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Ocean Freight: Pending Rate Change May Mean Higher Ocean Freight

ContainerOver the past several weeks, carriers in the Asia to USA trade have been discussing the idea of changing how rates are calculated for a 20’ container. The current rate for a 20’ container is essentially calculated by multiplying 80% of the dry 40’ container rate. The change being discussed that will be implemented in the 2015-2016 contract year will be increasing the current calculation of 80% to 90% of the dry 40’ container rate.

The reason for this increase is fairly well documented by the carriers and below are some of the reasons:
- Demand for service via the Panama Canal is at an all-time high and since 20’ equipment is typically used for heavy/dense cargo, like canned foods, the steamship line is limited in total 20’ equipment lift per vessel as the heavy weight containers make each vessel sailing hit their maximum payload allowed to transit the Canal.
- Essentially carriers can load more 40’ equipment per vessel with less weight generating more revenue.

The Panama Canal is now completing the current phase of enlarging the locks in depth, width, and length. In essence, ships prior to the enlargement could carry 5,000 TEU’s (Twenty foot Equivalent Units, size of ocean containers used to ship cargo) now will be able to carry 13,000 TEU’s! This will reduce congestion in the Canal, and expedite service.

During the past few months, there has not been enough space to accommodate all the cargo being imported for the holiday season, delaying many shipments from Asia to the USA.

 


Pears: Early Indications Point to an Adequate Yield; Prices Expected to Remain Firm

Pears are just beginning to come in from the fields now in China. Last year’s crop was severely damaged by hail shortly after the bud set, reducing the yield significantly. So far, this growing season has been very good and a normal yield is expected. Prices have not yet reflected the better supply this year over last, as the pipeline has been empty for some months. It will be some time before we may see prices more in line with a better supply.


Peaches: Strong Yield Means Slight Easing of Prices for New Crop

Peaches from China are almost all out of the fields now, and in cans. The unofficial yield was better than last year. The early varieties harvested are most similar in quality to California Yellow Clings. The sizing this season however is smaller than normal, which will result in smaller sized Slices. Dices will not be affected as much. Due to the good yield this season, raw material is lower priced, but the cost of labor and tin plate is up, with the net effect being slightly lower prices this year over last.


Anchovies: Chilean Prices Stable, Supply is Adequate

Overall supply has been adequate from South America.  Much of the raw material used is landed in Arica, Chile, the very northern area of Chile, on the border of Peru.  Pricing has been stable over the past year or so.

There are unsubstantiated reports of raw material shortages in Morocco, a major source of supply of Anchovies.  If proven, this will certainly put pressure on the South American availability and pricing.  It is our opinion that the fish from South American Pacific are slightly larger and give a better appearance vs the Moroccan fish; that product is commonly imported from China, and processed in Morocco.


Tuna: Albacore Firming, Skipjack Trending Higher

The entire market has been turbulent these past few months.  We have seen the market for light meat Skipjack take a steady decline in price due to very low demand.  The market hit what appears to be the bottom and has begun moving up.

Albacore raw material has been very short in supply through the Spring, typically the better fishing season.  Prices have risen steadily and raw material is not always available on demand.  For those that buy Albacore by the container load, it is best you plan further ahead.

Ramadan, the Muslim holy month, began June 28th.  Typically, factories in Muslim countries work on a limited schedule during  Ramadan.  This is affecting production of Albacore in Indonesia, a major source.

Typically, the Fall is a hectic time for tuna factories for end of the year shipments so we are anticipating a firm trend in tuna pricing through the end of the year.


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