Commodity Report Summer 2021

COMMODITY REPORT SUMMER 2021

COMMODITY REPORT SUMMER 2021

Economic Outlook Overall, current inflation is significant at the moment and The Grocer article (to the right) explains some of the key reasons why.

The prospect of food price inflation is a worrying new development April 30, 2021

The contributing factors are creating a perfect storm of uncertainty and high prices. Some could have perhaps been foreseen, i.e. Brexit red tape. However, many of the issues would have been difficult to plan for, not least because of our reliance on quick and historically cheap supply chains (i.e. a full shipping container from China to the UK for less than $2000 (now $13,000) and its subsequent effect in the market. In addition, the global packaging shortage combined with various commodity increases (oils, wheat, etc), means that inevitably we are experiencing levels of food inflation that we have not seen for some time.

Whether it’s soaring shipping costs, packaging supply issues, commodity price hikes, shortages of drivers and seasonal workers, increased labour and safety costs, or new Brexit-related red tape, inflationary pressures have been mounting.

Source: The Grocer

COMMODITY REPORT SUMMER 2021

Supply Chain – Driver Shortages As well as rising costs for containers entering the UK and Ireland, there are rising costs domestically when it comes to a significant driver shortage. The supply chain issues are already and will continue to add cost to finished goods and eventually end-users, as well as potentially impacting availability.

HGV driver shortage pressure set to lead to higher food prices May 21, 2021 A chronic shortage of drivers is set to hit consumers in the pocket by forcing up food prices, experts are warning. A 70,000 shortfall of HGV drivers, principally fuelled by EU workers repatriating to the continent during the pandemic, has seen wages shoot up by 20%.

Further pressure has come from changes to tax regulations and the introduction of IR35 in April, forcing companies using agency drivers to employ them on a PAYE basis, pushing up costs by £2 an hour per driver.

The Grocer understands suppliers are already pressing supermarkets for cost increases. “There is currently a huge appetite for suppliers wanting to put cost prices through right now,” said Sentinel Management Consultants CEO David Sables.

“The inflation in driver wages is possibly the straw that has broken the camel’s back here. There is an awful pressure, it absolutely has to go to the price of goods going up.

Read the full article Source: The Grocer

COMMODITY REPORT SUMMER 2021

Supply Chain – Driver Shortages The following document from the Road Haulage Association (RHA) highlights the growing concern and crisis level that the UK is reaching in regards to a shortage of HGV drivers.

A combination of long and short-term factors have contributed to the current situation facing the sector: -

COVID-19

-

Brexit

-

Changes in IR35 (tax legislation)

-

Higher freight rates

-

Licence costs

To read the full report

Click Here

COMMODITY REPORT SUMMER 2021

Supply Chain - Shipping Non-stop demand for ocean freight and the resulting delays and equipment shortages pushed spot rates to new heights across major trade lanes once again this week. But with nearly 40% of containers

getting

cancelled,

many

shippers

are

paying

significantly more in premiums in the hopes of securing space, up to $13,000 for a 40ft container. Demand and rates from Asia to North Europe and the Mediterranean – where prices had started to drop back before the Suez canal fiasco, are now back towards record highs this week, with Asia-North Europe rates up an incredible 469% annually – these are not expected to ease until after Q3.

COMMODITY REPORT SUMMER 2021

Supply Chain - Shipping Return of blanked Asia-Europe sailings as carriers bid to get back on schedule May 17, 2021 The spectre of blank sailings may be about to return to haunt shippers and forwarders on the Asia-Europe trades, as carrier begin to cancel departures in an effort to restore schedule reliability.

Japanese carrier ONE this morning told customers THE Alliance would cancel three sailings on the FE2 and FE3 service departing Asia at the end of May and beginning of June, “due to the unfortunate schedule delays”.

The scheduled departure of the FE2 sailing from Pusan on 30 May has been cancelled, as well as the FE3 departure from Hong Kong on the same day. It has also cancelled the scheduled 13 June FE3 departure from Hong Kong.

“This is more pain. Beyond delays now. Just cancelling loops. Delays abound. Madness out there,” was how one freight forwarder responded to the latest blankings.

Meanwhile, eeSea’s schedule reliability tracker found that just 10% of Asia-Europe sailings in January arrived on time, which rose to 13% in February and up to 41% in March – although this was of course before the Ever Given ran aground in the Suez Canal, effectively cancelling the industry’s efforts to get on time.

