Currency update
Sterling has taken a hit in the last few days dropping 2% the biggest daily fall this year. The economy grew quarter on quarter by 5.5%, but now fuel shortages, energy supplies, future taxes increases, escalating prices and the end of Furlough drag on the pound. The solution perhaps is to increase interest rates, but this will add to the cost of UK Government debt servicing, which would not be good news.
A higher inflationary environment is developing in the USA too. Combined with fallout from the Evergrande issues in China, and escalating debt financing issues.
The Euro is fairing better, having weathered the German elections and unexpected price competition. However concerns over Chinese growth predictions and high energy prices might make this short lived.
FX Monthly movement
- US$/ £ 1.35
- US$/ € 1.16
- £/€ 1.16
General news
This month we have seen supply chain issues escalate combined with disappointing harvests around the globe. On this point, all seeds are increasing rapidly in price now, whilst there was some lag for certain crops, all have caught the mood and started to increase.
Operational costs continue to increase too, along with delays in either getting containers on board vessels or collecting from port. On average now we have to wait 10 days for transport to pick up containers, due to a variety of issues. The analytical requirements on materials are also increasing to meet ever tightening food standards, which add cost plus time delay.
We do not see the situation improving for many months, certainly not before second half 2022.
China has its Autumn holiday from 1st-7th October, and this is followed by a rather quiet Anuga from 10th-13th October. Attendance will be down, particularly from India & China but we are still looking forward to seeing many of our suppliers & customers. Please contact us, should you wish to make an appointment.
The environment we are trading in requires quick decisions to short term offers as we attempt to lock out price volatility.
Pumpkinseed kernels
Harvesting is starting and small quantities of material are arriving in market yards. There is no carryover from 2020 harvest, and the combination of the Moon cake festival and Autumn public holiday week, means strong domestic demand especially for shine skin varieties is pushing prices higher. For GWS, the yield is well down, and all demand is export driven. But things appear set for an upward correction during October in our view. In number terms we believe GWS crop is 15% down at least and shine skin perhaps 20-30% off a normal year.
Very hard to not see prices start significantly higher in middle October.
Linseed
Concern over this crop has been increasing and now we face prices almost double last season, defaults by suppliers from Kazakhstan & Poland, and a miserable outlook for supplies. With a short crop, strong demand, and an unreliable supply base prices will remain firm, and as the winter approaches are likely to go higher as logistics issues get in the way.
Sesame seed
So rain rain rain in the principle growing areas in India has damaged the crop. How much we do not yet know, but we do know sesame does not like moisture after it has germinated, so this is bad news. The harvest is late, the quality impacted and the yield reduced. No surprise prices have increased by 20%.
In South America Brazil & Paraguay are sold out until new crop in February/March. We believe Mexico is going to have a small crop, whereas Guatemala & Nicaragua are more or less normal.
African news is limited, but it is hard to see that their situation is better after the ravages of Covid.
If we add to this escalating freight, locked out containers and then port health inspections adding up to one month to the supply chain, prices will not decline.
Hulled Millet
Slow to react compared to other commodities it is now catching up. The millet growing regions have gradually migrated North in Ukraine, but we are picking up issues on glyphosate and other pesticides. All outside EU/UK regulations.
This week we hear they have harvested 50% of last years crop. No surprise then that the market jumped 20%.
Sunflower
The expectation was prices might decline in Q2/2022 as Argentina harvests, but now? EU rapeseed hits an all time high this month, and other oilseeds are following. Processors are struggling to cover Raw material in Bulgaria and everything looks bullish.
Not much more to add. Even premium processors are reluctant to offer prices firm for longer than 48 hours.
Poppy
The fundamentals remain. There is not sufficient poppy being grown or harvested to meet usual demand. In this climate with all other seeds climbing poppy will surely follow.
We see the situation getting worse in 2022 not better, and potentially we are in for another peak year. There is latent demand in the market as delayed stocks get used, but with peak demand season nearly on us from Eastern European buyers, if poppy is going to react it will be soon.
Quinoa
This market is quiet. Too quiet perhaps. Demand is lagging for sure. The increased attention to EU pesticide regulations for Chlorpyrifos in particular is removing the cheaper graders from our markets. New origins are starting to appear, but without GFSI processing facilities they remain uncompetitive and should be of quality and supply concern.
Chia
Not an easy one. Fundamentally we cannot buy chia at present. South American crop has basically failed. It is likely to yield 30% of normal at best. We all remember chia being 4-5 times higher than recent levels, and this could come again.
If you get offers buy it!
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