Sunday, October 25, 2009

DOLLAR/EURO: Dollar Plunges Over The Past Year

Saturday, October 24, 2009

Tuna Raw Material Price falls

Friday, October 23, 2009


TRADE/POLITICS - Food facilities required to register with the FDA under the Bioterrorism Act (facilities located anywhere in the world that manufacture, process, package or hold food for consumption in the United States) must now submit a report to the FDA's new Reportable Food Registry within 24 hours if they find a reasonable probability an article of food may cause severe health problems or death to a person or animal. Failure to timely submit the required report may lead to civil and criminal penalties.

The US government is conducting its 2009 Annual GSP Review for Acceptance of Product & Country Practice Petitions. Over the next few months it will be decided which products will gain, and which will lose, GSP duty free preference.

CURRENCY UPDATE - After most investment banks predicted firming for the US dollar, the opposite actually occurred with significant weakening in the dollar’s value over the past month against most major currencies. Per Rabobank, a leading European bank: “The market has clearly taken the view that the failure of the communiqué post the recent G7 meeting in Istanbul to firm up the previous language as regards currency markets proved to give something of a green light to additional USD selling interest.” The result: the dollar is trading lower today than at any point over the past year.

TUNA - Packers bought raw material heavily in the summer months, afraid that fish would be short after the ban on FAD-fishing (fish aggregating devices) and the coming El Nino. Their strong purchases supported the market and pushed prices up to $1500/mton. In October when it became apparent that fishing remained strong, but well covered packers had no new purchasing requirements, the market for raw material fell suddenly by over $500/mton in a matter of weeks, and is now solidly below $1000/mton. Yellowfin so far is firm at $1550 (in Thailand, catch is running 98% skipjack, 2% yellowfin) and albacore remains steady at $2,500/mton. In American Samoa, the Starkist plant is said to be offline due to damage to the local power plant caused by the recent tsunami, while the Chicken of the Sea plant there has been permanently shut due to uncompetitive labor costs. According to the Spanish Fisheries Confederation, Pirates in the Indian Ocean are placing at risk the supply of tuna to the canning industry in Spain.

PINEAPPLE and TROPICAL FRUIT - The Thai winter crop is underway and fruit prices have dropped to a more realistic level of 5.0-5.5 baht/kg, after opening a few weeks ago at 6.0-7.0 baht/kg. It is reported that several large pineapple plantations have been converted to more profitable crops such as sugar cane, rubber, etc. Indonesia is experiencing drier weather due to the El Nino effect, and a leading Indonesian packer claims they have had to irrigate their farms to ensure fruit growth. The Philippines is reporting a short crop due to recent typhoons that have been ravaging the islands. However, overall worldwide demand has dipped with Russia not purchasing much. Additionally, with the anti-dumping issue out of the way in the US, more packers are now able to sell to the US market, increasing the overall competitive environment. Overall, prices are stable on high quality product, but weaker on standard grades. Tropical fruit salad is also stable with all components (red papaya, yellow papaya, pineapple, guava, & banana) reported to be currently available.

MUSHROOMS - China’s Northern provinces are starting their harvest with raw material prices high at 7.0 rmb/kg, compared to 3.0-3.5 rmb/kg last year, and too high for canneries to absorb. The short crop is brought about by farmers’ switching to alternate crops as the past two years have been unprofitable. A current survey by a leading Chinese manufacturer showed the following levels of raw material volume by province: Fujian (responsible for 60% of China’s total production) - down 35% vs last crop; Henan (20%) - down 55%; Sichuan (5%) - down 60%; Guangxi (5%) - down 50%. While there seems to be pressure for prices to move up, the dynamics are more complex this year as several new plants are newly approved to ship to the US market (re anti-dumping regulations), and competition between them is fierce. On the other hand, there seems to be a growing local fresh market demand and Eastern Europe is waking up from its two-year buying hiatus. As a consequence, the “real” opening price will not be known until early December. India’s biggest producer, after substantially reducing their output in 2009 is now gearing up to go on full production in 2010 due to anticipated higher prices. Unlike China where mushrooms grow primarily in caves, India produces in climate controlled rooms and thus has better control of their desired production levels. In the US, the industry has shifted much of its focus from canned production to fresh.

OLIVES – In Spain, the Manzanilla crop, originally estimated at 197,000 mtons is now forecasted at 155,000 mtons, with very small sized fruits. The Queen crop, originally estimated at 32,000 mtons remains stable with a revised forecast of 31,000. Hojiblancas, used primary for ripe olives and oil, is looking better than originally forecasted with the latest forecast at 232,000 mtons, up from 208,000. Domestically, US growers are experiencing their third crop failure in four years; they are aggressively buying raw material overseas. Over the past few months, USFDA has started rejecting containers of stuffed olives entering the country, saying the product lack a process registration with FDA's Low-Acid Canned Food office, even though they’ve been entered into the country this way for decades. Packers are rushing to revise their registrations and in the meantime containers are being rejected. Because the new registrations apply only to newly entered containers, the identical rejected containers have to be exported back to their countries of origin. Note there is no problem at all with any of the olives in question – only the paperwork.