Source: The Load Star

Read the full article

COMMODITY REPORT SUMMER 2021

Exchange Rates Pound Sterling was looking positive at GBP/EUR of €1.17 early April but then dropped €0.02 in the space of 3 days, a run of losses not seen since December 2020, with similar declines being experienced against the Dollar. A suspected fundamental driver for the losses was the announcement of some loss of momentum in the UK's vaccine rollout programme with the ban on the AstraZeneca vaccine for the below 30 age group (since changed to under 40’s). However, the outlook is now back on track to recover with current rates at €1.16 and rising.

COMMODITY REPORT SUMMER 2021

Exchange Rates Pound-Dollar Ticks Higher on Stronger than Expected Rise in Employment May 18, 2021 The pound gained versus the Dollar on Tuesday in the wake of better than expected labour market statistics.

The ONS on Tuesday reported 84,000 jobs were created in the three months to March, up on the -73,000 reading in the three months to February. The unemployment rate fell slightly to 4.8% in the three months to March, down from 4.9% in February "The latest estimates for January to March 2021 show signs of recovery, with a quarterly increase in the employment rate," said the ONS. This positive news has pushed the GBP/Dollar back to its highest point since April 2018 at $1.42 which is a good for anything being traded in dollars.

Source: Pound Sterling Live

COMMODITY REPORT SUMMER 2021

Fuel Costs Petrol prices at highest in two years, says RAC June 2, 2021 Petrol prices have climbed to their highest level in two years, according to the RAC. Pump prices fell in May 2020 to a low of 106p as oil prices plummeted, but motorists had to abide by travel restrictions.

The average cost of a litre has since soared to 129.27p, the highest level since August 2019. The cost of a litre of unleaded is now more than 22p more expensive than a year ago - the biggest 12-month increase seen for 11 years.

"After seven consecutive months of rising prices drivers will be wondering if the increases are ever going to end," said RAC fuel spokesman Simon Williams.

"Looking at the wholesale price of both fuels, in normal circumstances unleaded definitely shouldn't be continuing to rise with the numbers actually pointing to the potential for a 2p reduction," said Mr Williams.

He added that diesel is currently 4p too expensive "which suggests retailers are using the saving in the wholesale price to help make up for lower fuel sales over the last year".

The future of fuel prices is hard to predict more than a few weeks in advance and even more so now as the pandemic appears to have altered the dynamics of fuel retailing, he said.

Source: BBC

NONFOOD

BEVERAGES

DRY STORE

DAIRY

MEAT & FISH & POULTRY SEAFOOD

KEY COMMODITY PRICING It is important to note that the current issues facing the market’s supply chain, such as delays in import shipping and driver shortages are having a huge and notable impact on all commodities.

Tuna

Salmon

Chicken

Pork

Butter

Milk

Cheese

Durum Wheat

Rice

Sugar

Edible Oils

Dried Fruit & Nuts

Cocoa

Increasing Juices

Coffee

Stable Chemicals

Packaging

Decreasing

FISH & SEAFOOD Tuna Skipjack tuna prices in general have fallen since the highs of last summer, where prices were around $1600 per tonne. They are now around $1300 which is probably somewhere in the middle going back over the past 2-3 years. A benefit to this, is that the Pound versus the Dollar looks more favourable than it has done for some time, in fact the previous best exchange rate was April 2018 and so current rates are helping keep delivered UK tuna prices at a good value.

FISH & SEAFOOD Salmon Salmon prices have started to rebound, please refer to the Mintec article below.

Norwegian salmon price hits 10-month high as European demand returns May 13, 2021 The Mintec spot price of farmed salmon QZ08 (weighted average, fresh and gutted, free carrier Oslo) reached a 10-month high of NOK 65.50/kg during the week ending 28th April 2021. April was a strong month for Norwegian salmon exports, which increased by approximately 3,300 tonnes (+4%) y-o-y, according to the Norwegian Seafood Council (NSC). The growth is partly attributable to export demand returning to France and Italy, where demand tanked as the COVID-19 pandemic escalated. France opened fresh fish counters in April 2021, further strengthening demand, making it the second-largest market for Norwegian salmon that month.

Source: Mintec

MEAT & POULTRY Pork In general pork prices have risen since the turn of the year. A backlog of pigs in Europe and slow demand had caused prices to fall but the tide seems to have turned.

According to Jonathan Riley of Farmers Weekly – ‘Pig prices have made a significant step towards recovery with the largest weekly rise in five years, according to AHDB figures.’ Pig prices are rising and this is founded on increased demand and reducing supply in Europe. China has also started to increase its imports of pigs again following COVID-19.

