Mel's Market Report September 2019
Sterling continues to trade around a 4 month low, with the pound vulnerable to further downslide as the ongoing Brexit uncertainty continues. While the best outcome for sterling would be a pro-deal Prime Minister, the risk of a no-deal at Number 10 cannot be ruled out. If a no deal exit happens, we can expect further weakening of the pound.
There are many different views as to where butter prices are, and going, with lower prices achieved considering the relative value of cream. At the end of June temperatures across the UK and Europe were soaring, with those in Paris reportedly reaching 39o C! Speculation is advising that spot butter pricing has now hit the floor but we know that dairy has that irritating habit of not adhering to expectations!
With SMP already tight, processors with options are almost certain to be switching milk into cheese, adding to the pressures there. Mild cheddar is holding on by its fingertips, say traders, but unless butter rallies soon the pressure may prove too much. That said, cheddar has defied gravity since the flush and manufacturers are still relaxed and content in a way that butter sellers aren’t.
The outlook for the new sugar campaign year is already deficient. The drought in Europe is taking a heavier than anticipated toll with an expected revision to production down to 16.9 million MT. Alongside reductions in the planted area decisions made for 19/20 which were taken when beets were less competitive than alternative crop and an EU ban on an insecticide (neonicotinoids) that protects beets seeds from ground pest and air pest (aphids). Alternative insecticides are now being used on beet crops but it is too early to evaluate their efficiency.
OILS AND FATS
RAPESEED - At the end of June rapeseed oil premiums were on the rise and that trend will continue if weather conditions don’t improve, forecasts show record high temperatures which is not good news for an already low rapeseed crop.
PALM – There is currently surplus of palm and soybean supply globally, amid flat demand outlook coupled with the uncertainty over the US – China trade dispute, has put additional pressure on palm oil prices. On top of that, output will likely increase as we enter the peak production period.
CURRANTS - We are now at the end of the season and some packers have a few loads of Currants that buyers have not purchased at this year’s high levels. The summer temperatures in Greece are rising above 35 degrees, consequently packers are hoping these temperatures do not continue for a prolonged period. Everyone is hoping that we could expect a crop of around 20,000mt. With little carry over there is uncertainty as to how quickly the market will react to a fairly decent crop.
SULTANAS – It appears there is enough volume from the 2018 harvest to see us through until the next harvest however carryover will be close to zero. Current crop development is looking good and we should be receiving price indication from Turkey in the next week. Although with little or no carryover into new crop we could see strong demand for early shipments and pricing may not fall as fast as some would hope during September.