Fish prices are trending upward these days. Skipjack is $1,400/MT or more and suppliers are expecting that to increase to $1,500/MT after the new year. The primary cause of this is limited supply. Catching in the Western Pacific remains good, but many vessels are not bothering to go out to the India Ocean due to poor catches there. Yellowfin in particular is also seeing a large increase in demand from the frozen sector, especially in Europe. Albacore tuna may return to a more normal supply and demand trend soon, but currently supply is somewhat limited. For Tongol, there is basically no supply at all due to poor weather keeping ships from going out.
Current Tuna Market Raw Material Price:
SKJ = US$1400/ton
YFN = US$1700/ton
Albacore = US$3500/ton
Tongol = US$2000/ton (no supply)
The mandarin season in the W region will end in Mid-December and L region will end in early Jan. The cost of raw material is slightly higher than the beginning of the season but still stable. European customers had already finished their booking as of last week of November, while only Walmart from US has placed their orders. Packers are expecting that prices will go up after the middle of December once all the material is booked for the season.
High demand has pushed mushroom prices slightly higher recently. The market as a whole has seen growth over the past year, but it has been unevenly spread. Demand remains very low from restaurants and catering, but very strong from retail. Overall, demand is so high that packers are not able to keep up and are turning away orders. While mushroom production can scale up with demand generally, COVID-19 related restrictions are making it difficult to do so.
The water chestnut season in China started in mid-November and so far, output is less than at this point last year. The total area planted is about 1/3 less than in previous years as well. Because of this, many factories are running under capacity and cannot get enough supply. While this may improve as more of the harvest comes in, the weather is forecasted to be very cold, which could further decrease available supply. Low material availability combined with the upcoming Chinese New Year holiday means price increases are likely.
Prices for dried coconut continue to rise and are doing so at a rate faster than earlier predictions. Across the entire production region, factories are considering shutting down due to high prices. Most producers in the Philippines have already done so. The few Indonesian factories that have not are asking for very high prices even compared to a week ago. High freight costs, shortages of containers, logistical difficulties, recent typhoons that have hit the Philippines, and raw material shortages all will result in an absence of material in the market going forward. Physical stocks in destination markets are also fast depleting. We will likely see product shortages in Q1, but demand shows no sign of slowing down. Expect further price increases.
Sesame seed production is facing a number of simultaneous problems. First among them is the ongoing conflict in Northern Ethiopia, which has already caused a rise in prices. This is on top of poor crop across East Africa, particularly in Sudan and the rest of Ethiopia. Putting further upward pressure on prices is a massive recall of Indian sourced sesame seeds. 20 countries, mostly in Europe, have issued recalls over concerns about Ethylene Oxide. Overall, price increases are already being seen and are expected to continue. In fact, it is possible that they will increase dramatically.
The EUR/USD exchange rate continues to move against the dollar. The general trend is mostly driven by the differences in how COVID-19 is playing out in each currency zone. During the first part of the pandemic, the dollar got a boost as a safe haven currency, but that extra support has mostly faded. Most analysts expect continued, but not substantial, weakening of the dollar. However, within that there are several sources of volatility. With the deadline on Brexit negotiations fast approaching, the possibility of the UK leaving the EU without a deal is causing a lot of uncertainty. Additionally, ongoing negotiations in the US about possible relief packages are adding to the difficulty of predicting the future path of the currency. The European Central Bank meets this week and the Federal Reserve will meet next week. The outcome of those meetings will also influence the exchange rate.
GROCERY AND RETAIL
With fewer opportunities to eat outside the home, grocery sales remain strong. While most stores have been able to keep up with increased demand, buying trends have changed enough from previous years that keeping every item in stock is proving a challenge. Among the changes, there are 2 that are getting attention right now. The first is the increase in the online and delivery grocery market. A survey by Mercatus showed that 60.1 million households had at least one delivery during the month of November. Total sales have stayed over $8 billion per month since May. The second trend is toward value brands. Inmar Intelligence found that six in ten consumers have switched to less expensive brands since the start of the pandemic. Across the entire industry, private label products have seen very high growth, and this is expected to continue.
GENERALIZED SYSTEM OF PREFERENCES
The Generalized System of Preferences, which provides duty-free treatment for imports of thousands of products from more than 100 developing nations, is set to expire Dec. 31. If not renewed before then, subject goods will be subject to U.S. tariffs beginning Jan. 1, 2021. While the GSP has been renewed multiple times in the past, there does not seem to be any sign that Congress will push through an extension before the end of the year. A recent letter from 300 companies urged Congress to act, but analysts are not optimistic. Even in the best-case scenario, the renewal would probably be for a short time. The incoming administration has said they do not plan to put trade policy at the top of their priority list, so action on this and other tariffs isn’t expected soon.
OCEAN FREIGHT AND SUPPLY CHAIN
Trans-Pacific rates are not much changed in the last month, but instead are staying at historic highs. There is a global shortage of containers, which makes getting anything shipped difficult in the current market. This is on top of huge backlogs both at export terminals in Asia and terminals here in the US. As of last Monday, there were 20 containers ships waiting at anchor at Los Angeles-Long Beach, to give an example of the current difficulties. According to the Global Liner Report by Sea-Intelligence Maritime Analysis, the on time percentage for containers shipments has plunged from around 80% as recently as June of this year to only 32.1% to the West Coast and 34.5% to the East Coast.
- BKK to WC – $2,900/20’ (+0)
- BKK to EC – $3,700/20’ (+$200)
- China to WC – $3,200/20’ (+$100)
- China to EC – $3,700/20’ (+$0)