November 2018 Market Report
Posted by Quality Ingredients on
Worldwide Seed Markets have taken the course we have been warning of for some time. Did you take action?
Rapidly changing markets have been the focus for the past month, with many reacting as we anticipated, others waiting for further stimulus. The SIAL fair always acts as a catalyst as the spread of information on markets sets buyers and sellers on the same course. With lots of talk about trade barriers, hard Brexit and some natural disasters, prices are volatile and supply fragile. 2018 is a very different season to 2017, and we already anticipate 2019 to be more challenging for a variety of reasons we will gradually explain in the coming months.
It was widely mentioned from some of the top sources worldwide. “Expect interruptions and volatility along with supply challenges going forward.”
Pumpkin seed kernels:
Our China team have conducted an extensive survey this season. The shine skin crop is undoubtedly in good shape, at around 120,000mt, and of good quality. The increase in quantity has been started by strong domestic demand for ‘in shell’ snacking product. GWS and snow white have decreased in volume, in GWS terms probably less than 8,000mt. Three things hang over the pumpkin market. Firstly, the poor demand from overseas buyers, this has pushed many export-orientated companies into a losing situation, due to farmer contracts fixed at higher levels. Secondly the realization now that the recent shift of pumpkin production to the recently demilitarized Xingang region, has led to a significant increase in pesticide contamination due to residues in the soil from cotton production, which relies on heavy use of pesticides. Those actions shall cause us to focus on alternative regions where this would be better controlled. The product will be slightly more expensive, but as usual, we will operate a positive release system on pesticide analysis before departure from China. Finally, the USA sanctions/trade barriers are potentially pushing the Chinese government to increase production of soya and maize with financial subsidies to farmers who traditionally grow the pumpkin. Assuming the sanctions remain in place. It certainly could materially change the plantings for 2019, and the impact would be felt, in this year’s harvest. A more comprehensive report is available on request.
Over the last week, the market has caught fire. The prices are up 10-15% in India where the harvest has started. We are experiencing ‘the perfect storm’ in Indian sesame at present; no carryover, poor harvest, export buyers short of material, domestic buyers requiring material religious holidays, and no time to supply alternative raw material. It has led to a hothouse. The over fundamentals still look bearish, in that global sesame supply mainly from Africa is good. But this vacuum in India has had a dramatic effect. Indeed, Korean tenders which act as indicators on the market, have been awarded to Pakistan (poor quality) and China (resellers of Indian seed) as opposed to the conventional origin processors. We still believe there will be some correction in early 2019, but how long can buyers hang in there? Central America is heading towards its harvest in late November/December. Information is limited, but we expect reasonable if not plentiful crops. It is likely, the Japanese will move fast to cover their requirements, and they are the preferred buyers since they take in large consignments immediately after harvest. It’s going to be an exciting year!
Perhaps the most comfortable item at present, premium hullers are well sold forward, prices are relatively stable. The supply for hullers is dependent on seed quality since they need the larger kernels for hulling, selling their screenings to the oil crushers. Currently, the amount is more than adequate in Bulgaria for this. The low-quality cheaper hullers will provide smaller and more broken kernels in their product to achieve price advantage, but this inferior material complicates and keeps the pressure on the premium huller supplies. You get what you pay for in this market currently!
We have been trying to prepare you for this all year!
What a mess! Poppy supplies this year at best have only 2/3 of our global demand. There is no carryover, and every origin had either low plantings or poor yields. Several had both. Australian will be available in limited quantities from April, but strictly limited quantities. Until then, ‘hold on to your hats!’ Of course, already farmers seeing an opportunity are switching their plans. So, in Turkey where production has over the years turned to white poppy, it is swinging back to blue. There is some autumn planting in Turkey, and we are already anticipating a vast crop their next summer. Similar in other regions where supply is possible to adapt for seed purposes as opposed to morphine.
Peru is losing its significance in supply at present due to pesticide concerns. We see attractive more and more offers coming from Paraguay, Mexico, and Argentina. Bolivia is a good producer, and this still comes out primarily through Peru. We see some other potential and quite exciting origins developing too.
This market has gone wild recently too, primarily due to the sudden excitement in Peru that China has opened its doors to permit the importation of Quinoa. Once again, we see the devastating power of China suddenly impacting on the global supply. Of course, if you investigate this a little further, it is possible that China only demands 200mt of quinoa which it imports through Vietnam. The global market is about 40,000mt. So the reaction of Peruvian farmers is probably overdone, and the 20- 25% increase in price is unnecessary.