September 16, 2022

Vacation and reality

Many people have just returned from their well-deserved annual vacation, but the harsh reality quickly catches up with us. In private: The Italian restaurant around the corner is suddenly closed an extra day a week, even fine gourmet restaurants are suddenly only open from Tuesday to Saturday. The vegetables at the weekly market have become more expensive again, as have the croissants at the bakery. On the business side, suppliers announce massive price increases, contracts vanish into thin air, agreed purchases collapse, rising interest rates and the pressure of the devaluation of the euro make every calculation uncertain.

Of course, we know why this is happening and who and what is responsible for it. We also know that many market players in our industry have their backs to the wall, and that more and more end consumers will be paying for heating and electricity rather than for the usual visit to a restaurant or a well-filled shopping cart.

This is a dangerous cocktail that we will probably have to cope with in the near future.
Nevertheless, we at Paul M. Müller neither lose our optimism nor our enthusiasm for investment. Our new ADRIA website is in the starting blocks - be curious, we will let you know in time. In terms of personnel, we are in a top position, our long-standing suppliers and forwarders stand by us and we support each other. We see challenges as opportunities for the future. Those who have done their homework and are able to adapt to the new situation will also win tomorrow.

Thomas Schneidawind

Portugal:

Trends

The supply of tomato products is secured from our side. Tomato paste as well as the classics peeled tomatoes and pizza sauce are finally available again from new harvests. We have reacted in time and have been on the lookout worldwide for the sought-after products.

However, our favorite product, tomato, has given us a real headache this time. We have repeatedly reported openly and honestly about the challenges of this season: Drought in Southern Europe, Ukraine's failure as a producer of tomato paste, price explosion in energy (especially gas) and packaging, as well as political instability in Italy, uncertain yields, etc. The gas price trend also poses major problems for the suppliers of the factories (labels, cartons, plastic, jars...), which also consume a lot of energy during production.

An explosive mix, which together has now already led to price explosions of over 100% for the 2650 ml peeled tomatoes compared to last year.

There are hardly any alternatives. Tomato products from Turkey or Greece are also already "horrendously expensive", report our partners. The price situation has gotten out of control, complains one producer. Not only because of high production costs, but also because there is simply a lack of basic materials (for the production of tomato paste, for dried tomatoes, pizza sauce).

What's next? In Portugal and Italy, if the weather doesn't put a spanner in the works, the harvest will run until the beginning of October. There is sufficient raw material available for processing. In the north of Italy there is more (about 2.8 million tons), in the south less (max. 2.6 million tons) this year. The catering business is increasingly looking for the 3-kilo can (peeled tomatoes and diced tomatoes) and the processing industry is looking for barrels with all tomato varieties, but there are hardly any offers for these. Small cans (e.g. 425 ml) are on offer - for the most part also leftover stocks from the previous year, because the orders of many customers from the supermarket segment had been too optimistic at lockdown time.

With Conesa, one of the leading processors of tomato products on the Iberian Peninsula, we have, among others, a top partner that processes over 340,000 tons of fresh tomatoes per harvest. The company has locations worldwide. PMM has worked with the long-established Conesa offshoot (formerly Sopragol) in Mora, Portugal, for decades.

The manufacturer has long specialized in producing tomato products in barrels there, in addition to cans (5 million units). Certainly, fully preserved canned food makes sense in the kitchen in times of high energy costs, since it can be stored without cooling. We stand by it, that's where PMM's roots lie. However, the trend must go towards alternative packaging, as the tinplate can, despite unbeatable production efficiency, will soon become unaffordable compared to the pouch.

Therefore, PMM offers a product novelty from another top Portuguese manufacturer now for the first time: the 5x3 kg pouch with ADRIA pizza sauce. This will be the future, like it or not, we have to break new ground on this item as well. Testing is worth it!

Turkey:

It Remains Difficult

The hot pepper harvest in Turkey has been completed, while the bell pepper harvest will continue until mid-October. For jalapeños, there was a bumper harvest this season - with the result that after the run on them, everything was sold within a very short time.

