As reported in May, Mandarin Oranges continue to be very difficult, with supply almost nonexistent in China. Prices rose drastically from April-July with increases as high as 25-30%. Some believe that there may be a few available stocks come September when the suppliers take a good look at what is left in the warehouse vs. what is expected to ship on contracts. We expect prices to hold firm until the new crop. New harvest normally begins at the end of October to early November, with shipments of canned mandarin oranges arriving at the end of December or early January. There will be little to no carryover going into the new crop that is expected to be better than last year’s. We should see some relief in prices heading into the New Year.
2017/2018 proves to be another tough season for mandarin oranges in China. Since the previous season was short, partially because the Chinese New Year started relatively early (January 28, 2017), and partially because of a short fruit crop, there was practically no carryover before the new season and buyers could hardly wait for the fresh production to begin.
If we thought that the situation could not be any worse than last year, we were wrong as this season seems to be quite a disaster. Raw material supply is short and a decrease in available labor in all packing areas, when compared to the previous year, forced factories to firm up their quotes to compensate for the decrease in production.
Packing mandarin orange segments is very labor intensive since every single fruit has to be peeled and segmented by hand and factories are unable to fill all shifts and all production lines with workers. It has been reported that the price of the raw material is still on the upward trend and offers for finished product, both retail and foodservice, are following the same path.
For this reason, many factories are reluctant to speculate and they only produce for firm orders that reflect the day’s raw material price and have prompt shipping dates. Even though Chinese New year is late this year (February 16, 2018), factories aren’t planning to pack mandarin oranges until that date like they used to because of the above reasons.
In addition, the Chinese currency (RMB or Yuan) has been steadily gaining value against the USD and reached its highest level since end 2015. The weak dollar, together with the higher cost of labor, sugar, tin plate and cardboard are all adding to the already firm market prices of canned mandarin oranges.
For months the market has been advancing for all species of tuna; Bonito, Skipjack, Yellowfin, Tongol, and Albacore. The main reason the market has been firm is that fishing hasn’t been good since there is a lack of raw material. To further exacerbate the problem, some countries such as Indonesia, have instituted fishing restrictions to help the fish population regenerate. It is now illegal to have carriage vessels transport fish from the ‘fishing’ vessels back to land, so the fishing vessels stay out at sea. The smaller fishing vessels can’t store enough fish on their boats to keep returning to land. Also, the declining fish population doesn’t swim as close to shore as they used to so boats now have to travel 100+ miles further to fish.
For some other oceans, a fishing ban (ending October 31st) has been implemented. Of course it makes sense to restrict fishing to help the population redevelop. We all want there to be enough fish for generations to come, but balancing supply and demand with social responsibility is a difficult business.
Skipjack raw material, which is the high volume industry standard, has been rising steadily throughout the year to now hover around $2,100/ton in Bangkok with no relief in sight. Typically around this time of year, it is a busy buying season for importers because they are purchasing their first quarter requirements. Due to higher prices and the shortage of fish, buying has been slow. Unfortunately, there is little doubt that the tuna market for all species will remain strong through at least January and we can expect to see some shortages along the way.
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.
Olives are harvested in the fall for the Mediterranean areas of Spain, Italy, Greece, Turkey, Tunisia, and Morocco. Thus far, the growing conditions have been very good, but rain is still needed for the olives to mature to full size so the farmers can get the best yield. The fruit fly incidents have been causing some concern, but if the weather turns cooler, perhaps this will reduce the risk of crop damage. This is a newly reported problem still being assessed.
Olive Oil has been under some pricing pressure, keeping prices firm. There seems to be sufficient inventories of most varieties used for table Green Olives. The supply of the Hojiblanca Olives, used for ripe olives in Spain, and the Kalamata Olives in Greece, also have good numbers which maintains strong supply. Because of the financial crisis in Greece, over the past few seasons the farmers have been asking for more money which pushes up pricing.
Typically, new crop prices for olive oil and table olives are announced in January. The pricing for new crop Kalamata Olives is also usually announced early in the year as well, as this crop is still harvested into the first quarter of the year.
The Chinese Mandarin Orange pack season has finished and all reports indicate a short crop in the largest growing areas (Hunan, Hubei Zhejiang Provinces). According to sources in China, rainy weather throughout November damaged fruit trees and ripe fruit, forcing growers to dump up to 40% of fruit at the end of the harvest. The remaining fruit, according to reports, is of “very poor” quality.
At the same time, Chinese packers are worried about what they see as a decrease in the number of orders placed by US importers. The United States is China’s largest market for canned mandarin oranges and this product shortage has driven prices up. American importers seem to be holding out for falling prices, adding further pressure to the Chinese packers.
The price of mandarin oranges has been fairly low for the last few seasons, but it can be expected the prices will increase throughout the New Year if demand surpasses supply. The days of inexpensive mandarin oranges may be coming to an end.
As reported in our June posting, anchovy raw material still remains short. After the fish has been caught, it takes up to 3 months to fully cure, so it can be cleaned and packed into cans. The demand is very strong and for those with a good source of supply, like us, it is very difficult to keep up with the need. Raw material will remain short throughout the rest of this year. Pricing is firm and fillets will trend toward the smaller size since that is all that is being caught recently.
Although not usually a big topic in the news, anchovies are now newsworthy because there aren’t enough raw materials to meet the demand of the anchovy market. The fishing in the North Atlantic Ocean near Morocco has been very short. Fishing in the Pacific Ocean off the coast of Chile and Peru has been very short as well. Over the past 15 years, much of the world wide anchovy production has moved to Northern Chile and Peru. Due to the effects of El Nino, the water off the coast of Peru is warmer than normal making it difficult to attract cold water Anchoas Ringens, anchovies. The fish are migrating further north away from the traditional catching areas of Arica, Chile, and Pisco, Peru, and are headed to Chimbote, Peru, which is about 6 hours north (by truck) from the main factories around Pisco, Peru. There are no official figures for the raw materials, but it is quite short in supply and the cost has almost tripled in the past 3 years. The yield of the fish is only about 25% so the increase has not had an overwhelming impact on the cost of the finished product. Processing anchovies is very labor intensive which is a huge reason as to why anchovies are expensive.
The prices of anchovies should remain firm, but they will continue to be in very short supply for at least the next 6 months.
Fruit Cocktail and Fruit Mix come in several different quality formats, which will certainly affect pricing. Where better quality peaches, pineapple, and grapes are used, the pricing tends to be slightly higher than inferior product. Pricing will also depend on the mix that is used; more pears than peaches would lower the cost. Pricing is similar to last season, and supply will not be a problem this year.
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.