Not much movement in terms of fishing. Skipjack price is above $1,750/mt in the market. The demand in Ecuador remains, they are still paying above $1,800/mt. Apart from the slow fishing itself, the global fuel price is still in an upward trend, so it is also impacting the cost of raw material. There is no pressure by the fish supplier to hurry up to sell their fish on hand to Thailand if Ecuador is still able to pay at a high level. For yellowfin, there is nothing changed in the market. The price remains at the same level, around $2,000/mt. A big portion of yellowfin transports to fish suppliers in Vietnam for making frozen steak. Albacore is very limited especially Pole & Line, hopefully the situation will improve since fishing season started in February.
Raw Material Price
SKJ = US $1,700-$1,750/ton
YFN = US $1,900-$2,000/ton
Albacore = US $3,300/ton – limited supply
Tongol = US $2,100/ton
The Coconut fruit pricing has increased due to short supply. The pricing is also still being affected by the increases in packaging costs. Although these prices have stabilized in recent months, the prices remain high. Packers expect pricing to remain on the high side for Q1 and Q2. Pricing could improve starting in Q3 if supply and packaging costs improve. Buyers need to make sure their needs are covered for the first half of the year and be ready to place any additional orders if pricing starts coming down after August.
The new Jalapeño crop in Mexico started in January and everything indicates that it is consistent in size. In some areas, the growers were experiencing issues with the chemicals needed, raising concerns among growers. Their production cost per acre has increased substantially and this will affect the price of the jalapeños. Additionally, growers also face issues with hand labor as there is not enough due to social programs. The expectation is to have at least a 20% increase vs last year´s on the jalapeño price at the fields.
Currently, most of the packers’ warehouses are at low levels and this will cause some pressure on the beginning of the crop.
The news from the fields in Mexico is not good. Most of the dry chipotle peppers are produced at the end of the packing season in October and November. In 2022 the Chipotle peppers crop ended earlier than usual and when the growers were drying and smoking the peppers at the fields, out of season rains affected them. Consequently, prices on this product are up over 30%, and there will not be enough produce to cover the market´s needs. The situation is not expected to improve until the end of the next season by October 2023.
2022 was the 4th year in a row in Mexico that there was not enough tomatillo to cover the market´s demand. In effort to cover customer´s needs packers had to pay a premium to secure raw material, which in some cases lead to 40% increase on produce cost. The focus now is on supporting farmers to open new growing areas. The winter crop is not expected to make any difference despite starting earlier as it is also expected to be shorter.
The packing of this product is expected to start by mid-January. Banana peppers crop in Mexico is limited and therefore new sales usually have to be contracted about three months in advance of each crop, which is in April for the summer crop and in October for late winter crop.
The euro hikes this week, after recent news released from ECB, to continue rate increases. On the other side, USD fell down, despite this, inflation still remains high, while previously it showed signs of likely already reaching the peak. There is still rate increase expectations at next Fed meeting, from 25 to 50 bps. Bank analysists believe the inflation issues that raised from 2022 will largely still be present this year. It is important for Central banks to balance between monetary policies and containing price growth. There are a lot of uncertainties involved when dealing with inflation and slower economic growth at the same time.
PORT CONGESTION & OCEAN FREIGHT
Freight rates and congestion has been following the same trends that we have seen the last several months.
There are almost no ships waiting in Pacific waters and increasingly few off the East and Gulf coasts.
The number of ships waiting off East and Gulf coast ports are roughly half the number in late November. Queues are between zero and two ships at all other North American ports, marking a return to the pre-COVID norm.
Rate changes remain relatively stable across the board. Pricing from Asia to the US is still seeing minor dips as the drastic downward momentum settles and levels out. These prices are at their lowest points since the international supply chain crisis started several years ago. And we are not expecting much change until demand for freight picks up on a global level.
We have been optimistic that shipping cargo from the EU and South America would follow the rate-drop trends from Asia, just with some lag time. And while prices from these regions are falling, it’s not as rapid or as consistent as it was from Asia. It is a bumpy ride, the velocity, and origin locations, where rates are improving changes dramatically from month to month. The overall trend appears clear though - the pendulum continues to swing in the favor of those hiring out space from the shipping lines.
Heavy container congestion continues to be a challenge for importers. US businesses are still heavy on inventory, and it is causing unique challenges for ACME and other importers. Warehouse capacity is still stretched thin, chassis are still scarce, and rail depots/ports are still heavy on containers. Shuffling containers around in these conditions is slow and costly.
One final note is that we are seeing some forecast issues from the shipping lines caused by blank sailings out of Asia. We have had many delays due to planned sailings being canceled. On the other side of the coin sometimes containers arrive early because planned vessel stops are skipped. Meaning these blank sailings just add another layer of complexity to forecasts, as shipments may either arrive either early or late mid sailing. ACME continues to develop our strategy to lesson these shocks, and to increase transparency when they do happen.