Tuna consumption worldwide increased over the first half of this year. US imports are up 17% and overall retail sales are up 30% year to date. However, fishing is still poor in the Western Pacific and prices continue to increase. With these higher prices, some packers are choosing not to buy and are instead waiting for October to buy for the last quarter of year 2020.
Current Tuna Market Raw Material Price:
SKJ = US$1,650 -1700-/ton YFN = US$2,000/ton
Albacore = US$3,800/ton Tongol = US$1,900/ton
Pear season has started in China and will end in late October. Pear output this season is extremely low due to bad weather in Hubei and Anhui region. With overall low output and high demand, packers are expecting there will be a 15% – 20% increase in price around the middle of September.
The Greek 2020 Pepperoncini crop is turning out about as expected. While the weather was mostly very good this year, an unexpected heat wave in late May caused some stress on the young plants. The heat wave led to around 15 – 20% of the plants in most areas showing some damage. Nevertheless, the overall crop is very good in both quality and size.
In the US, overall sales of fresh and preserved mushrooms in June and July fell by 2% compared to the same period last year. The decline is due to decreased demand from restaurants and the catering business. On the other hand, retail demand, especially for canned product, has increased strongly since March and is expected to continue to grow. While American growers have had to reduce their workforce due to COVID-19, our European packers are increasing their capacities and expect continued growth.
In previous years, the harvest of Peruvian asparagus would already be strongly underway. Due to COVID-19, the harvest is off to a slow start. It is expected to be up to full force in the middle of October and is projected to end in early February, which is the same as last year.
Thankfully, the weather has been consistent this year and farmers do not expect it will be a factor in prices or available volume. However, due to the delayed harvest and exporters trying to fulfill their orders, cost of raw material may increase in the short term. By the middle of the season, prices should return to normal levels.
Overall, due to increasing complexity in the business because of COVID-19, prices will increase over time. Companies that have experience and those specialized in certain products may only see small increases, if any at all.
El Niño has affected coconut raw material in both Thailand and Vietnam this year. The Mekong Delta is also facing a salinity problem for all agriculture production for 2021. A lack of rain is causing sea water to come deep into the Delta. On the other hand, the COVID-19 issue is under control in both Thailand and Vietnam and is not affecting production capacity or delivery at this time.
The price of coconut raw material will remain at high levels for the second half of 2020 thru at least Q1-Q2/ 2021. The EU/Vietnam Free Trade Agreement that is in effect thru August 1, 2021 has demand from the EU markets up for coconut milk with Import duties going from 5.5% down to 0% (The EU/Thailand is currently at 8.9%). In the US, excessive buying habits due to COVID-19 have created great pressure on the raw material supply and some suppliers have stopped taking new orders in order to ensure they can cover current bookings. Suppliers are at capacity for the next 6 months and order lead times for Vietnamese products are approx. 8 -10 weeks out.
New harvest of olives for olive oil production will start early November 2020 and finish late February 2021. Dry and hot weather in Italy and Greece over 2020 has affected olive crops negatively, and they are expected to produce less olive oil than previous seasons. In Spain, thanks to spring rains this year, the harvest is expected to reach approx. 1.55 million tons of olive oil, lower than predicted earlier in the year. Spain’s crop 2020 – 2021 was supposed to surpass 1.8 million tons.
The world production of olive oil 2020 – 2021 is expected to be lower than 3 million tons, which is approximately 100,000 tons lower than previous seasons. While current prices are historically low, prices are expected to be adjusted upwards into 2021.
Many operators have turned to bottling olive oil of non-Spanish origin for the USA market because of tariffs. Considering that Tunisia, Italy, Greece, and Turkey will have smaller crops this winter, the demand for Portuguese oil will increase, which will probably lead to the cost of Portuguese olive oil increasing in 2021. In any case, sharp price increases are not expected, as global availability of olive oil is not at risk.
The Peruvian season for green olives will be from the last week of February to the first week of May. As with all agricultural products, the weather will be an important factor for how this season goes. One producer with farms in the south of Peru says the weather has been good and is hoping availability and prices will remain as expected.