MEAT & POULTRY Chicken Chicken prices across the EU and Brazil have risen over the last quarter.

The issues are being driven by continuing increases in animal feed (soya, etc) and the Avian Flu. The current Avian Flu outbreak in Poland has wiped out just over six million birds this year, Poland is currently fighting 262 outbreaks of Avian Influenza, the country’s highest number ever, the previous highest was 62.

Additionally, the spike in transport costs and large packaging increases indicates that the upward trend will likely continue for the next quarter and is already putting pressure on other resources such as Thai/Brazilian.

Brazil are struggling with Covid infections creating staffing issues and transport issues. Refer to the graphs to the right showing price changes on Polish (fresh) and Brazilian (frozen) origins.

DAIRY Milk Prices Unanimously milk prices are rising and the main reason at the moment is that grass growth is low and prices are being pushed higher. In addition, packaging materials such as HDPE used to make milk bottles are also rising in price (see non-food page), adding some further pressure on to liquid bottled milk prices. There has been a shift from dry to wet over the last couple of weeks but this is too late for the first cut silage for farmers.

DAIRY Butter, Cream and Skimmed Milk Butter prices remain firm, currently sitting around £3,400 per tonne for bulk raw material. Demand remains strong especially with the opening up of hospitality. Prices are expected to rise further into June. French prices are very high at around €4230 with other EU prices around the €4000 mark.

Cream prices are around £1.35/kg for bulk cream, although higher is being commanded for export business due to a shortage in Europe.

Skimmed milk powder and whey powder prices also continue to rise, with UK Skimmed Milk Powder around £2,200 and helped by Arla’s Global Dairy Trade Auctions price being well above that.

DAIRY Cheese (Cheddar and Mozzarella) Cheddar and Mozzarella remain very stable at around £3,000 per tonne. The sentiment however is that prices can only go one way, which is upwards. Younger cheeses such as Mozzarella are generally commanding a high price with bulk mozzarella being sold up to £3,000 per tonne, the same price as mild cheddar for example.

The belief is that manufacturers will soon be asking for higher prices on the basis that they will be paying more for their milk.

The general sentiment is that demand is also starting to pick up following the re-opening of hospitality both in the UK and Europe.

DRY STORE Durum Wheat Durum wheat prices continue to rise year on year by about 4% with the two year change of almost +30-35% across Europe and North America (refer to the adjacent charts).

Wheat crop conditions for the 2021/22 season are being reported as positive in the Northern Hemisphere, although the situation in Russia is still unclear. According to France’s Agriculture Ministry, 87% of the soft wheat crop was reported “good-to-excellent” in midMarch, a significant improvement on last year. Whilst crops in Eastern Europe were generally seen in “fair-to-good” condition, suggests that pricing will start to fall.

DRY STORE Rice In Southeast Asia, rice farming has been affected due to a lack of access to credit, capital inputs, and remittance income. Additionally, restrictions on exports resulted in a short supply of the product, which in turn, caused the rise in price. Thailand and Vietnam rice export prices marked a rise of almost 20% after the COVID-19 outbreak, India stayed, and remains, at a flat level. The pricing in the Asian market has settled and the expectation is the pricing will start to come back in line with early 2020 pricing by the end of the 2021.

DRY STORE Dried Fruit and Nuts Brazil Nuts The disruption to normal business in Bolivia has been severe and as prices have climbed, so has the reluctance by smaller exporters to honour their earlier and lower priced export sales.

These delays, and those coming from poor availability of containers to physically ship stock in, is creating a trickle feed and as demand picks up, there is insufficient supply to meet demand.

While these higher prices may well impact on new demand moving forward, the present situation is increases of up to 75%.

Commentary from: Curtis, the ingredients people Of course, and sadly to repeat, but the other issue remains on escalating freight rates, where shipments from the Far East have been at the epicentre of container shortages and higher shipping costs from the outset of this now global issue.

So, short term, we can expect to see prices continue to rise but medium to longer term, we would hope to see price stability other than through the fluctuations of the currency and the profile of freight rates if they continue to increase.

Source: Curtis

DRY STORE Dried Fruit and Nuts Sunflower After the major price escalation at the start of this season, we have seen prices stabilise. With attention focussed on the weather over the key summer growing months, and the hope that a return to a normal crop and a surplus of supply, could see prices ease back off at least towards more recognisable price levels.

Walnuts The March report from the Californian Walnut Board was released on April 7th and outlines some notably growth in their export sales.

