The supply of organics remains a challenge, which we do not see changing fast. Extra testing on arrival and increased legislation, create an unpleasant environment to supply into. Many originators are declining business for the EU/UK now. Prices have to rise, as a differential to conventional material.
For UK clients Brexit is ‘but a supply chain away’! Whilst many of you enjoy a 3 day delivery service, our supply chain operates on a three month lead time. So we are fast approaching decision day on arranging our call offs for January 2021 and the subsequent impact on pricing. None of us know what duty/levy rates will be levied on which products from where, but we should consider this in our forward pricing and contract structure. It is by no means certain that all things remain the same. Price adjustments, switches in origin preference are all possible. Be warned.
We are also starting to experience significant logistical issues in our supply chains. Shipping lines have reduced services, or diverted routes, voyage times and routes are changing for the worse. The lack of space, and wrongly located containers is creating a strain and a potential price increase. When combined with more stringent customs checks and variable demand patterns it will mean less spot security of supply. Place contracts forward now.
Finally in this sector, COVID-19 is impacting on the ability to assess and measure crop performance. So be ready for rapid changes in market sentiment this year. With the closure of borders globally too, the usual crop dynamics should be ignored.
So where are we in China? Well with Xingang as the primary source, and many issues surrounding this region, it is impossible to state at this point what the crop is like. Our China office are assessing the situation in Heilongjiang, North East China currently which should give an indication on crop. But logistics issues plague China, along with travel restrictions. We know the GWS crop is very small, perhaps 8,000mt. We expect Shine skin demand to be domestically strong and supply around 200,000mt. Prices are relatively stable now which could be good or bad! We are back 25 years in information availability. If you want an opinion, don’t get caught short, when FX is so favourable.
Well the bottom of the market has passed, and the only direction is upward now. FX will soften the blow temporarily, but dry weather, drought and hydrocyanic acid level investigation by EU will keep prices firm now. A little rain (as we now have) in harvest could push prices well above last year. Prices are increasing in ‘base currency’ and this will continue.
A worrying year ahead! The monsoon in India has not stopped, we are looking at 30-50% crop loss in the premium growing areas. Official assessments are yet to be published, but the situation is grave. Combine this with COVID-19 reaching rural communities. September will be critical, already showers are forecast, but if these develop into more serious down pours the crop will be very poor. Of course, sesame and rain mean poor quality seed. So – know your supplier!
Africa the situation is not so bad, we believe, but their crop is later, and there is virtually no hulling available. China has had heavy rains which could impact on their harvest which is underway. If the impact here is significant, we could see a major escalation in price.
Sellers are mainly offering spot parcels too, but forward contracts are hard to negotiate and come at a premium for carrying charges.
All is set for potentially a very fast upward correction in prices. We would strongly suggest cover is taken now.
We do see natural sesame available from Brazil and elsewhere, but this is primarily destined to the Chinese market, and whilst positive as an alternate source, is not available in sufficient quantity to solve the potential global shortage.
Whilst south of the Himalayas we worry about rain, North in the Central European belt we worry about drought. This is now hitting the Ukraine millet harvest. The USA is already priced out of the market again for the coming year and is likely to be a net importer again. So we see a tight availability complicated by a lack of clarity on UK import regulations. The EU should maintain its supply base from Poland etc., all within the community, but for the UK we face levies from outside the community, and therefore from EU suppliers too after December. This adds around £ 100-110/mt. What happens here will impact on our supply base for 2021 and forward. It is unpredictable, and potentially contractual adjustments could be forth coming when we know the situation.
Last month we encouraged buyers to cover their requirements, today we say similar, but the market is already up nearly 20% from this time last month, and above pre-COVID levels. Demand plus poor yields and quality combined with strong demand from oil crushers pushed the market up. We should keep an eye on US/China trade discussions too since vegetable oils are a key player in these.
Really the only advice is buy now, tomorrow it will be higher. Of course, with the current FX rates the impact is mitigated, but when these adjust the full impact will be felt.
Poppy comes from two main sectors; that grown for culinary purposes, primarily Czech Republic, and the by-product of the pharmaceutical industry. The later is heavily impacted by COVID-19, and this is impacting on the supply. The culinary poppy market has an element of Government control and this is stabilising prices in both Czech & Turkey. But there is availability this season. Prices are declining, but complexity over alkaloid content is increasing. We see little reason to worry over supplies at this stage, but confidence over the alkaloid content of your supply is critical. We are continuing to focus on single origin supply options, not wanting to introduce blended multi origin poppy options, but this is becoming increasingly difficult to manage.
Demand from USA remains sluggish, growers are looking for finance to plant the new crop, but the lack of demand is not giving the market confidence. COVID-19, is far from under control in Peru, which is not assisting the situation. The price is not reacting currently, but we do not see it falling this season.
No real news. Prices are stable, pesticide issues from various origins. Generally competitive compared to previous seasons and really no downside. We would recommend taking cover and forgetting about until 2022.