Currencies are in for a stormy December as uncertainty and change dominates everywhere. In the US, Joe Biden is likely to stimulate a dollar weakening set of fiscal policies, and concern over the labour market and household spending could add to this. For Sterling, Brexit continues to dominate, along with fears of a double dip recession, but US$ weakness makes Sterling appear stronger. Volatility is likely to be the name of the game for coming weeks. In Europe, talks are about the support measures and further QE being discussed in Brussels due to the pandemic, although Poland & Hungary have initially vetoed the budget plan. But the Euro is close to its highs against major currencies, and thus has some strength against these possible weakening measures.
FX Monthly movement
- US$/ £ 1.33 up
- US$/ € 1.19 up
- £/€ 1.11 up
The challenge now are the delays and diversions at all UK, and to some extent EU ports. Combined with restrictions in various origin countries and misplaced containers, the supply chains are severely impacted from all sources. The unilateral decision by shipping lines to; firstly impose extortionate surcharges on containers heading to UK, plus divert vessels away from UK ports is hugely disruptive and there will be supply problems in the coming weeks. UK ports are struggling under COVID restrictions plus a huge number of containers of PPE not clearing the docks and blocking up container storage, transport and booking slots. Coupled with a shortage of transport generally, and in particular vehicles not wanting to come from EU to UK. Firstly this increases prices significantly, but more importantly lorries cannot be found. This is going to get worse as we head towards Christmas & the 1st January changeover date.
The market is one of our quieter ones at present. GWS remains firm and in short supply. We do not see this changing significantly. Fundamentally we believe many processors are short of raw material to cover contracts, and those that sell CIF are reeling under the huge freight surcharges being imposed for UK.
Expect shortage in supply.
Shine skin remains steady, as demand is slow and thus we expect the market at origin to remain stable, whilst export prices will increase due to freight challenges.
Chinese New Year is approaching now too, and this will stop shipments through most of February, so we see a tight situation through until Q2/2021 in UK/EU.
At a time where transport becomes a problem across Eastern Europe and beyond, Covid is also taking a greater hold. The price is rocketing and with limited availability of raw material transport replacement prices are being further impacted.
Transport issues from Kazakhstan continue to hit the supply of raw materials and get reflected in finished product prices. As we approach the full winter weather there is really no sign of this situation improving and therefore supply & prices will remain firm and potentially increase. China is buying heavily in Kazakhstan too, further increasing prices. Canada is a cheaper option, but GMO concerns must be covered for each consignment, if buyers wish to look towards this region.
ETO continues to dominate this supply situation. No agreement between EU/IOPEPC means all Indian shipments still suspended. Meetings are on going, but realistically now, shipments will not recommence before 2021. For arrivals in February at the earliest. Meanwhile the market in India is increasing fuelled by a poor harvest quantity, and strong domestic demand.
The EU had more than 100 containers looking for a home all with ETO levels above EU regulations.
Other options are limited; China can supply African seed hulled in China, which is expensive but of higher quality than the Nigerian hulled seed available, which we do not see as a good alternative for most uses. Central America has availability but have been hit by two hurricanes/tropical storms in two weeks, which at harvest time is bad news. We know some crop damage has occurred, but plantings were up so the overall impact might not be so bad.
However, we strongly suggest cover is taken now for Jan/ Feb. since in conjunction with the shipping & ETO issues, there will not be huge amounts of available spot material.
Some normal news, with good availability and price stability, and a general feeling of good quality available. Still some concerns over the levies applicable for the UK post Brexit, but this will not impact on EU clients.
The USA will import from Europe again this year due to the reduced harvest.
Everything has compounded to make this a horrific year for sunflower. With poor harvest, export bans and now shipping problems, it is hardly surprising prices are up nearly 100%, and have room to climb higher. Support for Palm oil by India lowering import duty further underwrites the vegetable oil market, and dry weather in South America threatens this harvest yield too. So with global quantities lower than last season yet a higher demand for crushing, it is hard to see how this market can decline before 2021 harvest, and expect a tightness in supply throughout the season.
The Southern hemisphere crop is approaching, and prices remain stable. Demand is sluggish and availability good, with processors calling for collections. Prices have not weakened further, and we do not see this as likely in the coming months. Discussions continue over alkaloid levels permitted in the seed, with different requirements for different customers.
Prices are increasing for EU quality, perhaps in light of concern over the EU imposing regulations on the pesticide levels, like they dealt with the ETO issues. Increased port health scrutiny will also identify the Codex material being identified and remove the cheap material from the market. In the meantime buyers should be aware that if this issue develops, product recalls will be required by the authorities. Suppliers look for funds to assist with the 2021 crop which is being sown now are also increasing prices somewhat. We expect a smaller crop however, due to the weak price levels.
Global demand for Chia seems to have run out of steam and this decline in demand has seen the market quite weak. Most South American countries are now aligned pricewise. But each region has its issues, either supply problems or political instability or even COVID.