Monday, August 24, 2009

REMA FOODS IMPORT MARKET FLASH August 24, 2009

TRADE/POLITICS
The Food Safety Enhancement Act of 2009 passed the House of Representatives last night by a vote of 283 to 142. Now, the Senate must approve a food safety bill. Once that occurs, a small group from both the House and Senate will "conference" and come up with a compromise bill. The House Bill harmonizes FDA's authority to prohibit or restrict the movement of tainted foods with that of USDA. It also clarifies who exactly does, and does not, have to register with FDA and pay the new annual registration fee.

The first half of the year saw ocean freight rates drop to historically low levels - prices that have proven to be unsustainable. Recent increases in fuel and continued losses by the shipping lines have prompted companies to implement a “cost recovery program” (CRP) and a peak season surcharge (PSS) ranging from about $300-$800/TEU.

El Niño is back. An El Niño is a completely natural event that usually lasts between a year and 18 months. It’s experienced every two to seven years, with varying degrees of vigor. Over the last couple of months the waters of the Pacific have shifted and the first impacts are already being seen. During a 'normal' year, the prevailing winds push the warm surface waters of the Pacific toward Indonesia. This makes the waters there about 8°C warmer and half a meter higher than the waters along the west coast of South America. During the El Niño, winds ease and warmer waters well up along the west coast of South America, around Peru and Ecuador. The change is tiny, just a couple of degrees Celsius, but the effect can be dramatic. Fish that prefer colder waters swim thousands of miles further north or south and/or head to deeper water, making them harder to catch. Agriculturally, Southeast Asia sees drier weather while the rains over the coast of Peru or Bolivia become heavier. Over the last month or so there has been a significant decrease in the rainfall over Indonesia. The effects are expected to become even more widespread in the coming period between December and February.

The Customs-Trade Partnership Against Terrorism (C-TPAT) program continues to evolve with respect to providing benefits to its partners in return for proof of strong supply chains (Rema Foods achieved C-TPAT approval several years ago). The ‘Importer Security Filing (ISF) and Additional Carrier Requirements’ known simply as “10+2” significantly increases the scope and accuracy of information gathered on imports US CUSTOMS has committed to a 1-year delayed enforcement period in order to provide the trade time to make the necessary changes to their business processes. The Guidelines for the Assessment and Cancellation of Claims for Liquidated Damages for Failure to Comply with the Vessel Stow Plan, Container Status Message, and Importer Security Filing Requirements have been finalized and will be published in the Customs Bulletin shortly. Certain C-TPAT partners will be eligible for additional mitigation - up to 50% of the normal mitigation amount, a benefit available only to those partners who have excelled in their commitment to supply chain security and in their partnership with US CUSTOMS.

CURRENCY UPDATE
After falling considerably several months ago, the US dollar has been stable to weak over the past two months.

TUNA
Skipjack remains firm at about $1450-1500/mton. Purse seine operators fishing in international waters have braced themselves for a major cut in tuna production effective this month as a result of a ban on FAD-fishing (fish aggregating devices) imposed by the Western and Central Pacific Fisheries Conference to replenish tuna stocks. The ban is in affect August 1 through September 30. Longer term, packers are worried about possible shorter catches resulting from the impending El Niño. The Yellowfin/skipjack ratio has been stable. With the tongol season now over in Thailand, market could firm. Albacore availability is improving, while demand remains strong. For the overall US tuna market, demand remains healthy as dollar sales in the $1 billion canned tuna category went up 6.7% for the 52 weeks ended July 12, according to Information Resources, Inc.

PINEAPPLE and TROPICAL FRUIT SALAD
Thailand, the major producer of canned pineapple, had a short summer crop, ending about four weeks earlier than usual. Raw material prices reached 7.00 baht/kg and fruit was reportedly smaller than usual. Most factories will stop producing by the end of the month, and winter crop relief will not arrive until December. Indonesia is experiencing the El Niño effect; due to the lack of rain, farmers have had to resort to expensive irrigation and the crop is expected to be reduced by about 10%. Tropical fruit is quite firm as last year's red papaya crop was very short and new crop does not arrive until the end of the year.

MUSHROOMS
The first half of the year saw mushroom pricing tumble drastically. Recent weeks however are showing firmness. China is still about four months away from its new crop and it is reported that currently available raw material is estimated at about half the usual levels. It is also reported that new crop production in the northern growing provinces will be around 50% below last year (thus only 25% that of 2007). Due to the anticipated shortage, brine mushroom prices have firmed more than 20% in the past month and are still rising. In India, the other major producing country, the situation is much the same. The only major producer, currently undergoing a financial reorganization, has decided to decrease production until prices improve.

OLIVES
Preliminary expectations point to a good upcoming crop this season, with good volume but possibly smaller olive sizing. More details should be available next month.

OLIVE OIL
After the historical low prices of olive oil seen in the earlier months of this year, prices are now on the upswing and projections are for a continuing uptrend until the end of the year. Prices have been under upward pressure because at their lowest levels, the selling prices were below the cost of production. In response, the EU is temporarily buying some inventory off the market to prevent further declines. The exchange rate (weak dollar) is also contributing to the price firmness in the US. However, don’t expect any significant long term price increases as the upcoming crop looks very good (ships early 2010). In the US, there are reports of some soy oil labeled as EVOO making it into distribution on the west coast. Buyer beware.

