Monday, January 26, 2009


The US Trade Representative has modified the list of items subjected to duties as a result of the World Trade Organization’s ruling against the European Union’s ban of hormone-treated beef. Starting March 23, a 100% punitive duty will be applied to European canned peaches, pears, various fruit juices, certain French chestnuts, Italian mineral water, lingonberry & raspberry jams, and chocolate (not in bulk form), among other items. Items with duty reductions include French mustard and Holland Rusk.

White House Chief of Staff Rahm Emanuel issued a memo to all federal departments and agencies on January 20 asking them to suspend the issuance of proposed and final regulations pending further review. U.S. Customs and Border Protection’s final importer security filing rule, also known as 10+2, is slated to become effective January 26. Press reports indicate that while this rule could be subject to review, it might also fall under the “national security” exemption.

In late December, President Bush issued a proclamation accelerating the elimination of import duties on several items under the U.S. free trade agreement with Chile. Of note, the list includes canned artichokes.

The recent drop in fuel prices along with lower demand for containers is pushing ocean freight rates down. So far, several lines have cut freight rates by about 10-15%. In order to stabilize pricing, steamship lines have, as of December 25, idled 165 vessels, effectively removing 430,000 TEUs (Twenty Foot Equivalent Units), representing 3.5% of the total world fleet in TEUs.

On February 18, 2009, the California port of Long Beach will begin collecting a Clean Trucks Fee of $35 per Twenty Foot Container. The fee is expected to raise about $1 billion over the next few years to accelerate the replacement of thousands of polluting cargo trucks.

Chinese New Year is today, January 26, 2009 - relatively early this year.

Trading in the U.S. dollar has been mixed: the dollar is slightly off of the highs it hit a few months ago, but stronger than the lows of last summer.

Volatility is up in the tuna world. Financial pressure and panic brought end of year skipjack pricing to a several year low of just under $900/mton, down from $1200 a few weeks prior. However, poor catches in January forced the price within days to shoot up to $1050-1150. The initial steep drop caused fishermen to stop fishing, leading to raw material drying up, and a quick turnaround in the psychology of panicking packers and traders. While very little quantities were sold at the lowest prices, the market is now trying to stabilize at a level commensurate with raw material costs – which itself is trying to stabilize to a level commensurate with the catch. As panic subsides, true fundamentals will take hold: the most important of which are the fish catch, fish demand and fuel cost. As the single largest cost variable in fishing, fuel pricing peaked at about $150/barrel, pushing skipjack cost to $2000/mton, but oil is now around $40/barrel. While supply is variable, tuna demand is expected to hold up in the current economy as consumers turn to cheap proteins like canned fish. Currently, catching by Japanese boats is moderate, reporting 26 mtons per boat per day in Western Pacific; their Taiwanese and Korean counterparts performed at a level similar to last week with 15 mtons/boat daily. French and Spanish boats maintained catching in the Indian Ocean, taking in 15-20 mtons per boat/day. The whole Maldives remained poor, checking in only 70 tons each day. Skipjack-Yellowfin ratios is 85:15 in the Western Pacific; 25:75 in the Indian Ocean. Reported albacore price in Bangkok is $2600, up from $2450 in December. Local tongol catch is trading at Thai baht 51/kilo. To top it all off, according to Reuters, tuna catches in the south-western Indian Ocean are reportedly down 30% as pirates blocked access to tuna-rich waters off Somalia. From August-November 2008, fishing boats in the yellowfin rich waters beyond Somalia's Exclusive Economic Zone were attacked by pirates at least three times.

After last year’s tight supply situation, this year’s crop is proving to be more abundant – not because of increased supply, but rather weaker world demand. Thailand’s next season is expected to come early as packers predict a March crop peak rather that the usual April peak. China’s pineapple exports to the US have been growing consistently since 2005 and the U.S. now accounts for close to 50% of China’s pineapple export market.

While fundamentals reported by the packers should point to stronger market, the overall market remains extremely weak. China’s crop season is underway and growers are still reporting an estimated drop of 50% in raw material supply. In the Fujian province, which accounts for about 60% of China’s crop, the season started late due to unusually warm weather. Most farmers, discouraged by the current low prices, are reducing their output to minimize losses. However, it is also being reported that most Chinese packers have carry-over inventory from the 2007/2008 crop season. India continues to produce regularly and is generally keeping competitive with China to guarantee a continued order flow.