Domestic activity was down 16% on the month (March 21 vs March 20), but some of their export destinations have seen strong monthly growth year on year.

DRY STORE Sugar Sugar prices have been rising over the past 12 months. An article, written by Farmers Guardian (read on the next page) outlines an influx of Brazilian cane sugar in Q1 this year, which is likely to be more competitive than the cost that European beet farmers grow beet sugar for. This could keep a lid on the level of price moving forward and has caused disgruntlement from UK farmers, at the Government allowing this level of imported cane sugar tariff for free. They are stating this may be a sign of things to come, with cheaper imports where standards do not necessarily meet the same level as British farmers.

Nevertheless, it does add competition into the market and therefore pricing more accurately reflects market conditions.

DRY STORE Sugar UK’s post-Brexit sugar tariff leads to ‘significant upsurge’ in Brazilian imports May 19, 2021 Brazilian exports of sugar to the UK rocketed in the first quarter of 2021 as a direct result of the UK’s post-Brexit tariff regime.

In December last year, Ministers announced that 260,000 tonnes of raw can sugar would be allowed to enter the UK without a tariff in 2021 through an autonomous tariff quota (ATQ).

Now Apex-Brasil, the Brazilian Trade and Investment Promotion Agency, has reported that exports of sugar and alcohol to the UK grew by 21 per cent – an increase worth almost £4m compared to 2020. The group directly attributed the rise to the ATQ. In a statement, Apex-Brasil told Farmers Guardian Brazil had ‘great competitiveness’ in agricultural products and intended to take ‘full advantage’ of the new quota arrangements.

Cambridgeshire grower and NFU sugar board member Tom Clarke described the increase in Brazilian exports as ‘Exhibit A’ for what the UK can expect in future trade deals.

“When Government opens the gates to subsidised agri-food imports produced in environmentally damaging ways, they will grab market share, put pressure on domestic prices and undercut efficient, local, cleaner and greener suppliers” he said. “What you see here with Brazilian sugar is a deliberate and expected consequence of Government policy. “The Government gave away one-eighth of the UK sugar market with a stroke of the pen, and asked for nothing in return, before any new trade deal was struck.

Source: Farmers Guardian

DRY STORE Edible Oils Rapeseed Oil

Soya Oil

At present, almost all ‘edible oils’ markets are witnessing the same trend; prices

As well as rapeseed oil prices reaching record highs, so is soya oil. This really

continue to rise on the back of poor supply and rising demand. Rapeseed Oil,

highlights the difficulties in the market. The key issues are tight availability in key

predominantly used in mayonnaise and a key cooking oil, is now well over £1,000 per

areas like South America and ever increasing exports from the US to China, meaning

tonne. These are record price levels for rapeseed, and a price has not been seen this

overall supply is incredibly tight. The current harvest in that region is also progressing

high since 2011, when it was recorded at around £970 per tonne. These

very slowly, ensuring further pressure on prices. A positive outtake is that the

unprecedented levels are now filtering through into the market and as yet there is

2020/2021 harvest is expected to be up 8% year on year which may help a future

unlikely to be any reductions at least until the new rapeseed crop harvest takes place

outlook.

around August/September this year. The 2021 EU crop numbers do not look any lower than 2020 and it is expected to relieve some pressure on the current market. A

Olive Oil

factor that could prevent this from happening is poor weather conditions over the

In a similar vein, albeit predominantly a European crop, prices are at a two year high.

next couple of months.

The price of extra virgin olive oil in Jaén, which is considered the benchmark for Spanish olive oil production, reached €272 for 100 kilograms, 27.8% higher than it

Palm Oil

was one year ago. Low yields in Spain this year have been compounded by poor

Palm Oil is also at a very high level. Prices are up 72% year on year. There are some

harvests in Italy, Greece, Tunisia and Turkey, all of which have led to lower

signs that this market may be slowing down a little. The futures price in Malaysia,

production levels than initially forecasted.

where most of the product is traded, shows a 9% reduction week on week. This may be the start of the market easing moving forward.

DRY STORE

DRY STORE Cocoa Compared to the beginning of the 2020/21 cocoa year, prices of the frontmonth cocoa futures contract on the London and New York markets decreased by 4% and 7% respectively as seen at end of April 2021.

Exchange certified stocks increased by 22% in Europe while a 13% rise was recorded in certified stocks in the United States, due to April grading operations.

Cocoa production levels in Côte d’Ivoire and Ghana remained higher than in the previous cocoa year. Unlike in Europe, grindings data for the first quarter of 2021 showed a year-on-year increase in North America and Southeast Asia. Expectations of increasing demand for cocoa powder sustained price hikes.

