TUNA
Skipjack value has been on an upward trend since March after Russia invaded Ukraine setting off a domino effect in the global supply chain with major commodity shortage as well as diesel. The soaring fuel prices are having a clear impact on the prices of a ton of frozen whole round skipjack in Thailand’s processing hub. Processors see no other options than to accept these higher levels for skipjack whole round nearing $2,000/MT, this is a 14% jump from $1,750 /MT in March.
Current Tuna Market Raw Material Price:
SKJ = US$2,000/ton
YFN = US$2,600/ton very limited supply
Albacore = US$3,600-$3,800/ton limited supply
Tongol = US$2,600/ton short supply
ARTICHOKES
Peruvian artichokes are an excellent source of fiber and contain vitamins C and K, magnesium, iron, potassium, and manganese, and there has been a constant increase in demand for artichoke products. Producers are anticipating it and trying to plan for it. For the next season, many suppliers are planning to grow additional fields before the usual time and start the harvest earlier. The goal is to fulfill contracted quantities for existing customers with the first harvests and stay competitive having extra product to offer. Along with the positive data, indicating a good new crop, comes the concern of increasing production cost. Factors like the war in Ukraine affected the price of fertilizers and sunflower oil used to marinated artichokes and adding to the logistic challenges the supply chain is already struggling with. Ocean freight rates continue to increase for this region and obtaining available space is harder and lead times are getting longer. While producers and importers are trying to navigate and maintain the supply, the market price of artichoke products will continue to go up.
PINEAPPLE
Raw material from summer crop at this point is not expected to be a problem in terms of supply due to rain in February. However, packers are now getting into summer weather so we will have to see if the heat will affect supply. There are, however, other concerns from suppliers. First, notice has been received from packaging suppliers informing that label and carton prices will be increased in Q2.
Secondly, there are effects from the Russia-Ukraine war such as an increased fuel and transportation cost. One of the most concerning costs for farmers is fertilizer pricing as it is believed that the domestic fertilizer market has reached critical levels as a result of the Russia-Ukraine conflict with sanctions imposed on Russia who is the world’s largest fertilizer exporter. The Ministry of Commerce has just approved the increase of fertilizer prices. Although they approved on a case-by-case basis in order to reduce the impact of rising fertilizer production costs, it is a sign that producers/importers cannot hold prices anymore. In fact, since 2020 until now, fertilizer prices have increased over 100% which is quite a burden for farmers. The increase will affect farmers in 2 ways. One way is that their production cost will be raised so pineapple prices may be increased. The other way is that if farmers cannot afford the increased fertilizer prices, they will stop using it altogether and let pineapple grow naturally which will affect in terms of size and quality.
Lastly, it is assumed that the Government will increase minimum wage on May 1st because it has not been adjusted for 2 years and it is one of the policies that the current Government promised with the people while their term only has one year remaining. So, it is believed that they will increase the minimum wage to prepare for the next election. Current minimum wage is THB 336/day, and the new average rate will be about THB 492/day in response to the increased cost of living. This will be another huge increased cost for manufacturers.
COCONUT
Prices are on the rise and customers need to secure their orders earlier rather than later. Raw material is in season and although the price is high, it is stable for now. It is important to get large orders in now to reserve material because availability will decline June-October and pricing will increase. Packers need to plan production schedules and secure resources heading into the low season. Demand is beginning to surface from around the world and capacities are filling up. Pricing on packing materials – cans, labels and cartons has increased about 30% from the previous year and is still rising. Production costs are also increasing due to rising oil prices in the global market.
The delicate political position in Sri Lanka could shift demand to other producing countries, such as Vietnam. This will also impact availability and pricing.
The war in Ukraine, which is the largest producer of Sunflower Oil, has pushed prices up not only for Sunflower Oil but also on other edible oils such as Palm Oil and Coconut Oil. This is another factor of the rising prices of raw coconuts.
It is safe to expect a drastic price increase on 2022 pricing for new tenders coming in and to remain high for the foreseeable future.
OTHER NEWS
THE EURO
After falling 2.9% in the first few months of 2022 and falling further in the second quarter, we foresee the euro will continue to face downward pressure. With global inflation, especially in the United States, most likely the Fed will continue raising interest rates earlier than the European Central Bank. This may become a direct support for US currency. Also, tighter Fed monetary policy may also be US dollar supportive. Most institutional investors believe that the euro-dollar exchange rate will continue to fall in second and third quarter while risks are likely to persist in the second half of 2022
OCEAN FREIGHT AND SUPPLY CHAIN
Although we have some reductions for Asian lanes but secure spaces under FAK rates are still limited.
Forwarders advised that they do see spot rate market being down about 2.5% but the contract rates being up about 6%. They don’t anticipate ocean freight rates will curve downward in the near future because markets are still stressed and there are still capacity issues, such as port delays, labor shortages and supply chain disruptions.
Port Congestions:
West Coast: Demand into the US remains strong (+16.1%). Structural voids and omissions will continue as liners look to maximize asset deployment and turn times.
East Coast: Since 2021, LA/LB’s ports have experienced a record high level of congestion. Although they have gotten the situation somewhat under control, there is no letup in import volume. Naturally, freight forwarders have been shifting their shipments to East Coast ports. East Coast ports now have a longer queue than the Los Angeles and Long Beach ports. Factors including an increasing demand for foreign-made products, shortages of truckers and dockworkers, and pandemic-related disruptions affecting shipping lines are causing these delays.
