Wednesday, December 22, 2010

House passes the FDA Food Modernization Act of 2010

The House of Representatives last night passed, by a vote of 215-144, the "FDA Food Modernization Act of 2010." President Obama indicated he will sign the bill into law before the end of the year.

Monday, December 20, 2010

Senate Passes Food Safety Bill

The Senate unexpectedly passed the Food Safety Bill S.510 late Sunday evening by unanimous consent, and substituted it onto a House-passed bill to correct the technical error that plagued it last time. As the Washington Post is reporting, passage in the House appears very likely.

Monday, December 13, 2010


Raw material costs for “Winter Crop” pineapple, the smaller of the two annual crops, have escalated from 4.00 baht in the volume peak of last winter to 6.50 baht this year; a 62% increase.

The U.S. dollar has also lost nearly 10% of its buying power against the baht in the same time frame.

Factories are not offering as they work to fill existing contracts from the limited available raw material.

Packers are advising a firm market as there is strong worldwide demand, a smaller crop, and a shorter pack season.

There is also a shortage of pineapple concentrate. Packers are prioritizing available resources toward their concentrate production lines as it is more profitable.

China is historically a source for the cheaper “Queen Variety” fruit. This year, they experienced a poor crop. The small crop, coupled with strong domestic demand for fresh fruit in China is increasing demand in the Thailand & Indonesia markets. Chinese new crop prices are actually higher then Thailand at this point.

The summer crop, the larger of the two seasonal packs, historically begins in April for summer arrivals.


As of 12/09/10 the new crop has yet to begin in China. Packers historically begin packing in late October / early November.

The delay in starting the pack and the fact that Chinese New Year is earlier this upcoming year (02/03/11 vs. 02/14/10) will yield a shorter period of actual canning time this season verses last year, limiting supply for the first quarter of 2011.

There is no carry over inventory from the previous crop in China.

The high Chinese food price, inflation, labor shortage and expected strengthening Chinese currency are all contributing to a firmer market with higher prices.

India is mainly following China’s lead.

Sunday, December 12, 2010

House Passes the CR/Food Safety Bill

The House just passed the CR/Food Safety bill by a vote of 212-206. Earlier, the rules for debate were passed by a margin of 207-206. The CR will need to be passed in the Senate before it is sent to the President. The close vote margins in the House are an indicator of how difficult Senate passage might be.

Wednesday, December 08, 2010


As most have undoubtedly read in the newspapers over the past couple of months, growth and inflation are very strong in China. The Chinese government is also trying to maintain pegged value of their currency against the dollar; however there is tremendous pressure on them to allow the yuan to appreciate. All of the above point to higher food costs from China, especially on exports.

Farmers are currently sitting on raw material thinking that the longer they wait, the higher the price will go. As the time for the packing season is limited, canneries are pushing the price trying to get raw material. Overall a viscous cycle has begun, resulting in dramatically higher prices. Canneries have produced very limited quantities to date. As of two weeks ago, one of the largest packers claims to have only packed only 50 containers where at this time last year they had produced nearly 500 containers in the same time period.

Total available raw material is said to be 25% - 35% less then last year’s pack

A labor shortage is a major factor holding back production at the plants that have raw material. With workers making higher wages working in other industries, and the overall Chinese economy “on fire”, mandarin farmers are said to be waiting until December 20th when the cotton crop comes to an end to hopefully secure more workers.

Factories will normally finish packing by Chinese New year, which falls this year on February 3, 2011 (it was 02/14 in 2010). Overall, this year the packing time will be cut by over a month given the late start and early expected finish.

Replacement costs are said to be $5.00 - $6.00 higher then last year (FOB China) which is about a 50% increase.

There will be little to no Broken Mandarins exported from China this year, as factories are concentrating on whole segments and “cells” for juice production. Spain may come into play this year for Broken requirements but so far, their price on broken is even higher than China’s price on whole.

The market will dictate if the higher prices will hold. If market pulls back on demand due to the higher costs, packers overseas may be forced to reduce their price down the road on whatever inventory they may have on hand. However, now they claim that unless a full year’s pack is not bought in advance, they won’t pack and customers will go without merchandise. As always, Supply vs Demand will dictate the market in 2011, but expect a wile ride ahead.


Skipjack raw material -

Continues to climb from an October low of approximately $950 M/T. Skipjack replacement price jumped to $1100 a few weeks ago. Packers withdrew since fishermen stopped quoting firm pricing. Days later, some fish traded at $1200 - $1250, upon which fisherman started asking for $1300+. Plants are now expecting $1450 in the near future and are afraid to quote lower for fear of being caught short. Factories are currently in full production fulfilling existing contracts for first quarter 2011 requirements.
Smaller then expected catch has suppliers holding off contracting futures as they assess the overall market
Oil, the single largest price component in tuna costing, jumped to a six month high this week (nearly $89 a barrel).
The U.S. dollar has also lost 3% to the Euro in the last few days.
Suppliers are waiting for firm orders prior to securing the raw material. The market is currently volatile as there is a shortage of raw material. Supply verses demand is escalating the market. Couple that with higher oil prices and a weaker U.S. Dollar and it results in higher replacement prices. This situation will remain until the overall catch improves to offset the increased cost variables previously mentioned.

Yellowfin raw material - is also firm as the reduced overall tuna catch limits supply, but additionally the percentage of yellowfin to skipjack has dropped off dramatically over the past month. Japanese market is buying up whatever yellowfin they can obtain.

Tongol raw material - a locally caught fish mainly in Thailand and Indonesian waters, is not available overseas. Existing contracts are late with virtually all packers withdrawn.

Albacore raw material - has been stable, but the increased cost of oil and low value of the U.S. Dollar have this market leaning towards firming.