Korf Food Products B.V.

Over the past 2 weeks, prices for black pepper from Vietnam have been a little weak. Vietnamese farms, agents and brokers have been actively selling black pepper. This increase in activity is being driven by the need for liquidity to invest in coffee farming. Coffee prices have risen sharply due to lower yields and rising global demand, making it a more profitable business.

So far, China has largely stayed on the sidelines in 2024, buying only limited amounts of pepper. Some traders cite China's economic slowdown, which is starting to be felt, as a possible reason for this, but a more obvious explanation is that stocks are being used up and not being replenished.

There are several possible scenarios for the coming months 1) Origin prices move sideways within a small range (VND 150,000 +/- 10,000) with a possible dip in early 2025 when Vietnamese new crop becomes available, only to quickly recover to current levels. 2) Origin prices move higher following an actual shortage (with China possibly returning to the market). With Vietnam new crop, prices could fall back to current levels.

The Guatemalan cardamom crop has slowed somewhat and appears to be even smaller than previously thought. On the other hand, the Mexican pimento crop appears to be slightly better than expected and prices are a little lower.

We are also seeing some lower origin prices for cloves. This follows a good crop in Indonesia. It will take until early 2025 for this to be reflected in lower spot prices.

The USD/EUR exchange rate is 2% higher than 2 weeks ago. Slightly lower dollar prices are therefore not or less visible in euro prices.

Over the past 3 weeks, prices for black pepper from Vietnam have moved little. Prices from both Indonesia and Brazil have been slightly lower, which is logical as the new crop there is now taking place. As mentioned in a previous update, the Brazilian crop will be smaller than expected earlier in the year. Extreme weather conditions due to climate change will have a lasting impact on the crop. Peppers also face competition from crops that have similar growing conditions but offer farmers better returns. One such competing crop is coffee. Its production is also under pressure. Researchers have found that rising temperatures could reduce the area suitable for growing coffee by 50 percent. Needless to say, what that would mean for (pepper) prices...

Sourcing EU compliant commodities in India remains a challenge, with prices for IPM cumin and turmeric significantly higher than prices for conventional material. For cumin, this premium can be in excess of USD 1000/t! Some local ‘competitive’ offers should therefore be treated with scepticism.

The dollar is weak against many other currencies, including those of the source countries, due to a sharp reduction in interest rate. European rates are also expected to come down again. This is intended to stimulate the economy. Some key industries are facing tough times.

Black pepper prices have risen by around 10% since our last update. Chinese buyers have returned to the (Vietnam) market after a long absence and this has immediately changed sentiment. In addition, crop expectations for Brazil have been revised further downwards. Under ideal conditions, the crop in southern Brazil (Esperito Santo and Bahia) could easily exceed 100 KMT. Due to abnormal weather conditions, this year's crop is now expected to be only around 65 KMT. The Cambodian crop is also smaller than in previous years. As a result, the market outlook remains good through to the end of 2024 and even into 2025.

Freight rates from the Far East to Europe are slowly coming down. The exchange rate of the Indonesian rupiah to the US dollar strengthened by more than 4% in August, resulting in higher nutmeg prices.

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During the first half of August, Vietnamese pepper prices traded in a tight range close to VND140K/kg. This week we have seen a little more activity and as a result prices have risen by 3%. The market was somewhat subdued with US and European buyers enjoying their summer holidays and Chinese buyers remaining on the sidelines. International traders turned to Indonesia for slightly better offers. The new crop of Brazilian pepper is just around the corner, so the market outlook for the near future is fairly stable, although the fundamentals remain strong.

Initial prices for new crop pimento are at the same high level as last year. The crop in Mexico has only just started and if the crop is good, prices may come down a little. The Guatemalan crop, like that of cardamom, appears to have suffered from the drought earlier in the year.

The new autumn crop of star anise in Vietnam looks good and prices have corrected downwards. However, the first shipments are not expected before late October. Until then, spot prices will remain high.

Extreme weather conditions are causing crop uncertainty around the world. In many cases, farmers can no longer rely on yields that were previously considered normal. This is true of the cloves harvest in Indonesia. Although this year's crop is good, we hear that some farmers, particularly in the Moluccas, are beginning to switch to other, more stable crops.

