Friday, September 23, 2011


There’s hopefully some life coming soon for the GSP duty free treatment offered by the U.S. for its closest trading partners. GSP originally lapsed at the end of 2010, but the reinstatement bill passed last night in the Senate by a vote of 70-27, after the House approved a similar bill earlier in the week. Since the Senate amended the original House bill to add items unrelated to GSP, it now goes back to the House for another approval. Once both the House and Senate pass an identical bill, it will go to the president for his signature.

The World Trade Organization agreed with Mexico, ruling that "Dolphin-safe" labels used to market tuna sold in the U.S. and authorized by the U.S. Commerce Department "are more trade-restrictive than necessary to achieve a legitimate objective" of letting consumers know whether dolphins were accidentally harmed in tuna fishing. The U.S. will most likely appeal and it’s not expected that any changes will be made to labeling requirements in the U.S. at the current time.

On October 1st, US Customs will begin strict enforcement of the Importer Security Filing (ISF/10+2) rule, introduced over a year ago but previously under discretionary enforcement. If compliance is not met, importers can face fines of $5,000 for each violation. This security rule requires 12 items of cargo information to be transmitted to Customs at least 24 hours before goods are loaded onto a vessel for shipment into the US.

The FDA has also announced its plan to implement a “re-examination” fee by October 1st. Under the Food Safety Modernization Act, the FDA is authorized to collect a fee of $224/hour plus expenses for the re-inspection/re-examination of imported food if there is any identified failure to comply with required food safety standards.

The possible doom scenarios in Europe are pushing down the value of the euro and thus firming the value of the US dollar. While the dollar is still weaker than it was in the beginning of 2011, it has strengthened over the past few weeks. The cost of importing from China however is on the rise as the US dollar continues to fall against the Chinese Yuan: from 6.59 in January to 6.38 today.

Skipjack tuna prices are at record high levels: $2100/Metric Ton (up from $1700 in July), impacted by a seasonal “fish aggregating device” (FAD) fishing ban stretching from July through September. Over the past two years, the market tended to soften around August (even while the ban was in effect) as most packers were able to stock up on their raw material requirements prior to the ban, but the lower catches in the first half of 2011 did not make this feasible. Yellowfin catches have been very low resulting in a firm market at $3100/MT. Strong demand from Japan is also keeping prices firm. Albacore prices have steadied as high prices have softened demand. Raw material prices are now reported at $3400/Metric Ton. Tongol, in scarce supply over the past few months, is still mostly unavailable.

The Thai Food Processors Association has predicted that Thailand will produce 2.3 million mtons for processing this year. The summer crop produced 1.4 million mtons (up 37% from last year), and the winter crop is forecasted to produce 900,000 mtons. Thailand has just begun its winter crop and while the crop is forecasted to be better than the last year’s, it’s still not quite living up to the hoped-for expectations. Raw material costs are now 5.00-5.50 baht/kilo compared to 6.00-7.00 during the summer crop, but the government is trying to keep prices from falling further in an effort to protect the agricultural sector. While fruit cost is lower at the moment, other inputs such as tinplate and labor are up. Indonesia has just begun its production after closing down for Ramadan. Early reports from the farms indicate that there may be a looming drought situation due to the absence of rainfall for the past 6 months. China has begun making offers - many of which are higher than Thai prices because of their growing domestic demand for fresh pineapple. All in all, the situation is definitely better than it’s been in a while, but not yet as good as all are hoping for.
China’s peach crop season ended last month with total output finishing 20-30% lower than in 2010. Packers were reporting that raw material prices were increasing daily from $0.28/kilo at the beginning of the season to $0.55/kilo at the end. Besides less raw material, increased domestic demand and higher costs for tins and sugar have resulted in historically high costs. Greece’s overall production ended slightly lower than originally estimated and raw material prices have increased by about 25% this year. California’s crop is reported to have been affected by hail damage earlier last month leading to predictions that this year’s harvest could be the lowest since 2006.

The U.S. Dept of Commerce issued their final anti-dumping rates for Chinese mushroom packers, which for the most part will preclude Chinese exporters from shipping to the U.S. The rates range by packer from a best case 13.12% to a worst case 266.13% (up from only about 1% for the previous best case rate). India is now fighting with the resulting surge in demand. Offers from Holland, Spain and France, are also entering the market at higher prices.

The initial forecasts for the Spanish harvest were excellent, but hot weather caused early ripening in several varieties, and what was originally predicted to be an abundant season is now forecasted to come in shorter than last year. The manzanilla crop, which could end as early as next week, is expected to close at 154 thousand mtons vs 210 last year while queens should finish at 23 vs 37. The later hojiblanca variety, important for canned ripe olives, is still estimated to end down only slightly at 226 vs 254 last year. Compared to the average crop sizes for the past five years, this year’s manz and queen crops should finish below average, but the hoji’s could still hopefully come in above the five year average.

It’s still too early to make predictions, but the packers in China are not optimistic. The market is empty with no carryover, and farmers are predicting opening raw material prices of 0.50 RMB compared to 0.30 last season.

It has been reported that global production of apples has dropped by 11% in 2010/11 compared with 2009/10. The biggest drop in processing has been in China where increased domestic consumption has resulted in the processing of only 14.5% of their crop this year vs 17.7% last year.

Hot humid weather in Thailand caused the crop to mature quickly, lowering the crop volume and causing severe shortages of high-count (smaller 300+) product.

Italy’s hot weather for the past few weeks has affected the tomato crop. What started out as a decent crop turned around very quickly, forcing packers to sell out their production early in the season. Premature fruit ripening and bunching of raw material prevented most packers from processing their usual quantities.

The cold weather in Peru has delayed the start of the asparagus crop by one month to October. Furthermore, farmers planted less acreage as they converted to more profitable crops such as cotton, grapes, etc). Packers are proceeding very cautiously and are not committing to any long-term contracts.