Ingredients Market Report: October 2019
Political uncertainty is clearly evident as a significant impact on currencies at present. The continued attempts to impeach Mr Trump, and the fear of further rate cuts and continued trade wars impact on the US$. Sterling struggles to find direction for obvious reasons, and as we approach month end with no clear resolution, one can only assume the markets will start to move it in one direction. If a deal is struck £/$ 1.30 is likely until then volatility will rule. Whilst in the EU, recession threatens, and poor economic data continues. It is hard to find reason for the Euro to strengthen at this time. Division is clear within the ECB as recent resignations have indicated.
FX Monthly movement
- US$/ £ 1.3 up
- US$/ € 1.09 down
- £/€ 1.12 up
As indicated last month, as harvest continue news looks increasingly disappointing on several product lines and prices are reacting. It seems incredible that we still find little out about harvest forecasts until crops are gathered. Certainly, changing rules and regulations within the EU on the use of pesticides & herbicides are impacting yields, and challenging other origins to meet increasingly tight levels. Unseasonal and quite dramatic and severe weather pattern changes are impacting crops at or just before harvest, whilst unseasonal growing conditions change the developing physiology of plants turning a great looking crop into a poor yielding one.
Anuga starts 5th October, and as usual it acts as a catalyst for market movement. The international mix of suppliers & clients tends to impact market trends, highlight weaknesses or potential problems/shortfalls, and can lead to some quite severe market adjustments more or less overnight. In todays connected world, face to face encounters still have a greater impact than the passage of electronic data.
Once again we are looking forward to visiting Anuga, Koln this year.
Please let us know if you are there, and relevant stand numbers.
Let us know if you wish to diarise a meeting … We look forward to catching up with you all
Whilst we see a stable market for GWS supply, although the crop is as usual quite small, we are seeing quality issues developing that may be a consequence of changing harvesting techniques being employed in China. We have increased our QA/QC vigilance on this product both through our Chinese team’s inspection of shipments and our own arrival analysis, to secure end users do not suffer a deterioration in quality.
For Shine skin, the domestic demand is strong taking the premium raw material out of the market. The AA material is highly priced, but the impact of the import tariffs in USA is pushing buyers to the cheaper grades, and we see the price of A grade likely to increase soon narrowing the gap. Additionally, we are seeing better quality product being harvested this season, meaning more dark green kernels, restricting supply of the graded-out A grade seeds.
This market has reacted in the past week as poor weather in Kazakhstan has prevented harvest commencing. Linseed is always the last crop to be collected, and a delay here followed by an early winter can have dramatic impact on the crops, and its quality. The USA/China trade wars also give this region an opportunity to develop exports to China, increasing demand and pushing up prices. We feel this market has left the bottom behind now, and whilst increases may not be dramatic, the cost is increasing.
Indian market is quiet since we are truly between harvest now. Prices weakened a little due to India largely missing the recent Korean tender, which favoured African sources. As a consequence, long stockholders became nervous and started liquidating remaining stocks.
The situation will fluctuate now due to arrivals in the market yard and rupee appreciation/depreciation until we get a feeling for the crop condition early in October. The sowing area is slightly down on last year (about -3%) but this is probably too close to call accurately and can easily be accommodated in yield figures.
Africa bides its time to sell new crop sesame, knowing China will come to buy the 99/1 natural sesame as usual.
Central America we see the potential for slightly larger crops as farmers in some of the more volatile regions revert to traditional crops for security. So, we would expect adequate demand, although Japan has already started to request info and availability for large quantities of natural seeds to be shipped straight after harvest.
Nervousness surrounds the Polish/Russian supply routes at present, whilst we have seen good offers of quantity from Ukraine. Prices have not reacted, but the situation described in the section on linseed is likely to have an impact.
Global sunflower production is forecast to be slightly up this year at 52.5 Million tonnes, roughly 1 million tonnes up on last year. The increase is roughly equally split between; Russia/EU/Ukraine. EU demand is roughly equal to its likely production of 9.9Million tonnes. Demand for kernels however is strong and prices have edged upwards from Bulgaria, as this increase in demand has come to bear. So, we feel the market is off the bottom now for the year to come. In fact with many large buyers still mainly uncovered prices could climb significantly, being demand led.
The Czech Republic is busy fulfilling contracts written for supply from 2018 harvest, or early new crop purchases and as a consequence is unable to offer low morphine seed for sale. This situation should change in coming weeks. This has reversed the price trend for other non-morphine/low morphine origins, in particularly Turkey, causing a reverse in the price direction for ‘spot’ supply.
Other crops appear to be harvest impacted, with hail having significantly impacted some Central European crops. Our indications are that Australia is reducing planting too for its February 2020 harvest, so the market looks quite unstable again, and somewhat surprisingly.
Plentiful supply from accredited facilities from Paraguay to Peru, keeps prices low. The split market between EU and USA quality leads to confusion since the price spread is around US$ 2-300/MT, with the EU quality commanding the premium, as long as buyers do not turn a blind eye to the pesticide residue levels.