One issue affecting prices is the high tariffs that the US has placed on Spanish olives. There has been a strong increase in demand over the past 2 years, which, while excellent for their business, is increasing prices because Peru does not have enough olives for the entire American market.
The harvest for Spanish olives started on September 7th. Due to high temperatures in July and August and a lower amount of rainfall than usual, fruit sizes are generally smaller than past years. Overall, tonnage is expected to be slightly higher than past years, despite the smaller fruit.
OTHER PERUVIAN CROPS – ARTICHOKES, PEPPERS, MANGO
Artichoke season started in Peru in July and will end late November. Red Pepper season started in August and will end this month, and the Mango crop is from January to March. Fortunately, there have been no problems with the weather so volumes should be the same as earlier estimates. Prices should likewise stay the same level.
Regarding COVID-19, the largest effect from the reductions in available personal has been increased lead times from packaging materials suppliers. Thankfully, packers have responded by carrying more stock of packaging and have mostly been able to avoid delays.
The raw material for Tahini is grown in areas of Africa that are normally dry with little rain, so any unexpected rain can damage the sesame fields. This, along with the ongoing locust infestation in Africa, means we do not have good information about the 2020 – 2021 crop yet. The crop is from November – December, so we will know what prices to expect at the beginning of January.
With all that uncertainty, at this moment, we expect prices of Organic Sesame to stay around current levels or increase slightly. Conventional prices could go either way. It is especially important now to plan ahead due to the combination of increased worldwide demand, new COVID-19 regulations, currency movements and changes in freight rates. Thankfully, so far, the only effects we have seen are increased lead times, but it is good to be prepared.
Demand for pineapple is rising, and higher prices seem an inevitability as Thailand is hobbled by its inability to supply. “I have never seen Thailand’s fresh pineapple tonnage below one million tonnes,” commented a source, in response to IHS Market’s Food & Agricultural Commodities inquiry. “It is a disaster year and the sun is setting on Thailand’s pineapple industry. Thailand’s tonnage this year will be less than 900,000 tonnes. Between January and July this year, the tonnage was only 490,000 tonnes.” “Do I think Thailand is going to recover?” asked another, rhetorically. “No. I have a new production figure for Thailand for this year: it will be 740,000 tonnes, down from 850,000 tonnes, and Thailand will only partly recover in 2022 and full recovery will not happen until 2023.” A European contact confirmed this year’s reduced production.
With the summer crop over very early, Thailand’s winter crop and next year’s summer crop will present “a very challenging situation”, according to another contact. “Farmers may try to plant more pineapple, but land availability and planting materials are very limited. “I do not see Thailand will be able to recover next year.” This viewpoint was echoed by a UK buyer. The feeling is that the ‘new normal’ for Thailand will be harvests of 1.4 million tonnes and below. Moreover, while consumers are still stocking up during the pandemic, the focus will be more on canned production leaving even less fruit for manufacture.
FDA FOOD FACILITY REGISTRATION
This year is FDA Food Facility Registration (FFR) renewal. FDA FFR needs to be renewed every other year (in even number years). For this year’s renewal, the FDA has added a new requirement and is accepting the Data Universal Numbering System numbers (DUNS) as an acceptable unique facility identifier for FSVP. Any facility required to register must obtain a DUNS number that must be included in the renewal process.
The EURO/USD exchange rate continues to hover around 1.185, levels last seen in 2018. With the Federal Reserve expected to maintain a dovish stance, the dollar could see further decline. However, the European Central Bank Chief Economist Philip Lane has taken note that European inflation rates are negative and expressed the possibility they will intervene in the market to push the currency lower. Complicating the ECB’s response is the ongoing negotiation over Brexit. At this point, there really is no way to know what the EURO/USD rate will be in the future.
Freight rates from Asia are expected to increase even further than the large increases seen over the last few months. Some carriers have already announced GRI to the West Coast of $320/20’ and plan to increase East Coast rates by around $400/20’ in the coming weeks.
- BKK to WC – $2,700/20’ (+$525)
- BKK to EC – $3,400/20’ (+$950)
- China to WC – $3,000/20’ (+$450)
- China to EC – $3,650/20’ (+$900)