Ingredients Market Report: November 2019
Volatility is the name of the game; Brexit, trade wars, US global policing, dropping US$ interest rates, pending EU recession all impact currency, with no clear direction for any. Essentially it is best to convert to local currency and forget these days.
FX Monthly movement
- US$/ £ 1.28 up
- US$/ € 1.09 unchanged
- £/€ 1.15 up
Challenges! Sums up the seed supply business today for the conscientious buyer. Challenges over product authenticity, status and origin. Compounded with variable grades and qualities make the supply chain security a major issue. Nothing is as it seems; prices cannot easily be compared for qualities that appear similar but have contaminants or poor certification accompanying it. Markets are adjusting, and supply routes changing. It all creates a huge technical burden, but delivers real financial savings, if flexibility remains in the supply chain within GFSI standards.
Markets have generally rebounded in last few weeks, as we have been warning. Prices have left the market bottoms, and these levels will not be seen again. In UK, sterling has been stronger to assist in masking these rises, but the EU zone has fared less well. Quality on paper v quality on delivery vary immensely and takes some unravelling to permit clarity.
Generally, we feel buyers should be covered now for 2020, or expect to pay more, but make sure you are buying what you actually need, as opposed to what people wish to sell.
Organics continue to be a challenge, particularly from China where many suppliers are turning their back on this sector due to over regulation in their eyes. We do not see the situation improving through 2020, and prices will increase. We suggest you cover what you can now.
The market has polarized. GWS is in short supply, and the realization that the transfer to mechanical harvesting techniques is leading to the potential serious contamination with ‘goat head thorn’ and has changed the supply opportunity here. It is key that premium suppliers are used to avoid contamination with the sharp black seed. Otherwise EU recleaning should occur, with close monitoring of waste extracted and its contents. This item, whilst technically EVM, can cause very severe customer complaints.
Shine skin, whilst the harvest was of exceptional quality, with around 80% AA grades, the market has remained firm due to strong domestic demand from the ‘in shell’ snack sector. The significant price differential between the two grades has led to an increased export demand for A grade. We see the prices here increasing so narrowing the gap between the two qualities.
Supply is difficult. East European weather issues and increasing doom surrounding this crop have led to prices firming by 5-10% in the last month. There is no issue over the availability of raw material, just its suitability and supply opportunity. We would suggest you cover now.
India: So, we started with good sowing, but then it rained too much. Africa reports a good crop and the situation in India improved as we approached harvest, but nobody really knows. The IOPEPC met in Dubai, straight after Anuga, and generally the market is gearing up to good quality and quantity. But now we are in Diwali for a week. The clouds will clear next week, but we are anticipating a good crop with plenty available for export compared to previous years. All can turn on the weather forecast, but for now, we see the recent price weakness maintaining, although perhaps not declining much as we enter the period of strong domestic demand. Seems like a good time to take cover.
Central America: The challenges within the sugar industry, coupled with political uncertainty has led to an increased planting in sesame this year, which is an encouraging reversal of recent trends. Central America will follow the trend from India in a slightly bearish direction. This is good since it impedes the importation of Indian seed into Mexico to act as a cheap alternative poorer quality Central American seed.
What started so well, is turning into another challenging year for European supplies. Issues in Russia, Poland and Ukraine are firming prices and the bottom has long gone. Further uncertainty over tariffs, levies and potential; WTO tariffs add uncertainty. The USA material, still being imported as sowing seed by some companies, further clouds the picture, creating artificially low-price comparisons. These non-paid levies are reclaimable by HMRC retrospectively.
So, the market has moved at last! We have been warning that a correction is long overdue and now it happens. Strong demand, poor quality, increasing oil prices are firming the market and this is likely to continue now.
The lack of CZ offers has been difficult to understand. Apart from there being few, if any, GFSI facilities and a smaller crop than forecast, where are the offers? Well it starts to unravel; The CZ relies for its early exports on supplies from Hungary. Hungary had a disastrous crop, so CZ ended up short of material to fulfill its contracts, so when it harvested in late August/September it has had to fill these orders and had no surplus material to offer. On top of this CZ farmers are good at spotting an opportunity, and with other poppy crops on the poor side, they see and are witnessing prices rebound significantly.
The further added complication of maximum alkaloid levels becoming of significant importance to clients makes the whole situation complex, and ultimately prices bullish.
There are no other poppy sources available until Australian arrives in EU in March. So, we are dependent on CZ and Turkish supplies until then.
Quite a steady market currently, with supplies from Bolivia and Paraguay keeping the market supplied. We feel it is at the bottom so worth covering. As usual the USA qualities are cheaper due to more relaxed pesticide regulations. With no testing on importation, you must be confident in your source to avoid these potential issues with the consumer.