Markets are behaving unpredictably currently due to all the well-known factors. The global slowdown has led to most end users being overstocked and over bought. Range reduction by retailers has further added to these issues. Consequently, processors and suppliers, themselves are overstocked at high prices and pushing material out into the supply chain.
Farmers are liquidating material too as demand is slow pushing spot prices unrealistically low, but it is not generating demand since buyers are over bought. This situation is particularly severe for Eastern European crops. Furthermore, global weather patterns are definitely changing and making the production of crops unpredictable. For instance, virtually no rain across Southern Europe this year has impacted harvest which are becoming due in June. Yields are down, and now rain arrives which will potentially impact crop quality.
Generally, the situation is very unstable, and risks a major correction if/when demand suddenly picks up.
Demand continues to be weak from overseas markets, and prices are relatively stable. The new crop is now fully planted in Inner Mongolia and elsewhere. Shine Skin harvest expectations based on area planted are good, but GWS is thought to be down 30%. The reason for this difference is that GWS is primarily an export orientated product, and demand has been so weak. If things remain like this, we should expect the differential between the two grades to widen.
It is worth remembering new crop pumpkin does not arrive in EU/USA until January. So, with tight stocks already in China prices are unlikely to weaken for spot demand.
The first trade fair that Chinese exporters could attend took place in Thailand last week. Processors rushed to be present, so we would expect a good attendance at Anuga this year.
Farmers here are more or less at rock bottom now, and there is resistance to lowering the price. Weak demand has continued and supports these lower prices. It is likely there will be a carry over in Kazakhstan from this crop which will compensate for the reduced planting area expected.
India has had a good crop and flaxseed is increasing in quantity from this region. It seems to grow well in Norther India, Rajasthan, and the HCN issue is manageable too. The seed quality is good. Expect to see this come more significant in coming years. India is particularly competitive for organic flax at the moment.
The Indian summer crop is collected, whilst unseasonal rains will impact on quality a little, staining the natural seed, the volumes are a welcome relief to processors. Korea announced a tender which India won and prompted further buying interest. Prices have weakened and are expected to continue to do so. In South America, Venezuela has had its harvest, which is of significance having been almost absent for a number of years, Brazil is expected to start in a couple of weeks. So, the sesame complex is becoming resupplied. The only concern is the political situation in Sudan, a large supplier of natural seed, favoured by China.
We are hearing positive news on area sown in Ukraine, with in excess of 1 million hectares planted. The flow of products due to the partial EU import ban is hampering cargo arrival. Whilst this is in place to protect farmers in neighbouring regions, it is supposed to be temporary, but this is uncertain at the time of writing. Poland is expecting good volumes in the new crop and will be competing with Ukraine, particularly if the ban mentioned above remains in place. We shall see!
We are yet to see new crop pricing, but this should start some time end June/July.
Major stock liquidation is being attempted by processors offering kernels at levels which are not supported by market fundamentals but due to offloading of physical material prior to the new harvest. Prices for sunflower oil and other oil seeds are higher. Demand has badly impacted suppliers and exacerbated the drop in price. It is a very unstable situation.
Supplies for 2023/2024 look to be very tight. None of the producing origins are increasing production. All have severe reductions in expectation. It is very hard to see how there will be sufficient poppy to meet global demand for 2023/2024. Suppliers will ration their material. The fundamentals for this seed are impacted by a multitude of reasons, Weather in Spain, alternate crops in Czech, reduced demand for alkaloid and contraction of processing base in Australia. Turkey continues to manipulate the price keeping it uncompetitively high to support farmers, with subsidies etc.
Harvesting is taking place in Peru, having been delayed by heavy rains for a couple of weeks. The crop is forecasted to be 25% lower in volume than last season, which is expected to force prices higher. Current new crop offers are therefore competitively priced and with easing freight rates, it is a good time to look to cover requirements.
Organic material is going to be difficult to acquire this year due to excessive analysis requirements and costs.
Hardly any stock left in the market at origin in Paraguay now. The new crop is delayed by adverse weather too. The worry now is early frost which will impact the quality and yield, but all being well 40-50,000mt is expected. India is increasing its quantity year on year, and with no pesticide issues is competitively priced to fill the void until South American material arrives here which will be no earlier than end August/September.