Thursday, February 02, 2012


Europe continues to deal with its debt crisis which has allowed the dollar to strengthen relative to the euro over the past few months. This could increase exports from Europe in early 2012, as a strong euro hindered the industry for most of 2011.
The three month fishing ban on Fish Aggregate Devices (FAD) is long over and the floods that flowed through Thailand over the last few months have ceased. However, catch levels still remain at all-time lows and market demand remains high. The cost of skipjack has returned to record-highs from last summer, increasing from $1950/mton in November to $2100/mton in early January. Chinese New Year however is coming to end, so fishermen should start fishing more aggressively in the upcoming weeks, hopefully leading to an improvement in the catch. With six months of fishing ban on Fish Aggregate Devices (FAD) expected in 2012, improvement may be short-lived. Three of months of the ban are expected to be July-Sept; the balance has not yet been decided. Albacore has risen to $3600/mton, up from $3500/mton in November. Sustainability may be improving in the near term as the first commercial scale fishery has just gained Marine Stewardship Certification (MSC). Once more packers obtain certification this year, MSC product should become readily available on the market.
We are approaching the end of the pineapple winter crop with the summer crop beginning in April. Pricing of raw material remains stable around 4 baht per kilo after the Thai government instituted an incentive to put a floor on raw material. Their program involves making low cost loans (2% rate) available to packers that do not pay less than 4 baht for raw material. If a packer pays a lower price, his loans are revised to a 5% rate.
The mushroom market has weakened with new crop announcements from China. After being scarce in 2011, they have returned to the market with a goal of increased market share in 2012. India, unwilling to give up the share they commanded over the past year, has followed suit to undercut China’s pricing. The strengthening Chinese currency is making it harder for the Chinese to compete. The soft euro is also allowing European canneries to compete more effectively than in recent years.
Initial new crop opening price levels for Chinese mandarins were very high, but levels recently fell with packers needing to raise capital. Chinese New Year however is ending at the end of January and by then most canners will have finished production for this season. The supply this year has increased but a strong demand domestically for mandarins has lead prices to ease off only slightly.
Labor costs in Peru have increased and the Peruvian currency has risen six percent in the past few months. This has led to slight increase in pepper pricing. Peru may potentially discontinue production of jalapeno peppers as strong competition from India and Mexico is making the business unprofitable for them. Turkey meanwhile had a poor crop and most packers are finding themselves short on all varieties of peppers.
Overall, the harvested production in Spain was 503,000 mtons, down 15.4% from the previous year. The two main reasons for this were a lack of financing at both grower and processor levels, as well as the low profitability this year for the growers. The fact that they were unable to cover their costs caused many to leave their crops for olive oil. For Manzanillas, the harvest was 148,000 mtons, down 29.7% from last year. Adding in the carryover from the previous harvest, the total availability was 288,600 mtons, 5.5% less than last year. The average size has also been somewhat lower than the previous year, 295 olives/kilo compared to 260 in last year. The Queen volume is significantly less than last year with a total of 28,630 mtons; 24.6% less, and no significant carryover to help. Larger size olives are especially short this year. The Hojiblanca variety, used mainly for ripe olives, is about the same as the last crop; 253.380 mtons, up 0.2% from the previous year.
The olive oil market has softened, a result of several concurrent factors: (1) a decent Hojiblanca crop, (2) growers not aggressively picking olives for table olive production but rather leaving them on the trees for oil and (3) the firming dollar vs. euro. Blends (olive oil blended with soy or canola oil) remain volatile due to uncertainty of the economy, bio-fuel mandates and weather conditions in South America.
According to the first USDA survey of the year, tomato processors in California are planning for 12.7 million tons of tomatoes in 2012. If achieved, this would represent a 4% increase on last year’s production.