MANDARIN ORANGES
A major typhoon hit Zhejiang and Fujian, two of China’s leading mandarin orange production regions recently, leading some packers to caution that tree damage may dampen prospects for what was expected to be a good crop. The USDA’s forecast in July for China 2008/09 crop was 12.3 million mtons, up from 11 million last season. A USDA spokesman reported that their next report will reflect any damage from the typhoon.

ARTICHOKES
Simultaneous poor crops abound worldwide. Spain's crop ended early; it is reported that the final crop was about 30% less than last year. Peru, with two major canneries stopping canned artichoke production this season, has only one major and a few minor factories left. Farmers have decided to plant less acreage this year due to losses suffered the previous year. Chile seemed to be the new frontier with a newly granted duty-free status in the US, but their crop is also reported to be short.

PEACHES
Greek peach production is underway and though packing was deliberately started late, it is reported that supply will be sufficient. Some Greek factories have carry over inventories and demand is not as strong. Most packers in Greece have reduced the volume they are packing by about 30%. China’s crop is also on-going - earlier reports of heavy rains affecting the fruit seem to be unfounded. China has been steadily increasing their yearly output in the last 5 years. In 2008, their production was almost double that of 2004 levels (372,500 mtons vs 200,500 mtons). This season is reported to be about the same as last year, however, with weak demand there should be sufficient supply for canning. Soft demand is being reflected in the 20% lower opening price of this year’s crop.

SUNDRIED TOMATOES
With last season’s very low sales, this year’s season is off to a rocky start. Most of the Turkish packers have carry-over inventory and as a result are unwilling to dry big quantities for the upcoming season. Farmers are likewise hesitant to commit resources for drying product due to losses suffered last year. As a result, the total quantities available for sundried tomatoes will be about 20-30% lower than last year. While products may be available now, there may be a shortage of good quality products toward the end of the season. Prices are about 25% lower than last year’s opening prices.

MARASCHINO CHERRIES
This year’s bumper crop of cherries in the US is poised to surge by 32% to 284 million lbs in 2009, the largest in seven years according to the USDA’s forecast. The crop in Michigan is expected to soar by a third. Washington State is expecting their harvest to exceed 20 million pounds. By contrast, the state’s prior record of 14.9 million pounds was set in 2007. Eighteen pound cartons of size 10 Washington Bings were priced at $18 to $26 last week, according to the US Department of Agriculture, compared to $45 per carton at this time last year.

PASTEURIZED CRABMEAT (refrigerated)
Imports from Indonesia, Vietnam, Philippines, Thailand and India continue to be slow in the first half of 2009 as importers were still heavy on inventories they were carrying from last year at higher costs. Compared to 2008, through April, imports from those five countries dropped to 1.2 million pounds from 2.7 million pounds, according to the National Marine Fisheries Service. Supply of jumbo lump has been hindered by below average sizes. Typical yield from a blue swimming crab for jumbo lump is roughly between 18 to 20 percent of the pick, but for the last 90 days the yield has dropped to 8 to 10 percent. Jumbo lump supplies have diminished and prices are rising. Clawmeat, the lowest cost meat, has generally been the shortest in the market.

SHRIMP (frozen)
According to the National Marine Fisheries Service, US shrimp imports after falling in both January and February by 13.2 percent and 13.8 percent respectively, rose for a second consecutive month in April. March shrimp imports rose 8.7 percent and April jumped 6.3 percent above prior year sales for the same periods. Overall, shrimp imports through April were down 4.2 percent from the first four months of last year, to 336.3 million pounds. China and Vietnam were the main culprits as sales to the US dropped 32.9 percent and 20.9 percent, respectively. Asian Black Tiger Shrimp at the 21-25 count and smaller HLSO are steady to firm with limited supplies, particularly on 26-30 and 31-40 count which are offered at a premium cost. Vannamei Shrimp supply is steady for a fair demand and supplies of 41-50 count and smaller shrimp are fairly tight.

SALMON (frozen)
Farm raised Atlantic salmon prices are gradually on the rise as supply continues to tighten. Less fish in general is available from Chile. Look for the market to continue to tighten through the balance of the year and into 2010.

TILAPIA (frozen)
US tilapia imports through April rose slightly from 123 million pounds in 2008 to 125 million pounds this year, according to the National Marine Fisheries Service. US imports of frozen tilapia fillets from China totaled about 69 million pounds through April, up 10 million pounds from the same four-month period last year, while imports of frozen whole tilapia from China reached about 27 million pounds through April, up about 6 million pounds from last year. While the drop in China’s output caused prices of frozen tilapia fillets to increase steadily last year, prices are expected to hold steady in the coming months.

CATFISH (frozen)
Prices holding steady at the moment with no immediate price changes expected in the short term, but beware of possible incremental price increases that could materialize late this year or early 2010. Indications from farmers and producers are supporting such assumptions, due to size demands and available fish now growing for new season production.

CALAMARI (frozen)
Current squid landings are heavy in the northeast and the sizing and overall quality is excellent. Lower water temperatures seem to have brought the landings on a little later in the summer this year as heavy landings began on the 4th of July. Overseas, the Indian season is active right now but it appears to be lighter than last year. In Peru, the El Niño is expected to have a significant effect on catch.

SCALLOPS (frozen)
Early and unexpected closures on Georges Banks in June cost approximately 100 trips at 18,000 lbs lost due to the early closure. Close to 2 million pounds won’t hit the market, causing shortages for businesses using U/10 size as 80% of the catch in this area was U/10’s. There are a limited number of open area fishing days remaining in the 2009 season and even with the slow economy boat prices should not fall again. Excessive rain during the course of June has slowed the summer trade in the New Bedford area.