The mandarin situation seems to have changed in China very quickly. As reported earlier, packers were dealing with a substantial carryover from the 2012/13 season at the beginning of the production; however, those lower-priced stocks have dried up quickly and the shortage of the 2013/14 crop became promptly evident. Raw material prices tripled between end November and January, forcing a third of the mandarin packers to abandon packing altogether. This shorter capacity, strong domestic demand, expensive labor and energy costs, as well as the early Chinese New Year that normally marks the end of the season, have all contributed to the sudden increase of mandarin orange prices. After the initial offerings packers quickly withdraw their offers and have since been holding their prices steady at a level that’s about 30% higher than last year’s. Unsold stocks aren’t substantial and prices are expected to go even higher by the summer.
Thai pineapple processors have been experiencing a very poor fruit supply for several months. In comparison to the production volume of the same period last year, the output for January – March 2014 is expected to shrink by as much as 50%. Along with tight supply the price of raw material has hit the unheard-of level of Thai Baht 8.00 per kg, equivalent to USD 250/mt that is by about 40% higher than the average price of winter crop fruit. What fruit is available is of small size and processors have no option but pay the growers’ asking price, otherwise the farmers may simply abandon pineapple cultivation and choose some other crop, like soybeans, that promises them a quicker and higher return.
In fact, the low price of processed pineapple that has persisted for the last couple of years has also exacerbated the shortage of fruit because farmers couldn’t afford fertilizers to renew their plantations. This has caused a raw material shortage that cannot be quickly rectified; therefore pineapple prices are expected to remain high for quite some time. Processors forecast a tight supply of fruit and claim that there won’t be a summer peak season (April/May) this year at all; they don’t expect any relief through the end of the year and beyond. The world market is finally realizing that prices aren’t falling anymore and major European retailers have concluded contracts at much higher levels than in 2013, thus setting the level for other customers all over the world.
Currency exchange is one of the most unpredictable components of an importers cost. Political events such as are happening now in Ukraine, can create temporary peaks or valleys in the value of any world currency. In the past several months the value of the US Dollar vs the Euro, and some other world currencies, has declined, which means that the cost has gone up. Most all are affected by this. Why not hedge? Hedging is a great strategy, if you are certain when the US Dollar will rise or fall. The value of the US Dollar vs the Euro has dropped about 11% over the past 14 months or so.
These once a year crops are now feeling the pressure of a short harvest last summer in China. Greece did not have a good harvest of Peaches, and California deliveries over the past 4 years are down almost 22%. The drought in California may reduce yield this coming season. Inventories are low and still several months before new crop will keep prices strong. The Pear crop in China was devastated by the hail storm last Spring, and China makes up over 90% of imported Pears into the USA. With domestic pears increasing in price the past few years, there is significant demand for imported Pears. The Pear harvest is late summer, early fall, so we are many months off from any increase in supply. Factories unsold inventory is very limited, and much of what remains is off grade.