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