Over the past week, Vietnamese pepper prices have gradually fallen, in search of a new level of support. Farm gate prices at origin are hovering around VND 145,000 per m/t. So far, China has stayed on the sidelines, buying virtually no pepper from Vietnam. We understand that Chinese importers still have over 40K m/t in their warehouses and are in no hurry to buy. However, at the beginning of 2024, this buffer stock was supposed to be around 100K m/t, which means that it has decreased considerably. At present, the trend is still bearish. New harvests in Brazil and Indonesia have started and sufficient material is available. Slower sales and longer transit times cause a liquidity crunch with exporters. Moreover, banks are increasingly unwilling to finance positions.

Financial markets are quite turbulent. An unexpectedly high inflation rate in the EU has greatly reduced the likelihood of a further rate cut, resulting in a markedly firmer EURO exchange rate. This further contributes to lower prices.

So far in July, pepper prices moved sideways within a narrow range. Buyers and sellers are waiting for news about new harvests in Indonesia and Brazil. Although the crop in Indonesia is expected to be larger than in previous years, it will still not have a major impact on the market.  As for Brazil, the crop has been delayed and good quantities for both Para and Esperito Santo origin are not expected to become available until September. The crop is expected to fall short of previous forecasts.

We understand from India that new plantings of chilli and turmeric have increased from last year. In anticipation prices for turmeric already have come down somewhat.

Cloves prices show some weakness now that new crops become available. Indonesia is expected to have a good crop of around 100K m/t.

Cardamom prices remain extremely high. This year the anticipated Guatemala crop will only be around 20K m/t which is just 50 % of a normal crop. Plantations suffered from the extreme drought and it will plantations take years to recover.

Weather conditions worldwide remain a great cause of concenr. Where some origin countries suffer from heat and drought others are jeopardised by tropical storms and excess rain.

Over the past 2 weeks, pepper prices again have been volatile. First, the price of black pepper in Vietnam fell to around VND 145,000, only to rebound quickly to over VND 160,000 when the market faced good demand. In recent days, the market has been slightly weaker again. Brazil hardly offers any pepper and prices are higher than in Vietnam. We hear that the Esperito Santo harvest will be late and 20-30% smaller than initially expected. Poor weather conditions are to blame.   

The supply of EU-compliant cumin seeds remains problematic. The same goes for other Indian seeds and turmeric.

Prices for most spices are firm. Freight rates from Asia to Europe are rising, further supporting the market.

The European spot market is somewhat slow. Rainy weather and low temperatures are keeping people indoors instead of sitting at the BBQ. Companies serving that market segment are extra affected.

This week, Grenada and other Caribbean islands were hit hard by Hurricane Beryl. The storm is expected to reach Mexico this Friday. Never before has there been a tropical storm of this strength so early in the year. Oceans are the main drivers of hurricanes and many factors are involved in their formation and intensity. As a result of El Nino, sea water temperatures in the Atlantic are (much) higher than normal. The World Meteorological Organisation (WMO) said Beryl "sets an alarming precedent for what is expected to be a very active hurricane season." It is possible that this will affect upcoming crops.

The sharp price increase of pepper continued into June. We saw origin prices peak medio week 24 around VND 175,000 before coming down a little. Prices for VBP now seems kind of stable at levels around VND 160,000 with clear support. This origin level corresponds with a price in USD of around USD 8,150/ton CIF for 550gr/l STST EU compliant. Brazil is quoting above this level with just limited offers. Once the new crop starts here we possibly see more competitive prices. Overall sentiment and fundamentals are unchanged.

New crop garlic prices in China move sideways. The market is supported by stockists buying freshly produced flakes. They still have older crops dehydrated material in the books and don’t want prices to come down.

Weather worldwide remains a source of great concern. 2024 seems to be going the warmest year ever (following 2022 and 2023 … !). Temperatures especially in the Middle East and North India are well above 40 degrees celsius for some time now.

Freight rates for both 20ft and 40ft containers remain extremely high. For pepper coming from Vietnam the freight is around usd 300/t !

During May Vietnam pepper prices rose with a staggering 50%! One could compare the market to a volcanic eruption. For months it has been rumbling and there were signs that something was about to happen. Signs that were ignored by many of us in the hope that an even better buying opportunity would come along. But once the resistance level of VND 100,000 was broken, the way up was wide open. This current strong upward market trend might continue for some time.

