Market trend

30.03.2017

MARKET TREND

PEPPER 

Local experts have projected that the prices of Vietnam’s farm produce such as rubber latex, coffee and pepper will increase in the coming time given an expected rise in demand of importers from China and other markets.

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Last week, China’s central bank reduced the interest rate on one-year loans by 0.4 percentage point to 5.6% and this will enable more Chinese companies to take out loans to import, this will place a positive impact on the world’s farm produce market in the short term.

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Pepper market last week witnessed the daily price changed of $ 50100 per ton. At present, all areas of Vietnam are harvesting but Vietnamese farmers are reluctant to sell at current levels because they continue to compare present price with previous crops from 2014 to 2016. Most believe that prices will be rebound/steady tone before Indonesia crop so farmers did not accept to discounts or rush sales even when the market is not favorable.

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The USD continued to depreciate against Vietnam currency after FED raised the interest rate only 0.25% while the financial sector in Vietnam expected a minimum of 0.5%. Indonesian offer in the domestic market at a very high level (from $ 800 - $ 1,000 / MT more than Vietnam).

PEPPER 

The new crop is expected to start in July/Aug but the weather does not advantage. As many sources predict that Lampung's output will decline compared to 2016. However, it is still too early to forecast the crop of Indonesia at this time.

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Brazil continues to be very competitive on price, but stock now quite tight and prices have increased weekly following Vietnam. Cambodia has started harvesting the last 2 weeks with a quantity equal to the last year. India has continued to import from Vietnam after officially lifted the pepper embargo so Vietnam pepper can deliver to India after 17th March.

TURMERIC 

Turmeric is expected to extend its consolidation within the current range, prices are likely to breakout on the higher side in the short term.

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The physical market support is steady with the arrival of new turmeric and reports indicate a strong demand for the same which is likely to support prices along with strong exports which have been significantly higher compared to last year.

ONION 

Fresh onion prices in the state have touched a five-year low. The average price farmers have fetched for a quintal has been Rs 450. At the Lasalgaon APMC, the biggest market yard for onions in the country, the average price for a quintal has been Rs 740 in February 2016, when the state was reeling under a severe drought. The cost of production for a quintal is Rs 950. Prices were the highest in 2013, with farmers fetching Rs 1,424 a quintal.

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The dip in price is due to bumper production in the state. Lack of storage and processing infrastructure to increase the shelf life of the produce has left farmers at the mercy of traders, who are consistently quoting low prices.

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Some farmers have set their onions on fire, as they were not even getting the basic input cost. Initially, prices were affected due to demonetisation, and they did not pick up till the December-end; since January, heavy inflow and skewed demand and supply ratio led to the dip in price.

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All the drop in fresh onion prices will be felt later in the dehydrated onion prices. If the government will not set up a price limit we may have higher prices for next year when the farmers will choose other crops.

CHILLI ďƒ’

Red chilli prices have halved in a year as extended cultivation in key growing states of Karnataka, Andhra Pradesh and Telangana has increased supply but higher demand from spices makers and the international market may arrest the fall.

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Production is estimated to be higher by 20% in the three states where harvest is in full swing. There is strong demand especially from China and Vietnam, Curry masala companies have also started buying on a large scale with the drop in prices.

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Last month, when harvest started, purchases were sluggish in the absence of large buyers following demonetisation.

CARDAMOM 

In India, Cardamom prices were trading up as speculators enlarged their positions amid an upsurge in physical demand in the domestic spot market. Further, tight supplies from major producing regions also supported the upside in cardamom prices.

According to Bank of Guatemala, Guatemala has already exported 28,700 Metric Tons of Cardamom from 1st Jan 2016 up to 20 Oct 2016. Accumulated exports for last year season reached 30,000 Metric Tons excluding carry forward of around 6,000 Metric Tons which was held by local exporters and speculators.

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Total harvested Cardamom from Guatemala is in three stages one till 15th Jan 2017 from the first picking. Next picking would be initiated from 15th Jan 2017 till 28th Feb 2017. Third picking would be starting from 15th March to 30th May 2017.

