MARKET REPORT NOVEMBER 2007

PATRICK REDFERN MARKET REPORT NOVEMBER 2007


CRUDE OIL:
The world economy is affecting Main Street USA. My last market report of September reported that crude oil was then at $80.00 a barrel and was expected to reach $85.00 within a few weeks. The price of crude oil hit $98.00 a barrel on 11/7/07. Projections are that the price for crude will continue to increase to over $100.00 by the end of December. Some doomsday Sayers are predicting that crude oil will increase to between $130.00 to $150.00 a barrel. US stocks of crude oil are depleting to record lows. World consumption of crude oil is reported at 85.6 million barrels a day and is projected to increase an additional 1.8 million barrels a day next year. Increasing strong oil consumption in India and China has contributed to the general opinion that world demand for oil is outpacing supply. The weak US dollar has also been a major contributor to the rise in oil pricing as crude oil is generally traded in US dollars.

We expect to see a continuation of ocean freight costs as steamship lines passes on higher bunker fuel sur charges to the importer. We are seeing monthly increases of fifty cents or more per cases just to cover the fuel sur charges. Here in the US the cost of fuel is forcing the truckers to reduce the number of stops. It is impossible to find a trucker that will make more than three stops. Therefore, the minimum number of cases for a delivery has to increase. The same goes for distributors delivering to their operator customers.

US DOLLAR EXCHANGE:
The dollar was at $1.38 when the September market report was written. Today the dollar is at 1.466 to the Euro. Some currency experts are predicting the dollar to decline to as low as 1.600 to the Euro in 2008. Why? Yesterday a Chinese minister stated that China is considering moving the 1.4 Trillion dollars that they are holding to a more viable currency, such as the Euro. For sure, we will see the dollar at 1.500 euros’ by the end of December, if not sooner. The weaker dollar will add pressure on the price of crude oil, forcing it to go higher. Imported items, be it food stuffs, cars, clothing, machinery, etc, all will have higher prices due to the weak dollar.

WHEAT:
The world wheat crisis of 2007 will continue on in 2008. Global wheat production for 2007/08 is projected to be down 5.8 million tons this month reflecting lower output in Australia, Europe, and the US. The US wheat ending stocks for 2007/08 are projected at 307 million bushels, down 55 million bushels from last month. If realized this will be the lowest ending stocks in the US in 49 years. Wheat will remain short and correspondingly carry higher prices world wide. Pasta and related wheat items will continue to increase in pricing.


TURKEY:
Fires and sever drought has caused havoc with Turkey’s olive and grain crops. Turkey has historically been a net exporter of wheat but this year is expected to import up to 1,000,000 metric tons for its domestic consumption. The drought in the eastern Mediterranean has impacted on the production of Peppers of all kinds, Capers, Sun Dried Tomatoes, Pepperoncini, and some Olives. Capers and Sun Dried Tomatoes have increased over substantially because of this.

SPANISH OLIVES:
Spanish production this crop year is generally good except for Queen olives. Manzanilla production is expected to come in at 10% above last year’s crop. Prices should be stable fob Spain, but then again we have to factor in the weak dollar and fuel surcharges. The Hojiblanca production is expected to increase by approximately 15% which should help provide pricing relief on a fob Spain basis.

The problem child in this 2007/08 crop is the Queen olive. It was no secret that Spain was importing Greek Queen Olives to augment their production. Greece lost 454,000 acres of olive/olive oil production to this summer’s fires. Spanish Queen Production is off 20-25% (with no help from Greece) with smaller average fruit size. There is a high percentage of Azofairon or petite/sub petite olives.

MUSHROOMS:
There remains only two Chinese mushroom production facilities, albeit rather large facilities, that can ship to the US due to antidumping duty constraits. In most of 2007 India had sever problems with compost used in the growing operation that drastically reduce production. India is now picking up productions and will soon be in normal production. With both China and India back to full steam and as they begin to compete for business we are predicting the market price will start to come down by June 2008. In the meantime US stocks of mushrooms pieces & stems will remain critical. Pricing will remain very firm, supplies not enough to meet demand, and absolutely no deals to be found.

ROASTED RED PEPPERS:
Spain will have supplies but very strong pricing due to the exchange rate. . Turkey had decent pricing but is no longer taking any orders because they are sold out due to the drought. The bet source will be in Chile and Peru. Prices will be much more competitive than Spain with comparable quality.

ARTICHOKES:
Spain has had quality and supply issues. Pricing is high for a multitude of reasons. Spanish quality is questionable with browning in the tips. Chile and Peru this year offer better quality at competitive pricing.

Patrick M. Redfern

Ghigi Pasta

There has been a lot of speculationla tely aboutt he situationw ith Ghigi pasta. We would like to clarify the pictures o that the rumors and speculation can be put to rest.

Ron-Son Foods has been associated with Ghigi for twenty six years. It is sad to have to report that, due to reasons beyond anyone's control, Ghigi's strengthh as become its Achilles heel. Ghigi is a co-operativem adeup of local wheat farmers who always committed their product to the Ghigi mill.

This was then turned into Ghigi pasta. It was an axrangement that had lasted over one hundred years. In 2007 things happenedth at were to changee verythingw ithin a period of threem onths. The first blow was the delay in the issuing of licenses for the new factory which had been due to open this past summer. Then came the huge run up in wheat prices. The co-op farmers were always paid a fixed rate for their wheat,a nd then at the end of the fiscal years, they shared in the past a mill's profits.

In 2006 the profits were quite modest. This year speculatorsa nd big corporationsa pproachedth e farmers and offlered them money up front, payable net 10 days for their wheat. Most of the farmers took the deal and Ghigi was in trouble. Today there are two companies interested in buying Ghigi and what ever happens will be decided before the end of October.
Ron-Son Foods, in order to secure a steady reliable supply, has decided to share its needs withtwo packers. Ghigi hopefirlly will be one, and the other will be De Matteis from Avellino. They arealsoa miller asw ell asa pasta producer just like Ghigi. They are qualrty oriented and have won awards for their environmental practices.

Leone Bianco is the label we have decided to use for our pasta products in the future. It will beItalian, it will be of high quality, and having Leone Bianco as the label it will help prevent us from being a victim of any future cataclysmic market conditions.

We at Ron-Son realize we are all subject to the present malaise of the dollar and the huge jumpin wheat prices. Believe us when we say that we are doing everything to minimize the affects for our customers at this difficult time.

Please note that at this time we do not have licenses for Trivellini or Small Shells. We are in theprocesso f selectings omethings imilar. It is also worth noting that therew ill be new shapes available and we now have access to Organic and Whole Wheat pasta products.

We will keep you advised as the time to switch to Leone Bianco gets closer. Thank you for yourpatience. Please feel free to contact me or your representative if you require any further information.

Sincerely yours,
Ron-Son Foods marketing team