The Euro has outperformed both Sterling and the US Dollar in the past month, and as vaccine delivery appears to be improving across the region, there is the return of some optimism. In the UK, Sterling has been more stable than the turmoil in the pre-Brexit years. The next weeks elections might introduce some volatility, particularly if the Scottish nationalists perform well and it increases pressure on another referendum for independence.
Output figures, strong financial support and an accelerating vaccination program is supporting the US$, but growth prospects are also increasing globally, and in the Eurozone in particular, which cancels out some US Dollar support.
FX Monthly movement
- US$/ £ 1.39 up
- US$/ € 1.15 down
- £/€ 1.21 up
Whilst cargo on the Ever Given is still stuck in the Suez basin, the knock on impact is being felt everywhere. Supply chains are struggling as vessels are slowed down, to restrict congestion at ports. Cargo is building up in the Med too that would normally move on the vessels transiting through the Suez. This effect will last for most of May. We are seeing arrival dates of vessels moving 10 days over night for vessels with imminent arrival.
On top of these issues the shortage of containers in all Asian countries, compounded with congestion in Singapore, a major regional hub, plus Covid lock downs is causing sea freight rates to reach levels never experienced before, as well as haphazard departure dates and voyage times. Rates are up 3-500%, for inferior service. There is no doubt shipping lines are having a bonanza currently. We do not see the situation improving before Quarter 4.
Organic supplies are also challenged from both India & China, as systems and suppliers struggle to meet the new/stricter imposed regulations. Expect this market to remain challenging for some time.
From a seed supply perspective we are in the most extremely challenging times we have seen in 30 years of managing the various options. Clients best protection is to be long covered with reliable importers.
The increasing reaction against Xinjiang suppliers, whilst sweeping in its generalisation and discrimination in application will have a major impact on pumpkin supplies. Compounded with local encouragement by the authorities to convert farmers to growing other crops that are needed to fulfil local demand. So at this stage we see supply reducing, prices remaining firm, and the freight impact mentioned above becomes the icing on the cake. Pumpkin will stay firm through 2021 & potentially beyond.
As we approach the end of the season, the usual concerns over inferior quality material are of increasing concern. We are hoping the improving Covid situation in Poland will ease the logistics issues from this area. Linseed could get caught up in the general oilseed tightness we are seeing ( see sunflower below), with further rumours of an export tax like sunflower. The market will remain firm for now, and new crop news should start end June.
India has its small summer crop in April. Whilst forecast at 100,000mt, the harvesting is delayed by the severe Covid situation. The crop is expected to be around 20-25,000mt black sesame, 20,000mt organic & the balance conventional white sesame. This will be the start of re-registration of organic suppliers in India, from farm level, through processors & exporters. But it is going to take some time. The Covid situation is very unpredictable with lockdowns & slowdowns impact at all levels. So for instance we have encountered issues with paper bag supply, sample collection procedures, laboratory shut downs that all delay product. Then we get to shipping issues, but we have already mentioned those above!
The new testing regimes seem to be working, but are slowing everything down and increasing cost. In the end it has exposed the market. Cheap sesame means ETO treatment and pesticides, and whilst the EU/UK have exposed this situation many countries in the world still buy on price only. ETO masks health concerns in the product.
From Central America demand has decreased somewhat, and stocks are declining and we do not expect prices to remain, but creep upwards at least until new crop.
South America has harvested with good availability of natural seed from Brazil & Paraguay. These regions look towards China for their main markets for natural sesame.
Quotas from Ukraine are expired in EU and rapidly reducing in UK, although it exposes again that importers are mis declaring many imports as sowing millet and thus face potential issues should investigations follow. The high sunflower prices will attract some growers to switch out of millet, although we still expect Ukraine volume of this item to decline.
Polish supplies continue, if somewhat haphazard!
Prices for oilseeds have reached highs not seen for many years. The latest push is due to huge demand, unfavourable conditions in South America. Fundamentals have demand exceeding supply and the situation is unlikely to change for sometime. Russia imposed its export tax on sunflower and Ukraine limited the export quantity for these reasons.
Soya prices are climbing with strong Chinese demand, rapeseed for EU from Ukraine is facing a crop failure. For sunflower the USA is forecasting a near 10% reduction in yield for 2021 ( this is 5 million tonnes!) Russia, Ukraine, Argentina, Turkey & EU all forecast significant crop reductions too.
There is meanwhile no free stock of old crop in Bulgaria, and firm prices or no supply from processors for further old crop volumes. New crop offers are limited too, and starting at high levels. New crop is also potentially delayed due to restrictions in planting and concern over extreme Spring weather.
We expect this market to get very tight over the summer months, and there is no certainty prices will Actually fall with the new crop. We all must get used to a new pricing level for sunflower kernels in our opinion.
Again a potentially tight supply year is upon us. Australia is reducing production due to the high stocks of poppy seed straw to extract the alkaloid from. EU harvests are covid & weather impacted. How much we do not know, but believe Spain is in a reasonable position at least. Turkey is entering its first lockdown, what impact will this have on their harvest in a couple of months and how will the Government reflect this in their price support mechanism for the farmer.
As we have often written poppy is an potentially price explosive crop. Globally only 65-70,000mt is available in a normal year, so the supply-demand scenario is finely balanced. See the supply decrease and prices can triple almost over night.
Whilst there is a good carryover, the crop which is harvesting now, is going to be around 70,000mt, down on last season. The combination if this should mean stable availability in our view. But demand as food sector outlets reopen and farmers look to recover losses may well lead to higher pricing. Peru is entering elections which will potentially add further civil unrest and impact on export policies.
The lower area planted, impacted by the South American drought this year will lead to higher prices for the coming season. Bolivian information is limited, but we know the crop is late and they will not rush to sell, holding out for the expected higher prices as Asian demand builds.