The Chinese crop season, whose peak started in mid-November, will be ending early this year because of the sooner than usual date of Chinese New Year. Volume is reported to be good this season with likewise good quality of fruit expected. While the above average quality is advantageous for whole segment production, it may actually cause a shortage of broken segment packs. The Spanish crop season has just ended as well and packers say that it was a good year in terms of raw material. However, with an anti-dumping duty in place on Chinese mandarins brought into Europe, Spanish pricing is artificially inflated and totally uncompetitive for shipment to the U.S. market.

Peru and Chile have both ended their crop seasons earlier that forecasted. Farmers in southern Peru did not plant substantial quantities due to drought; the next crop cycle doesn’t begin until April. Chile has just been granted duty-free access to the U.S. (Peru already has duty free access), while Spanish artichokes still carry a 13.8% duty. The Murcia region in Spain was blanketed by a frost last weekend that may negatively affect as much as 30% of the crop. Some packers are reporting that only the first cut was affected; the second flowering is already on the plants and should be available soon. Other sources such as China, Ecuador, Egypt and Turkey have industries still in their early stages. Product quality from these countries is still far from that of Spain, Chile and Peru.

Initial forecasts for the current season point to a total olive oil production of 2,351,000 mtons, down from 2,451,000 last year, but up from 2,526,900 the year before. Carryover, at 219,900, is similar to last year. Consumption is forecasted at 2,353,000 this year, compared to 2,433,000 last year resulting in a balance similar to last year. Estimated crop size by major producing country is: Spain 1,100,000 mtons; Italy 500,000; Greece 250,000; Turkey 150,000; Tunisia 120,000; Syria 100,000; and Morocco 70,000. Year-end financial pressures on the smaller packers and farmers caused significant weakening of raw material cost in December, while the stronger U.S. dollar further lowered costs for the U.S. market. On the other hand, January brought some firming in costs and a weaker dollar, for a higher market price.

A report from the Chesapeake Bay Foundation has concluded that pollution and overfishing have devastated the U.S. Chesapeake Bay's blue crab harvest. December saw some players – primarily importers heavily dependent on crabmeat – dropping prices for imported crabmeat in an attempt to raise cash before year end and to avoid defaulting on year-end bank covenants. However, January brought less panic selling and some stabilization to the market.

SHRIMP (frozen)
US Customs is sending a team to Indonesia to investigate the largest packer there, which they are accusing of transshipping Chinese shrimp to the USA in an effort to circumvent the US anti-dumping duty of 112.81%. With regard to overseas production, the second harvest season is almost nearing the end and raw shrimp arrivals should be over in a few weeks time. There is expected to be a prolonged dry season with the next crop harvest coming only by end May.

SCALLOPS (frozen)
A majority of the boats saved a couple of trips from the end of the year in the Elephant Trunk (ETAA) area and will be landing the allowable 18,000 lbs, with an average of 70% 10/20 size and 30% U/12 size. Landings were enough to cover the holiday business, but no over abundance is expected to flood the market and create lower boat prices. The New England Fishery Management Council (NEFMC) will meet in February 2009 to make final the scallop fishing regulations for the new season, presenting them to the National Marine Fisheries Service. The council is also working on a long range fishery plan that has to be in place by 2010.

TILAPIA (frozen)
Turmoil in the World’s economies has had an effect on tilapia markets. Prior efforts by Chinese producers to reduce their dependence on the U.S. market have been stymied with weakening economies of other potential markets such as Mexico and Russia. To avoid another freeze, Chinese farmers harvested most of their fish this year before winter, producing plentiful supplies of smaller fillets. While small fillet commodity pricing is down from last year, the market remains firm for higher quality product. Supply could be short as Chinese plants will be closed for the New Year holiday. Supply should improve by May 2009.

SALMON (frozen)
Despite a sharp change in the exchange rate of the Chilean Peso vs. the U.S. dollar, the market for Atlantic salmon remains firm due to ISA problems and forecasts of much lower production going into 2009. Production for 2009 is projected to drop more than 40% compared to 2008. Many Chilean producers are having serious financial problems and with the lower production, packers are predicting that prices could rise substantially come spring.

CATFISH (frozen)
After a slight price firming at the end of 2008, Chinese catfish supply remains steady at this time.