Thailand had a decent summer crop and prices are currently stable as factories have closed production until September. Stocks of canned pineapple were relatively high at the end of May and June that caused the price of certain pack sizes to dip slightly as packers wanted to move out some of the inventory. The price of fresh pineapple went as low as 3 Baht per kilo due to sluggish demand. This is not a good situation for the farmers or producers. At these prices farmers look to alternative crops that will give them a higher value per acre of cultivated land. At this moment we do not know the effect of this low raw material cost on future crops, but we are expecting a fairly normal winter crop, with stable pricing. Flooding in certain regions of Thailand has put stress on many agricultural products but nothing has been reported at the moment of affecting the pineapple crop. This is something that we will be watching closely in the upcoming months.
Canned pineapple production in Thailand to remain stable. The pineapple processing industry in Thailand is about to enter the peak season this month. Canned pineapple prices have finally reached a comfortable level that allows both growers and processors to make a living.
Boom-and-bust cycles are well known in the pineapple business; they occur periodically when supply and demand are out of balance due to a disastrous crop or lack of interest in growing pineapple due to low raw material prices. The industry was dealing with extremely high prices and shortages during 2015 and 2016; then the trend finally turned around in 2017: prices started to come down and reached the bottom by the end of the year. Packers have finally caught up with orders and started to built up inventories to a healthy level.
Our sources don’t expect the prices to change much in the near future; the summer crop looks decent and the raw material prices have stabilized. On the long run though there are hints about shortages for the winter crop as some growers are switching to other crops because they aren’t happy with the current prices. “Normal” fresh pineapple prices (about 5-6 Baht per kilo) are considered rather low compared to the previous 2-3 year highs (as high as 13-14 Baht per kilo), resulting in some farmers’ turning away from pineapple cultivation or paying less attention to their plantations. This practice is common and will affect the yield of the winter crop.
Our packers believe that this is a good time to contract for canned pineapple for spread shipment as they expect the market to firm up later during the year.
As Thai pineapple processors are getting ready to make a push for 2018 at the ANUGA Food Show in Cologne, Germany October 7-11th, 2017, they are reporting that the fruit supply is slowly recovering from last year’s low levels. Thai canned pineapple products have taken a lot of “beating” from end-users during the last 12-18 months because of lack of flavor; fruit was picked and processed before it had a chance to mature during the period when supply was low and demand was high.
Pineapple growing areas have been getting a good amount of rainfall this year which helped increase the yield and improve the quality of the fruit. According to a report published by the FoodNews, “Thailand’s processing pineapple harvest this year will be slightly larger than last year’s 1.49 million tons, but still way below historical norms.” The total tonnage for 2017 is estimated to be around 1.7-1.8 million tons or about 20% more than last year.
According to our local sources, factories will face difficulties hiring workers to fill their maximum processing capacity because of the latest government regulations. In an effort to prevent human trafficking, the Thai government has recently enacted new laws for hiring migrant workers and set quotas for companies that desire to hire temporary migrant workers. This can be a major problem for processors during high season because they can’t just hire extra labor when the fruit is pouring in. Instead, they must get work permits first and they cannot exceed their assigned quotas.
A factor that we have to take into consideration is the strengthening of the Thai Baht against the US dollar. The Baht has gained about 8% in value against the USD during the past two months. However, given the better fruit supply, we expect the prices to get back to “normal” levels. The Thai pineapple processing industry has traditionally endured a lot of “boom and bust” cycles and they hope that supply and demand situation will balance out during the next 12-month period.
According to the recent report of The Thai Food Processors’ Association, El Nino caused higher temperatures than normal during the first months of the year which threatened the upcoming pineapple crop and damaged the plantations greatly. Around 30-40% of the crop was affected with damages including sun-burnt fruits. Because of the severe drought that El Nino has brought on, farmers were unable to properly care for their plants that will result in a delayed winter crop.
Since the fruit supply has been low, there hasn’t been enough for cannery production, forcing packers to run with half capacity. Most packers are struggling to fulfill their contracts and shipments are delayed by several months because of the insufficient fruit supply.
The total crop outlook from January through the annual shutdown in August has been predicted to be around 1.1 million tons of fruit which is about 30% less than harvested the same period last year. Because of this severe shortage raw material prices are expected to increase to THB 14.50-15.50/kg.
Apart from dealing with expensive raw material, Thai pineapple packers are forced to pay more for tinplate as well; the price was increased by USD $30.00/ ton in 2Q16 and by another USD $130.00/ton in 3Q16.
At the recent New York Fancy Food Show, some Thai packers claimed there wouldn’t be a relief in pineapple supply before the winter crop of 2017, given the long growing cycle of the fruit.
