Really a very quiet month as stated previously. We are at the mid season point, where crops are largely planted, old crops more or less committed and with lock down impacting everywhere to a greater or lesser extent, markets remain more or less unchanged. Various changes in the freight market impact prices and supply too. Overall, we have seen a reduction in demand with customers reducing their call off demand, effectively pushing forward the cover the have into the next period. This will dampen demand for immediate supply from new crop harvests we would expect.
Otherwise everyone is finding it hard to budget in a future we are not quite sure of, so this stops further demand led volatility. All in all, it is probably a good time to take cover forward due to the overall quietness and lethargy in markets, and potential volatility in FX.
The supply of organic seeds is becoming very challenging, with many suppliers in China deciding to switch out of this business due to the risks. Eastern Europe fills some of the gaps, but supplies are not necessarily that robust either. Going forward we would strongly suggest clients cover their annual requirements at harvest time, so supply continuity can be managed.
The major concerns here are supply of shine skin A, which as we have stated previously ins in short supply this season due to the overall quality of the harvest. This has meant a higher percentage of AA being incorporated narrowing the differential between the two grades. The demand has been higher for the cheaper grades too, due to the import duties imposed in the USA. With China/USA relations souring, we could see this situation deteriorate in coming months. We see overall sufficient shine skin for this season, and pricing remaining fairly flat.
GWS supply is smaller, but more stable and we see an equilibrium in supply/demand for this season.
New crops will emerge in late August, it is yet to be determined how COVID-19 has impacted demand for the new season.
Old crop now is getting quite tight and available seed is of poor quality. We have seen prices increase over the season by 25-30% in total. New crop is a long way off, linseed is one of the last crops harvested normally. The weather is concerning with the dryness over Russia, Ukraine and Kazakhstan, but there is time for this to recover. But the lows of 2019 harvest seem unlikely to be achieved again for harvest 2020. More info should become available in July.
Golden linseed is a more extreme case of above where non-Canadian sources are more or less exhausted, prices are firm and likely to climb higher.
In India market yards in some regions are re opening for auction allowing farmers to deliver stocks for sale. But slow/low demand for export has kept pressure on prices. Farmers are needing cash to buy seed to prepare for planting the next harvest. Strangely processors are also under pressure to sell, since having imported seed from Africa, they need to pay the import duties levied.
The summer crop had a good yield, all some states producing non hulling varieties such as Bengal were then hit by a cyclone which damages the quality and yield. This seed will be offered cheaply, but the quality will be very poor in appearance.
So far the monsoon appears to be developing normally. The rainy season commences in June in the South West of India arriving in the sesame regions towards the beginning of July. It is expected to be on time and of normal characteristics. Planting will occur then leading to the usual crop end September.
In Africa, China has been active in Ethiopia due to other regions, Sudan for instance, stopping exports due to lockdown restrictions. West Africa crop is more or less committed now with new harvest due in September.
Central American shipments have been badly impacted by the closure of the Fast Food Industry in EU/UK. This has led to a build up of stocks and push back of contract. For the market to develop normally we need to see this backlog of inventory and orders clear, hopefully in the second half of 2020. Production of natural sesame in some South American countries is increasing, with Brazil and Paraguay offering.
The market has been caught out with the end of the Quota for Ukrainian hulled millet coming earlier than expected. This effectively sees pricing increase by € 130/mt for imported material and as a consequence, EU material should increase in price. Obviously, this might be delayed depending on stock holding. Other main source of millet is USA, where a levy is always in place, but this season their crop has had moisture issues, impacting quality.
The new quota is a long way off, normally being released in September to start 1st October.
New crop reports should start to filter through in about six weeks, and we will advise accordingly.
Despite a staggering fall in mineral oil prices over recent weeks, which was mirrored to some extent by soya and rapeseed markets sunflower has been relatively stable and recovered quickly. The old crop situation has been supported by strong returning demand from China, and thus diminishing supply, to the point that season end stocks might be tight. The new crop situation is less clear, with the global crop forecast to be a record, yet both Russia & Ukraine and other parts of Eastern Europe already suffering drought conditions, which impacted on the rapeseed yield already. So, sunflower has entered the classic weather market scenario for the new season, if drought continues prices could climb rapidly, but if it rains …
Everyone awaits EU new crops from Spain to Czech Republic. Conditions have been favourable for many EU crops however, and if this continues, we should see good availability of seed, with quantities similar to 2019. Australia is reaching the end of its season for shipments, and obviously the availability for 2021 is still unknown, but the slowdown in pain relief demand could impact on plantings in Australia who are increasingly relying on imports of poppy straw from EU where the yield is favourable.
Turkey will harvest low morphine material in July too. We understand around 480 hectares were sown, yielding 30/32,000mt of seed, although two thirds of this will be white poppy.
The increasing demand for low morphine poppy, is challenging this market too, widening the spread between the grades.
Concerning situation on supply as the lockdown in Peru has been extended again, where health services are stretched. With supplies from Bolivia also hit by COVID-19 restrictions. Shipping from this region is always slow. The market is firmer than expected due to Government support, when they stop buying prices are expected to correct downwards towards the end of June.
Due to the over supply and weak market in 2019, plantings for the 2020 harvest are significantly reduced. Concern over yield is increasing with drought impacting crops in Paraguay & elsewhere. Bolivia is struggling with COVID regulations, despite relatively low number of cases compared to elsewhere in South America. But a good crop is expected. Prices seem likely to increase in the coming season.