Friday, January 03, 2014


TRADE/GOVERNMENT: As part of the Food Safety Modernization Act, FDA proposed two weeks ago a rule that would require food producers in the U.S. and abroad to take steps to prevent facilities from being the target of intentional attempts to contaminate the food supply. The rule would require a food facility to have a written food defense plan that addresses significant vulnerabilities in its food production process. Facilities would then have to identify and implement strategies to address these vulnerabilities, establish monitoring procedures and corrective actions, verify that the system is working, and ensure that personnel assigned to the vulnerable areas receive appropriate training and maintain certain records. The proposed rule is the sixth issued under FSMA.

CURRENCY: Dollar remains weak against the euro, trading in the 1.36-1.38 range over the past couple of weeks.

MANDARINS: The situation seems to have turned around in China quickly and with a vengeance. Lower priced offers on carry-over quantities in the beginning of the season have dried up as the reality of the crop shortage becomes apparent. Reports indicate the total crop will be 30-40% off from last year.  Raw material prices have increased from a low of RMB 0.60/kg last year to RMB 1.90/kg this year.   As most packers suffered from last year’s glut, about 40% reportedly decided not to pack this season. This, coupled with strong domestic demand, short labor supply and an early Chinese New Year (Jan 31) led the remaining packers to withdraw and wait for the market to stabilize.

TUNA: Market overall remains sluggish, with skipjack dipping below $1600/mton.  Yellowfin is currently at $2450/mt; catching has improved, but the price spread is between skipjack and yellowfin still wide.  It’s always tough to predict a bottom, but there are several factors that should be considered as we start 2014: 1) there’s been a substantial cost decline over the past half year, 2) the holiday season of Christmas to Chinese New Year brings about less fishing, 3) raw material costs are starting to reach possible breakeven cost levels – something not discussed for years, and 4) there is a general pessimism felt in the market (the “reverse-bubble” mentality) which could cause any firming to have a disproportionate effect on the market (think mandarins two months ago).  The fishermen made a lot of money over the past few years and it remains to be seen how much lower raw material can drop before it becomes unprofitable for some fishermen to go out to sea.  On a separate note, while still a minor player in tuna canning, China is increasing its tuna exports into the US.  Exports went from 11,592 tons in 2012 to 14,696 in 2013, up from only 1,708 in 2008.  The US is now China’s largest canned tuna export market.

PINEAPPLE: the Thai winter peak season (initially forecasted for mid November/early December) has not materialized.  Raw material prices remain firm at 6.00-6.50 baht/kg.  Expectations were for prices of around 4.00 baht/kg.  This firm pricing is offset partially by a 14% weakening of the Thai baht, a result of political turmoil in Thailand.  Most packers are maintaining a “wait and see” attitude and are refraining from offering substantial quantities from the winter pack.

ARTICHOKES: Spanish crop is underway and barring any weather related disaster, everything appears to be normal with good prospects for 2014.

PEACHES: Domestic peaches are projected to remain short for years to come.  According to the California Canning Peach Association (CCPA), California’s cling peach bearing acreage will fall to its lowest level in recent memory.  Bearing acreage of 21,200 in 2013 is expected to fall to 19,900 in 2014 and 19400 in 2015.  By contract, it was 30,200 in 2005 and has fallen every year since. Imports will to play a major role in making up the shortfall.