Supply from the Western Pacific Ocean is improving and Skipjack tuna prices have dropped from $1,300 to $1,250 in Thailand. Yellowfin and Albacore prices remain steady while Tongol is still short of supply. With the rising COVID-19 cases in Thailand, Thai government has declared 28 provinces as high-risk zones. This includes Bangkok where many tuna canneries are located. Workplaces are being strictly controlled and cannery operations are severely impacted.
Current Tuna Market Raw Material Price:
SKJ = US$1,250/ton
YFN = US$1,700/ton
Albacore = US$3,400/ton
Tongol = US$2,000/ton (no supply)
Mandarin orange season has ended and the production from the 2020-2021 season is fully booked for most packers. The cost of raw material has increased from $0.19/kg to $0.46/kg and packers are expected to adjust their prices upward for all their stocks, including A10 sizes.
The overall mushroom market continues to see steady growth and that trend is expected to continue through 2021. To accommodate this, both European and Asian producers are working to expand their capacity. While there have been no shortages so far, many packers are unable to take on additional business at this time. Several trends are driving growth, but the largest are the increased demand for take-out and rising demand for health focused and plant-based foods. Fifty-six percent of global consumers want to eat more plant-based foods and beverages, according to ADM research.
Prices for olive oil were historically low in 2020 and therefore the market is expected to trend toward higher prices in the present environment. This is especially true for higher quality and organic Extra Virgin Olive Oil. The two main factors driving up prices are the sharp increase of freight costs by shipping companies due to high congestion of maritime traffic, and the lower production of Extra Virgin Olive Oil at world level, partly due to low crops expected this year in Italy, Tunisia, Greece and Turkey. Though Spain is expected to increase output, it is not enough to compensate for a low crop elsewhere. The weather is not favorable either. Spain recently suffered a very rough snowstorm in central, eastern and southern Spain and a high percentage of the olives which have not been harvested yet may have frozen on the trees and so cannot be used for Extra Virgin production.
Last year, favorable spring weather led to high expectations for a good 2021 table olive crop. However, the weather changed for the worse and there was an extremely hot summer with much less rain than usual. In Andalusia, where 80% of table olives are grown, there was 35% less rainfall than average. Manzanilla and Gordal varieties were picked early and quickly and, as a result, a good yield of both was harvested before the worst effects of the weather conditions set in. On the other hand, tonnage predictions for the Hojiblanca variety are the lowest in the last ten years. This will be the second poor harvest in a row for this variety. As it is picked later in the season than Manzanilla and Gordal, this variety suffered much more from the lack of rain and from high temperatures. A significant proportion of the olives darkened in color or shriveled on the trees, meaning that they were no longer suitable for use as table olives. On the positive side, olives of all varieties are sound in quality and free of insect damage and disease. From the commercial point of view, sizing is acceptable overall, though weights are down somewhat.
The Peruvian table olive crop was also negatively affected by the weather and is going to be 35% below the crop from last year. Additionally, packers are facing supply chain restraints as demand is higher than their current capacity for packaging materials. Many are attempting to import glass jars to meet demand.
While the water chestnut season is ongoing, there are currently severe restrictions in supply. Low temperatures have made it difficult for farmers to harvest and prepare the crop, which is preventing many packers from getting any supply at all. Because of this, packers are not taking orders. Demand is high for fresh, canned and frozen water chestnuts, so most farmers are selling to the fresh market, which pays a higher price. Prices are expected to rise in 2021.
The Pineapple supply situation improved towards the end of last year and prices softened to around THB7/kg in the month of December. The quick price drop drove farmers in Prachuap Khiri Khan province to ask for help from the Governor as they fear that prices will continue to drop further than their costs. As a result, factories were called for meetings and asked to maintain prices. Considering that total supply is still 30-40% less than normal, pineapple price should not drop much. The main factor restricting pineapple supply is the COVID-19 pandemic. All factories have been facing the same labor shortage problem. They all rely heavily on foreign workers, but borders are still closed and may be closed until Thailand receives enough COVID-19 vaccines for everyone. The labor shortage problem prevents factories from running at full capacity. With limited workers, canneries can only produce 50-60% of normal capacity while still having to pay high fix costs, so one way to reduce cost is to bring down fruit price. This will affect farmers directly and if pineapple price continues to decrease, some farmers may stop investing in their farms. Consequently, shortages may return sooner than expected.
Summer crop is forecasted to be more or less the same as Q4 2020 for both quantity and price. Supply in 2021 is forecasted to be around 1 million tons for canneries, still lower than normal condition.
After a continued rise for most of the last year, the USD/EUR exchange rate is a little lower than it was one month ago. From a high of $1.233 it has gone as low as $1.207. Overall, most analysts do not expect the dollar to strengthen significantly or quickly due to ongoing loose monetary policy.
GENERALIZED SYSTEM OF PREFERENCES
The Generalized of Preferences was allowed to expire on December 31, 2020. It was the largest and oldest U.S. trade preference program, allowing duty-free entry into the U.S. for over 3,500 products from 119 designated beneficiary countries. There is a debate in Congress on whether to reauthorize the program “as is” or revise the GSP eligibility criteria to include environmental and labor conditions. Because these differences could not be worked out in time, the program has lapsed. There is encouraging news that this is now back in discussion and could be renewed soon without any changes.
OCEAN FREIGHT AND SUPPLY CHAIN
Worldwide, freight and logistics systems are stressed and prices are at records highs. The final Shanghai Containerized Freight Index (SCFI) for 2020, published on 31 December, recorded a 190% gain on the year. Despite the transpacific spot rate falls in the final week of the year, several carriers announced $1,000 per 40ft GRI’s for on January 1st, with others increasing their rates from mid-month. Even companies able to pay these higher prices are often unable to get any empty containers due to widespread shortages. Additionally, congestion in US ports, particularly in California, are leading to ships simply waiting for berths. Reportedly more than 30 ships were waiting in the San Pedro Bay area over Christmas. Congestion charges are seen at ports, for dray and trucking, and at warehouses.
- BKK to WC – $3,375/20’ (+2,100 since Jan 2020)
- BKK to EC – $4,775/20’ (+$2,500)
- China to WC – $3,375/20’ (+$2,100)
- China to EC – $4,850/20’ (+$2,600)