2024 has started with the Red Sea crisis, escalating freight rates by 400% more or less overnight. Additionally, it adds around two weeks to supply chains. These costs are immediate and will be reflected in prices. The situation will expand, with contagion into every freight route across the globe. It is further escalated by shipping lines reducing services and withdrawing capacity due to the global slowdown. These processes are not easily reversed.
Should the conflicts escalate during 2024, we see further surcharges coming onto freight in particular, higher oil prices, slower journeys, higher insurance rates. All are inflationary, and potentially counter the opportunity for Governments to cut interest rates as is their strategy.
Overall, it is hard to see a weak scenario on prices throughout 2024.
The market has settled for both grades at origin, as demand quietened down. The underlying supply situation has not changed however with a tight situation on GWS, particularly with acceptable pesticide residue levels, but greater availability of shine skin product. It is unlikely that prices will drop in the coming weeks at origin, and with freight issues now we could see the market firming at destination ports in the coming months.
Organic material to meet requirements is very difficult to come by.
There is limited old crop carryover now, so with new material trading at a premium, prices are gradually increasing. The Orthodox Christmas is limiting supplier interaction at present from Kazakhstan and Russia but when all return to work prices could jump further.
Indian new crop is approaching, and prices are decreasing. The Red Sea freight challenges has however stopped them becoming competitive for the time being.
In India the demand-supply situation is balanced and market price thus stable. The summer crop will be planted soon in Gujarat, and this will give an indication of how farmers see the value. Mean while India continues to import from Africa and Brazil, so to keep compliant with regulations one needs to know seed source. The situation in the Red Sea advantages Nigeria supply, which is obviously less impacted, but potentially their logistical issues will also deteriorate from an already low base.
In Central America harvesting is more or less completed and volumes are down again across the region, as buyers fail to support the prices required locally.
Brazil is expected to deliver a poor crop for reasons already mentioned so there is no weakness in the sesame complex that we can see.
The Ukrainian crop and quality were good this last harvest and prices responded accordingly. The 0% levy has been extended through until June 2024 at this time, hopefully it will continue further.
A strange market, which is fundamentally bullish but actually not reacting to the same pressures. Processors are struggling to source material, transport costs especially in Eurozone increased on 1st January as green taxes were enhanced. Oil markets are firm and bad news is coming out of South America for their crop after record heat has caused severe damage. The only thing holding vegetable oils back is weaker demand.
We do believe sunflower is at the bottom now. It has been very stable at these cheap levels for a long time.
Short availability continues and will get worse though the first nine months of 2024.
Prices stabilised due to the smaller year-end crop. Organic quinoa to meet EU regulations is hard to find.
Bolivia is now sold out and we await news on Peruvian new crop due in the late Spring/Summer. We will be visiting the fields during February to assess the situation and will report more extensively thereafter.
There is limited material available with an expectation of higher pricing failing to materialize. Certainly, EU compliant material is getting scarcer at origin, but resale material has helped keep prices lower, along with some farmer liquidation to meet cash requirements.