Currently weakness in the US$ is evident with Sterling and the Euro both holding up against this currency. Sterling is thus holding against the Euro too, which is probably actually masking true weakness in the pound due to the two obvious factors of ‘new variant’ COVID and subsequent lockdown 3 and economic consequences, plus the economic consequences of Brexit. Will this lead to a double dip recession? It has to be likely. This will be true for the EU too we fear. The US is genuinely concerned about the slowness of recovery and the fact that employment levels are unlikely to recover to pre-COVID levels until 2024 at the earliest. They are pushing for further stimulus packages to support the economy.
Finally the Australian dollar is strengthening in response to the positive handling of their covid crisis and the recovery of the domestic economy, whilst QE continues. This situation could develop in the UK if the vaccination program continues to out pace the EU, we should see the UK economy show signs of earlier recovery, potentially strengthening Sterling.
FX Monthly movement
- US$/ £ 1.36 unchanged
- US$/ € 1.22 down
- £/€ 1.12 up
On the positive side we achieved our BRC renewal audit achieving AA grading this month which we are obviously pleased with.
In addition we agreed our carbon offset plans with Oblong Trees (www.oblongtrees.com), agreeing a 10 year plan to plant approximately 1400 trees annually which should each sequester 1mt of carbon in their 40 year life cycle. This more than compensates for Unicorn’s carbon output, and makes us carbon positive as a business. We are progressing towards ISO 14001 certification later this year.
Other less positive aspects of 2021 are due primarily to the impact of COVID-19, Brexit and ETO issues surrounding Indian sesame. Whilst we are gradually resolving these, freight and transport issues abound everywhere, challenging supply chains. There are elements beyond our ability to control; sudden border closures, confusion over paperwork, containers being transshipped or shut out of vessels. We can only urge clients to be long covered, which might seem a challenge in these uncertain times, but for us to keep the supply chain going we are having to work further and further ahead, and the only way we can absolutely guarantee to have material is to have orders in our hands to permit us to plan.
The organic supply sector is currently facing extreme challenges on pesticide levels as the EU tightens their controls from various origins. We are seeing several supply options disappear from the market as the challenges are too great.
Whilst the origin market, which has been increasing, is relatively stable the freight market has added 5-7% of price hike in past weeks. This scenario is continuing beyond the Chinese spring festival which occurs this month. It is leading to supply issues as some exporters are unwilling to pay the surcharges of $5-8000/ container for contacted goods to the EU/UK. Other parts of the world are also suffering freight surcharges but to a lesser extent.
The longer term scenario is somewhat worrying. GWS areas are continually reducing as it is an export orientated crop only. Shine skin areas are significantly greater, but China is feeling too dependent on some imported agri-products and farmers are being encouraged again to grow soya, wheat and maize, staple alternatives, and taking area from pumpkinseed.
Canadian supplies have corrected in price, and there is general tightness in supply. Obviously Canada has supply challenges with the weather at this time of year, but generally the slow march of linseed prices will continue until new crop supplies remove the pressure.
Golden linseed supplies are extremely tight now and we should see the differential between the two types widen in coming weeks.
For UK clients, freight costs are climbing as border checks delay consignments, increase paperwork and add to transport costs.
Obviously, this market has been dominated by the ETO issue for the last 4 months. In our opinion the EU/IOPEPC have reached a final agreement that essentially means every container is checked prior to shipment in Indian for ETO, Salmonella & 164 pesticides. If it passes, an export certificate is issued. On arrival in EU 50% of containers will be checked, at importers expense. If they test positive for any of the above, they will be refused entry.
There is undoubtedly significant cost for exporters and importers a like, but at least the problem is resolved, and supplies will be as per EU regulations. The impact on prices is obviously significant and has yet to settle down both for exporters and importers, as does the modus operandii for potential claims, costs and return arrangements. It is leading to a significant two-tier market in India, which should be of concern to non-EU/UK buyers since the rejected material will be looking for a home where regulations are less extreme. Many Indian processors will drop out of EU/UK supply chains due to this development and fight for the other markets. So, we would suggest non-EU clients should be very wary of the processor, and not buy purely on price.
The ETO issue in sesame is of course the start of a bigger concern. It is not restricted to sesame only. ETO treatment is used on many Indian agricultural products to mask the underlying health issues in the product process. The pesticide levels are also widespread. The impact on Indian agriculture will be significant, and on an industry that is already under pressure domestically from government changes imposed recently.
In Central America the crop has been harvested and the majority purchased by suppliers & speculators. The quality is good, and all should proceed. We are concerned that Venezuela is likely to have no harvest again this March/April and with issues in Paraguay, we see a shortage developing in South/Central American supply.
Overall sesame is heading into a firmer period, and the base has notched up too, so price is unlikely to return to the lows of recent times.
Some importers are looking at African seed either direct or hulled in Turkey. We see issues with this, apparently some has already had ETO issues, shipping problems are occurring, and generally the seed is not of such a good quality, and there are few GFSI facilities. We see pesticides as an issue too from some regions.
Millet prices are on the up too, and this trend will continue through to the summer. USA material is really not Available, and extremely expensive. Polish & Ukraine sources can be of mixed quality. Some processors struggle to remove tiny stones, or hull the product completely, but we have confidence in those we source from.
What a year! Prices are high, contracts prorated and supply tight. For UK clients added regulations on pallets & paperwork impose some surcharge, and then freight congestion everywhere adds further. The situation will not improve until October. Defaults & renegotiations continue.
After a pause in the price rises, the market has continues upward for all oilseeds for fundamental reasons; poor weather in South America ( drought), Russian export bans. A lot depends now on the outlook for 2021 harvest as to where prices will stablise. Any ones guess at this stage.
Prices are stable and attractive currently. We see it very much as an opportunity to extend cover through 2021. Alkaloid producers are struggling with over capacity and poor demand for their primary product the alkaloid produced from the poppy straw. As we see it today, this will impact on 2021 demand and plantings, so we would not be surprised for prices for Q3/Q4 2021 and 2022 to increase.
End of the season, and new crops have been planted. Generally this season demand from the major market, USA, has been down keeping prices stable and stock availability good. We should receive new crop information towards the end of March.
Prices are gradually increasing from Bolivia & Paraguay, in particular from accredited suppliers, and this is likely to continue for the time being. Essentially Chia is undervalued currently as demand has been poor, impacted by the global situation, so this gradual climb is a necessary correction.