Ingredients Market Report: February 2020
Well, Brexit is done, but both sides are starting the negotiation on the post transition agreement and are taking fairly hard lines as expected. Markets initially favoured Sterling, but this was short lived and are now looking for direction. The Corona virus has impacted oil prices and stock markets. The Chinese government has injected large amounts of cash to stabilise the situation, but obviously this situation will run for some time. China is the largest importer of oil, so whilst their country is under a shutdown order demand slumps hugely. President Trump should be cleared this week too, and eyes in the USA are on the upcoming election.
So, plenty of major events at the start of February, but no clear direction yet.
FX Monthly movement
- US$/ £ 1.31 unchanged
- US$/ € 1.11 unchanged
- £/€ 1.18 up
Once again, the EU has changed at the last minute import requirements for organic documents which is going to disrupt supplies, whilst importers struggle to meet the new regulations. Biofach and Gulfood take place this month, but one would expect attendance, certainly from China to be reduced significantly due to the Corona Virus situation. Obviously, the China shutdown will also impact on shipments, which already were delayed due to the Spring holidays. It is unlikely we will receive any shipments in February now, so next earliest arrivals will be mid-April into EU/UK. We are holding stock to cover normal requirements to cover this period.
We have expanded our EU team, based in Germany with the arrival of Valerie Schneider, who will join Anna & Vera in looking after EU based clients & suppliers.
Stability in prices due primarily to the Spring holiday period continues. We see the shortage of shine skin A grade continuing all season, due to the improved quality of the 2019 crop. It can only hold prices up, since shippers will have to use more AA grade to make up the volume.
The Goat Head thorn problem rumbles on in GWS grades, and cheaper suppliers’ product should be carefully checked.
We have seen a re-emergence of pesticide issues from some shippers of shine skin material. So it is paramount that goods are well screened prior to leaving China, with a good sampling protocol and accredited laboratory.
Prices have stabilised but supply is tight, particularly for golden linseed of an EU origin. We are carefully monitoring microbiological levels which are always a concern in linseed and do seem high from some sources this season, probably related to harvest time weather.
We think it unlikely the price will decline this season now.
Supply is stable in the market yards of India, around 100mt/day is delivered to the major yard. Due to the extended monsoon, reservoirs are full and this is a good sign for the summer crop, since irrigation will not be a problem and soil moisture is good too. African imports continue and add stability to process due to ready supply. Around 80,000mt was imported in 2019, similar to 2018.
Domestic demand has tailed off as usual, so combined, these factors give a softer tone to the market, and prices should ease in coming weeks.
Central America, has collected a good crop, seed quality looks good, and the seed is generally larger than previous seasons. More work is going into seed selection now than for the past 10 years or longer, which is good. We see significant investment into the Industry from some processors now and are optimistic about supply arrangements from Central America.
Prices trundle along, and demand seems good, whilst shipments are a little problematic. We have a little nervousness of the forward market due mainly to poor information on the overall crop situation. We hear stories of a poor USA crop, with high moisture seed and if this develops and demand increases in East Europe, we could see another spike in price.
Bulgarians are reluctant sellers at present, with prices, already 30% up, and still moving upwards. Shipments are forthcoming but slow. Hullers have to compete with oil crushers who have significant capacity for seed.
Demand for sunflower is likely to continue and with new crop Bulgarian not available until September, we could see a very tight supply situation over the summer months.
In the USA a wet harvest period caused significant loss to their expectations. Some estimates indicating 20-25% of the crop was left in the fields. The wet conditions will increase the sclerotia levels of the crop and impact the overall quality too.
Short supply, stable pricing. Morphine issues continue to surround the supply for many customers. Overall we still do not see significant quantities coming forward until the summer at the earliest. Australia is starting to ship, but the seed will not be seen in EU/UK until April. Odd parcels pop up from Czech Republic only. Spain is committed. Turkey has low morphine seed at high prices but is a reliable source.
We would recommend cover is taken through until at least Q4 2020, to maintain the supply chain and avoid mishaps.