Indian IPM Cumin prices are slightly higher following good demand. Syria new crop will start shortly but we understand that crop quality suffered from rains. Many farmers in both India and Syria cultivated cumin instead of other crops. Prices of nigella seeds moved up considerably.

Continued drought in both Central America and Mexico is a cause of concern for the upcoming cardamom and pimento crop. Cardamom origin prices already reacted and moved up further to well above USD 20/kg for MYQ.

Increasing freight rates also cause prices to rise.

Last week, the price of black pepper in Vietnam broke through the resistance level of VND 100,000. Demand remains unchanged good with China becoming a little active. During the week the prices lingered around the 105K level. Buyers need some time to digest these higher prices. Meantime weather conditions in the highlands are of great concern with high temperatures combined with drought. The impact is limited for the current crop, but all the more so for future crop(s). Like coffee, pepper plants need a lot of water and do not tolerate drought well.

Mexico and Central America are also experiencing high temperatures and drought. Cardamom crop expectations have been revised downward and prices have continued to rise with virtually no offers from origin.

Turmeric prices remain kind of high and will likely not come back to the lows we have seen before. Cumin prices plummeted with the new crop coming available. The spot Europe price is still high as new crop shipments did not arrive yet.

Since our last market report (9 April), we have seen black pepper prices make a perfect U-turn. First, origin prices dropped from VND 98,000 to 91,000 only to rebound to the old level in a few days (18-20 April). Strong overall demand pushed prices up again. Farmers received very good prices for competing crops, like coffee and durian, and anticipate a further price increase. Looking at the market in a technical way, we can say that there is clear support at VND 90,0000 and (so far) resistance at VND 100,000. Contrary our previous market update we now anticipate prices to pick up further.

In Egypt the new crop of herbs and seeds is about to start and attractively offered. Shipment however will be earliest late May and before goods are available in our market it will be late June.

The Indian onion crop has almost finished. This year prices for dehydrated onions started higher and did not come down during the crop as they mostly do. Prices therefore will be higher than in previous years.

Global weather conditions are still under influence of El Nino. Vietnam and the Philippines suffer from drought whereas China, Indonesia and Central America are likely to receive excessive rains the coming months.

Apart from that the global political situation remains invariably tense. Due to the conflict in the Middle East, the shipping route through the Red Sea and the Suez Canal remains unsafe. This forces ships to take the longer shipping route via South Africa. As a result, shipments are en route 1 to 2 weeks longer.

With low economic growth rates, inflation in Europe seems under control. The ECB expects interest rates to gradually fall to 2% by 2025. The US economy is expected to grow by 2.5% in 2024. As a result, we see the dollar exchange rate strengthening against the euro.

Throughout March, Vietnam pepper prices ex farmer's gate moved around VND 95,000. We can take this as a sign of firmness. The crop benefitted from favourable weather circumstances and will be about the same as in 2023. Farmers though have enough liquidity and are stocking material as they expect to get a better price later in the year. Meantime, the harvest in Vietnam is about 80% complete. In Cambodia, to the contrary, the harvest only just started. It is anticipated to be around 20KMT which quantity will also have to find its way to the world market via Vietnam. This caused prices to come down 1-2 % in the past few days. China's role in pricing and sentiment is important. It has bought substantial quantities in recent years. In 2024 however, up to now very little. We understand that the Chinese importers still have ample stocks and are quoting prices for old crop material (2022/2023) below Vietnam's current price.

In view of the above, we believe that pepper prices will remain firm with just limited downside risk. At the same time, we do not expect prices to rise in Q2. Later in 2024, the situation may be different.

Chinese garlic prices are moving up and down with usd 300/t. Like with pepper speculators are trying the catch the momentum but new crop is getting closer and It seems it will not be that bad after all.

The Indian onion crop is commencing well and will be finished by late April. Normally we see prices dipping when the flow of material is at its peak. This year the situation seems a little different. Even though the Indian export ban for fresh onion is still in force, prices for dehydrated material move up gradually.

