Sunday, March 28, 2010


Ocean freight rates continue to climb. A General Rate Increase is being imposed effective April 1, 2010. Increases range from $200 to $400 per 20’ container.

The FDA is launching a new electronic screening tool for food imports called Predictive Risk-Based Evaluation for Dynamic Import Compliance Targeting (PREDICT). PREDICT is a risk-based screening system that automatically scans hundreds of databases for information that may affect FDA’s admissibility determination. This system identifies patterns and associations (looking for inherent product risks, compliance history, admissibility history, etc.) and then issues a risk score for each entry. PREDICT was pilot tested in LA and is now being implemented in NY; it will be rolled out in the rest of the country over the next few months. Initially, this may result in increased sampling and reviews. Eventually, it is expected that PREDICT will quicken the process, increasing the number of automated “may proceed” decisions for large food importers in legitimate trade.

With Capitol Hill busy with healthcare, several trade issues have been put in the back burner, such as the extension of lower duty rates for Spanish Capers & Artichokes and Greek Pepperoncini. As a result the government continues to collect the higher rates.

The dollar has held on to its recent gains as several EU countries such as Greece, Italy, Portugal, Spain and Ireland battle their own financial woes. The dollar/euro exchange rate has been steady in the 1.36 to 1.38 range.

Skipjack raw material continues its roller coaster ride, as volatility remains high. After peaking at $1500/mton in September then falling to 900 in December raw material has been see-sawing the past few months between 900 and 1100. The latest: skipjack is back on the uptrend with sales at $1100-1200/mton reported already and some even expect $1300. Yellowfin continues to firm with skipjack while tongol is steady. For albacore, catching in Middle Indian Ocean has already finished and the boats have moved to operate at Southern Indian Ocean where albacore at this area is a lot smaller and current catching is poor. Situation is not expected to improve until Japanese Summer Albacore season begin in late May/June. The leaders of eight Pacific Island nations (Papua New Guinea, Marshall Islands, Kiribati, Solomon Islands, Tuvalu, Micronesia, Nauru and Palau) have announced their intention to set up an OPEC like group to “increase their profits from the sector.” The group will control about 25% of the world’s total annual tuna supply. A US supported proposal to ban the international trade of Atlantic bluefin tuna was rejected on Thursday at a United Nations conference on endangered species in Doha, Qatar. Bluefin, a tuna species that is not sustainable, is used for sushi, not canning.

After falling with the past winter crop, pineapple raw material costs have recently increased sharply. Normally, availability improves in April when the summer crop comes in, but this year a drought and a severe backlog of orders have factories fighting for product and predicting that the raw material costs will continue to rise through the season, peaking at between 7 and 8 baht/kilo before the summer. At this point, relief is expected only with the winter crop late in the year. Even with lower worldwide demand, canned costs are up because of the firm raw material as well as higher tinplate, more expensive ocean freight rates and strong pineapple juice concentrate pricing.

Extreme weather fluctuations in China have resulted in a significant decrease in raw material availability. The situation is much worse than originally predicted and there are widespread defaults among Chinese packers not honoring their opening contracts. Most packers are expecting about 30-40% less raw material this year as compared to last, and raw material costs have doubled. This shortage is exacerbated by the increased demand from the Chinese domestic market and the renewed buying activity in Russia. With only three weeks remaining in the spring crop season, packers are not optimistic about seeing a significant improvement in the supply situation, and canned mushroom pricing has escalated overseas by over 20%. India is seeing their poor financial position improve as they benefit from the higher world pricing and strong demand.

While official figures are not yet posted, initial reports show the volume of olive oil will be a few hundred metric tons less that originally predicted. Heavy rains affected the growing areas hindering the timely picking of olives. Most of the olives will not be suitable for Extra Virgin production and will have to be downgraded. At the moment, prices (in euros) are holding steady and are expected to remain so until mid-May when feedback about the flowering season is expected. Current speculation is that the next season could be a good one given all the rains that the trees have had this year.

USDA has predicted that total Chinese canned mandarin output will drop by 12% in the current 2009/10 season, as compared to last year. Packers report that raw material costs rose from $0.10/kg to $0.33/kg. Significant shortages are looming especially in broken mandarins as packers divert production to more profitable production of cells (used for drinks).

Initially crop failures in the Southern hemisphere (Peru and Chile) turned all attention to the Northern Hemisphere (Spain). Unfortunately, now the Spanish crop has been seriously damaged by pockets of bad weather that hit the Murcia region. Earlier in the year, frost affected the artichoke growing regions causing most packers to stop production due to lack of raw material to process. The icing hinders the fruit’s ability to absorb water, therefore causing the dehydration and blackening. Additionally, as recently as last week, late snow covered most of growing regions. Packers are hoping some artichokes can be saved if the weather improves. Peru and Chile will not be starting their new crops until around June/July, but recent weather disturbances are leading to speculations that the crop may arrive late this season.

