still, the current market slowdown is keeping most buyers on the sidelines. Given the low prices and lack of demand, four Thai canneries have shut their lines and stopped taking in fruit.

The Chinese mushroom season is on-going and packers report that total raw material available will be 40-50% less than last season. However, with some Chinese carryover brine stock still left over from last year’s crop, India shipping regularly and Holland recovered from their compost troubles of last year, the market is soft. For the first nine months of 2008, China has exported 341,523 mtons, compared with 294,650 for the same period last year and 244,033 the year before that. Russia was the second largest buyer after the U.S.

The Chinese crop season is on-going and is reported to be good but the season will be a little shorter due to an early Chinese New Year. Packers started out looking for a price increase (about 15%) from last crop due to the rising cost of cans, but weak demand quashed that. In addition, Europe has imposed exorbitant anti-dumping duties on Chinese mandarins that should force canneries to divert more quantities to the U.S.

Two years ago, Spain exported about twice the artichokes of Chile and Peru combined. Over the past two years, this came full circle with Chile and Peru each exporting about as much as Spain does. This year however, dramatic currency swings are causing another reversal as a weakened euro is providing opportunity for Spanish packers once again to compete in the commodity artichoke market. After seeing their market share disappear on everything excluding specialty packs, the Spaniards are planning to compete again for commodity artichokes in 2009.

The season for green olives has ended. Packers are reporting a good crop for manzanillas but a short crop for queens. The manzanilla crop is estimated to have ended at 180,000 mtons (slightly less than last year’s 188,000 tons), but smaller sizes lowered processing yields. The gordal variety, used mainly for queens, ended quite short with only 21,000 mtons (vs. last year’s 35,000 mtons). The season for hojiblancas, used mainly for ripe olive production, is still on-going and is reported to be good.

Initial reports point to a good new season for olive oil. Spain is reported to have about 200,000-300,000 mtons of carry over and this year’s crop is expected to come in at 2.3 million mtons. The expectation of a good crop, remaining carry over, the reality of slowing demand, and the current favorable exchange rate will all contribute to significant price decreases over the next few months as packers start shipping new crop oil. To combat fraud, several U.S. states are finally passing legislation to ensure the economic integrity of olive oil. So far, Connecticut and California have passed laws that closely match the International Olive Oil Council standard. The Association of Food Industries and the North American Olive Oil Association were both instrumental in the getting the bills introduced.

Last crop’s fixation on alternative fuels has affected the growing areas available for mustard seeds, the majority of which come from Canada. Many Canadian farmers found it more attractive to convert their land to canola and wheat to receive subsidies from the government. This significantly affected the supply of mustard seeds resulting in an enormous 144% raw material cost increase. To make matters worse, the possibility of an increased duty rate on mustard (now already tariffed at 100 %) is being reviewed by the U.S. Government.

The new Chinese season for waterchestnuts is on-going and this year’s crop is reportedly much better than last year’s. Prices, which almost doubled last season, are expected to return to a more normal level this season.

The market in the U.S. is understandably quiet given the economic uncertainty facing consumers, and prices for crabmeat, one of the most expensive proteins sold in the U.S., have tumbled significantly. In Indonesia, Phillips shut down three factories and laid off all the workers associated with those plants and is now just operating two plants in Java. It’s been reported that several cash starved importers are using the current environment to get rid of poor quality packer label crabmeat.

SHRIMP (frozen)
For the first nine months of 2008, shrimp imports were up 2.7% in pounds, and up 4.6% in value.
Black Tiger arrivals in India for the second crop have just started but landing patterns clearly indicate minimal supplies with 30-40% less inventory than the first crop. Raw shrimp prices have been more or less stable with a slight weakening trend on most large sizes while prices on mid to smaller sizes have been strong due to very low arrivals. Black Tiger first crop arrivals in Vietnam are much lower than normal. More farmers are now tilting towards vannamei whites due to low viability on the tigers, but vannamei seasonal production is expected to taper off in the next few weeks. Given the economic climate, suppliers are closely monitoring sales as retailers brought in less shrimp than normal going into this holiday season.

SCALLOPS (frozen)
The Elephant Trunk Access Area (ETAA) re-opened on November 1 after being closed all of September and October for migrating sea turtles. The 275 trips that remain in this area need to be used by February 28, 2009. Most trips will yield 18,000 lbs each, so a total of approximately 5 million lbs should land during this 4 month period. Look for the 10/20 supply to be adequate, with limited availability on the U/12’s and U/10’s. The smaller sizes (20/30 and 30/40) will also have limited availability due to the ETAA yielding no smaller sizes. Traditionally the smaller sizes are landed from inshore areas.

TILAPIA (frozen)
Increased production, strength of the USD, and the desire by the Chinese producers to pull as much product from the ponds prior to Chinese New Year in January 2009 (in order to minimize risk against another “freeze” which was seen earlier this year) is putting some slight downward pressure on prices for smaller fillets, yet overall tilapia prices and sales remain strong.

SALMON (frozen)
ISA disease issues continue to hold down production; however a weak economic climate is so far preventing prices from increasing.

CATFISH (frozen)
Recently, a limited number of Chinese Catfish producers were removed from the FDA auto-detention list after they met FDA criteria for food safety. The result will be a reduction in import-related delays for imports of those company’s products.