During the past 2 weeks pepper prices have been moving sideways. This itself shows the strong fundamentals in the market. With a new crop in Vietnam in full swing plenty of material is available and prices are still staying in the higher regions.

Overall we see prices ruling firm. The upcoming Indonesian crops of nutmeg and cloves are anticipated to be good and prices have been kind of stable without too much upward potential.

Indian harvests of cumin, fennel and other seed spices have started and prices are expected to come down somewhat, especially that of cumin.

After peaking 2 weeks ago Chinese garlic prices came down a little this week. It is still too early for reliable information about the new crop in May.

The exchange rate of the USD/EUR is slowly moving a little higher pushing up prices listed in EURO.

After rising sharply during the first months of 2024, pepper prices now seem kind of stable at a higher level. The new crop in Vietnam is commencing well but exports fall somewhat behind compared to previous years. This situation may change quickly when Chinese buyers become active.

 As for cumin the new crop situation in India looks promising. The weather has been favourable in the growing areas. Meantime the harvest started and the first quotations look attractive. First shipments will be effected medio April to arrive In Europe somewhere in June. 

The same counts for the Indian onion harvest. March-April should be good months to cover your demand for the upcoming year.

For now clove prices remain firm. Indonesia is said to expect a good crop that will start in June. This may change the sentiment. 

The shipping situation in the red sea remains troublesome because of Houthi attacks and most shipping companies have re-routed their vessels via Cape of good hope. Transshipment times from the Far East to Europe are now 6 to 8 weeks. As this situation now has become kind of normal  freight rates slowly come down a little.

Over the past 2 weeks, we saw a sharp rise in pepper prices. Most Vietnam pepper farmers also cultivate coffee as an intermediate crop. The current high coffee prices have given them a strong financial fundament and there is no urge to sell their pepper quickly. Apart from that the pepper carry-over in Vietnam is small while the expected 2024 crop is just about 180,000 m/t.  If Vietnam exports at the same pace as previous years, we will face a serious squeeze at the end of 2024. In our view, China's role in this is important, with (speculative) purchases by Chinese traders having a major impact on sentiment and pricing in recent years.

Several other products also experienced sharp price increases. Disappointing harvests caused prices of chillies and turmeric to rise sharply.

The price of (dried) Chinese garlic also made a jump of more than

US$ 500 per m/t. Extremely cold weather in northern China has fuelled fears that the upcoming harvest could be smaller. We have also seen this happen in previous years and falls under the category of speculation. After all, there are still significant stocks of garlic in China.

After a sharp rise in late 2023, pepper prices now seem to be stabilising. Vietnam, India and also Indonesia experienced good rains and growing conditions and therefore good volumes can be expected. The planted area in Vietnam is slightly smaller and the expected crop will be slightly lower than last year.

The Nigerian ginger crop turned out to be extremely poor and prices rose sharply because there was no material available. Prices from India and China are also high. Do not expect low prices in 2024.

The new onion harvest in India has now started and the first price quotations are trickling in. While these seem reasonable, we expect slightly lower levels in February. Available SPOT material is still very limited and premiums have to be paid.

Turmeric prices remain high. The upcoming harvest in India will be about 20% smaller. Cumin and fennel seed crops will be larger and prices for these products may fall. Availability of EU-compliant IPM grades remains tight and significant premiums have to be paid.

Geopolitical tensions continue to affect our trade. Attacks on ships in the Red Sea by Houthi rebels have led to sharply higher transport rates and longer container transit times. This has led to rising prices.

During November prices of black and white pepper gradually increased. The price for farmgate BP now moves around 75000 VND per kg without much pepper being offered. Brazil prices also surged in sympathy with Vietnam prices and especially offers for sundried pepper are limited. To us it seems like a technical squeeze with short-sellers trying to cover for nearby positions. Too early yet to state that the trend changed to bullish. The upcoming Vietnam crop will be smaller around 175KMT but any real supply deficit will only become apparent during 2nd half 2024.

Madagascar clove prices remain firm. Export licenses meantime have been issued by the government and first containers are about to be shipped. Good demand is keeping prices at a high level.

Cardamom new crop prices seem to settle at higher levels. For MYQ we hear prices around USD 9/kg CF EMP, green 2P is quoted little below usd 20/kg.