Recent drought conditions in Thailand have prompted concern that some major agricultural growing areas will be adversely affected this year. As reported in Bangkok’s local newspaper, there are already about 14,000 villages in 36 provinces that have been declared as drought-stricken areas. Weather conditions are not expected to improve until mid-April. Jasmine rice prices have already increased overseas due to the higher costs of unhulled rice.

Thailand’s drought and hot weather are expected to cut baby corn production there by as much as 15% in 2010.

US import figures (Jan-Nov) show U.S. imports increased steadily between from 30,000 mtons in 2004 to a high of 95,000 tons in 2007, only to decrease to 64,000 in 2008, and only 52,000 in 2009. High carryover stocks in China will lead factories to produce less in this 2009/10. While exports are down, the 20% growth in Chinese domestic demand is expected to absorb the difference. In California, the CCPA confirmed that 81 growers removed 1415 acres as part of a large tree pull program that successfully reduced the 2010 bearing acreage to 23,000 acres, “the lowest acreage figure in modern history.” A severe decline in the financial health of the Greek canning industry has the industry predicting that direct assistance from the EU will be needed. In Australia, farmers expect the pear crop to be down 50-60% in 2010, due to warmer than expected weather in early 2010 and February brush fires.

In the United States, reports show output of 11 major vegetables used for processing is up 11% this year. Sweet corn in particular recorded its highest level of production since 2005.

After record output last year, the first official estimate from the WPTC for this year’s worldwide tomato processing production shows an expected reduction of 6.7%, to 39.5 million mtons. It is hoped the decrease will help balance last season’s record output. California, the world’s largest producer, is expected to bring production down by 5.3% to 11.4 million mtons, though this will still represent the second-largest crop ever after last year. Italy is expecting a very large volume reduction of 13%, to 5.0 million mtons.

Crab landings in February were 20-25% less than January as weather issues and the Chinese New Year holiday impacted the catch. Hot summer temperatures arrived earlier this year in Thailand, Indonesia and the Philippines causing water temperatures to rise. As the water temperatures increase, the crabs move to deeper, cooler waters causing a poorer catch. Smaller crabs and poor recovery caused the Jumbo breakdown to be 18-20%, down from a normal yield of 23%.

SHRIMP (frozen)
Contrary to general expectation shrimp consumption in the U.S. was least affected by the economic down turn in 2009. Overall shrimp imports from Jan-Dec 2009 declined by 2.5%. India and Thailand posted import gains while Indonesia, Vietnam, Malaysia and Bangladesh saw declines. Shell on and breaded shrimp declined while cooked and peeled shrimp sales increased over 2008. For 2009, in the U.S. Market:
Raw Shell on Shrimp accounted for about 40% of imports, down 10% vs 2008.
Raw Peeled Shrimp accounted for about 34% of imports, up 1.4% vs 2008.
Cooked Shrimp accounted for about 18% of imports, up 7.3% vs 2008.
Breaded Shrimp accounted for about 7% of imports, down 4.3% vs 2008

SCALLOPS (frozen)
Light landings are expected until the end of the 2nd week of March and pricing will remain stable at high levels. The 2010 season will have 38 open days and 4 closed area trips of 18,000 lbs. Open area trips will yield very few large scallops so expect availability of U/10’s and U/12’s to be tight. At the end of June, the Nantucket Lightship Access Area opens where all large scallops will be caught. This will be the only chance to buy any amount of U/10’s (end of June, early July).

TILAPIA (frozen)
Colder than expected winter weather in China has slowed tilapia production causing market to firm up. Prices might drop slightly again during the May harvest.

SALMON (frozen)
Production of salmon in Chile could fall 38% in 2010 as the country continues its efforts to rebound from the outbreak of ISA (Infectious Salmon Anemia). Expectations are that the country will produce 250,000 – 300,000 metric tons this year, down from 400,000 tons in 2009 and 650,000 tons in 2008. Meanwhile, Chile will start its first deepwater salmon farming project as it attempts to reverse low yields on salmon. The project will involve the floating of large rafts at sea with large numbers of Atlantic salmon positioned at greater depths. Stronger sea currents at these greater depths are hoped to create improved conditions that might avoid disease.

CATFISH (frozen)
The market remains steady, with strong demand not only through Lent but in general. Limited production began after the Chinese New Year holiday but the new season production will begin in full force in late June or early July. Prices holding firm at this time.

CALAMARI (frozen)
Domestic squid landings have been nonexistent since the first weeks of the year, caused primarily by strong winter storms which have limited trips off shore by winter weather cycle boats. The current situation will begin to put pressure on inventory in the next couple of months if landings don’t improve. The squid fishery often works this way as the animal disappears only to reappear in “superabundance” when inventory is replenished. Import inventories remain strong.