Tuesday, May 04, 2010


After the meltdown of the Greek economy, the food industry is now looking towards Spain, where many large packers reside. The situation is terrible in Spain, and the economy is several times the size of Greece’s. With banks withdrawing credit to all but the strongest companies, many large packers are bordering on the brink with no financing to run new pack. Major problems loom on the horizon.

Political turmoil in Bangkok, Thailand, has forced the organizers of Tuna 2010 to postpone the biennial conference. The political unrest intensified this week when protesters and police clashed on the streets of Bangkok. For the past six weeks, demonstrators known as the “Red Shirts,” who are demanding that Prime Minister Abhisit Vejjajiva resign, have been clashing with the Thai military. Recently, at least five grenades exploded in the center of Bangkok near the protests, killing one person and wounding at least 75.

Ocean freight rates continue to rise as lines firm up their rate increases.

The U.S. dollar continues to firm as problems in Europe weaken the euro. The U.S. dollar has weakened however against our neighbor to the north resulting in the Canadian and U.S. dollars now trading at about parity.

Skipjack prices have been on a strong upswing over the last few weeks. After dipping to a low of below $1000/MT late last year, current raw material prices are cresting $1500/MT and packers are predicting $1650/MT by the end of the week. The sudden increase is partly brought about by the anticipated effect of the planned fishing ban from July 29 to Sept. 28, 2010 in IATTC/Eastern Pacific waters and the FAD (fish aggregating device) ban from July to Sept. 2010. Additionally, fishermen are reporting poor catches in traditional fishing grounds like the Indian Ocean and the Southwest Pacific. In the large Eastern Pacific grounds, skipjack catch for the first quarter 2010 was 46,257MT, down substantially from 71,347MT last year and 93,100MT in 2008. Conversely, lower Bangkok freezer stocks have forced importation of raw material there to go up 30% this year, from 140,433 to 182,952 MT, increasing demand in a tight supply environment. Furthermore, canneries in the Eastern Pacific which normally rely on their local fishing grounds have had to secure their raw material requirements from the Southwest Pacific. The recent spike in crude oil/fuel prices have also contributed as fuel is the single largest expense in fishing. On the sustainability front, in addition to the fishing bans, it was just announced that nearly half the skipjack tuna caught in the Western and Central Pacific managed by the Parties to the Nauru Agreement (PNA), might be assessed by the Marine Stewardship Council (MSC) for well-managed and sustainable fisheries as early as next year.

It is now reported that Thailand’s production in the second quarter of 2010 may drop by as much as 20%. This decrease is being attributed largely to the El Nino weather phenomenon. The insufficient rainfall in the first quarter did not alleviate the heat and did not provide the much needed irrigation for the plantations. It is expected that the traditional summer peak season (which normally comes in April) may be very short or may not come at all. With raw material prices over 6 baht/kg, packers are driven to maximize use of their raw material, leading them to divert much to pineapple juice concentrate production. The higher prices have also pushed some farmers to harvest earlier, providing less ripened fruit for canning, further pressuring fancy grades. Exacerbating the tight situation is the improving overall demand for pineapple. Thailand’s export data in the first two months of 2010 shows volume up by 10% vs. 2009, with US being the top export destination at 18,925 MT. Germany’s imports increased by about 7.5 % (at 7,070 MT) vs. its 2009 imports. The biggest increase is from Russia at 6750 MT, which is a 587% increase from their 2009 volume. Adding to the increase is the significantly higher cost of cans. A further 20-25% increase in tinplate cost was just announced.