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Guatemala Cardamom Exporters are trying to push up the local markets at the parity of their imported goods to get rid of the stocks, as prices are expected to fall once this cardamom reaches its final destination and the importers start competing with each other for sales. There was an artificial increase of the prices caused by the Guatemala exporters which hold offers till October 2016 and suddenly resuming in November 2016.

CARDAMOM ďƒ’

For the first three months of the season (October to December 2016) the Guatemala Cardamom Exporters offered higher prices based on false information that Guatemalan cardamom crop is going to be 40% less quantity than last season. Last year crop 2015-2016 was around 36,000 Metric Tons from which accumulated exports were around 30,000 during 2016. The remaining 6,000 Metric Tons have been mixed up with the new crop.

ďƒ’

Total harvested Cardamom from Guatemala until today is estimated to be around 17,000 Metric Ton and the 3rd picking would be also there, starting from April 2017 onwards.

GARLIC 

The fact that the Chinese garlic harvest last year was disappointing was positive for growers in other countries. China accounts for 70 percent of the world production, so if that country records a 15 percent drop in volume, the impact becomes clearly noticeable.

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China controls half of the global garlic market. The country struggled with a cold winter, which decimated the harvest. Because of this shortage in China, opportunities have been created in the global market for other producers. However, China has not been the only country where the production has been smaller, as France has also recorded a drop. Spain and India have been the biggest beneficiaries of this situation.

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Prices are high and demand and exports are on the rise. Net importers, like the Netherlands and South Africa, can only adjust to the developments on the world market.

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In March, some of China’s earliest garlic crop from Yunnan province arrived in the market. The Chinese domestic market is eagerly waiting on the new garlic, which will be lower in price than the garlic currently kept in cold storage.

GARLIC 

In previous years, the Yunnan garlic crop was not that influential as total output from the province is much lower compared to farms in Shandong. However, due to last season’s high prices, growers in Yunnan have invested in garlic and output is expected to be 20% more than in past seasons.

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Henan and Shandong will start to harvest from April, Henan being two to three weeks earlier. Total production this year will be 20% bigger than last year. Therefore garlic prices will come down. When the new harvest arrives, no one will be interested in purchasing the old crop.

Hence the garlic in cold storage now will have to be sold at a lower price, or will not be sold at all.

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The total amount of garlic in stock is comparable to last year. However, last year, the market was aware that the harvest was considerably smaller due to frosts in Winter. This year, the market knows that output will increase.

PALM OIL 

Palm is up due to soybean oil, which is holding up and is supportive for palm. Palm has been range-bound since late February with market signals mixed, as demand remains weak and output growth is still uncertain, according to traders. It is in line for a third weekly decline in four, losing 1.7% on a weekly basis last week. Malaysian production in February dropped 1.4% on month.

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March data is however expected to show a recovery in line with the seasonal trend. Palm oil prices often take direction from related vegetable oils, including soy oil, as they compete for a share of the global vegetable oil market.

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Soybean oil on the Chicago Board of Trade fell as much as 2% on Monday over concerns about rising supplies, before rising 0.2% on Tuesday.

SOY 

Price may start to go down from mid of April. The government of Chine will start to sell their stored soybeans in April. Factories are still closed.

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For soybeans, early estimates indicate that 2017 could be a record year for soybean acres in the U.S. and record production elsewhere, and that is already influencing the market. USDA recently pegged Brazil’s soybean crop at 108 million metric tons (3.968 billion bushels), up from 104 million the prior month.

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Harvest progress in South America has been good with no weather complications to speak of so far which has traders thinking that U.S. soybean exports could struggle into the start of the next marketing year. Also, the large South America soybean supply could continue to weigh on new crop prices moving forward.

SESAME 

The market in India is continuously picking upwards and week by week prices are becoming higher. The key issue is lower raw-material arrivals leading to difficulty in covering big volumes.

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For example - in the good white seed category Gujarat origin only arrivals is 400-600 bags per day, and even with hard- cash payment, we are only getting only 1-2 trucks per day which are nothing for such a big industry.

This is very critical that a short supply scenario developing at ground level in India and the new big harvest is not before October 2017.

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Our reading say that the price did not move up north too much before due to  

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1) DEMONITISATION that sucked all the cash from the trade in end 2016 2) in early 2017 months there has been HUGE SUDAN REDDISH seed arrivals in India, with people doing the blending business.

