Potentially we are entering a period of calm as economies start to recover post COVID and whilst there are inflationary pressures entering all regions there is general reluctance to react to this in the short term, but instead keep interest rates on hold until 2022 at the earliest. The support schemes in place are also continuing with job retention schemes and QE not being withdrawn for the time being. This all adds stability to the economies.
Eyes are currently on the EU/UK and the Northern Ireland protocol which reaches the end of its current grace period, along with the US employment numbers due shortly. Otherwise, UK travel hopes are being dashed by the rise of the Delta variant here, restricting destinations UK citizens can easily travel to.
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The supply chain challenges continue to be the major factor influencing things. Freight rates are still climbing, congestion and container supply issues are spreading over to South/Central America now and all supply chains are lengthening. It is a precarious situation, and ultimately increasing costs significantly. We do not expect the situation to improve before 2022. As an indicator, freight from China has increased over 1000% in six months, from $1000/fcl to $ 12000. This adds $ 500/mt for products from this region.
Current market, which effectively is for supplies through until January 2022 in EU, will continue to show upward trend now, as demand outstrips supply. New crop availability in China will be September and this is likely to be turning point for pricing and availability. There is a lot of discussion on a reduced crop due to the demands for other products such as soya & corn. Some forecasts indicate a 30% reduction in planting, but this is not guaranteed. We continue to be concerned about the GWS area since this item unlike Shine skin and snow-white varieties are not supported by domestic demand. But frankly it is too early to predict this, and certainly the primary domestic demand will have a lot to do with available quantity for export. The issues over Xinjiang are significant for UK supplies in particular, and we have managed this by selecting processing facilities outside the region and ensuring our local QA team are ever present in the facilities. We have ethical & modern slavery procedures and audits agreed and continue to work towards SEDEX or SA8000 accreditation.
Organic pumpkin is in very short supply now with no free stock available from this crop. If you require stocks prior to 2022 you should secure now.
With sowing several weeks late this season, new crop harvest is delayed. Harvest starts in the East; so Russia, and then Poland/Kazakhstan following. These later countries are suffering what seems to be the usual drought conditions, and this has predicted from several directions now a 50% reduction in yield.
There is a reluctance for farmers to drop prices now, and the general sentiment is firmer for new crop, although a lower level than the current market pricing.
Shipments are arriving steadily now from India, although the number of shippers is hugely reduced, but product is passing into EU/UK relatively smoothly and consistently. EU/UK prices are now trading at a small premium to offers for other parts of the world as processors absorb the increased costs of seed selection, analysis, and delays in despatching cargo. Obviously, the risks are also a factor in the final price. On importation an adjustment needs to be made for port inspection costs too. But despite all this Indian sesame is still attractively priced, and of a good consistent and reliable quality.
The April crop is collected, and the weather is favourable so planting next month should begin and is expected to be good.
Organic seed supplies remain a challenge since recertification for sesame has not happened and will not happen until the new crop is harvested. Then it will start with farmers and proceed up the supply chain to processors.
South American harvests are also collected, and volumes are down as expected due to the switch by farmers to growing corn. Brazil harvested about 60,000mt, mainly oil crushing varieties that are shipped to the far east. Paraguay has some stock but shipping issues from here are immense. We are seeing 4-month transit times now.
Demand from Central America has reduced somewhat due to the above re supply situation, but a significant number of clients have decided to keep supplies going from this region, so we expect demand for the new crop in December 2021 and supply 2022 to be stronger than recent years.
The millet situation is in a state of flux. The growing regions in Ukraine are changing, moving North, as farmers in the South try to capitalize on the booming sunflower market and high price for maize. This leads to new problems regarding pesticides & herbicide contamination from these regions.
The quota system, for importers who follow the correct procedures means levy is applicable to imports for 2021 in both EU/UK for Ukrainian millet, meaning that for Q4/2021 supplies are likely to be primarily from Polish processors.
Old crop is coming to an end, and supplies are definitely limited now. There is potential for a supply squeeze as we have seen before over August/September. New crop prices are stable, but as forecast at a high level compared to previous seasons.
We are worrying a little over the crop again. Cry weather once again persists over a large region of Central Europe. We have seen pictures of the sunflower crop in Kazakhstan which show plants extremely stressed by lack of moisture, and whatever happens yields will be lower.
The unpredictability of Russia’s approach to supporting local supply by imposing export taxes is also troubling for this market. With overall global demand in context of the global vegetable oil supply situation makes it look hard for sunflower to drop further.
This product is concerning again. From our conversations we do not see sufficient supply becoming available to meet demand. We know Australia is planning a small crop due to poor demand for alkaloid production. Spain has at most a normal harvest, the smaller producers have minimal production this year. The Turkish crop has been hit with a drought and is severely reduced. The only unknown is the Czech crop. As you know, their farmers keep things quiet, but we were concerned at planting time about their crop, and its potential yield so we do not expect a bumper harvest, and even if it is, poppy is looking short for 2021/22.
The market is currently stable but there are clear signs it will be increasing in the coming weeks. Freight and container availability is also impacting on supply and price. Peru is in a fairly unstable political situation currently, once this is resolved the possible new leaders have indicated a change in direction on export support and subsidy.
Southern hemisphere harvest is underway, and we await results from Argentina which always raises concerns over pesticide contamination etc. In Paraguay the planted area was reduced but the yield looks good and new crop is available, but logistical issues dominate the supply chain. Bolivian prices are still high, but the generally quiet and low demand for this product will come to an end, and we should then see Bolivia compete again.