A firm sentiment now rests on nearly all markets, after the gradual drift down experienced over the first few months of 2020. Generally, harvests, yields, qualities, supply chain problems, short covering is all coming together to create a firm picture for this season. Combined with a lack of confidence in any particular currency, and global COVID-19 issues, we strongly suggest cover your requirements now. In your domestic currency.
The other concern is the tariff situation post Brexit. We have no indication of what the UK will fix for 2021 onwards. Some items will incur levies as far as we can see today, as per the WTO system, but we do not have 100% certainty in any of this data.
Brexit preparations are our priority now. If you have a particular requirement, let us know your needs. We will build a limited stock position, but cannot guarantee to have all excess requirements or weeks of cover in place prior to the deadline. Please talk to your account manager if you require special arrangements before 15th October.
As we suggested last month, do not get caught short! The relatively poor GWS harvest has caused prices to jump 10-15%, Shine skin follows it, although the harvest is good. It will depend on local demand. Quality looks good again this season, with good colour in both grades. The Xinjiang issues mentioned last month are developing with proposed bans from USA on items from this region (the primary pumpkin area). Again, currency fluctuation is important here, so we would recommend cover for at least H1/2021 now, possibly the whole year.
The dry weather and poor yields have hit pricing, which is steadily climbing now, and will not return to the lows this season. The general market conditions will soon be impacted by weather closing in. Brown linseed has responded first due to the volume, and gold is lagging, but likely to react too, potential more dramatically.
It is watch and wait on this commodity. We hear China has had a relatively small crop, and will be looking to Nigeria & Sudan, who in turn have had issues with plagues of locusts and floods. Next on their shopping trip will be Brazil, where available quantities are reducing. In India, rains continue and have definitely impacted the Gujarat crop. This region produces the best quality sesame. Rajasthan, MP, UP are less affected by weather but under various states of lockdown. Market yards are closed and information scarce. The IOPEPC will conduct a crop survey mid October, but for now situation is concerning, and demand surprisingly low. The market price is however stable at low levels. We see limited downside for 2020/21, particularly with local demand always increasing between now and Christmas. There is little point not covering requirements now.
Recent EU alerts indicate that unsurprisingly the cheaper exporters, with poor hygiene standards have been treating the sesame with Ethylene Oxide, a banned EU fumigant which restricts the microbial count, and masks underlying hygiene standards. Our Indian team monitor our suppliers regularly and we categorically know our sesame supplies are not treated in this manner. As usual these practices come from cheap sources of sesame, which is a product that should be bought on supply chain confidence, not price.
Central America will be harvesting in early December where the demand has been sluggish this year, so there is carryover stock, but prices will react to the global market plus local influences. We see it as competitively priced currently, and unlikely to decline.
We are experiencing significant shipping issues from both India (container availability) & Guatemala (Vessel availability and voyage time).
Probably from the UK perspective this is all about Brexit and the levy situation. Unless importers have been using the’ seed for sowing’ category, the levy on millet from all regions is likely to be £ 130/mt in 2021 since there are no agreements and the WTO tariffs specify such. Certainly, the disparity from different regions in declarations is going to be more transparent going forward, so we expect this mis declaration to be reviewed, and of course is retrospectively implemented.
The market however is still relatively stable for EU clients where the situation continues unchanged. The dryness has impacted yields, but so far availability is good and the impact will be felt later in the season if at all. THE USA has had a second poor crop and will be net importers again this season.
The market for sunflower derivatives has turned a very sharp corner and is climbing rapidly. Currently prices are up over 50% from the bottom and likely to continue an upward direction through this season. This correction has been expected for some weeks now, and whilst bigger than anticipated has been indicated for some time. The causes are many creating a near perfect storm.
- Global production of sunflower is expected to fall by 1 million tonnes or nearly 2%
- Production in Russia/Kazakhstan etc is actually down nearly 2 million tonnes or 15%
- Dry EU weather has impacted this seasons rapeseed crop, and threatening already 2021 harvest
- Soya is firming due to strong demand from China, and the US crop suffered extreme dryness
- The rapid price escalation is leading to defaulted contracts
- Generally, buyers are short and adding significant demand to the market
What a difference a year makes! Poppy is generally in good supply and markets are stable. There is a large differential between high & low morphine levels. We do not anticipate a large crop in Australia this coming harvest (February 2021) but for now the higher morphine varieties are competitively priced compared to the last couple of seasons, whilst low morphine sources are carefully controlled and supported at previous season levels.
We are seeing prices in EU/UK market which indicate that material is outside EU pesticide specifications are being imported into the community as opposed to going to less demanding origins. This might partly be a consequence of USA demand being poor and the price differential widening and tempting some importers. The small crop will be sown shortly, but this material is generally outside EU specification too on pesticides. It is clearly important at this time to make sure your deliveries are within pesticide limits.
The cheapest origins are Paraguay & Argentina but glyphosate and aflatoxin issues are still forth coming from these areas. The Paraguayan crop was disappointing with only 14,000mt of EU suitable material, about 40% lower than last season. The next crop is Mexico, due in November/December. This is generally directed to the USA and is uncompetitive for UK/EU destinations.