After two months of slow-moving skipjack trading activity in Bangkok, the price for the whole round frozen raw material is seeing a slight increase due to rising demand from processors while the effect of the WCPO FAD ban has started kicking in. Sources have confirmed that $1,450 per ton price is no longer available and the spot price traded now is about $1,525 per ton. Market is expecting it to rise even further, close to $1,600 per ton for cargo anticipated to land in the later part of August in Bangkok.
Historically, around late July to August, there is a hike in the skipjack value due to the drop in raw material supply because FAD ban during the July to September period.
Tongol and Yellowfin raw materials are continued to be limited and prices are on the upward trend.
Albacore tuna prices remain same as last month.
Raw Material Price
SKJ = US $1,600/ton
YFN = US $2,400/ton limited supply
Albacore = US $3,400/ton
Tongol = US $2,300/ton limited supply
China – Tree pruning across peach orchards coupled with stronger demand from the fresh market, resulted in lower fruit supply for canning. Canned peach prices are at $23-$25 per 24×29 oz FOB which is 20% higher than last season, described by some local manufacturers as the highest in history. Pack season ends in Aug.
Greece – Final production of canned peach is lower than expected despite the normal crop at around 400,000 tons recovering from last year’s disastrous crop falling to around 160,000 tons. This is due to less workforce availability in both the fields and factories. Final product prices for canned peach are remaining as high as last season, range from €30-35 per 24x 29 oz FOB.
Spain – Peach harvest is 40% below the usual volume this year. As a result, fruit supply available for processing in Spain will be at least 40% lower than the previous year’s, lowering to no more than 50,000 tons of raw material for canning this season. Therefore, canned peach prices set at over €39 per 24x 29 oz carton FOB, well above the market price set by Greece.
The summer pineapple packing season has come to an end. The inclement weather brought on by La Nina in 2022 will contribute to good harvest for coming winter crop. It is worth noting that growing areas in Thailand continue to decrease. Presently, the areas in West and East that represent the main harvesting areas for processing is now 120,000 acres, compared with 151,000 acres in 2014. While there is an increase of supply in 2022 over 2021, it is not expected to increase much in 2023 because of higher production costs due to higher prices of chemicals and fertilizers, as well as the limited labor force.
There are also concerns over the energy crisis due to the ongoing Russian-Ukraine war that pushes the inflation rate and commodity prices. There is expected to be increases of iron ore and steel prices affecting cost of packaging, increase of sugar prices as relates to the price of energy and increase of minimum wage in Thailand to be in line with inflation rate that recorded 7.66% in June 2022. Dollar power may also affect the purchasing powers of some countries as suppliers are seeing softer sales. Nevertheless, the sales of pineapple juice concentrate remain strong.
The price of raw materials may have well hit bottom. We don’t expect lower prices than they are now. The demand over the last few months has been lower than expected. Many farmers and factories have reduced labor and switched to more profitable items. In addition to the lower demand, the heavy rains in Southeast Asia are impeding the harvests. This alongside the Philippine Typhoon season could lower supply even further. In the coming months as demand increases, prices could rise due to limited supplies. Rising raw material costs on top of rising production costs will create higher prices for finished goods. We would encourage buyers to take advantage of the lower prices and fill any open positions or requirements now before prices reverse as expected in Q3.
The mushroom canning industry has been plagued with several factors causing prices to increase. These factors include low availability of raw materials, and sharp increases in costs of ingredients, packaging, raw materials and energy. These increases range from 30-200 percent. The huge increases in energy costs in Europe have affected all aspect of the production process and supply chain. Prices have not yet stabilized, and availability is no longer guaranteed. These cost increases cannot be absorbed by any one entity. They will be passed along to all levels of the supply chain.
Demand for canned mushrooms has remained strong during the year and shows no signs of abating. The current elevated inflation could lead to even higher demand as consumer habits change based on higher costs of fresh goods.
A US-producer filed a petition to impose anti-dumping duties against retail packaged canned mushrooms from France, Netherlands, Poland, and Spain. No decisions have been made yet on the duties or the rates, but this could be imposed as soon as the end of October. This would greatly affect the price and supply of canned mushrooms for retail.
Probably due to the rising cost, the total sales in July 2022 went down to 112,700 tons, compared to the high monthly sales for Q1 and Q2 (128,000 tons monthly average). Since the Spanish bottling industry holds 271,000 tons of Olive Oil and does not have immediate needs for further inventory, the expectations are that the monthly sales in August and September will be adjusted further, probably down to the level of 110,000 tons/month.
In addition to raw material prices, all input costs of production have continued to skyrocket. The packing materials (bottles, caps, labels, cartons and other packaging elements) have created severe challenges since early 2022. The international energy, transport, & logistical crisis have caused high volatility in all aspects of procurement. For example, glass bottles have gone up 27% and carton cases have gone up 31% since October 2021.
The weather conditions have been extremely adverse this summer. There was a good start of the blossoming of the olive trees with some rain that fell in Spain in April, but then continuous heat waves have hit Spain. Currently the water reserves in Spain are 39% (they were 47% the same week last year) with South of Spain, the main area of Olive Oil production, being 28%. Although widespread throughout the major growing regions, irrigation has been seriously compromised especially since many areas started restricting water supply.
The forecast of the 2022-23 Spanish harvest was initially estimated at 1,450,000 tons. According to farmers, the forecast needs to be reduced by 30%, down to 1,000,000 tons which has triggered a hold-up of stocks and a sharp price increase -10%- since June.
The price situation might be relieved by a decrease of the monthly sales in August & September, and the possibility that it rains in September & October, as well as by the current and anticipated recessionary environment that may put a hold on any further price/cost increases.
EUR/USD continued to weaken this morning, reaching 1.0035, after staying resistance around 1.0170 the past few days. Weaken EUR could push up importing costs, accelerate inflation, and make European exports more competitive in global market. Bank analysts believe the near-term economic outlook is getting mixed and could lead to some near-term consolidation in the U.S. dollar. They still expect an incoming Fed tightening policy, at the next Fed meeting as the most likely outcome.
US PORTS ON THE SUPPLY CHAIN HEAT MAP
Supply chains are essentially networks that link producers to consumers, often with dozens of steps from beginning to end. Before the pandemic each of these steps happened with fairly predictable timing. Today the global supply chain faces labor shortages, lack of equipment availability and the ripple effect of global bottlenecks. The current situation at the major US Ports is probably the best example for this.
Over the past two years container lines have been assigning more ships and more containers to the eastbound trans-Pacific route trade lane because of high demand from U.S. consumers. But the increase in the number of ships and containers meant fewer ships per hour made it to the ports because of the increased congestion. The ship would arrive but wouldn’t be able to unload (or load) its freight because that station would be already at capacity. Meanwhile many of those stuck-in-traffic ships were transferred from other trade lanes, like Europe to the U.S. which meant less capacity there and higher freight rates.
At some ports, ocean carriers continue to bring thousands of containers per month and only pick up a fraction of that number. Carriers are charging per diem container charges even when the shipper or trucker cannot possibly return the container due to terminal congestion. The problem has become so serious that NY-NJ port decided to impose Dwell fee targeting empty containers, starting Sept 1st. A $100-per-container fee will be applied if ocean carriers don’t remove at least 110% of the containers they dropped off during the quarter, which eventually will improve port’s efficiency and bring down logistics cost. With waiting time for a berth being between 10-12 days on the East Coast and over $40 Billion in cargo on containers waiting offshore, Port bottlenecks have tied up U.S. supply chains, raising costs and adding new shipping complications for importers trying to manage the flow of goods.