There is no doubt global supplies of all major and many minor commodities have been adversely affected by climate change impacts this year. Droughts have hit all regions. Starting early in 2022 in South America and continuing into EU, UK, USA & China. Furthermore extreme floods have caught other regions and global yields are down, whether for the above reasons or to remain unharvested due to conflict. There is really little bearish news around at present. But we will mention some below.
Freights have declined also.
So some optimistic news here, pumpkin kernels coming from Northern China primarily has not been too badly impacted and the crops look promising. Shine skin which is the first to harvest has entered the local market for roasters and prices have eased somewhat. GWS which is mainly exported will harvest very soon. Quantities look good, but demand is weak, so prices are soft. The shine skin market will be supported by the internal requirement providing demand. When the price is right and EU/USA stockholders have reduced inventory export demand will come into support the price. Pumpkin has come down around 20% from recent peaks, but as explained above, this is not really appreciated in export markets.
It feels like pumpkin is probably worth covering forward in the next few weeks, and certainly before SIAL in October.
A complicated scenario this season. Starting with Canada, we hear there crop is disappointing, even though it does not harvest until November. From Kazakhstan the news in better, but is it really? The drought across southern Europe could well be impacted in this region too. Russian seed is not wanted in UK, although EU buyers have a more relaxed attitude to this than some.
The more concerning issue perhaps is the new EU regulations regarding HCN. From 1st January 2023, non bakery or processed levels are fixed at 150mg/kg. This is a tough limit and differentiates linseed for direct consumption. It will impact any packer in UK who exports to EU. Some origins seem unable to guarantee this level.
Finally golden linseed looks like it will be in particularly tight supply for 2023. Supply options and quantities are severely limited if one looks at all the issues.
We are in a very unstable market situation. Globally production for 2022/23 was forecast to be down around 100.000mt with the major reductions in West Africa, compensated by increased production in India and Pakistan. Then the floods came to Pakistan, and we have no idea of the impact on the crop, but it is unlikely to be good. Furthermore, we see and expect the Chinese crop to be smaller than previous years and continue the decline in their harvest trend. Traditionally China has sought to secure its surplus requirements from West Africa with an increasing and significant growing dependence on Pakistan. But both these regions are going to be smaller so where will China turn? Well due to their inventory being high due to Covid slowdowns it is not an imminent issue
Logistics issues improve from Africa but fundamentally remain with regard to EU requirements. A shortage of GFSI facilities also hamper the trade of reliable quality.
The EU/UK largely continue to rely on Ukraine, where the harvest will be down, perhaps 50%, due to well known factors; lower plantings, unharvested crops, poor weather. Operational challenges from all origins and market volatility make processors reluctant to offer forward more than a few months. There are supplies from outside the EU, but levies make them uncompetitively priced, but also effectively give some room for EU supplies to move upward in price without competition.
A volatile product for 2022/23. Potentially the loss from Ukraine for the reasons stated above, plus the drought impacted crops in France and other EU countries could remove 15 million tonnes from a global crop of around 50 million tonnes. The market price will be driven fully by the vegetable oil market this season. Availability of rapeseed/canola and what the South American harvest will bring in February remain major influences on the market. Ultimately however consumers remain overstocked and demand is sluggish and uncertain. It all could change very fast!
We said it last month and repeat it again. The maths of supply and demand do not match up this year. It is very hard to see how we will avoid sky high pricing. Perhaps the only positive would be a tempering of demand from Russia, or ability to meet that normal demand requirement.
The market has stabilized, at least for the time being with freight also appearing to have settled, be it at high levels. Again latent demand from China for red and black grades is likely to firm these items when it returns, post covid restrictions and this might well drag the white market higher.
Pesticide concerns are impacting the supply & price of organic grades, with fosetyl aluminum levels worrying.
Paraguay had a good crop with high yields and good quality. Softening prices as other newer origins, India & Africa, have crops too although supply options are of a lower food safety standard. Compared to other seeds Chia is a good option for the coming season, and considering historical levels a good buy, with understood health benefits.