It was good to see many of you at IFE earlier this month, after so little face to face meetings in the last two years it was refreshing to catch up.
Obviously, the last few weeks have introduced huge uncertainty on the crops, supply chains and future availability of material coming from Eastern Europe. Disrupted supply chains, import duties, Force Majeure claims, contract defaults and renegotiations have all become regular daily events. Escalating prices and lack of security in supply has created anxious moments. We have all had to flex our expectations and work together to facilitate the disruption and change to contracts, specifications and approved status.
The impact of this disruption plus the escalating impact of energy costs on fertilizer prices are going to roll on for several years in the commodity supply. Farmers will plant different crops, in particular wheat where returns per hectare are likely to out pace the more specialist seed crops. The reliance of supplies from one specific region globally will be reviewed and perhaps seen as too risky going forward, perhaps reversing the globalization of some of these base commodity markets. All of this does mean we are moving to different pricing levels in the short to medium term. Some of this is catch up adjustment, where prices have been driven down too low as more and more efficiencies were driven into the supply chain, but others are consequences of the new world post pandemic we find ourselves in.
Weak demand continues for pumpkin due to focus on other issues in seed supply, along with slow domestic demand we assume due to the impact of Covid lockdowns increasing across the country. The situation is mixed across the grades. Shine skin which has the strongest domestic demand normally has drifted down the most, but potentially could rebound the fastest. A lot of the remaining stocks are in speculators hands and the pricing trend is likely to discourage farmers from planting this variety. GWS is in tighter supply and with the higher pricing might actually reverse recent trends and more be planted. Snow white is tight still and current stocks are ageing and discolouring as usual. We expect the plantings to increase for the coming season.
Organic pumpkin is challenging, very limited suitable material to meet the EU/UK regulations and the high risk profile of this material is discouraging shippers from entering the market at all.
Supplies are limited, offers restricted to small parcels from some suppliers only. The imposition of an import duty of 35% on Russian material not already in the EU causes further issues in the supply going forward.
If we look outside EU, Canada/USA has material but is challenged to meet the tight cadmium regulations imposed by the authorities, South America suffered a significant drought and we see all volumes reduced from this region. EU plantings are reduced after subsidies were withdrawn several years ago. So, all eyes on Kazakhstan for supplies of significance.
We are upon the Indian summer crop in Gujarat and all is looking good. We expect a larger volume to be available than previous years. Normally a significant percentage of this crop is black sesame, not suitable for hulling. The relaxed EU testing protocols seem to be working, and supplies from India are clearing routinely through port health, although still incurring significant costs.
Africa which made gains during the ETO issues is determined to hang on to these sales opportunities and seed availability remains good, although logistical issues and GFSI status are challenging. But it will keep prices under pressure in India.
South America suffered a drought as already stated and we are being advised availability out of Paraguay this season is going to be very limited. This situation will have impacted on Brazil as well, the primary supplier to China.
Generally, like pumpkin, the sesame market has been very quiet as buyers focus on the problem crops.
Supplies have switched away from Ukraine towards the USA due to the war, and prices have jumped accordingly. We are looking at alternate origins, but quality and appearance are somewhat different. Going forward if Ukraine does not supply, and with a government embargo on exports for the remainder of 2022, as well as the conflict this product is going to be challenging in 2023. Other regions can grow millet, hulling facilities are limited, but the competition from wheat and oilseed crops is unlikely to mean large amounts of millet are planted. We shall see.
With so much of the global sunflower supply coming from Russia & Ukraine (80%) it is not surprising the vegetable oil market jumped so rapidly and kernels followed. The situation is slightly more relaxed now, but we are at a 60-70% price increase, and new crop cover is a concern, since demand will stay high whilst the supply from the above regions is disrupted through embargo or war. Of course, not all the world is refusing Russian oil and this might cause global prices to reduce for us all, as transactions are down specifically with Russian producers who are keen to secure foreign currency and export.
So, time might stabilise the situation a little.
Increasing concerns over the availability of material for Q4 2022 & beyond. Reduced plantings in the Southern Hemisphere, this season and next on top of the collapse of one of the larger suppliers are causing a vacuum in supply here. We are hearing that plantings in the Czech Republic are likely to be reduced, partly through better paying crops and partly due to the loss of Russia a big market for their material. So global production is unlikely to meet demand. When we see this in the poppy market we know what happens to prices.
Prices are on the up, about 10%+ in the last month alone. There availability of white quinoa is going to be tight as more black & red is expected in the coming harvest. Demand from Asia for these types is pushing this. We forecast prices to continue to rise through the season. This will be compounded by freight issues which are not easing from South America.
As mentioned, the droughts in South America have severely impacted yields on all crops and chia is no exception. Old crop is exhausted. It seems the market is poised for an upward movement, although not necessarily of wild proportions. Freight is a challenge and we do not see this easing in the nearby positions.
We were hoping for increased production in some of the developing regions such as India and East Africa, but to date quantities have not been of significance.