On the other hand, the people like us who don’t do this dirty job have nothing else to do but to face the increased prices inventory to cater our customers. However now, there is no savior from Africa as prices there are boomed up around 1200$ for white sesame that terms hulled prices well over 1650$ range (if someone imports & offer hulled for re-export).

SESAME 

There is a 10000MTS Korean tender open in the market for early April bidding, thus all factors suggest the market will be firm in the coming days.

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There is no reason to expect fall-out of prices down the line as the summer crop reports are also very bad for now with sowing only around 12000-14000 hectares as per market sources. The USD/INR exchange slipped 3-4% since last few days below 65.00 that is another factor adding fuel to fire.

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We would again suggest you take some cargo as this would be positive for your business considering the scenario developing in sesame, any demand vacuum will push the market upwards as supply is shorter than demand and customers can check globally that Indian Hulled is the most competitive right now compared to prices from Africa/South America etc.

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So in general everything has become expensive.

NUTMEG 

Supplies are finely balanced at the moment with the market struggling to get on top of itself due to a slowdown in collections caused by poor weather conditions.

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Given the current wet weather conditions, it is hard to see any sudden influx of raw materials coming through soon as many farmers have chosen not to return to their plantations until prices return to consistently higher levels. There are also many back orders in the supply chain as many large buyers entered the market late last year. This has decreased the amount of unsold material in the local market and is keeping prices firm.

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Don’t expect too many changes over the next couple of months, if anything prices could still tighten a little further.

CASSIA 

This sustained period of adverse weather is impacting most of Indonesia’s supplies. Storms and high rainfall have caused floods across various regions and have undermined harvesting and collection efforts for many products. The weather conditions in Indonesia are expected to remain poor.

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Indonesia’s weather is generally said to be predictable – ‘hot with the chance of rain’ could be said for 90% of the year. However, in recent months that line is increasingly more likely to be ‘hot with heavy rains’.

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Torrential downpours across Indonesia have led to widespread flooding throughout the country. The capital city, Jakarta, has been particularly affected, with the Jakarta Observatory recording more than 144 millimeters (about 5.7 inches) of rainfall in just 24 hours as recently as February 28th; more than the total average rainfall for the month of February.

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The heavy rains have caused flooding that has killed at least four people and led to the evacuation of more than 20,000. Schools and offices have been forced to close, and floodwaters have inundated hundreds of homes, causing significant damage to property.

CASSIA 

It's not just raining but there have also been 3 earthquakes in Aceh in just over two months, causing much disruption to supplies:  

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7th December – 100+ killed in Aceh earthquake (6.5 magnitude) 16th February – Two more earthquakes in Aceh (5.1 and 5.6 magnitude).

The bad weather combined with the Sumatra's farmers holding stocks, expecting an even higher price increase. Demand is present especially with the early Ramadan for this year.

VANILLA 

Global vanilla prices look set for potential renewed upward pressure ahead after it has become evident that a cyclone has caused extensive damage to the country’s forthcoming 2017 crop.

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On, March 7th, a powerful cyclone hit the northeastern corner of Madagascar, the country's primary vanilla-producing region. In the weeks since the storm, we have been assessing the extent of the damage to the region. While damage in certain areas has been severe, it remains too early to speculate about the overall impact on the 2017/2018 crop.

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The immediate impact has been higher world prices, which may increase further. Additionally, product quality may suffer as low-quality green vanilla beans salvaged from the storm will be immediately processed and brought to market.

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It is believed to be the most powerful storm to hit Madagascar in 13 years with winds estimated at 145mph coupled with heavy rainfall leading to floodings in some parts.

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The widespread destruction includes losses to vanilla fields and plants, which is being estimated at approximately 30%. There also could be further losses once fields have been examined more closely

MILK 

Skim milk powder prices in Europe weakened at each end of the price range. Larger magnitude declines occurred in France and Netherlands, less so in Germany.

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The SMP price is expected to remain around current levels given the high stock levels.

SWEET WHEY POWDER 

Whey prices in Europe are steady to slightly higher at the top of the price range. Sellers find interest both within Europe and for export sales to other regions.

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No SMP was offered into intervention last week.