In detail: In the case of hot peppers, we have to report a poor harvest result. Lower yields in the fields have led to a "fierce battle for the raw product”, as market experts report. We see the same scenario with sweet peppers. It mainly affects the bell pepper varieties Topa (round bell pepper) and Kapia (pointed bell pepper). Background: Producers of bell pepper paste are currently looking for as much raw material as possible because the market price for this product has become interesting. In the PMM market report July, we had already predicted this turbulence. A significant price increase is now evident for all bell pepper products. Last but not least, the problem of dramatic cost increases for energy, wages and packaging materials is also becoming more and more noticeable on the Bosporus. Added to this is galloping inflation in the country (officially 80%; unofficially triple digits), which is fueling the critical development on the producer side. PMM will also have to take this into account.

Greece:

Final spurt

Final spurt for peaches: After the fruits (mainly flat peaches) turned out very small this year in Greece, lower quantities were available for the production of peach slices and cubes. Hail and bad weather damaged or destroyed almost 70% of the so-called Saturn or donut peaches, which are grown at an altitude of around 1000 meters. For this reason, this variety was more likely to be processed into puree or concentrate, and only a small quantity ended up in the can. In view of the given conditions, market experts nevertheless speak overall of "normal production", which is, however, once again characterized by known cost factors (energy, canning, labor wages). Current double-digit inflation in Greece is likely to have an additional price-increasing effect on production.

An exciting development is emerging in the case of pears: More fruit trees are being planted in Hellas every year. Market observers assume that in the medium term, the aim is to compete with Italy as a source of pears in terms of both quantity and quality.

We anticipate sales problems with our fruit cocktail. Sales are expected to be even lower than in the previous year. The reason for this is the increasingly expensive ingredients for the end product (five ingredients: pineapple, pear, cherry, peach and grape). Due to the highly strained financial situation in which many catering businesses (but also private households) find themselves, it is almost impossible to implement higher retail prices.

Tuna:

Calm before the storm

The tuna business continues to be characterized by lively ups and downs. Traditionally, demand for tuna picks up strongly again worldwide in October. 

Currently, the price for raw Skipjack (SKJ) at the Bangkok trading center (BKK) and in Papua New Guinea (PNG) is US$ 1800/t. In Manta (Ecuador), the current price is US$ 1900/t. In last spring, however, the price in Bangkok and Manta for a ton of SKJ was already quoted at just under US$2000

Until the end of September, a three-month "FAD ban" (fishing ban between July and September) still applies in the largest fishing area, the Western Pacific (FAO 71). This means that fishing with decoy buoys is prohibited during this period. This was recently compounded by bad weather and high operating costs (diesel oil) for vessel owners, resulting in fewer vessels at sea. All this together led to even lower catch results in the FAO 71 fishing area in August compared to the same month last year (-50%). The situation is similar in September. Market insiders believe that catch quotas in August and September will determine the price until the end of the year. So as soon as demand picks up, the price will also climb. This will be in the fall at the latest, when traditionally the big tenders come from the retail sector, which will then meet a lower market supply. Another price driver is the poor euro/dollar exchange rate, which imports inflation into Europe. This is because everything that has to be paid for in US$ is additionally made more expensive by the weak euro ... The situation is similar in September.

Market insiders believe that catch quotas in August and September will determine the price until the end of the year. So as soon as demand picks up, the price will also climb. This will be in the fall at the latest, when traditionally the big tenders come from the retail sector, which will then meet a lower market supply. Another price driver is the poor euro/dollar exchange rate, which imports inflation into Europe. This is because everything that has to be paid for in US$ is additionally made more expensive by the weak euro ... According to our latest information, the producers of canned tuna are already sold out until December. Negotiations are currently underway for shipments for January and February 2023. But don't worry: We are well stocked with top quality tuna (in the durable can and as a space-saving pouch pack). Just ask our PMM experts directly.

