Supply chain issues continue as vessels are redirected to alternate ports to escape congestion issues, driver shortages continue and availability of containers in all origins remains a problem. We do not see the situation improving significantly for many months, certainly not before second half 2022.
India is celebrating Diwali this week, so all markets are closed until 8th November.
The environment we are trading in requires quick decisions to short term offers as we attempt to lock out price volatility.
Organic supplies continue to be a challenge with many suppliers deciding to abandon the marketplace due to the ever increasing requirements of the EU.
We see some cheap offers in the marketplace as supplies left behind on contracts due to Covid delays get sorted, or sellers look for cash flow requirements, but these are short lived and not indicative of the fundamentals.
The market stalled a little over China New Year, then opened about 5% higher. Freight rates continue to be at extremely high levels, and as yet we do not see this element of the cost reducing.
As is becoming a trend the shortage of ‘A’ grade material due to improved varieties is narrowing the gap between the two grades.
2022 is likely to see prices climb a little higher in our view.
It has been a nightmare over the last month as defaults from all regions have occurred in multiples. The cause is escalating prices and supply issues from Kazakhstan. The price has more or less doubled over expectation. Canada has material but is making higher prices still and crops from the Southern Hemisphere are higher again.
The cycle seems endless, and stability a long way off. Golden linseed seems very tight. To see linseed at similar prices to sunflower is almost unheard of.
The picture here is concerning. Starting with India the crop is disappointing, the quality poor and carryover small. Domestic demand is strong and international buyers are also returning. The market is bullish, and in an upward trend. Africa is not helping, with report of a 30%+ crop reduction over previous seasons accompanied by major logistical issues.
South American harvest is some months off and impacted by extremely high freight rates to move the cargo to hulling regions, but is largely sold out. Central America will harvest end November, as is expecting a normal production, but in global terms the quantity is not significant.
Global sesame crop is normally around 2M mt, so if both India & Africa experience a 30% shortfall, then this removes 300,000mt from the global supply situation. Coupled with reduced crop in China, who also have hulling issues due to power outages, plus no carry over puts the supply in significant deficit for 2022.
Prices have reacted now in millet supply, as Ukraine and southern Europe growers realise the impact of the seasons weather. This has dramatically impacted yield. The situation is similar for buckwheat where we have heard reported yield reductions of 85%. These issues are compounded by glyphosate contamination from farmers treating the material pre harvest. So we see a shortage in good quality material and a reluctance for sellers to go forward.
Some importers continue to evade the levy on Ukraine millet, which is retrospectively reclaimable when HMRC determine the mis use of the quota system. Seed is imported for sowing purposes which avoids a levy.
Canada is not offering at levels that get close to EU prices.
Prices should continue upwards we feel.
The thought of lower prices seems to be vanishing as firm vegetable oil markets support the seed price. The number of processors in Bulgaria has reduced due to the challenges, and shipments are challenging to obtain as vessels get repositioned, containers are not available etc. The situation looks like it will remain tight for the foreseeable future.
Processors are generally nervous about being caught and carefully prorating supply to the contract period, so it is difficult to react to sudden spot demand. As the weather deteriorates the situation will get worse.
As with sesame, there is not sufficient poppy in the market place or forecast to be available prior to next September to meet the demand, so prices have to rise in our opinion. Poppy is the last seed to react to the supply situation, and historically when it does react it can be swift and dramatic. We believe there is a carry over of stocks that is fast being used up, and when significant demand comes to market prices will jump up.
Carry over and a small interim harvest has kept prices stable but there is expected latent demand from the US market due, which might see a correction in this product. Currently it is a good buy so we would urge clients to cover their 2022 requirement now.
Very short supply from South America, the last few containers have been sold at high spot rates, and have to last until summer 2022 for South American origins.
Alternate supplies from India & Africa are as yet untested/approved, but will help a little, but realistically it is going to be a tight supply situation all year.