REMA FOODS MARKET FLASH May 19, 2014
TRADE/POLITICS: Still no progress on GSP renewal and the Miscellaneous Tariff Bill. The U.S. Generalized System of Preferences (GSP) is a program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 5,000 products when imported from one of 123 designated beneficiary countries and territories. GSP, which expired July 31, is a program with lots of Congressional support, so it’s still expected to be renewed. As for the MTB, this is a huge bill containing duty reductions/eliminations for thousands of items.
The current labor contract between the West Coast Terminals and the International Longshoremen’s Association, AFL-CIO ends on June 30, 2014. There is the potential for a strike if a new contract is not agreed to prior to this date. If history repeats itself, the lockout would last a week and result in losses of at least a billion dollars a day. If a strike occurs, the steamship lines plan to charge a contingency surcharge of $1,000 per container for "port congestion."
Vermont became the first state to pass a bill requiring food labels to note if contents are produced “with genetic engineering.” Twenty-nine other states have proposed, but not passed, similar bills on GMO labeling.
Food Safety Modernization Act: the first set of FSMA rules will be published on August 30, 2015. For any company importing even one container from overseas, it’s urgent to set up the infrastructure to meet the requirements of FSMA. Most of the burden to prove the safety of the supply chain will rest on the importer and failure to comply with FSMA will be punishable as a criminal act.
CURRENCY: The dollar has firmed slightly over the past week, erasing some of its losses from the past month. However, the dollar is still weaker now than it was earlier this year.
TUNA: It appears the skipjack raw material price has finally bottomed out from its lowest levels of $1150-$1200/mton last month. With fishing poor and most packers fully committed, fishermen are trying to hold off on their deliveries in anticipation of higher prices. While the concern not long ago was how low can it go, now the market is gearing up for the exact opposite as we head into the start of the FAD ban period this summer. Current raw material price levels are now reported to be at: $1350-$1400/mton, but many packers are basing on $1500+ as a sense of panic is starting to set in. Yellowfin normally follows the pricing trend on skipjack and is now over $2,000. Albacore has been firming over the past month and is now reported at $3150-3200/mton. Overall albacore is quite short with some packers fully booked until after the summer. The Biennial INFOFISH Tuna conference runs from May 21-23 in Bangkok, Thailand. Major tuna industry players, tuna governing bodies and NGOs will gather to discuss current issues and trends in the industry. This year’s theme is: “Working Together towards a Sustainable Industry.”
PINEAPPLE: Thai pineapple prices have continued to increase amidst shortage of supply. It’s reported raw material prices have now reached 8.00-8.50 baht/kg, while pricing is normally around 3.00-5.00 baht/kg. Most packers are holding off on offers and are waiting for the outcome of the Thaifex Food show to be held on May 21-25 in Bangkok, Thailand. Meanwhile, high quality fruit is especially limited because some farmers, tempted by the high prices, are harvesting fruits before they are fully ripened to choice/fancy grade.
MANDARINS: It seems that the reported raw material shortage in China during the crop season actually transpired and was not just mere speculation. Final figures show the 2013/2014 crop was 40% short vs 2012/2013. Since there was a substantial carryover from the 2012/2013 crop so most factories reduced their production. Additionally, since some overseas markets use orange sacs and are able to pay a higher price, most raw material intended for broken mandarins were diverted to sacs. Remaining supply of broken mandarins are especially limited.
PEACHES: The anticipated California peach shortage did not seem to have materialized as badly as the industry predicted and a better crop is expected this season. In China, last year’s crop was about 20% shorter and prices were about 30% higher than the previous year. As for this year, so far normal temperature during the flower season (March/April) is expected to bring a normal crop. However, it is still early as harvesting does not begin until end June/early July.
ANCHOVIES: After many years of stability, the annual Moroccan peak fishing season of March through May this year has been a disaster. While fishermen kept hoping the fish would come, they never did. Packers are scrambling for fish; raw material costs have firmed dramatically.
ARTICHOKES: In Spain, despite record high temperatures affecting the Murcia region (the main artichoke growing area in Spain), all has been good for this season and the crop is normal. In Peru, due to increasing costs, packers have found it difficult to compete with Spain. As a result, most packers have decided to reduce their planting areas.
MUSHROOMS: European mushrooms (Dutch, Spanish and French) have successfully displaced Chinese mushrooms in the US market for now. Over the past few years, USFDA has been testing imported mushrooms for specific pesticide residues. Rejections of Chinese mushrooms have discouraged many packers from exporting to the US. This is further exacerbated by the high anti-dumping rates imposed on most Chinese packers (300%+). The main Chinese factories have instead opted to supply their local fresh market and other non-US export markets. While the USA was the top export market for Chinese mushrooms in 2012, it dropped to 19th place for 2014. Another emerging growing region is Poland, however their prices are still not competitive enough for the US market.
TOMATOES: Globally, processed tomato production is expected to increase by 18% this year to 38.85 million mtons worldwide. Much of the growth is being driven by China (up 49%) and the EU (up 22%). US production, the largest worldwide, is forecasted to grow by only 11% but concern is building over how the water shortage in California will affect this year’s crop. Water reserves are currently at 30% of their usual capacity, and growers are demanding higher prices.
CHERRIES: It’s being estimated at this time that the 2014 domestic US Northwest cherry crop has the potential to exceed last year’s crop in quantity by 20-25%.
DRIED APRICOTS: The Turkish apricot market is in a state of chaos as frost destroyed almost the entire new crop. Normally Turkey produces about 150,000 mtons annually; this year the expectation is for less than 15,000. Carryover is only about 35,000 mtons while annual export demand is normally 100,000 mtons. Raw material costs overseas have skyrocketed.