Tuesday, August 28, 2012

REMA FOODS IMPORT MARKET FLASH August 2012

 
Trade/Politics
USFDA has banned all Korean Shellfish and is forcing recall of all Korean shellfish brought into the country over the past two years. The ban and recall cover fresh, frozen and canned shellfish.
Importers are getting ready for the new onerous rules in the Food Safety Modernization Act, including the Foreign Supplier Verification Program and Voluntary Qualified Importer Program. FSMA shifts the primarily burden (and fines for noncompliance) to the importer of record.
 
The United States Trade Representative is conducting its 2012 Annual Generalized System of Preferences (GSP) Product and Country Eligibility Practices Review of duty free applications.
Negotiations between the ILA (International Longshoremen's Association) and USMX (United States Maritime Alliance), broke down last week. The ILA is comprised of over 14,000 dock workers in the East and Gulf Coasts. The ILA has not had a coast-wide strike since 1977. The current contract ends Sept. 30, 2012.
 
Tropical storms and typhoons in the Far East have forced several port closures, causing extensive delays. Especially hard hit is China.
Steamship lines are pushing hard to increase freight rates, with several lines imposing General Rate Increases (GRI) effective August and September 2012.
 
Scorching heat and the worst drought in nearly a half-century are threatening to send food prices up, spooking consumers and leading to worries about global food costs.
 
Currency
Economic trends have made the euro the center of attention in currency markets over the past few months. Strong concerns over the European crisis have led investors to more stable currencies, benefiting the U.S. dollar which strengthened over the past few months. Last week however, calm in Europe pushed the euro up again.
 
Tuna
The three month Fishing Aggregate Device (FAD) tuna ban will finally end on September 1st. The ban was put in place to maintain the population levels of tuna in the Western and Central Pacific.   It has as expected cut supply, causing some shortages and price increases overseas.  Skipjack raw material is firm at $2300/mton, up from $2100/mton a few months ago.   Yellowfin is trading at $2800/mton while Albacore fishing has improved, with raw material trading at $3500/mton.
 
Despite these high costs and the Eurozone crisis, demand is still growing for tuna in Europe and the Middle East.   European imports of tuna were up about 4.6% last year. The UK alone increased their canned tuna imports by 10.6% in 2011. Some fisherman are projecting that the low supply levels and increased demand globally could cause tuna pricing to stay high through 2012 and into 2013.
All packers are expected to pay close attention to fill weights as the three leading brands (Bumble Bee, Starkist and Chicken of the Sea) agreed to settle for $3.3 million a case brought by several California district attorneys charging low fill weight.   The settlement did not find the brands liable for any violations. In a statement from the National Fisheries Institute, the seafood trade organization that represents the three companies said the dispute centers on USDA’s 55-year-old pressed weight standard.  "Rather than litigate against an outdated standard, the companies will continue their own efforts with FDA towards establishing a more modern, consistent and reliable standard of measurement that can be easily understood and verified by consumers.  While working with FDA to change the standard, the brands continue to comply with FDA pressed weight regulations."
 
Pineapple
The ideal weather conditions throughout Asia during the summer pack (April) led to a good crop, low prices and a government plan to buy excess quantities to firm the market.  The government purchases were not implemented as the market firmed on its own mid-year to levels higher than the government support price.  As the winter crop approaches, current indications are good and some bargains are available on standard lower quality pineapple - while choice/fancy product is less plentiful.
 
Mushrooms
A number of global issues continue to keep the market firm.  The largest Indian source cannot ship to the U.S. because their current compost was treated with a fungicide allowed in the European Union, but not registered for use in mushrooms in the U.S.  They’re expected to be out of the market totally for several months as they replenish their compost.  Chinese packers are dealing with severe anti-dumping duties imposed by the U.S. government and preventing most exporters from shipping to this market.  In addition, the Dept of Commerce is changing the rate-setting process with regard to “non-market economies” (China and Vietnam), which could result in the imposition of even higher rates.  There is one piece of good news to report:  the higher market prices and firm dollar/weak euro are helping European packers from Spain, Holland, and France compete again in the U.S. market.
 
Peaches
With yields in the U.S. running 3 tons per acre below expectations, the total harvested crop is expected to be less than 400,000 tons, for just the third time in over a half a century.  Del Monte Foods took the drastic step of formally withdrawing from the foodservice market on peaches, fruit cocktail and apricots, cancelling all pending orders in their system and all future orders for the entire 2012/2013 selling season.  As the market looks to imports, China has experienced heavy rains, limiting the supply of this year’s peach crop. Crop volume is expected to be about 40% less than last year and increased domestic usage is projected to further drive up pricing.  More recently, China experienced a typhoon, flooding the peach regions.  Greece, the other major peach producer is in better shape, primarily due to a good crop and a weaker euro.  Currently pricing from Greece is competitive with China – which hasn’t been the case the past few years – however, with U.S. demand increasing, pricing is expected to firm.
 
Mandarin Oranges
Chinese new crop begins in November/December and there’s a great deal of uncertainty on where prices will open after the roller coaster ride experienced over the past two years.  In 2010/2011, the market opened with low pricing, and then shot up drastically as the season went on.  Many Chinese packers defaulted once the pricing firmed, forcing renegotiation of pricing.  In 2011/2012, the market opened up very firm, and packers demanded immediate shipment, refusing to hold contracted goods for shipment through the year.  Several months later, high production levels caused the market to soften on any overage of product remaining in China.
 
Olives and Olive Oil
Initial indications point to an expected reduction in raw material output caused by drought conditions. The olive oil is always the first to react and has already begun to firm, drastically in the case of extra virgin.
 
Tomatoes
Hot dry weather is putting severe pressure on the Italian tomato crop.  A recent report from the Mediterranean International Association of the Processing Tomato (AMITOM) noted that field yields are poor at 50-80 mton per hectare, but brix level is good, averaging 5.28.  Some large packers are predicting the crop volume will be 30% less than last year.  Most are holding off on offering new crop until the situation becomes clear.  One packer has already declared force majeure and nullified signed contracts.
 
Roasted Peppers
Peru, one of the world’s largest producers of peppers and a dominant supplier to the U.S., has experienced El Nino weather effects causing damage to almost all of the country’s crops.  Labor costs have risen by 25%, and a port strike three months ago backed up the port and continues to effect shipments today.  All the above have caused shortages in supply and price hikes which have opened the door for more competitive imports from other countries.
 
Spain, Turkey, and even China are working to increase market share on roasted red peppers for this crop season. Spain has always been one of the top producers of peppers but had trouble competing in the U.S. when the euro was high. Now, with the weaker euro, Spain is again a factor.   Turkey experienced a heat wave which limited supply but they continue to ship.  Finally, the Peruvian situation is allowing China to emerge as a new player, but quality is still uncertain.
 
Jalapenos
Due to the situation in Peru, packers in Turkey are pushing to increase their shipments of nacho sliced jalapenos.  Overall market pricing is up from last year, but less than from Peru alone.
 
Pepperoncini
High temperatures during the crop season in Turkey have firmed the market. The weather issues delayed the crop by a few weeks and shipments will not arrive until Oct-Nov.  Greece, the other major pepperoncini player, is reporting a normal year, but pricing still remains higher than in Turkey.