Reports coming in from the major pineapple growing regions throughout Southeast Asia point to a continued supply shortage and high pineapple prices. The El Nino effect is generating adverse weather conditions throughout Thailand and Indonesia, with water shortages stunting fruit growth and making harvests much smaller than usual. Thai packers are claiming shortfalls of 15% in December 2015 when compared to the same period in 2014, while Indonesian factories have started seeing up to 60% less in raw material in the past months than the same period a year before. To compound the issue, many factories are still working on filling back orders from last season, which makes the limited raw material available that much more of a commodity. These crop issues do not point towards any sort of pricing relief on pineapple in the near future.
The Thai Pineapple Industry Association has recently met and delivered its estimate of 1.4 million tons as Thailand’s total fresh pineapple production for 2015. In normal years, Thailand produces about 2 million tons of fruit, so this is about a 30% shortage. Some of the fruit will go to the fresh market, leaving the processors, canneries and juice concentrate manufacturers, with less fruit than in 2014 along with sky-rocketing prices that were unheard of in the past. In “normal years” fresh pineapple costs about 3.50-4.50 Baht per kilo, but right now fresh fruit is trading at around 12-13 Baht per kilo.
Some of the shortage is linked to the unusual weather pattern and an exceptionally strong El Nino that has been bringing lots of rain to parts of the world that are normally dry and drought to other parts, like Southeast Asia, where it should normally rain during “rainy season”. Processors fear that September 2015 to February 2016 is going to be the worst dry season the crop has ever seen. They don’t foresee any increase in the fruit supply and they predict the fruit supply to be about 40% less than what the industry needs.
Other than the weather-related crop fallout, a large part of the shortage can be explained by the “boom-and-bust” nature of the Thai pineapple industry. When the fruit prices plummet, farmers abandon their crops and grow something else that’s more profitable. Given the current high prices, farmers are expected to drift back to pineapple cultivation next year but no worthwhile increase in production can be expected before next year’s summer crop, at the very earliest.
For the time being, offers for canned pineapple from Thailand are scarce, prices are extremely high and packers are cautious about making commitments for large quantities as they continue dealing with back-orders. Other pineapple producing countries such as Indonesia or China are struggling to keep up with the high demand and can’t make up for the shortfall of Thailand, which is one of the largest pineapple exporters of the world.
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.
Thailand’s winter crop started late by a few weeks and now the flooding is affecting certain areas. Raw material prices were at around 5 Baht/kg as opposed to last year’s $4/Baht/kg. Packers were complaining about the weak European and Russian market and yet, they didn’t expect the prices to come down, given the raw material cost and lack of carryover from the summer crop. The winter crop is usually smaller than the summer crop and we will have to closely monitor the weather conditions in the coming months. This is the rainy season the Southeast Asia and steady rain and flooding may affect several crops, not only pineapple.
Pineapple prices have risen sharply over the past months in Thailand as supply shortages are becoming more apparent. Raw material prices have doubled as growers registered one of the poorest harvests in some 8 years in April, putting pressure on the canners and processors as inventory levels continue to diminish. Processors are claiming that there was no “peak season” this year – they usually expect to pack more during the summer crop (April to June) than during the winter crop (October to January). The size of the pineapple crop is cyclical: they usually get a fair crop after a good crop and the 3rd year generally results in a poor crop. This is mostly due to the supply-demand situation; the larger the crop, the lower the fruit prices, thus farmers are less likely to re-plant and take good care of their plantation. As the yield shrinks and fruit shortages become more severe, fruit prices shoot up and farmers have more incentive to grow more fruit again. Pineapples are cultivated by planting the crown of the fruit; as farmers proceed cutting the fruit they may either discard the crown or plant it as they move down the row. If planted, the crown grows into a new plant and will bear a fruit in about 26-30 months.
Most of the larger pineapple packers are expected to try to buy up as much product as possible in an effort to maintain supply levels, regardless of the cost. Chinese Pineapple prices have risen as well on speculation concerns, so there is unlikely to be any relief from that market any time soon.
The pineapple market remains quiet between crops. Most packers in Thailand have unsold stocks and are anxious to sell before the start of the summer crop production (April/May). Their prices are quite competitive, even though they are struggling with increased production costs due to the mandatory wage increase they had to implement at the beginning of the year. The strong Thai Baht isn’t helping export sales either; the local currency has appreciated about 4% against the USD during the past 90 days.
China has ample stocks also and the prices are similar to those quoted by their Thai competitors. Their crop cycles are the same as Thailand’s and they are gearing up for summer production as well. The variety that’s grown in China is different; it’s called Queen Victoria, while the dominant variety in Thailand is Smooth Cayenne.
Overall, this is a good time to book out pineapple because the current prices probably won’t last long, given the higher retail sales during the summer all over the Northern Hemisphere.