Nutmeg prices are slightly lower. Dry weather caused by ‘El Nino’ has been favourable to the ripening of the nuts resulting in a good crop.

The upcoming India chilli crop seems promising. Turmeric prices though are likely to remain firm as the crop at its best will just be moderate.

The US$ /EURO exchange rate came down with 3 % in favour of the EURO tempering SPOT prices.

Pepper prices remain somewhat weak, but sentiment could change quickly. Brazil Para is suffering from severe drought while the south has experienced abundant rainfall. This will inevitably lead to a higher plant failure rate and yields falling in future years. Harvests in Vietnam will also be somewhat lower in coming years. Due to weak demand, a response has so far failed to materialise.

Weak demand especially from China also negatively affects prices of other products. Enclosed an article that looks at this in a bit more depth.

Madagascar clove prices remain firm. The new crop started but the trade eagerly awaits export licenses by the government in order to ship out goods. Good demand from India and Indonesia is keeping prices at a high level. 

Cardamom prices have recovered strongly now that the upcoming harvest in Guatemala will be 20-30% lower due to drought.

Due to the 'El Nino' drought in Central America the number of ships that can use the Panama canal daily is strongly reduced. The slowing world-economy is causing transshipment times to increase anyway. Uncertainties about the state of the economy, interest rates, ongoing conficts, climate change, etc cause companies in all sectors to reduce their stocks.

Worldwide trade is slowing down, this week we were alerted by a freight agency about the following :

Cancelled sailings trackers - Weekly analysis: 15.09.2023

Across the major East-West headhaul trades: Transpacific, Transatlantic and Asia-North Europe & Med, 104 cancelled sailings have been announced between weeks 38 (18 Sep-24 Sep) and week 42 (16 Oct-22 Oct), out of a total of 665 scheduled sailings, representing 16% cancellation rate. During this period, 57% of the blank sailings will occur in the Transpacific Eastbound, 37% on Asia-North Europe and Med, and 7% on the Transatlantic Westbound trade. Over the next five weeks, OCEAN Alliance has announced 35 cancellations, followed by 2M and THE Alliance with 19 and 18 cancellations, respectively. During the same period, 32 blank sailings have been implemented in non-Alliance services. Against previous weeks we are seeing a significant decline in carrier service reliability. Over the next five weeks, on average, 84% of the ships are expected to sail as scheduled. In terms of ocean freight rates, Drewry’s Composite Freight Index resumed its downward trend this week, with a drop of 7% to $1,561. Weak peak season volumes and an oversupply of capacity on East-West trade routes have all contributed to the downward pressure rates. Despite a surge in blank sailings and reductions in vessel sizes, there have been few announcements of complete service withdrawals; downsizing operations alone may not be sufficient to reverse the recent fall in spot rates. Shippers and BCOs are advised to remain attentive, as these developments could potentially result in schedule disruption and delays in cargo movement. Source : Drewry WCI

So possibly shipments can be delayed with an increased transshipment time !

We see pepper prices continue to move sideways for the time being.

China garlic prices seem to bounce back a little from their previous lows. Origin prices for granulate range from 2150 CIF for dark qualities to usd 2750 CIF for first quality. Corresponding spot EU prices range from EUR 2,75 up to 3,35/kg FCA

Due to the earthquake in Morocco rosemary prices gained momentum.

During the past 2 weeks, pepper prices moved sideways. Vietnam sold most of its crop but thanks to imports and carry-over from previous years, it still has pepper available. The crop outlook for 2024 seems good and buyers are reluctant to cover forward positions at premium prices. Unexpected demand possibly may cause a squeeze in Q4 with somewhat higher prices but once new Vietnam crops becomes available prices likely fall back to the current level.

El Nino keeps influencing the weather worldwide.

The south of Indonesia is suffering from unseasonal drought. This is good for the pending nutmeg crop that is in the ripening stage. Other crops like pepper, cloves and more importantly rice are negatively influenced by this. Other producing countries like India and Thailand also carry low rice inventories.

Closer to home Turkey and especially Greece have been hit severely by storm ‘Daniel’.

China garlic prices have come down with some 20 % since medio July. Price forming of this commodity is not just resulting from supply and demand. Speculation plays an important role. The USD exchange rate is gradually moving up …