The current year’s olive crop was affected by low rainfall, which inhibited sizing. Later in the season the fruit flies infested some of the crop, primarily in Italy and Greece, affecting the quality.
The main sources of oil in order of predominance are: Spain, 1.4 mt (million tons), Italy 350 kt (thousand tons), Greece 250 kt, Turkey 120 kt, Tunisia 60kt, Morocco 40 kt.
With the production in Greece and Italy reduced, the packagers (primarily in Italy) are creating a lot of demand from the Spanish suppliers, pushing the market up, perhaps beyond a normal supply & demand balance.
Olive Oil is a highly speculative commodity driven by:
- A few very large companies
- By ‘Speculadores’ which means speculators in Spanish!
These 2 forces unpredictably control the olive oil market. The market remains quite firm now and may remain so until the spring. In the spring, the olive trees begin to flower, just as other flowering trees, which is the first indication of how much fruit the tree will bear during the season, leading to the initial ‘speculation’ on the new season crop.
Mandarin Orange production to finish early in China due to poor crop.
Our buyers have recently traveled to China and visited several mandarin orange packers in Zhejiang province (Ningbo area).
There are several growing areas in China, like Hunan, Hubei, and Zhejiang Provinces. According to packers, the crop in Zhejiang is some 40% shorter than in a regular year, while the crop is decent in the other provinces in terms of volume but poor in quality as fruit is small due to lack of rain. These other growing areas are in the middle of the country and domestic freight from Hunan and Hubei Provinces to ocean ports or to other factories in Zhejiang or Shandong Provinces makes the raw material very expensive.
Also, it may be hard to believe, but factories are having a hard time hiring workers. Processing mandarin orange segments requires a lot of manual labor and it’s a seasonal job. Some large factories pack nothing but mandarin oranges and they are only open for 2-3 months per year, so a temporary and tough job is not very appealing to workers.
China is facing challenges regarding environmental issues. The country is very polluted and the air quality is bad; as we can all see on the news and on the internet. The government is taking tough measures in order to “clean up” the air and the land; these clean-up efforts affect the food processing factories as well: they must contain and clean their waste and that costs a lot on money. Higher fruit prices, rising labor cost and expenses related to environmental clean-up contribute to higher production costs.
On the other hand, China’s largest competition in this business, Spain, is experiencing a good season, with expectations to exceed normal production volume due to strong demand. Chinese mandarins are subject to anti-dumping duties in Europe that can make their product hardly competitive when the crop is abundant in Spain.
The USA remains China’s main export market and even though the cost of production seems to have increased we expect the prices to remain around last year’s levels because of the decreased demand from Europe. Chinese packers traditionally continue processing mandarin oranges through Chinese New Year that falls on January 28th this year but we are hearing that production will be completed by end December or early January in most factories.
Since the spring 2016 report, the market has remained a bit tight. Raw material costs, the barometer for finished product costing, has remained firm after some increases in the 2nd quarter of last year. Prices have fluctuated in a fairly close range since then, but the bigger dilemma has been the landings of the raw material. Processors have been going more hand to mouth to fill orders rather than building a supply of raw material. The lower cost of fuel has helped the fishermen control costs to a small degree, but historical catchings have been low. In the 4th quarter of 2016, higher ocean freight rates have added to the cost. Tuna fish is still a reasonably priced protein and with broad consumer appeal.
Chunk Light Tuna: Pricing is stable, and possible increases are foreseeable in early 2017. Supply could be an issue as well for reasonably priced chunk light tuna.
Tongol Tuna: The Tongol supply is fairly tight, and prices remain very strong. This is the ‘lightest’ meat in the ‘light’ category, which explains its wide appeal. Tongol is less expensive than Albacore with similar appearance. Our Ambrosia® Tongol contains no vegetable broth.
Albacore: Pricing is steady and supply has improved a bit over the summer, but we are not in a comfortable place as far as supply is concerned. The traditional fishing season for Albacore is April/May, so we are hoping for an improvement.
FYI – Tuna is generally caught by larger vessels out at sea and then frozen on board. Smaller vessels then deliver the frozen tuna to land and it is kept frozen until ready for processing. When raw material is plentiful, building up stock is possible.
THE BIGGEST EFFECT ON CHINESE FRUITS THIS YEAR WILL BE OCEAN FREIGHT!
One of the larger cargo steamship lines, Hanjin, has filed for bankruptcy. It is estimated that Hanjin carries 7% of the world’s ocean cargo, which includes 30,000 TEU’s (twenty foot equivalent units -truckloads) from Asia to the USA weekly!
Ocean freight rates are at all-time lows, and this recent bankruptcy has given the other carriers opportunity to immediately raise their rates. We are expecting to see short term increases on Asia origin freight; between $0.50 – $1.00/case. Perhaps this will decrease to some degree come November.
To simplify the current situation, all the cargo on the Hanjin vessels around the world (about 90 vessels), is in limbo, as the Suez Canal operator will not allow Hanjin vessels in due to unpaid fees. This is the same reason why the Hanjin vessels are not being unloaded at destination ports around the world.
There are bankruptcy laws, international maritime laws, and local laws all in play here, making for a very complicated situation. Many USA importers have cargo on Hanjin vessels right now with no timeframe for delivery.
Please be understanding as there is nothing an importer can do! We are hoping the Hanjin situation is resolved soon and that the other ocean carriers can pick up the capacity. Higher ocean freight rates however, will remain in effect until at least November when the bulk of holiday shipments have passed.
Peaches: There was a very good crop in China this current season, which is concluding now. However, the consumption in China has been growing, putting a dent in the quantities available for export. The prices have softened a bit for the 2015 crop. Greece had some real quality problems this year due to some excessive rain and very hot weather. A lot of their raw material went to peach pulp, for industrial use. Also, the Brexit issue has now made exported Greek Peaches to Great Britain a dutiable item!
Pears: The harvest of Pears in China will now begin, and all indications point to another good crop season. First, Pears are harvested, and then fruit cocktail is made, followed by fruit mix. Pears have a long shelf life and when they are stored in refrigerated warehouses, they can be processed well into the spring!