The dire predictions about Chinese mushroom supply situation have materialized – and the situation may be even worse than predicted. With the packing season ending in about 1 week, there are some estimates showing China’s canned mushrooms production for the year ending up at only a tenth of last year’s output (down an incredible 90% in volume). Last year’s low prices discouraged farmers from growing mushrooms this season and they switched their acreage to more profitable crops. The extremely cold winter and erratic spring season then led to very low mushroom output. The shortage has prompted packers to default on their contracts. Some packers have re-negotiated their contracts at higher prices but still cannot guarantee supply. Russia, whose lack of demand last year somewhat contributed to the “oversupply” situation, has started to buy again. They have overtaken the US as the top export market for Chinese mushrooms with 8018 MT imported in the first two months of the year. The US imported 7425 MT during the same period. Also competing for the limited supply is China’s domestic market, which traditionally uses up to 50% of total output. China’s total exports for the first 2 months of 46991 MT, though up by about 12% compared to the same period last year, is a drastic 49% decrease compared to 2008. India is producing but is now overwhelmed with demand from all sectors.

The Spanish artichoke crop suffered harsh winter conditions, leaving a significant amount partly frozen. The last cold spell occurred as recently as three weeks ago. The quick onset of spring is also not helping as the sudden warm temperature will reduce the number of days left for harvesting. It is predicted that Spain will only supply about 40% of total demand. Chile’s plantations are reported to have been affected by the earthquake and a large factory there has reported a major damage to their facility. Peru, on the other hand, is expected to have a stable next crop; however, with very strong demand, prices are pushing upwards. At the moment, all Peruvians packers are sold out.

Market remains tight, especially on broken.

March/April crab landings in Thailand and Indonesia improved 10-15% above February but Jumbo yield continued to be poor at only 15-18% of the natural breakdown. Extreme hot weather in the Philippines created poor landings with crab sizing small to medium (10-15pcs/kg), poor crab quality and distorted breakdown. Majority of importers are reporting very low inventories with a very strong demand for jumbo and claw. Expect prices to increase over the next 30 days.

SHRIMP (frozen)
Black Tiger
Supplies remain extremely tight on 16/20 count and larger shrimp due to current raw material shortages. Shortages have been caused to some extent because higher prices encouraged local farmers to sell and start a second crop sooner than usual. 13/15 count shrimp are especially tight and raw material shortages are expected to continue until next seasons product arrives during the summer months. Expect pricing to soften slightly at that time on the larger sizes but not like they have in past years.

White Shrimp
Over the past 4-5 years, Pacific white shrimp pricing has been relatively steady except for a sharp but short increase in the summer of 2008 due to high fuel costs. Current conditions however with decreasing shrimp harvest volumes and the strong baht continue to drive vannamei prices up gradually in Thailand. Expect this trend to continue throughout 2010 as the strength of the Thai baht remains a major concern. The expected production volume will be equal to that of 2009, but with increased demand expect prices to rise 10% in 2010.

Closed and open areas are yielding 45% 20/30’s, 45% 10/20’s and 10% U/12’s and U/10’s. Closed area trips are 18,000 lbs each and boats are averaging 2,500 lbs per day in open areas. U-10’s & U-12’s continue to be very short. Prices expected to remain stable.

U.S. remains the main market for Chinese tilapia, accounting for about half of Chinese exports. Mexico continues to be the second major importer followed by Russia. Russian imports showed largest percentage gains in 2009 as it made up for lower quantities of Vietnamese pangasius with higher imports of Chinese tilapia. China exported some 21,900 MT to the Russian market in 2009, 28% more than the previous year. Supply is good and prices are expected to drop slightly during the summer.

Smaller salmon supplies are very limited which is forcing processors to utilize the larger fish. U.S. salmon imports remain poor due in part to the continued production challenges in Chile. U.S. salmon fillet/steak imports during the first two months of this year were 7% less than 2009. The whole Atlantic salmon market continues to track upward due to restricted supplies. Salmon prices could peak relatively soon.

Current Market Status for imported catfish holding very steady. Prices should hold steady through the summer.

Squid landings continue to be very limited on the Atlantic coast. Vessels have struggled to find any significant amounts of squid as poor weather has continued during the spring months. Ample inventories currently exist, but if current poor landings continue there will be shortages by early summer. Price increases have already begun.