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.
It has been reported that during the early days of April, freezing temperatures have affected the north and western regions of China and could have affected part of this years’ apple supply. However, this region only accounts for a small percentage of the total production and if there are no further surprises, the apple raw material market for canning should be similar to last year.
While the fruit raw material market should remain similar to last year, we are expecting a slight increase in prices to the final products due to the FX rate (a decline of the USD, from 6.60 to 6.33 RMB/$1.00, about a 5% decline) and higher prices on tinplate and cardboard.
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.
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.
As last reported in February, prices were so low that fisherman and canneries were not able to sell profitably. For Skipjack, the bellwether of the tuna market, prices have significantly increased over the past couple of months and raw material has not been plentiful. Prices are up $2.00-$3.00/case and are showing no sign of retreating.
Fishing of Tongol and Albacore has had very little success, which pushes up the price of raw material. Over the past few months, the prices of these canned products have been steadily increasing and as of recently, even less raw material is landing. Tongol price has increased by as much as $5.00/case and Albacore by $2.00-$3.00/case. April and May are the best time to catch fish, but this year it has been far below an average catch. If things don’t improve soon, we will see a very strong market.
Chunk Light Tuna: The chunk light tuna market is at the bottom. Since raw material is at a very low price, it is not profitable for fisherman to sell their catch to packers who are unwilling to process and pack it at the current market prices. There are two prominent species of tuna being used for Chunk Light Tuna. Over the past few years, Skipjack has been the traditional species and now Bonito is being processed in China and Vietnam, where labor rates are lower than Thailand. From certain factories, the quality of Bonito is much lighter in color than Skipjack (and at a lower cost), making it a very good value!
Tongol Tuna: Tongol is lightest in color of the light meat tunas, but is used as an alternative to the higher priced Albacore. Tongol is packed in all of the traditional tuna producing countries: Thailand, Indonesia, and Vietnam. Vietnam has a very short fishing season, which is in the fall, but they do receive limited quantities of raw material during the rest of the year. When raw material is available, the quality of fish from Vietnam is preferable. Indonesia is also a quality packer of Tongol and typically their prices are more competitive than Thailand. The market for Tongol tuna has been fairly stable the past few months with fluctuations of about +6%.
Albacore Tuna: The heaviest fishing season for Albacore is in April. Raw material has been in steady supply, but as of recently, it is a bit tight with prices firming. Fishing boats are coming in from the sea now for the upcoming Chinese New Year on February 8 (which lasts for about 10 days). Prices are firm and will continue to be so until at least April when the new season begins.
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 new olive crop in Spain was predicted to be close to “normal average” a couple of months ago, however, the exceptionally hot weather in Europe in July & August seems to have caused problems. One of the main problems is that some of the fruit has shriveled and fallen off the trees prematurely, thus reducing the expected harvest volume. Packers are concerned that there will be even less Hojiblanca olives, which are normally used for ripe olives and olive oil, than last year.
Soaring prices and low carryover of olive oil isn’t helping the situation either. We can expect table olive packers to compete for the same raw material as olive oil manufacturers which will drive the prices up. We have started seeing higher offers for ripe olives even though packers are still using fruit from last year’s crop.
Recent articles in the international media have reported on the world olive oil shortage and subsequent rise in prices due to the poor harvest in Spain and Italy last year (these two countries are responsible for 70% of the global olive oil output). Spain has suffered from extreme heat and drought in the summer of 2014 as well as 2015. Italy was hit with fruit fly infestations and the deadly Xylella fastidiosa bacterium which has decimated olive groves in the Puglia region and is feared to have spread to other parts of Southern Europe. There are reported cases on the island of Corsica where France is trying hard to contain the outbreak.
The crop of other Spanish olive varieties, for example Manzanillas and Gordal (Queen) olives, look alright so far and growers expect an average harvest volume. Further information on the crop size by variety should be available soon. The ANUGA International Food Show in Cologne, Germany is coming up on October 20th, where packers usually announce their new crop prices for ripe olives. Green table olive prices will be revealed later, after the fermentation is complete and packers have a better estimate on the volume of the various calibers of olives.
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.