Mel's Market Report October 2018
DAIRY: Cream prices have eased marginally off the back of higher levels of available milk. Farmers were receiving a better return and whilst the herds are now back on feed, production output is still higher. Although typical of dairy the volatility factors still make it difficult to forecast the immediate future markets. Milk prices are now showing signs of dropping so whilst Farmers have been making hay while the sun shines! These output levels could well start to pull back. The slight ease in butter prices are not anticipated to continue and present pricing is gauged to remain relatively flat as we head toward December. With cheese prices continuing to remain firm Q1 2019 is currently offering some light at the end of the tunnel! But unfortunately as we are all aware this could change on the flip of a coin! The joys of dairy.
SUGAR: The prolonged hot and dry weather of the summer impacted on the sugar beet development across Europe with the risk that the continued lack of rainfall would be detrimental to the crop yields for the campaign year which starts October. But that said and done there were still large pockets of contracted sugar around that needed to find a home before the end of September. Whilst the hot weather has created numerous issues across many commodities the pricing for purchases made from the new sugar year will offer beneficial downward adjustments.
FLOUR: Crop warnings were issued across UK and mainland Europe warning of the effects of the very hot dry weather. Crop expectations were much lower anticipating the damage of sun bleaching the lack of rainfall. Wheat prices rose significantly during July and August and coupled with the downgrades reported there was little in the way of relief in the wheat markets for the coming months. New contracts were negotiated for the 1st August with UK sourced flour covered until year end and European sourced bread, strong and wholemeal flours covered until August 2019 to protect against further market rises and Brexit volatility.
OILS AND FATS: Rapeseed Oil. The harvest is looking to total 19.8 MMT over the EU with demand at 25 MMT! The focus is already switching to next year and with the weather continuing to remain dry across Europe this has resulted in difficulties with planting the winter sown crop. Spring sown crops historically always have a lower yield than winter sown so the preference is to plant winter. Availability has become tight with currency continuing to have a major influence on prices. With the anticipated difficulties we took a contracted position back in August offering price stability as we head toward December.
Palm Oil: We are now heading into the peak production months of October through December with stocks at origin already building at a faster rate than anticipated and up 12.4% on last month. The overall market is expected to increase around 9% net of exports which is an historical pattern and the reason why we are starting to see lower levels, these will continue through to year end and then generally spike in January by around £20/£30 per tonne.
DRIED FRUIT: Sultanas Turkey - as the primary Sultana producer is now reporting a much reduced new crop than previously estimated and with strong early sales of fresh/table grapes into Russia, this will further deplete the remaining volumes available for sale as sultanas.Reports over June-August were setting the likely new crop at 280,000mts. Following unwelcome rains before and during harvest, and with a better assessment of the quality of the fruit being presented to the processors, the crop estimates are now down to 225-230,000mts. This is a major reduction in total supply and with a large chunk of volume being converted into Raisins, the supply of sultanas for the season ahead looks to be very tight. While the Lira weakness is still largely hiding the actual origin strength so if, and when, the currency does recover this will start to convert to escalating higher prices. Currants Unfortunately and as feared pre-harvest, it looks like 2018-19 season on currants will be another challenge for Greece and for currants overall for the year ahead. Greece has experienced another very hot summer together with unwelcome late rains and this looks to have reduced supply for another year below 20,000mts and likely closer to 18,000mts. This has immediately pushed new season prices up and having made a flurry of early new season sales, the larger packers have now withdrawn in order to see how the market settles in the coming weeks and months.