Wednesday, June 30, 2010


Freight rates and vessel availability – most shipping lines have implemented freight rate increases from $400 to $500 per 20’ container. In China, where space on shipping vessels is severely limited, the little space available is going to those willing to pay more than the published rates.

While the dollar has generally been firm (hitting the highest level reached against the euro in the last 18 months), the recent couple of weeks have brought about a correction with some weakening of the dollar to about 1.24 against the euro. China has recently announced that it will end its 2-year long peg to the US dollar. Almost immediately, the Chinese yuan appreciated nearly 0.5% against the US dollar, leading to a firming in Chinese products as packers anticipate further appreciation.

The recent spike in prices may be contributing to the market slowing down a bit. Raw material prices have now reached the $1700-1750/mton level and some packers are still expecting to see $1800-2000 level, while others think fishermen’s greed has brought the market to a peak. Those believing in higher levels point to the highly anticipated fishing ban that will be implemented from July to September, 2010 (1 month longer than last year). Additionally, catch situation in the traditional Eastern and Western Pacific fishing grounds remain poor, with skipjack catch almost 20% lower than the same period last year. Yellowfin is reportedly trading at $2150/mton. Tongol is at 43 baht/kilo. Albacore has moved up to $2700-2760/mton. It’s reported that some smaller importers are trying to peddle “bonito” as skipjack tuna – beware – bonito fish (often from China) is not tuna and it’s illegal in the U.S. to sell bonito labeled as tuna. U.S. Rep. Eni Faleomavaega of American Samoa is asking the U.S. Department of Commerce to open an antidumping investigation on canned tuna imported from Thailand, but a Wall Street Journal editorial claims that the minimum wage hike in American Samoa led to the destruction of its canned tuna industry and rising unemployment. Starkist decreased its workforce by 1,800, while Chicken of the Sea closed its tuna canning operation, leaving more than 2,000 workers jobless. The Government Accountability Office, which recently surveyed businesses and workers in the territory, found that many firms will be "leaving American Samoa or closing by the end of 2010." The tuna industry is the largest industry in American Samoa.

Thailand’s recently concluded summer harvest is reportedly to be the lowest in five years. The Pineapple Processor Group of Thai Food Processors’ Association issued their official notification and many packers are declaring Force Majeure. Raw material has jumped up to 6.50-7.20 baht per kg. The problems are a direct result of the El Nino phenomenon, which by warming the east-central tropical Pacific Ocean, has raised the land temperature and reduced the amount of rainfall. This weather pattern has prevented the natural flowering to occur in time for the summer harvest. The lack of rain caused young plants to wither and has reduced the size of the pineapple crop by as much as 50%. Comparing Jan-Apr 2010 to the same period in 2009, rainfall is down 57% and the average temperature in May rose to 109.4F from 105.8F last year. The traditional “summer peak season” never came, and as a result, most factories shut down early. Looking ahead, the forecast of a late rainy season is expected to affect the winter crop, delaying it to November/December while the volume will also be smaller that the same period last year. Among all the cuts, the most affected is crushed pineapple. As pineapple juice concentrate prices soar to over $2000/mton, packers are finding it more profitable to produce juice rather than canned product. China and Indonesia have had a similar experience and prices are being quoted at levels similar to Thailand.

The market is currently slow. Despite the reported short crop in China, limited quantities of brine mushrooms are still available. This year’s high prices may encourage more farmers to cultivate mushrooms for the next coming season, which would hopefully bring prices down to a more realistic level in 2011. India continues to take up the slack from the Chinese shortage. The weaker euro has also brought Spanish and Dutch mushrooms to the market, but at even higher prices than China.

Market remains tight with many Chinese packers defaulting on contracts for lack of stock. With no new production possible until the new season, still half a year away, there’s not much relief in sight. The market is especially short on broken segments.

The Spanish artichoke crop which was affected by frosts, prolonged cold weather conditions and sudden warm weather is reported to be running about 40% under the previous crop. The recent economic turmoil in Europe has also led banks to clamp down their lending policies, resulting in at least two major factories being forced to stop their operations. In Peru, the crop is expected to begin in the next month or so but it’s still too early to tell how it will turn out.

Global pear production is predicted to reach over 24 million mtons per year by 2015. This growth is largely due to the increase in acreage in China, the world’s largest producer. China’s planted area is expected to increase by 7% from last year.

As weather issues and the Chinese New Year holiday impacted the catch, crab landings in February were 20-25% lower than January. 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%.