As reported in January, Mandarin Oranges have proven to be difficult this year. Product continues to be in short supply due to no carry-over from the previous year, bad crop conditions, and a decrease in labor pool. Prices have increased dramatically over the past 2 months, with increases as high as 20-25%. Whole Segments in Juice are the most difficult to secure at the moment. Many suppliers indicate they are sold out completely until new crop.
We expect prices will continue to hold at these higher levels until new crop begins. The challenge will be securing enough product to hold until the new crop.
All species of tuna have been in short supply the past 6 months or so with prices climbing steadily. It seems as though there is no relief in sight now as landings of raw material are erratic and are not enough to meet demand. Skipjack raw material prices had fallen in certain producing markets during the first 3 weeks of January, which most likely are for small fish that have a lower yield. The season for higher catches is typically around April; therefore no one is expecting relief in pricing until May or June at the earliest.
- Chunk Light has increased steadily over the past 6 months and is now reaching the highest price in recent memory.
- Yellowfin, which was significantly cheaper than Tongol, is now almost the same cost.
- Tongol, the lightest of ‘light’ tuna, has been especially short and pricing reflects the short supply.
- Albacore is now in very short supply, and the issue isn’t always the high cost, it is also only available in limited quantities. Albacore is a completely sellers’ market and right now the demand is higher than the supply.
Pouch tuna fish is a viable option to canned tuna fish. Although typically more expensive than canned due to labor intensity, now it can be comparably priced. The reason for this is that pouch tuna is only packed with flakes, which is not as costly as chunks. Pouch tuna is an excellent alternative to canned for manufacturers as there is no draining required and the waste is significantly less because an empty pouch takes up less room than an empty can. Pouched tuna comes in Light and Albacore.
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.
Skipjack, the bellwether of the tuna market, has been steadily rising in price to near historic levels. Typically the new fishing season begins in spring, but not much fish have been landing. Pricing a few months ago was around $1,750/ton for raw material, and the market expected it to bottom out at $1,500/ton. Due to low volume of fish, the market is now expected to hit $1,900/ton this week! We expect prices to continue to rise with no reductions in sight. Shipments are also delayed due to this shortage of raw material.
Tongol is now very high priced but a good alternative is Yellowfin. Typically, Yellowfin is only a couple of dollars lower than Tongol which is why most have gravitated towards Tongol. Now the cost difference is about 10%, and Yellowfin is good looking tuna and looks even better with a bigger price spread.
Albacore has been firm and steady in pricing, but raw material has been tight on the supply side, creating some delays in exports out of producing countries such as Thailand and Indonesia.
A word of caution; be alert to some below market quotes! There is a lot of product being quoted with drained weights below the US FDA minimum, by almost 12%! Caveat Emptor, ‘Let the buyer beware’!
Although the olive trees in Spain have begun the new growing season on a good note, we are still a long way from the harvest, which begins in the fall. The trees require sufficient rain to allow the olives to mature to normal sizing.
The carry over from the last crop, plus the production of the current crop year (2016/2017) make up the total available for the year. Both the carryover and new crop for 2016/2017 were below budget, putting us into a very strong seller’s market due to the short supply. Prices have risen persistently since January and will continue to do so until the beginning of 2018!
Pomace in particular is very short in supply and extra virgin is short as well. The expectation is that as prices advance, sales will slow down which will hopefully allow the limited inventory to last until the new crop. To make matters worse, the value of the US dollar has dropped by about 8.5% in the past 2 months, increasing the cost of oil and all other European imports.
We have to get used to the “abnormal” being the new “normal” and this applies to the Spanish olive crop again. Whether the unusual crop results may be attributed to extreme weather conditions or to the nature of olives we won’t know; one thing is sure that the 2016 harvest didn’t turn out to be as it had been predicted just a few months before all olives were collected.
We were hearing about a “fantastic” crop from growers and processors until September. Then the reports started changing: first it was the drought over the summer months that seemed to affect the overall tonnage; then it was the rain in October that was supposed to help the yield as the fruit absorbed more water and grew larger. However, as we understood the rain came too late for certain varieties and a lot of the “shriveled” olives didn’t recover. Large size olives grew larger that resulted in a good crop of the Queen (Gordal) variety but the Hojiblanca variety that’s used for both olive oil and ripe olives came in quite short, so did the Manzanilla variety that’s used for green table olives. Given the short crop we can expect the ripe olive market to be quite firm throughout the year.
The growing season of Kalamata olives in Greece is similar to that of the various olive varieties in Spain but the Kalamata olives are left on the tree much longer to ripen; Kalamata olives aren’t going to change color during fermentation and they must reach their desirable purple color on the tree. Just like for Spanish olives, we expected a good crop until about August when we started hearing about the drought in Greece and some fruit fly that caused considerable damage to the crop. Growers were hoping that the yield would improve when rains arrived in the fall but, unfortunately, this wasn’t the case. By the time they finished the harvest in December, they reported an overall shortage of about 30% compared to 2015. There was very little carryover from 2015 and prices started to increase sharply in the New Year.
Kalamata olive processors don’t own Kalamata olive orchards; they buy olives from growers that keep their crop in fermentation tanks until they are ready for further processing and they sell the fruit little by little at prevailing market prices. In other words, they can charge what they want as long as they have a taker; the price is set at the time of the transaction. We understand from our suppliers that right now growers are holding the olives and they are not only quoting much higher prices than last year but they are also anticipating even higher prices later because of the short crop and high demand. Some packers think that the price of Kalamata olives may reach levels this year that we haven’t seen in some 15 years.
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.
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.
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.
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.