In the UK it is the end of the financial year, and it has been a month of huge financial stimulus due to COVID-19, and perhaps to some degree it has worked since the FX rates today are not too far off the end of February. The major concern going forward, and it is perhaps too early to be concerned is the impact on the US$ of the huge financial stimulus, plus the anticipated rise in the unemployment rate is going to put their economy under huge pressure. The inevitable global recession will add further strain. Perhaps the Eurozone will also have its challenges as the re-introduction of cross country borders reverse the Schengen area, and as the wealthier nations look inward to support their own population, strains will develop amongst the members. As for Brexit, well a delay seems possible beyond December 2020, with no one having the time to focus on it.
FX Monthly movement
- US$/ £ 1.23 down
- US$/ € 1.10 down
- £/€ 1.12 down
Demand has been erratic to say the least, since lock downs were introduced across the UK & EU. A variety of tactics have been deployed by manufacturers, from ‘business as usual’ to streamlining production lines to maximize output. But there has been a slowdown in requirements, which is causing significant backlog up the supply chain and therefore major cash flow issues. It is a time to work with professional robust organizations. The concern is that as supply chains adjust there will not be the inventory to supply should a rapid escalation in demand occur when the regulations are relaxed. There is also going to be a challenge and concessions required on BBE dates due to the build up of stock.
On the whole markets have been suspended, either intentionally or by accident over the past months, so there is little to report below. One concern going forward is how agriculture manages the lockdown in the various regions. In the Northern Hemisphere we are approaching Spring and the major planting season. Will farmers be able to function normally? Will seed supplies be available to plant? What impact will this have? Will there be sufficient chemicals to treat the products?
The knock on effects of today’s global lock down will not be fully known for some months.
Whilst processors are now more or less back to normal, demand from EU/USA is reduced and orders pushed back to avoid stock builds. Prices are basically unchanged over the month.
The situation remains where the quality of this seasons kernels was exceptional meaning that the ‘A’ graders contain a much higher percentage of ‘AA’ seeds. This has narrowed the spread between the two types obviously. BUT, this is exceptional and next season we might see the spread increase again, buyers of ‘A’ grades will see an apparent deterioration in quality/colour back to normal.
Finally, remain vigilant in GWS qualities for Goat Head thorn. Only the premium processors can reliably remove this new contaminant which has appeared as a consequence of mechanical harvesting techniques. It is a nasty contaminant, covered in spikes.
Prices are up and steady by 15-20%. We are seeing supply challenges out of Eastern Europe, due to the re-introduction of border controls. The quality is variable, with some loads having quite high microbiological levels, so please make sure you get a certificate to confirm the microbial loading. It is leading to a split price level too.
With India in lock down the market is more or less suspended. Their summer crop in Gujarat is due now, and normally this crop of around 40-60,000mt is 50% black sesame. The concern for sesame prices is when China come back to buy African natural which they surely will soon as their Covid 19 situation improves, this is likely to firm/stabilize
the market. The lock down in India will delay shipments since the sampling procedure required by IOPEPC cannot take place and this requires ten days to complete. The temporary closure of ports for a few days will not impact supply however.
In Central America, the closure of most fast food outlets across the EU/UK has impacted on demand, coupled with shipping issues through the Panama canal holding up containers. Until there is some guidance from the outlets as to their practices the supply chain and bakeries will take the strain or remain Largely closed.
Currently we see stable pricing and demand, as well as supply.
Prices leapt up in recent weeks, and strong demand back from China has kept it moving North. There is a supply issue in Bulgaria with a shortage of shipping containers for some destinations further adding to the challenge. Finally at least one processor has attempted to claim force majeure on their contracts which might trouble distributors and users alike. There is little chance of this market easing prior to new crop, so we would strongly recommend taking your cover through until October now.
Market & supply stable for now.
The lock down in Peru has stopped the testing of quinoa & chia for pesticides etc., which is delaying shipments EU/UK bound, although there is available supply. The majority of consignments fail EU/UK regulations, so this is a bigger problem for us than the USA. Buyers should make sure their shipments have the correct paperwork, since the temptation for some shippers would be to dismiss the certification and prioritize supply.
There are some very competitive offers coming through from Paraguay & Argentina at present that look like good value compared to the Bolivian/Peruvian supplies.