The pound has performed well over the last month mainly riding on the success of the vaccine program and a series of economic data which predicts the UK economy will recover faster and stronger than previously anticipated. Eyes are turning to inflation now, partly as a consequence of the over heated property market, but also due to the increasing cost to all supply chains of freight and other issues. This factor is an impact in EU & USA economies too. Whether the effect in transitory or permanent will impact WHAT, IF Any action, is taken.
The EU has raised and will underwrite € 750 Billion of loans for infrastructure and environmental projects. This will benefit the struggling economies most, since they will be able to borrow more competitively, and it should help to stimulate their economies.
The US dollar is waiting for the end of this week’s job report which will indicate how their economy is responding to the roll out of the vaccination program and the opening up of their world.
FX Monthly movement
- US$/ £ 1.42 up
- US$/ € 1.22 up
- £/€ 1.16 up
The biggest issue facing us all currently is the increasing length and cost of supply chains. From far east origins we are seeing voyage times increase by about 20 days to 65-70 days transit time, and costs increase ten-fold from March 2020. In real terms this is from around US$ 800/container to US$ 8,000/container with further increases expected.
We passed our first audit for ISO 14001 in May, an audit for an effective environmental management system within the business, furthering our move to be an environmentally responsible business.
Pumpkin supplies remain tight for this season, and as we already reported it looks like plantings for the 2021 harvest are going to be below 2020 due to the Government encouraging alternative crops of wheat & soya. Remaining stocks are largely gone now, with remaining supplies already committed to processors requirements or in the hands of speculators. We see ‘A’ grades being particularly tight in supply which is becoming a common theme in pumpkin as varieties grown show an improved coloured.
The exception to the above is snow white pumpkin which is in ready supply and considerably cheaper than GWS or shine skin. Worth considering perhaps.
Organic pumpkin is very short this season again, with several consignments getting pushed into new crop positions.
The market is quiet and stable for current crop supply. The quality being received is deteriorating as stocks diminish, making it harder to achieve specifications. The higher prices this season has encouraged more linseed to be planted, so we expect a good crop at this stage for the new season, and thus prices should ease back a little. But this is not guaranteed at this early stage.
Whilst Covid hampers things in India their summer harvest, whilst impacted by a cyclone is being collected. In total it amounts to 400,000mt but the majority of this is not suitable for either hulled or natural supplies, being dark brown double skinned varieties for crushing. It is used by some hullers to cheapen prices but will perform badly in baking.
The Gujarat crop of around 100,000mt (125,000mt expected prior to the cyclone) is mainly white, 85,000mt the remaining being black. But there will be no organic due to the removal of all organic registrations by APEDA. We do not expect Indian organic to be available until their main autumn crop in October.
Elsewhere South America has harvested with perhaps 100,000mt in Brazil & Paraguay. Traditionally this goes to China, but they have huge stocks in their warehouses and a crop due in August, so demand will be slow initially for this material. In Africa we see crops in Tanzania & Mozambique, perhaps 170,000mt in total, but this is mixed colours mainly for crushing.
Central American stocks are getting tight. They plant their crop in late August/September so new supplies will not be available until December shipment.
Ukraine is reporting that millet plantings are down around 30% on 2020 due to the high demand for sunflower. Hopefully the weather will be favourable otherwise supply from this important region will be very short. We are seeing demand increasing steadily from USA as their plantings of this crop reduce in favour of oilseeds.
Some concern over new crop essentially.
I think we all know the story. Old crop prices remain firm, and supplies are limited. Several processors will close for refurbishment/maintenance in August prior to new crop, so expect supply tightness through until at least September shipment. In September if things go as usual demand will be huge as buyers look to get hold of cheaper new crop supplies. But will they be cheaper? The global sunflower market looks short for 2021/22, with poor carry over stocks too. Demand for oil is high and prices firm for all oilseed types. Whilst good crops are forecast for EU producers, will Russian export taxes remain in place protecting local demand?
New crop is cheaper, and supply looks like it will be better, but prices are not going to collapse to previous levels supported by demand and intervention. But for now, it is going to be a weather market as crops develop.
It is hard to buy poppy at this moment. Spain does not harvest until July and is currently sold out. The Czech Republic appears to have planted its usual area but there is concern over the yield, so crop estimates are reduced. Australia is over stocked with alkaloid finished product and has no incentive to process more material. They will be significantly reducing their plantings for 2021. We see a tight situation developing in the coming weeks.
We hear good news from Peru over their likely crop figures, and new crop is available for shipment now. Demand from the USA is key to the market, and it is expected to pick up for this season. Peru has been challenged by Covid and also political unrest. A change in Government could impact significantly on their export policy and consequently prices and supply.
The harvest in South America is being collected and the quantity is down on 2020 due to lower plantings as farmers switch to the higher priced strong demand oilseeds. We see prices thus increasing for the new season by around 20%.