Source: ICCO - International Cocoa Organization

BEVERAGES Juices Currently, orange juice prices remain quite static, however, they are showing signs of recovery on the basis of the US crop details. In addition, Brazilian prices will inevitably fall foul of the high container cost prices, affecting much of the trade with global markets.

Chinese apple juice continue to rise in April 2021 May 3, 2021 The Mintec price of Chinese apple juice GR04 rose by 14% to CNY 10,500/MT in the 3 months to April 2021. The price increase can be attributed to higher freight costs, due to container shortages and reports of low apple juice processing volumes.

Chinese shipping cost have risen by 40% since the start of 2021 and 168% since the onset of the COVID-19 pandemic (March 2020).

Source: Mintec

Firm global orange juice prices due to tight supplies

Apple juice prices will also be affected by the cost of

May 18, 2021

shipping raw material from China, which is a huge source

Front=month orange juice prices on the Intercontinental Exchange (ICE) rose by 5% month-on-month to USD 1.15/lbs on the 13th May 2021. The price increase can be attributed to tighter orange supplies in recent weeks in the US and Mexico.

of low cost apple juice concentrate.

Read the articles to the right for more information.

The USDA expects Florida’s 2020/2021 orange crop to be 3.8 million boxes lower than the previously estimate (51.7 million boxes). This would be 23% lower than last season’s final production. Market participants say the high drop rate for the Valencia variety may be the main reason for the reduction in the USDA’s orange forecast.

Source: Fresh Plaza

BEVERAGES Coffee Coffee is the latest commodity to hit multi-year highs as Brazil drought sends prices souring June 1, 2021 • Coffee prices hit a 4.5 year high on Friday extending their rise to nearly 70% in the past year.

• Dr. Michaela Helbing-Kuhl, an agriculture analyst at Commerzbank, says Brazil's persistently dry weather is to blame.

• The drought is expected to continue through August which is "not a good sign for the 2022/23 crop," according to Dr. Helbing-Kuhl.

Prices of arabica coffee moved above $1.60 per pound last Friday for the first time since the fall of 2016. Coffee prices have risen nearly 70% in the past year and currently trade around $1.66 per pound. According to Dr. Michaela Helbing-Kuhl, an agricultural analyst at Commerzbank, global coffee production has been hurt by persistently dry weather in Brazil. Brazil's Paraná Basin, which is home to Minas Gerais, the country's biggest coffeeproducing state, has been hit with a drought that forecasters expect to continue through August, according to a recent commodities report from Commerzbank.

Source: Markets Insider

NON-FOOD Chemicals BARCELONA and LONDON (ICIS) Rising chemical prices around the world may be helping to strengthen inflation in industrial production and consumer goods.

Since the pandemic hit in early 2020, a series of events have disrupted supply of chemicals to global markets amid strong demand, leading to record prices.

As demand fell for transport fuels in the first half of 2020, refineries closed down or witnessed reduced run rates. This reduced the supply of feedstocks for chemicals production, such as naphtha and propylene. Refer to the graph on the right to show the rising costs of Film.

To view the latest BPF (British Plastics Federation Price Report

Click Here

NON-FOOD Chemicals In 2020, the US' hurricane season, followed by the February 2021 polar storm, caused large parts of the US chemicals sector to close down.

In the aftermath of the polar storm, 100% of US capacity was offline for some important products such as Butadiene (BD) and PolyCarbonates (PC). Repairs and restarts have taken several months and some are yet to be completed. The global container crisis has also disrupted chemicals supply. Normal flows of products have been delayed or cancelled due to a lack of available capacity, and prices have spiked to unsustainable levels, according to market participants. Below shows prices up 1275% up year on year for US Butadiene.

Butadiene is a key component in packaging and vinyl gloves.

Butadiene is a key component in packaging and vinyl gloves.

NON-FOOD Packaging Demand for Pulp has accelerated over the last 18 months, driven by the lockdowns and increasing numbers of home deliveries, majority of which are delivered in a cardboard box. Amazon has seen record numbers, with an estimated 40% increase at 4.9 billion packages in 2020 compared to 3.5 billion in 2019.

Other similar ecommerce companies have seen similar increases throughout the pandemic. As the use of cardboard boxes to package deliveries is widespread, the spike in use of pulp and corrugated paper has driven the worldwide packaging costs up by 53% year on year.

Butadiene is a key component in packaging and vinyl gloves.