Ingredients Market Report: December 2019
Merry Christmas & wishing all a healthy 2020
Sterling appears to be factoring in a Conservative win, although the lead is narrowing, but will fluctuate with the polls for the next couple of weeks.
The US$ is dependent on the US-China trade deals which appear to be moving in the right direction.
The Euro is dependent on Industrial data due this week, and will react to good news or bad, but fundamentally is looking more positive.
This probably mean a rough status quo for FX until at least 12th December 2019!
FX Monthly movement
- US$/ £ 1.29 unchanged
- US$/ € 1.09 unchanged
- £/€ 1.17 up
Lots of volatility on markets this period, all caused by sudden realization of crop performance, increased demand, weather and specification challenges, Generally all bad news with tightening supply and firming prices. There are one or two exceptions, but that’s all.
Organic supply is becoming tricky too, both from China and elsewhere. In China many suppliers are opting out due to the tough EU regulations imposed unexpectedly last January. We hear of pesticide issues from North America, and supply problem from Eastern Europe. Everything looks like a worsening supply situation and higher prices. But at least the product is likely to be Organic!
This market has probably reacted most severely, with a realization that the good quality harvest has not been a good quantity harvest. Furthermore, the improved quality, coupled with strong demand for lower grades from USA to neutralize the tariff increases, has led to a shortage of the ‘A’ grades firming these prices more and narrowing the spread. Pumpkin seems to be on a one-way street now, with defaults and short covered processors in China.
So, we see a situation of strong ‘spot’ demand and delayed shipments which will lead to the inevitable availability squeeze.
Market has firmed around 15% in recent weeks due to lack of availability, mainly weather driven, but also production problems at some processors. These issues should not last past the Spring, but that is still 5 months away.
Golden linseed has been more of a problem on availability. Canadian origin is back on the table, for the first time since the GM issue of 10 years ago. We are finding buyers reluctant to re-introduce this origin for now.
Crops in India and Africa are gradually softening the price for this item. The usual strong domestic demand for hulled seed in India currently keeps the market stronger than perhaps numbers dictate, so we hope for a weakening in early 2020. The odd Korean tender also helps support the market,
The points of concern are perhaps whether Sudan will continue to export, they have recently banned the export of peanuts, and due to the conflict, the port is heavily congested.
Central America is harvesting, and good crops are expected. Prices will follow the international market generally. There is strong demand for Central American at present from global buyers and Japan.
The prices have increased but appear to have stabilized now, with Ukraine delivering material consistently. It is not necessarily readily available, but consistently available for now.
So suddenly, it happens. Over committed suppliers are delaying shipment, global demand has kicked in and the price has reacted and started to catch up the global trend, that the kernels were ignoring. Stock is tight and will remain so until early 2020, prices are up 10% or more. The bottom of the market has passed now, for this season at least.
Still the CZ is elusive on its offers, and prices are remaining firm. The market is splitting into various ranges now dependent on morphine results in the UK, which until recently has not developed this trend which has been a factor in the EU for some time.
With strong East European demand, and limited supplies of stock, prices will remain on the firm side. Australia is starting to harvest, but volumes from this region will be relatively small this year ,and will not arrive EU until April.
This market is all about quality and supplier trust. There is some extremely cheap Chia around from Paraguay and elsewhere, but it is unlikely to meet EU regulations on pesticides. The price differential is several hundred US$/mt. If no one tests it, then who is to know. Until the authorities do a spot check. It is really important to know your supply, concentrate ON Bolivian material with all the certification, which should be lot specific.