The issue for the coming period is undoubtedly transport and supply chains. With freight rates continuing to climb and now transport rates and availability across UK/EU the impact is significant. Higher stock levels, longer lead times and less availability are all on the table. With increased regulations on importation, and slow clearance through port terminals due to health inspections and labour shortage added into the picture. It is going to be a tough H2 2021/Q1 2022. We can only advise clients to get contracted early, so supply chains account for their requirement.
Fundamentally we see little weakness in prices across the board for the new seasons, both in commodity prices, and all supply chain costs.
The supply of old crop is now quite tight, especially the ‘A’ grade material, and with freight increasing weekly the inclination to ship product is slipping away. Harvest will start towards the end of August, but with restrictions to sourcing regions imposed by some clients to assess the availability of material suitable for export is harder than previous seasons. The domestic demand is expected to remain strong for Q4/2021 and with the challenges imposed on the market for export material and the competing crops for internal consumption we do not expect prices to drop far, if at all for new crop material.
New crop offers are hard to come by currently, delayed because of the poor weather in the growing regions and the threat of export discouragements from other regions. Coupled with expensive freight and a large number of buyers uncovered for Q4/2021 significant price drops do not seem likely. Old crop material is still plentiful and prices stable, we would suggest Q4 cover asap.
Fundamentally we are beginning to feel the global sesame supply situation is going to get tighter in 2022. The major crops from India, China and Africa are all somewhat challenged. China as competitive crops take over, Africa due to drought in Sudan/Ethiopia etc. And Africa on suitability of material. In South America the small volume is also reduced in Brazil and supply challenges out of Paraguay. China currently has high stocks in their warehouses so this is keeping them out of the market and with their reduced crop due in August we do expect a rush of buying interest, but as the situation stabilises, we can see 2022 pushing higher.
From India freight rates and ETO/pesticides issues add considerably to the costs, so even if market prices at origin are stable we are seeing a base level 10% higher than last year due to the operational challenges.
Few shippers are offering EU bound cargo nowadays, and Rest of world supplies will be receiving ETO/pesticide contaminated cargo. Be certain of your supply base, contract forward.
Central America has seen increased demand this season and is expected to retain a significant portion of this. So again, although their crop is yet to be planted it will be in demand and as with many other regions, the pressure for alternate crops; maize, soya, sorghum puts pressure on the planting areas.
We expect first available new crop to be for September shipment in Ukraine, where the crop is smaller than previous years. The growing region is moving Northwards which brings it into the soya belt, which is bad news for the allergen risk.
So, we expect prices to be higher for the new season along with all associated costs.
Many processors have shut up now until new crop towards end August/FH September. Prices remain stable, off the highs of the last season, but nowhere near the lows. The market is short fundamentally, with all looking for cheap material first available new crop.
As usual for this material, the demand on supply through September/October will be a challenge, and with firm freight too expect shortages in supply.
The overall supply for 2021/22 is going to be short as far as we can see. Significant reduction in Australian, Eastern European and Turkish production will potentially place the world in a deficit position on seed available. Spain has a good crop, and the Czech Republic certainly planted a good area, but harvest news is scarce currently.
Pressure on alkaloid levels continues too further challenging the availability of suitable material.
Freight rates have jumped from this region too, forcing suppliers to renegotiate or default on forward contracts now. Compounded with increased food safety alerts for Chlorpyrifos is starting to expose the two tier marketplace explaining cheap prices. This will hopefully stabilise the market going forward in a similar way to the ETO issue in Indian sesame. Be prepared for potential product recalls and possible EU legislation to clean up the supply chain.
The crop was badly impacted by early frosts which have jumped prices for supply now on top of the well publicized freight issues. Material from Paraguay is taking months to ship, firstly to the seaports and then on the ocean voyage.