Ingredients Market Report: October 2024
General news
The major concern currently is that we are identifying that many clients are very short covered with their requirements for Q4/2024 into Q1/2025. With the challenge in supply chains and the global unsettled environment, we believe this is going to lead to short term disappointment, since importers are not holding adequate stocks. It is too late to position goods now before end December from nearly every origin.
We have expanded the Unicorn team in UK, with three new colleagues. They compliment the supply chain, shipping and technical departments and will hopefully add to an improved service to our clients.
Globally climate issues are all around us and every origin, unsettled political situations from the Middle East to port strikes in USA and drought in East Europe v floods in India impact on global markets. As ever the impact is delayed, but it means prices rise and supplies are disrupted.
The import requirements for ingredients become ever tighter adding to the supply chain issues mentioned. This is definitely deterring suppliers from offering to the EU/UK markets when easier opportunities without risk exist elsewhere. Whilst the concept is good, the impact on availability in the medium term is concerning.
Pumpkinseed kernels
As we have been reporting now for several weeks, a good crop was expected and has now been harvested. Prices reflect this and it is now being reported farmers are not making returns on the current levels. Ultimately this is not good news since alternative crops will be planted in subsequent seasons.
Buyers sensing a decline in prices have not bought and now warehouses are empty and will not be replenished until early 2025. There is very little free material in UK/USA/EU.
Freights have eased back a little too, and with a weaker US$, now is a buying opportunity.
Linseed
Whilst harvesting is under way in Kazakhstan there is little concrete information as to quality and yield. What is missing in addition to this is the expected requirement from China and when this might arrive, plus the ever-increasing duty rate on Russian material into the EU.
Canadian material is price attractive for USA based clients but does not work for EU markets and vice versa.
It is a tricky one to gauge, prices feel good but have continued to decline. Exchange rates add to the opportunity, but the picture is unclear.
Sesame seed
The major concern now is what is happening in India who are due to harvest. Heavy persistent rain has hit the crop quality, and quantity available as both hulled and natural for sure. But by how much? Pakistan has also suffered from this unseasonal weather. What we know is demand will pick up domestically as soon as harvest commences. From western markets demand is sluggish as prices fell, but now the tables could be turning.
There is lots of potential demand waiting for a level, that is probably already passed.
Africa has lots of supply issues both East and West. Brazil is experiencing defaults and quality challenges, plus rising freight from this region.
Sesame looks under valued in our opinion.
Hulled Millet
After the huge 2023 harvest 2024 yields are understandably lower. But there is plenty of material around and whilst quality has been impacted by the dry weather, it is definitely acceptable.  The imposition by the EU of the old levy on Ukraine millet is protectionist to assist Polish and other farmers. This does not apply to UK/USA which thus have the opportunity to pick up cheap millet which Ukraine is keen to export asap. This is making the ‘spot’ market much lower than the forward positions.
Sunflower
Awful situation. The crop was severely damaged by the extreme heat across Romania, Bulgaria and Ukraine. The impact is on both volume and quality, where kernels are significantly smaller.
Processors of kernels are struggling to acquire suitable material and farmers sensing the issues are holding inventory back. We have heard already of shippers renegotiating their forward contracts due to the higher prices.
Seems there can only be one direction for sunflower kernels now.
Poppy
Prices are definitely softer as we enter the new season after a very short season of supply. But they are stabilising from some regions as farmers hold out for fair prices. As a consequence, we feel the supply-demand situation is probably in balance and would not expect the price to drop much further, ands we face a situation where the market could turn around at season end. Whilst supply is currently OK, it is not limitless this season.
Quinoa
A firmer feel to the market after demand from the EU increased surprisingly. It was expected locally produced material would temper imports, but this has not occurred. The freight increases we saw earlier this season are now impacting on South America adding to the firmer tone. This seems to be the pattern of freight adjustments now with the Americas lagging 3-4 months on Asian markets.
Chia
A worrying situation as prices escalate and defaults occur. This is compounded by poorer quality arriving in EU leading to quality complaints/rejections.
Demand is strong and supply is failing to meet it pushing up prices which are further increased by escalating freight as mentioned earlier.
No obvious solution to a tight situation which seems likely to get worse before it gets better.
Currency update
FX Monthly movement:  US$/ £ 1.33  |  US$/ € 1.11  |  £/€ 1.20
Rates are all about who moves first on further interest rate cuts and by how much. There is speculation that the Federal reserve will impose another 0.5% cut in November further weakening the US$, but also that the Bank of England and EU Central bank will cut an additional 0.25%. Certainly, we are seeing exporting regions turning away from US$ pricing due to potential US dollar weakness in the forward positions, which is an unusual trend and one we have not seen for some time.
Certainly, a weaker US dollar increases export prices from regions where the rate turns unfavourable
Of course, all of this is overshadowed by the situation in the Middle East and the potential impact on global oil supplies if the situation deteriorates. This is contrary to recent announcements by OPERC to increase production weakening the oil price globally.
Finally, the US election is nearly on us, no prediction here other than it will surely have an impact, be it short term on US Dollar strength, so perhaps take advantage of the best rates seen against Sterling and the Euro for some considerable time.