"Plants are sensitive living creatures."

-Moiz Hemsi
As in any relationship, its permanence is only revealed in crisis. That's why we visited our long-time partner in Turkey, Hemsi Limited (Izmir), in the spring. And that is why we are currently asking owner and industry professional Moiz Hemsi how the situation has developed so far - in the country and for the experienced producer and exporter of agricultural goods himself. Read the exciting answers and views here.

PMM
Mr. Hemsi, due to the explosive circumstances, economically and politically, we must first ask: Can you guarantee the supply of raw goods – such as bell peppers, hot peppers, tomatoes and capers - in the next season?

Moiz Hemsi
Yes! Thanks to the expansion of contracted plantings and the promotion and support of growers. In the 2022 planting/decision period, the cost of growing tomatoes and peppers doubled to tripled. Alternative crops, especially cotton, promised high yields. For that reason, many farmers had switched to growing cotton and reduced planting of tomatoes and peppers. Now, at harvest time, farmers are disappointed with cotton prices falling again and satisfied with the yields from peppers and tomatoes. For the coming season, I can already say that the market will take this into account and increase the cultivation of peppers and tomatoes.

Do you expect any shifts in supply or prices?

As I said, I expect increased planting of tomatoes and peppers. As a result, prices may fall, but not sharply, as farmers need to cover their costs. Unfortunately, the cost of growing vegetables has continued to rise. However, I hope that the cost factors will decrease again, which would have a positive impact on the overall price level.

How do you deal with the unrestrained inflation in Turkey?

When inflation was local, i.e. only in Turkey, it was easier because the devaluation of the Turkish lira compensated for inflation. That doesn't work now, because the current inflation is a global problem. I'm afraid we have no other option but to increase productivity and lower profit margins to compensate for the increase caused by global inflation.

What impacts do you feel from the climate change?

Climate change poses the most serious and unpredictable threat to all who work in the agricultural sector. Farms are roofless factories and plants are sensitive living creatures. Any unusual weather conditions will affect crops and therefore yields.

In difficult times, partnerships between supplier and importer have to prove their worth. How do you view the long-standing cooperation with Paul M. Müller? Do you have any special wishes?

It is very important to have a loyal partner in such difficult times. We are pleased about the longstanding cooperation with Paul M. Müller and would like to further expand the cooperation. Last Word: One hand washes the other and both hands wash the face...

Thank you very much for the open conversation.

Lockdowns in China

Almost unnoticed, China keeps imposing massive lockdowns on cities (partly with millions of inhabitants) like Chengdu and provinces, even if only a handful of covid cases have occurred - it just caught parts of Inner Mongolia. The entire Xinjiang region has been in lockdown since August 10. This has just forced four producers of tomato paste in the south of the province to completely stop their operations. The sharp restrictions due to the "Zero-Covid Policy" could continue there until September 20. There are fears that this will have an impact on supply, as China is a global player when it comes to tomato paste.

German Road Haulage Association sounds the alarm

The Bundesverband Güterkraftverkehr Logistik und Entsorgung (BGL), the German Road Haulage, Logistics and Disposal Association, is sounding the alarm: SKW Stickstoffwerke Piesteritz GmbH, Germany's largest AdBlue manufacturer, had stopped production in mid-August until further notice due to high gas prices. Now the urea AdBlue, without which no modern diesel engine runs, is in short supply. "No AdBlue means no trucks. And that means no supply in Germany," warns the BGL.

Oktoberfest Mood


... we will not let ourselves be deprived of it. Put on your lederhosen, trim your mustache, put on your dirndl and pack your good mood - let's go to the world's biggest folk festival on September 17. After a two-year break from the Corona, the Oktoberfest in Munich is finally back (until October 3). Paul M. Müller will, of course, be there as usual.

We are looking forward to it and to our loyal guests!

We stay hungry, we stay foolish!

Although we rate the sources we use as being reliable, we cannot accept any liability
for the information provided here being complete or correct.

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