Currency update
Recession is in the air for 2023, with most major economies suffering at some point in the next twelve months, if not already. Certainly the US is looking more likely to fall into recession with weakness in housing, service and manufacturing sectors. This might curtail the Fed’s plan to increase interest rates.
The pound has strengthened so far this year but really this is US$ weakness rather than strength in the UK economy, which is plagued with recession, high cost of living increases, strikes and falling property prices. It is hard to see Sterling strength this year with most economists predicting one of the hardest recessions amongst the G7.
The Euro, start to improve towards the end of 2022, perhaps indicating the worst lies behind it. But recessionary clouds linger over the region, and continuing concerns over the energy sector. The significant drop in German manufacturing towards the end of 2022 was much bigger than expected and offers some further concerns, should it be replicated in December and January.
FX Monthly movement
- US$/£ 1.21
- US$/€ 1.07
- £/€ 1.13
General news
New regulations came into force on 1st January with regard to a variety of pesticide and other residual levels in various foodstuffs, both conventional and organic, further challenging supply chains.
Freight and logistics costs have impacted significantly on supply chains in 2022 and a lot of this is yet to be recovered from the end user.
2023 starts with a string of seasonal holidays that clump together; New Year, is followed by Orthodox Christmas and Twelfth night, with Chinese New Year and Spring holidays fast on their heels, starting 22nd January. This will slow supplies from this region further since shipments cannot leave until February for April arrival, and the new EU regulations have delayed some shipments awaiting analysis. All these requirements are challenged in China at present due to the rise in Covid cases in various regions. It must be remembered that goods from origin factories have to pass through several regions to reach the ports, all adding possibly delays.
Pumpkinseed kernels
As the Spring Festival approaches the markets are stabilizing as shippers wish to have a square book and International demand has not picked up yet in 2023.
After Spring Festival we see the potential for GWS to firm further since supply is limited. Shine skin is hard to predict, if domestic demand picks up for inshell as the Covid epidemic subsides we could see prices firm. Otherwise we have the opposite scenario where prices will be driven by International demand which has its supply hampered by Covid relating issues impacting supply chains and delaying shipments.
Linseed
Prices have improved somewhat due to the good quality & quantity of the Kazakhstan crop, whilst other regions faired less well. Russian material is available, but unpopular, and in the UK attracts a duty of 35%. So as long as supply chains remain accessible for Kazakhstan things should be stable. The one issue that may firm prices is when China is through the Covid issues they currently experience after their Spring Festival.
Sesame seed
The market has stayed quite firm compared to other seeds, despite a lack of demand from EU/USA buyers. This is partly due to processor manipulation too. However 2023 has started firm with interest from China for African seed and a Korean tender for 10,500mt being published too. India also has strong domestic demand at this time.
The summer crop in Gujarat should be being planted now, so one might expect a good area to be sown due to the reasonably high levels. We shall see!
In Central America harvest is in and volumes are smaller than previous years as expected. Farmers are switching more and more to more marketable crops.
Hulled Millet
The 2022 crop in Ukraine was of poor quality and reduced yields due to being left in the fields too long, or unharvested due to the conflict. Thankfully there was a large carryover from 2021 when supply chains were disrupted restricting the quantity exported. However we would expect supplies to tighten as we approach the end of this crop cycle. Other regions are currently uncompetitive, but there is a possibility of change in second half 2023.
Sunflower
The major news here is the reduction of import tax from 1st January by China on Bulgarian imports. This has spurred a Chinese buying activity, that has strengthened prices a little. Turkey is also reducing import taxes on sunflower oil which will add further demand.
In general vegetable oils have started 2023 firmer too, and this competes directly with the supply of kernels in Bulgaria. So there is a slightly firmer tone to this market now.
The spot market is further confused by the continuing war in Ukraine. This major producing region has added in some degree to depressing prices as farmers were keen to clear stocks and empty warehouses for cash, as opposed risk losing their inventory through confiscation or damage. Perhaps of greater concern is the impact this might have on 2023 harvest, with lower areas cultivated and a significant crop reduction in the largest growing region. We shall see.
Poppy
We continue to see a very tight supply situation, which has the potential to deteriorate further in 2023. In Australia there have been issues with the misuse of poppy seeds by consumer customers, causing some hospitalisations. This has temporarily restricted supply from this region. Hopefully it will be restored in 2023.
For bakery use, we do not see an issue on supplies and permitted alkaloid levels or issue on consumption, but for packaging great care is required on the source and analysis of the poppy seed.
Quinoa
A small crop and political unrest in Peru and poor weather in Bolivia this commodity has failed to increase in price to reflect these issues. Primarily due to low demand from the USA. We should start to receive new crop updates in a few weeks.
Chia
The global market is short of chia of all grades out of South America. As we have seen with other seeds farmers in Central America have also switched to alternate crops and prices are predicted to increase further.
Uganda and Indian crops are looking more attractive, and worth progressing technical approvals for supplies later in 2023.
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