Forward View of the Seed Market!
The oilseeds and vegetable oil markets are extremely volatile supported by increased palm oil prices, difficulties in the exports of soya from South America, frost damage to the rape crop in the EU and the market for veg. oil as a feed-stuff for bio diesel is also running high.
The huge demand for oil seed from China, is running at full speed.
The seed market is at a 10 year high currently, driven by extremely poor yields throughout the World and in particular Eastern Europe where we have witnessed a reduction of around 4% down from 9.64 m tonnes to 9.4m tonnes this year. Worldwide production is nearly 5 million tonnes lower than last year.
Russia has imposed an export tax as does the Ukraine which has compounded the supply issues and pushed prices up domestically, and as the EU is a net importer of Sunseeds and Sunoil it is now being reflected in prices in the EU markets.
Existing stocks are in firm hands and availability will be tight over the next couple of months leading into new crop. I don’t expect new crop prices to fall by much.
As winter is (almost) over in most parts of the Northern Hemisphere, we usually notice a drop in demand In February-March, which is evident now. But, this is compensated by increased buying for Ramandan season in most countries for their Confectionery products, in which Sesame seeds is one of the most important ingredients.
Post-Covid, there has been a drastic change in buying patterns from customers and we have seen an increased demand this year as they missed out/paused purchasing due to the whole Ethylene oxide nightmare. For the last 8-12 months post-covid, most customers have been buying hand-to-mouth and thus there are hardly any big stocks in any major destination country except China. Chinese consumption has been almost back to normal and thus even due to Covid related issues in most parts of the world, prices have remained on the higher side for African Sesame (which is their main source for raw sesame for their factories).
Most African origins reported a Normal to 20% Drop in their crop around November, due to Covid related issues of Labour and farmer’s preference to food crops like rice and beans as compared to a cash crop like Sesame. This is another reason why prices have remained high even though Indian purchases from Africa have been virtually non-existent this season. Timely Shipments from Africa still remains a BIG issue.
Indian Monsoon crop was a little higher than 2019 and around the harvest time, demand from EU vanished for a few months due to IOPEPC suspension to resolve Ethylene oxide related complaints. Thus, prices have been attractive from India in February. Indian stocks should be sufficient for the next 3 months’ consumption.
New Summer Crop, which is mostly sown in Gujarat, is expected to be good owing to good water supply after good monsoon season last year. We should be able to give a better idea of the actual size of the same by March second half after the sowing figures are announced by the Govt.
We are also hearing that many small hulling factories, operating in Central and North India have closed , due to a combined effect of Covid and EU/IOPEPC stricter controls on quality.
As most countries have already started their vaccination programs, we expect one of the major consumption market for Sesame - Quick Service Restaurants to resume normal working in the coming months and thus Demand can only increase from current levels.
We expect prices to remain stable in the next month after which it will take its’ cue from new crop figures.
The flaxseed market is not dissimilar to that of sunflower, in as much as there was a poor harvest in 2020, Covid and high demand from China in particular.
Unfortunately, I do not have access to much published statistical information as most of the seed is grown in Kazakhstan, Ukraine and Russia and transported to the EU for cleaning.
The costs have risen substantially since this time last year – 30% on Brown Flax and 14% on Golden with no signs that demand is easing.
We will have a better idea in June when the first signs of new crop planting will be known.
In what can be best described as a difficult year, we have seen a succession of obstacles colouring the market.
Firstly, we saw the outbreak of Covid-19 in China which put factories on lockdown and as a consequence shipments were delayed. The virus has also had a massive impact on freight from the Far East, as shipping lines struggled to place empty containers back into Chinese ports and the subsequent snowball effect of the virus had in particular, with UK ports which in turn were suffering from a blockage due to a massive influx of PPE plus the furlough of staff etc. thus deterring shipping lines from moving cargo into UK waters, preferring to go to Northern European ports instead – Hamburg, Rotterdam etc.
This created a massive problem in China as processors really struggled to book freight to the UK, and if they were able to, saw an incredible hike in quoted freight rates.
In normal circumstances a 20’ container costs in the region of $850, now lines are asking around $8000 !
This has had an inflationary effect on the price of seed.
We have seen GWS grade move up significantly from last season when it was a discount to Shineskin, mainly due to a combination of less seed planted, poorer quality and dealers paying a high price for GWS seed and a buoyant internal market from roasters. Additionally, the Chinese Government are subsidising corn and wheat production which I think will lead to farmers growing less pumpkin and as a result we may see even higher prices in 2022.
I think it extremely unlikely whether we will see any cost reduction in the short term.