General news

Extreme climate conditions are impacting many regions during the crop growing period. The effect of this is uncertain. It is likely quality will be generally adversely affected, but it is hard not to see an impact on quantity too.

The changing political picture in EU, UK & USA adds some uncertainty to currency markets which will impact prices at destination origins somehow. This should start to unfold in August onwards.

EU/UK authorities are turning their attention to spices from India, halting all imports for pesticide analysis. This is an issue delayed since Brexit but has resulted in significant quantities of containers being returned to India. It is reminiscent of the ETO/pesticide issue in sesame seed in 2019.

Finally: the Unicorn team will expand in July/August with new members joining both our supply chain and shipping departments.

Pumpkinseed kernels

The new crop is going well in all regions in China, with a very large shine skin crop expected. GWS as usual is smaller again in 2024 and equals less than 10% of the shine skin volume. Origin prices are drifting lower, with stocks in the hands of processors now. New crop will not arrive in EU/UK/USA until December, therefore for the remainder of 2024 we have to rely on old crop stocks and most of these will have left China by end August.

The problem we have is the continually escalating freight, which is almost back to the highs experienced last year. It erodes all the market gains being seen at origin.

Optimistically we still expect 2025 prices to be lower than this year.

Linseed

Planting was delayed in Northern Kazakhstan and as a consequence, harvest will also be pushed back meaning new crop material is unlikely to arrive before December in EU/UK. It also increases the potential impact of weather on the crop in the Autumn. Of course, the summer weather will as usual impact quality and quantity harvested, with hot conditions being experienced across a lot of the region already.  The current crop material will therefore have to last longer, and this is already being reflected with firmer prices for nearby material.

Moldova is also growing increased quantities this season which should be interesting. We have regularly seen Golden linseed from Moldova in the past, but not so much brown. We shall see how successful it turns out to be.

Organic material is firm due to limited supplies and large orders placed by Canada who are short of this item. Prices are unlikely to decline before the next new crop in April 2025!

Sesame seed

Large crops of natural seed in Brazil (140,000mt) and Pakistan (300,000mt) are putting pressure on natural sesame prices for oil or further processing. These grades have their traditional homes; Brazil goes to India for domestic use and hulling, where pesticide requirements are less stringent, and Pakistan is developing a good market in China replacing African material where supplies are impacted by civil unrest and conflict.

Indian prices for hulled seed are fairly stable whilst the country waits for the monsoon to arrive in the sesame growing areas. Currently extreme and unusual heat is affecting Northern India where the premium sesame is hulled. There are some non-hulling grades being incorporated into the hulling supplies now which cheapen prices but adversely affect the quality by shortening shelf life and seed performance.

In Central America we are at the tail end of the season, but here too civil unrest is impacting logistics and shipping supplies. The arrival of super hurricanes at the beginning of the season is also a concern. Whilst it will not cause any impact on the next crop which will only be planted in September, it hints there are potential issues to come.

African supplies of natural and to a lesser extent hulled continue to be plagued with operational difficulties and quality issues on arrival. Certainly, salmonella is an issue in the hulled seed.

Hulled Millet

Whilst prices currently languish at low levels due to Ukraine trying to dump material onto the market, we expect the situation to change soon. The EU has decided to reimpose a quota on Ukrainian millet which will soon be utilized since it encompasses several grains. After this, the price will likely rise since a duty will be payable. The UK has opted to continue to support Ukraine by keeping is duty free.

Sunflower

… Who knows?

The market is incredibly stable, huge expectations of a decline amongst buyers keep them from the market. But is this realistic? Incredible temperatures in the region must hit quality and quantity. Latent demand will also add some firmness at some point. We are at very low levels now, but buyers expect more. Hard to know where the bottom is, but it really cannot be far away considering farmer return etc.

Russia is a major producer, who can dump on global markets material for oil crushing but crop estimates are reducing for Russia and Ukraine. There will be no carryover of 2023 stocks into 2024. Reductions in rapeseed production for oil will also have a bullish impact on sunflower prices.

Really, why wait to cover? What is the downside everyone is waiting for? Surely it is better to avoid the upside!

Poppy

The situation continues with tight supply and high prices for available poppy. We are approaching the earlier new crops and seeing an easing of possible levels for Q4/2024 supply. Again, this is very weather dependent on EU crops.

The Czech Republic is reportedly forecasting a large crop, perhaps as much as 30,000mt, but they are never in a hurry to drop prices. Alkaloid producers have generally planted less than in the past, so volumes from these sources will be low again.

For now, however, high prices rule and there will be no sharp correction any time soon.

Quinoa

A better-than-expected harvest both in quality and quantity has led to a slight price drop in June. Demand has picked up and prices appear set now for the new crop provided demand stabilises. Should it continue to increase, prices will follow.

Asian demand is lower than expected, particularly for red and black grades. One factor here is that both China and India have started their own domestic production. If this impacts on future demand prices will have to respond, but it will probably take a few seasons before the quantity produced is significant. But it will happen for sure, particularly in China who is always keen to produce agricultural crops domestically.

Chia

Here we go again with the usual fears over the Paraguayan crop as we approach the main harvest. Cold weather, early frosts can play havoc with the quality and quantity harvested. Also, we see domestic demand in Paraguay picking up for this item.

All in all, however, we expect prices to be at good levels barring a disaster.

The window on competitively priced Indian material has closed as usual. The crop is still small and demand quickly soaks it up. The quality is established however as comparable to Paraguayan.

Currency update

Politics will be front and centre for markets once again at the start of July, with election developments dictating price action across a number of major currencies.

The first round of the French election largely confirmed the preliminary polling, with Marine Le Pen’s far-right National Rally picking up 34% of the vote and a larger-than-usual number of seats outright according to Ipsos’ estimate. That said, while a majority for the National Rally remains a possibility, the larger-than-expected outturn for Macron’s centrists and endorsement from Melenchons’ left coalition in seats where their candidates are set to lose makes this less likely than markets initially feared.

Based on our assessment of the first-round results, the tentative unwind in eurozone risk premium is well calibrated. However, we caution against running this theme much further.

While French elections held market attention coming into the new week, next up is a UK general election, scheduled for July 4th. That said, the UK vote should be much less dramatic than its continental counterpart. Labour holds a 20% lead in opinion polls ahead of Thursday’s election, all but guaranteeing a large parliamentary majority. Our base case is that the resulting stability, combined with modest reforms to boost productivity growth, should offer modest upside support for sterling over the medium term.

In the more immediate future, however, the impact of the poll should be minimal, with a large polling miss needed to produce a materially different outcome to expectations. Even so, where there are risks, they are tilted to the downside. Specifically, we suspect that markets would be unlikely to welcome a scenario where the Conservatives fall to third place in seats won. jasonguest@alphafx.co.uk