REMA FOODS MARKET FLASH January 5, 2015
West Coast Surcharge: After seven months of talks & continuing ILWU slowdowns, the Pacific Maritime Association (PMA), which represents employers at America's 29 West Coast ports, has asked for federal mediation in its contract negotiations with the International Longshore & Warehouse Union (ILWU). In the meantime, the labor action has caused delays, congestion and increased costs which the steamship lines are trying to pass on per tariff filings they made in 2012 to allow for this charge. In November, the steamship lines tried to impose a surcharge of $800 per 20’ container and $1000 per 40’ container on arriving shipments. Amidst protests, the surcharge imposition was suspended. The lines then tried to impose the surcharge on departing vessels, but finally in the end, this as well did not come to pass. Now, the lines are trying to impose a Peak Season surcharge. Pier haulers on the other hand have been successful in increasing pier haul rates on the west coast by an additional $400-600/container.
USFDA finalized two rules requiring calorie information to be listed on menus and menu boards in chain restaurants, similar retail food establishments and vending machines to help consumers make informed decisions about meals and snacks. The rule applies to establishments if they are part of a chain of 20 or more locations, doing business under the same name and offering substantially the same menu items.
CURRENCY: The dollar has been trading stronger against most major currencies and is now in the 1.19-1.22 range against the euro.
TUNA: A few months ago, going into the autumn Western and Central Pacific FAD fishing ban with very high pricing, the tuna market actually saw prices fall during the ban period. In 2015, for the first time, a new FAD ban period will be enforced from January to February 2015 (and also July-Sept 2015). Going into this ban period with raw material pricing now at very low levels, the expectation is strong that we’re seeing the bottom. Recent raw material costs for Skipjack have been in the range of $1180-$1250/MT. Yellowfin has remained steady at $1800/MT and Albacore has been holding at $3150/MT. Overseas, the European parliament granted the Philippines GSP+, which awards them a zero percent duty trade preference on 6,200 tariff lines, including canned tuna when shipped with qualifying fish.
PINEAPPLE: This current winter crop in Thailand is being reported as the worst crop ever. Most Thai packers are still reporting that they are operating at 25-30% of their capacities, with raw material tonnage running at 1800-3800 mtons/day as compared to 7000 mtons/day in Nov 2013. Coming after an awful summer crop, packers were hoping for some relief during the winter crop but due to lack of rain this never materialized. Raw material has remained scarce and prices have increased to around 9.00 – 10.00 baht per kg (compared to a normal level of about 3.00 – 4.00 baht per kg). Some improvement was seen for a short period in November but this was not sufficient to overcome the earlier crop shortfalls. Additionally, due to the high prices, farmers are cashing in by harvesting earlier, even if fruits are not yet at optimum ripeness levels. This is resulting in less availability for choice quality packs. Indonesia is hard-pressed to cover the strong demand.
OLIVES: The Spanish olive crop is estimated to finish with 517,000 mtons, 3% below the 5-year average of 534,000. For Manzanillas, there is a 28% increase to 189,000 mtons, however, a sizeable percentage is not suitable for table olives and will be diverted to olive oil production. For Queens, there will be 24,000 mtons, which is better than last year’s short crop of 11,000 but still far short of a 33,000 average crop. For Hojiblancas, the variety most commonly used to produce sliced ripe olives, the final expectation is 231,000, 6% below the average crop of 248,000 and a 20% drop from last year’s crop of 288,000 mtons
OLIVE OIL: Overall world output is expected to be 20% lower than last year. Spain, which accounts for 35% of total world production, is reporting a harvest of 900,000 mtons vs last year’s 1.6 million. Italy’s olive crop was affected by heavy rains and a fly infestation, causing a 35% reduction to 302,000 mtons. Countries in the southern part of Europe produce more than 70% of global olive oil output. The recent harvest figures have prompted prices to increase by about 25%+ in just the past couple of months.
PEACHES: The California Canning Peach Association ratified a 2015 price agreement between the growers and Del Monte Foods. The new price of $460/ton represents a huge increase of 21% from the prior year. Furthermore, the price is up 58% since 2011 (from $291/ton). Pullouts since June 1 amount to 1,244 acres, or 6.3% of 2014 bearing acreage. This year's harvest is expected to be the smallest in half a century. Imports are making up the shortfall, especially for buyers keen enough to buy during the summer season months when product was plentiful.
RAISINS: Domestically, California raisin growers and the industry’s packers have agreed on a price for the 2014 crop: $1,775/ton, an increase of 7.5% over the previous year. Raisin Bargaining Association officials were pushing for a higher price, given that some farmers have estimated the state’s raisin crop may be off by 10-40%. It’s the opposite situation however overseas, with excellent crops in most markets. Turkey (the world’s second largest producer after the US) is expecting a bumper crop. South Africa is expecting a crop of 61,000 mtons, its best in many years. Overall, the expectation this year is for much lower exports from the US, and greater imports into the US at attractive prices.
MANDARINS: The weak market of 2013 has reportedly pushed four Chinese mandarin plants into bankruptcy. The new Chinese crop is well underway and while raw material volumes seem to be good, prices are not dropping – in fact shortages of some grade such as broken are actually pushing prices up. Packers are reporting labor shortages, higher wages and stronger domestic demand for fresh mandarins as the reasons for firm pricing. In overseas markets, there has been a strong demand for orange sacs (used as an ingredient in juice drink). As most packers prefer to produce sacs over broken because they command a better price, a big shortage in broken mandarins has now developed.
ARTICHOKES: The Spanish crop season started about three weeks later than expected due to warm weather in October-November. At the moment, raw material prices are high due to the strong holiday demand from the fresh market, and packers are offering at about 10% higher pricing than last year. A minor frost was experienced in some growing areas last week, the effect is not yet clear, but it is being reported that canners may have to temporarily stop production until raw material conditions become more stable. Peru has so far proven uncompetitive this season, but Spain’s problems have given a slight opening for Peru to come back into the market. Egypt is expected to begin their crop in January and packers are still waiting to see how the crop develops.
WATER CHESTNUTS: Last year’s high prices have enticed farmers to increase production. However, because of increased demand from the Chinese domestic market, prices have remained relatively flat.
TOMATOES: While the overall crop volume was good, Italian processors are complaining of the lowest factory yields in years due to the low brix of the raw material this season. World production stands at 39.8 million mtons, with California leading world production with 12.7mm mtons (metric not short tons), China with 6.3mm, Italy with 4.9mm and Spain with 2.7mm mtons.
DESICCATED COCONUT: While the crop is finally improving, backlogs have kept the market relatively tight.