Major issues surround the US Dollar currently with two over riding concerns. Firstly, are we in another banking crisis or are we not? Secondly will the US increase their debt limit for the 74th time to permit the Government to increase borrowings to pay personnel amongst other issues. One assumes yes to this point. However, together they put the US$ on the back foot and as a consequence we see the € and £ appreciating.
Sterling is perhaps surprisingly strong considering the various industrial disputes, high and continuing inflation and disruption to working hours through May. Perhaps in part it is due to an expected interest rate rise to be introduced in the first meeting of the BoE committee this week.
In addition, the EU is expected to raise the rate this week also by 0.25-0.5 percentage points, as inflation continues to be a worry in their region.
FX Monthly movement
- US$/ £ 1.25
- US$/ € 1.10
- £/€ 1.13
Since most of our products are grown in the Northern Hemisphere crops are being sown at this time of year and we are completely between the 2022 and 2023 harvests. Demand is still sluggish as customers use up long inventory covered earlier in the season and producers push to deliver delayed contracts.
Cash management remains a key consideration for many companies as finance costs increase and inventories only slowly decline.
The other concern is the widespread drought in southern EU, impacting the whole region and becoming quite severe in many regions. With Spain recording over 38C in April for the first time, breaking previous records by several degrees, the impact on crops from the whole area must be a concern.
Finally, the recent import ban on Ukrainian material by 6 EU states has impacted supply chains, and to some degree prices for sunflower, millet and flaxseed from the region. The ban was put in place to protect local farmers and processors in the 6 countries, and unusually has been upheld by the EU despite being only a few of the member countries involved. This is under review, but currently is scheduled to last through May & June.
Pumpkin seeds left in the market in China are now very limited for both GWS and SS grades. GWS is effectively sold out and the SS stocks will soon be consumed by strong domestic demand. With several months of the season to go, it seems pumpkin could turn into a very bullish trend on SS. GWS which is primarily for the export market sees less pressure as overseas demand continues weak.
The new crop is being sown now, but from seed sales and forecasts it could be up to 50% down on 2022 harvest. Pressure from Government to grow alternative crops is also a major factor.
EU/UK compliant organic pumpkin is more or less sold out, and there will be little/no additional material available until arrivals in Europe early 2024. We strongly suggest buyers take what cover they can now.
The decline in prices due primarily to a lack of demand becomes somewhat self fulfilling as buyers continue to wait as they see prices fall.
Kazakhstan is feeling good demand from China and elsewhere however because of the dropping price. The 2023 sowing is underway, and forecasts predict a smaller area to be sown. Time will tell, however.
The India harvest is looking good and is occurring now. Prices are weak here and look competitive.
The issue of HCN levels for non bakery use continue, as we look into solutions to achieve a max of 150mg/kg.
Finally Golden linseed remains tighter in supply and seems to have more pesticide worries these days.
The Indian small summer crop is delayed slightly through unseasonal rains, but is still forecast to be around 115,000mt considerably up on previous seasons. This is due to the high price levels currently in India where inventory is completely sold out. Offers coming from India are for stocks imported earlier in the season from Africa or South America, where inventory is held at lower prices. USA/EU demand remains weak but Asian countries are still buying and having to pay the top levels.
When the harvest starts there will be a rush for stocks by processors to cover required material against forward sales, which will keep the market firm for a little while at least.
The situation in Sudan should not be ignored either for its impact on global sesame supplies for 2024. Sudan is traditionally a large producer of natural white sesame, so if the conflict escalates into the countryside, it could impact this crop.
During the ETO crisis Indian sesame imports into the EU declines in favour of Nigeria, but recent trends indicate this is reversing again due in part to the poor performance of Nigerian regarding salmonella, pesticides and logistical issues. Overall EU imports of sesame are below previous years, however.
Ukraine, the major supplier to the EU supplies 75% of demand. The recent grain embargo by 6 members of the EU, previously mentioned, has led to a tighter spot availability. Russian material is being offered at a significant discount and it remains individual buyers’ decisions as to whether to support this or not within the EU.In the UK, the implementation of a 35% import duty eliminates this choice. It is interesting to note that, although small in quantity, Russian imports into the EU have increased since the war started.
In Ukraine sowing has commenced and forecasts appear positive.
Apart from the ban on Ukraine sunflower entering Bulgaria, the market has continued to drift lower after the peaks this time last year and is more or less back to prewar levels. There are some cheap offers around for spot material as traders unload positions and inventory.
The majority of sunflower imported into the EU is for oil crushing, and it is interesting to note that supplies from Ukraine increased dramatically since the conflict started, reflecting Ukraine’s desire to export crops as fast as possible and thus make prices very competitive.
As reported previously, we see poppy supplies as a major concern going forward. We already advised that plantings in Australia and Spain are at record low levels (the heat in Spain won’t help either). Now we are learning that plantings in the Czech Republic are down 30%, partly due to rainy weather impacting sowing. Other smaller producing EU countries are also restricting their acreage or not planting at all. The situation for Q4/2023 and onward looks quite severe. Available stocks are also short for nearby supply.
Peru continues to suffer drought during sowing which along with political issues is likely to lead to a 20% reduction in sowing. Farmers and processors are expecting higher prices, and this is already being seen in Bolivian material.
The next few weeks will be critical.
Supplies are now very limited, and with the new crop delayed through climate issues causing replanting of around 25% of the crop, means several weeks delay.
The new crop therefore is likely to only be available from August shipment.