OLIVE OIL - The move of the EU to “purchase” about 80,000 MT of oil from the market and hold it for storage seems to have worked in firming the market. The current exchange rate of 1.50 euro is also pushing up pricing in the US. The new crop season is still expected to be good, yet it’s still too early to predict where price levels will open. The Monell Center, Northwestern University reported that Oleocanthal, a naturally-occurring compound found in extra-virgin olive oil, helps prevent Alzheimer's disease.

MANDARIN ORANGES – Flooding in China a few months ago has left packers expecting a slightly worse crop than last year. Spain is reporting a normal crop, but the weak dollar will prevent exports to the US. The Chinese report that tin plate is expected to increase in the beginning of next year, and the price of sugar has already gone up. Given weak demand, it’s still too early to predict where the “real” price of mandarins will open this year.

ARTICHOKES - Spain will start its winter crop in a few weeks and current expectations are for a normal season. The current exchange rate of the dollar/euro, however, is not helping and pricing in dollars could be high. Peru’s crop is on-going and seems to be unfolding better than originally expected (although several large canneries shut their doors this year). Chile had a short crop and is reportedly oversold. On a side note, Peruvian police seized four tons of liquid cocaine concealed in 8,000 cans of artichokes destined for Spain.

PEELED TOMATOES - The crop is reported to be 10-20% lower in volume than last year with the shortfall due primarily to packers’ being unwilling (or unable) to invest in cans. Italy’s rainy weather this year resulted in more yellow tomatoes; cheap offers from Italy are primarily for these “lower quality” tomatoes. Finally, the weak dollar will have a major impact on raising prices in the USA, the lading world market for #10s.

BABY CORN - Thailand’s most recent crop has ended and some packers report that the floods affected their crops. New crop is not expected until the first quarter of next year.

LEMON JUICE - With Argentinean lemon processing down by 10-15% at the end of last year, and the US crop forecast to be 10% below last year in volume, it appears that lemon juice will be tight again for the third year in a row.

PASTEURIZED CRABMEAT (refrigerated) - In Thailand, landings did not improve as expected and sizing was reported to be 10-13 pieces per kg. In Indonesia, crab landings were negatively impacted by hot weather and volume dropped by 40-50%. All factories ran production at 30-40% of capacity because of a shortage of raw material. Tropical storms and typhoons negatively affected landings in both Vietnam and the Philippine’s. Overall weak demand in the U.S. market continues.

SHRIMP (frozen) - For the first time in five months, National Marine Fisheries Service reported U.S. shrimp imports fell slightly in July reaching 100.5 million pounds just shy of July 2008’s total of 101.1 million pounds. Shrimp imports for the first seven months of 2009 were down only 0.8 percent from the same period last year, to 616.2 million pounds.

SCALLOPS (frozen) - Recent storms that fell just below the hurricane wind level, the end of summer, and kids going back to school have all influenced the market. Close to 75% of the entire scallop boat fleet has finished their 2009 allowable days at sea. Landings have been short and commanded high boat prices ranging from $9.25 for U/10’s and $6.60 or higher for 10/20’s and 20/30’s. With decreasing landings expected over the next four months, boat prices are not expected to come down below these levels and should increase as demand remains strong into the holidays.

TILAPIA (frozen) - As the demand for tilapia continues to grow worldwide, production is expected to reach 3 million mtons worldwide by 2010, compared with 2.6 million mtons in 2007. Asia farms roughly 75% of the world’s tilapia, with China the leading world supplier. China plans to improve technology in eastern coastal cities, including a planned research facility for disease prevention, high-quality feed and ecologically friendly cultivation methods.

SALMON (frozen) - Recent reports out of Chile continue to be bleak as the infectious salmon anemia outbreak takes its toll on the country’s production. According to one executive, the plunge in production could reach as high as 67%, to 120,000 mtons in 2009. The market continues to trade at relatively inflated levels despite slowed demand driven by challenged world economies.

CATFISH (frozen) - Farmers and producers in China report that available harvest size fish now growing for the new season production are at levels below last season. Factories overseas have an October 1st start time, so supply will not improve until mid December or early January 2010. A short market until then coupled with lower domestic production could raise domestic prices and increase imported demand.

CALAMARI (frozen) - September is a slow month for Loligo landings, which pick up in October through December. Overseas the Indian west coast season will begin soon as the east coast season for needle and semi-needle squid comes to a close. Peru is reporting a very quiet season and reports issued by NOAA have warned of an “ongoing weak El Nino” event taking place.