REMA FOODS IMPORT MARKET FLASH April 17, 2012
Trade and Politics
United States Trade Representative Ron Kirk announced that President Obama has suspended Argentina’s eligibility for preferential tariff treatment under the Generalized System of Preferences and added South Sudan as a GSP beneficiary. The action against Argentina effectively ends the duty free access granted to many Argentinean exports to the U.S., and will force these items to rise in price (or even become prohibitively expensive). The suspension was caused by the Argentine government’s failure to pay two longstanding arbitral awards (totaling about $300 million) in favor of U.S. companies. In 2011, U.S. imports from Argentina benefiting from GSP treatment totaled $477 million (about 11 percent of total imports from Argentina), making Argentina the ninth-ranking source of imports under the GSP program last year.
The new Food Safety Modernization Act will place more responsibility on importers to ensure the safety of the products they receive from overseas. While FDA currently monitors the safety of imported foods primarily by spot checking containers, the new policies will also require importers to create mechanisms within their supply chain to police incoming containers and ensure compliance here and overseas.
Ocean freight rates are moving up as steamship lines fight to increase rates in the face of rising fuel costs.
Lately, the US dollar is holding relatively steady against the euro.
The 8th meeting of the Western and Central Pacific Fishing Commission (WCPFC) took place in Guam from March 26-30, and the parties agreed to enforce a three month annual Fish Aggregate Device (FAD) ban for 2012 during the months of June through August. High raw material prices steered the group away from requiring a longer ban as many had anticipated. Of the last 32 weeks of fishing, vessels have reported catch levels as 19 poor weeks, 11 moderate weeks, and 2 good weeks, resulting in many plants running behind in shipments and raw material costs skyrocketing to all time highs. In 2011, raw material costs rose several hundred dollars per metric ton during the ban period. This year, skipjack trading at $2200 “pre-ban” has costs starting out at levels higher than the record figure reached last year during the ban period. Packers are fearful that costs could rise to $2300-2500 and most are withdrawn – afraid to quote before owning fish. Albacore is also currently short and trading at about $3800/mton. Other factors affecting price are increased labor costs and rising ocean freight costs. On April 1, the minimum wage rose significantly in Thailand, increasing labor costs for all tuna factories. In the Far East, MSC recently announced the world’s first certification of a commercial scale skipjack tuna fishery, with “chain of custody” certification in the works for the near future to allow for the sale of packed product. At the Boston Seafood show they also made clear their marketing strategy and 20%+ price premium demanded for MSC certified fish – a deal breaker for most.
The Thai government has devised a plan to step in and alleviate the current over-supply of pineapple raw material. They plan to take 200,000 mtons out of supply by purchasing both raw material and canned pineapple to distribute in the Thai school system. Farmers are getting impatient however as they await the actual execution of the plan, and thousands of growers have blockaded the main southern highway in protest. The government purchases will certainly help stem the fall in pricing but may not cause the tremendous lift hoped for by the plants as the summer is crop is quickly approaching and is forecasted to be plentiful. It is estimated that 805,000 mton of pineapple will be harvested between April and June. Other factors affecting price are increased labor costs and higher ocean freight costs.
The most recent pepperoncini crop ended early and finished with much less good raw material than originally forecasted, resulting in packers having trouble filling orders. Help from new crop will not arrive until August and the market overseas is currently empty.
After at first falling early in the season, Chinese mushroom prices have now firmed considerably as poor weather post Chinese New Year cut output significantly from original expectations. Raw material prices have risen about 30% through February, dampening the hopes of the Chinese industry to gain back market share lost last year to Indian and European packers. Most critical for the future, the U.S. government announced revised preliminary anti-dumping duties (which, when finalized, get applied retroactively on a period of imports). All Chinese packers were given prohibitive rates (approx. 200%), which if confirmed will effectively take China out of the U.S. market.
Mandarin packers in China originally predicted a tremendous shortage late last year when new crop began. Pricing was very firm and packers weren’t holding goods, instead requiring immediate payment and shipment. After Chinese New Year though, the bubble burst when some packers needed to raise funds, and production turned out to be better than expected. Strong Chinese domestic demand however has held up the market, leading to prices easing off only slightly. Spain experienced harsh frost and drought conditions, causing significant damage to this year’s mandarin crop.
The major artichoke players, Spain and Peru, have had very differing crops in 2012. Spain has experienced drastic weather, limiting the amount of artichokes in supply. After cold temperatures led to many crops freezing in February, Spain experienced very high temperatures in recent weeks, pushing the most recent raw material costs higher than last year. Peru, on the other hand, has not seen many weather problems and expects a normal sized crop. As Spanish packers struggle, Peru hopes to increase market share in 2012. At the moment though, the newest world player, Egypt, represents the best deal available, with Egyptian product in the U.S. selling for as much as $10 below the cost of Spanish or Peruvian artichokes.
Overall an acceptable table olive crop and a very good olive oil season have brought down the price of both commodities since last year. Over the past couple of months, the market has been stable with currency changes having the most influence.
This year’s initial forecasts released by the World Processing Tomato Council (WPTC) show a reduction of 2.2 million mtons in expected worldwide production compared to 2011. China is projecting a 25% decrease in tonnage; Italy estimates a 12% decrease and Spain a 14% reduction. California is estimating 11.52 million mtons, a 4% increase from last year, but is experiencing shortages now pre-new pack. Overall world production is projected to come in 6% behind last year.