Korf Food Products B.V.

International trade is still struggling with the (in)direct consequences of the Covid-19 pandemic. Global production and transport have been disrupted and need time to recover. In addition, harvests are increasingly (negatively) affected by climate change. Normal patterns that formed the basis for purchasing strategies are less evident. Overall we see firmer prices for agricultural products and spices. Higher fuel prices and high freight tariffs are fuelling inflation.  

Over the past 2 weeks, pepper prices have risen by some 10%. Prices price by now are about 75% higher than at the beginning of 2021. Available stocks in Vietnam are small and in financially strong hands.

The US dollar gained 2 % to the EURO over the past month. Political tensions and the threat of conflict make investors turning to the USD, which is still considered a safe haven.

We are facing an invariably difficult market with rising prices due to logistical problems (at several points in the chain).

Apart from the high freight rates, we now unfortunately also have to conclude that containers are travelling longer and that arrival times have become unpredictable. This will remain the case for the foreseeable future. There is currently a significant shortage of capacity and, although many ships are being built, this is expected to ease by mid-2022. It should be noted that various mergers and partnerships on the supply side have created an oligopoly which should be able to keep rates high.   

Pepper prices continue their gradual rise. There are regular problems with black pepper from Brazil in which salmonella is found during inspections by the food authorities. EU Authorities are (still) not very receptive to the fact that Brazilian black pepper is a raw material that will undergo further processing prior marketing. 

Prices therefore seem to lag somewhat behind those of other origins. The prices of pimento are very firm. This is a market that is dominated by a small number of larger exporters and importers.

After a few weeks of relative calm, a new momentum for garlic prices seems to be emerging.

In the past two weeks, we have seen rising origin prices caused by a combination of factors:

- Further increasing transport costs 
Until recently, this was limited to the routes from the Far East (China, Indonesia, Vietnam, etc) to various destinations.  In the meantime, the tariffs from India have also risen sharply and we see a clear upward trend for other routes too.

- Covid19

  In Europe, the situation seems to be normalizing now that many people have been vaccinated.   In many countries of origin, this is not (yet) the case and lock-down situations are in place causing factories to run at reduced capacity.

- Disappointing harvests

In previous market updates we already mentioned small harvests of cloves, garlic and pepper. Due to the hot dry summer in Northern and Eastern Europe, we now also see lower crops of mustard, coriander and caraway seeds. Also the oregano crop in Turkey is affected and meantime the price moved up considerably. In addition of above the dollar exchange rate has risen by 2%, which translates into higher euro prices.

The past 2 weeks have been relatively quiet on the SPOT market, which is normal at this time of year. Many companies are closed for the summer holidays or are working with reduced capacity.

Pepper prices remain firm. Vietnam's 2021 exports reached 180 KMT by the end of July. (This is quite an impressive figure, as the estimated crop for 2021 is only 225 KMT).

The situation for dehydrated garlic from China is complicated. The price for fresh 2021 garlic is high and therefore it is hardly used for drying. Almost all dehydrated garlic shipped is coming from 2020 (or older) crop material.

The recent extremely high temperatures in Turkey may have had a negative effect on local harvests. In anticipation of this, prices for oregano have risen somewhat.

Prices for staranis of origin seem to normalise after having peaked earlier this year. Freight prices are still rising and we see no signs that this will reverse soon. We are told that global freight volume will increase by 6% this year and freight capacity only by 3%.

Today we see a fairly strong US$ (EUR 1.00 = US$ 1.175 Attached please find our price-list. Prices are indicative – subject our final confirmation.

We see an unchanged active market with good demand for a wide range of products.

Pepper prices are slowly moving a little further up. Physically there is enough pepper available, but a large part of it is in the hands of collectors, traders and exporters that only slowly release product. The upcoming new harvest in Brazil may provide some relief. The crop estimate is slightly higher than in 2020 - 95KMT The first signs for the 2022 Vietnam crop also look good. (good flowering and weather conditions). Worldwide demand for pepper is increasing with 2% per annum which forms a solid foundation for the price.

The market situation for Mace and Nutmeg remains (very) difficult resulting in high(er) prices. Worldwide supply in 2021 is anticipated to be 10 % lower than in the previous years.

The high temperatures and severe drought in Canada and parts of (East) Europe are reason for concern.

Shipping charges from Asia to Europe remain extremely high. Exporters and importers have to pay for these, they do not have a choice but slowly reluctancy is growing. We witness some exporters (deliberately) delaying shipments of older contracts as execution means taking losses. SPOT available inventories seem to slowly decrease.

Over the past weeks we have seen a fairly active market with further increasing prices.

Vietnam black pepper prices slowly move a little higher. In the months to come Indonesia and Brazil will be more active as seller now that also there new crops become available.

Nutmeg, cassia and especially clove prices are very firm.

Freight rates remain a concern. Especially those from Asia to Europe are at an all-time high and are not expected to come down shortly.

We have started a pilot with sustainable grown black pepper : pepper coming from a Rain Forest Alliance program. This pepper comes at a slightly higher price than standard pepper. When we meet good support from the market we will expand this. (when interested please contact us for further information)

Covid-19 casualties In Europe are clearly less now that more people are vaccinated. In other parts of the world the virus is still very much present and it continues to affect our business.

The US$ today stands at 0,84 to the € (up 2 %)

After some quiet weeks during which pepper hardly moved we now see more activity with FOB prices that are 3-4 % higher. 

What is worrying is the fact that freight charges keep rising and have become a serious cost component. Before the Covid-19 pandemic we were calculating usd 75/t freight-cost for pepper from Vietnam, now  in between usd 400 and 600 per m/t ! These extremely high charges are applicable for shipments from Indonesia, Vietnam and China to Europe. Worldwide demand for container space stands at an all-time high (see attached DHL ocean freight market update that pretty much sums it up).

We see clearly higher (FOB) prices for cloves and nutmeg.  Also garlic prices are firm. Chinese garlic producers claim that the 2021 harvest is 10-15 % smaller compared to 2020.

During the past 2 weeks pepper prices moved sideways. The most recent Vietnam crop reports mention a crop of around 200-220K m/t. This means a smaller decline than initially anticipated. When this proves to be correct it means that the 2021 pepper carry-over will only be slightly smaller than in 2020. This partly results from a lower worldwide demand due to Covid-19 pandemic that is still very much around.

As already mentioned in a previous market updates the Indonesian clove crop looks (very) small. Prices already moved up considerably and we feel there is room for further increase.

China garlic prices also gaining momentum. The crop of fresh garlic is said to be 10 % lower than in 2020. We feel there is a decent carry-over of flakes from previous crop years that will temper the price-increase.

With Joe Biden in charge, the USA are working on an ambitious plan to revitalize its’ infrastructure and social institutions. Even though this will lead to an even higher deficit, so far it did not affect the exchange rate of the US$

After peaking late March / early April origin pepper prices came down with around 10 %. This seems a technical correction. Prices moved up very fast and buyers need time to accept these higher levels. Also the demand was kind of slow due to the Ramadan period. The trend for the rest of 2021 should become more clear in May.

The outlook for Indian origin produce remains troublesome. For most products there are a number of quality aspects to be safeguarded and regularly batches fail to pass one of these. Apart from that the country is now ranking no.1 for Covid-19 casualties which has a great impact on everyday lives. Many local markets are in lockdown for the coming weeks causing tight supply situations.

Worldwide container transport logistics are still difficult resulting in high freight rates. One needs some knowledge of all these global matters to understand market developments.

Pepper prices seem to have stabilised at a higher level. The Vietnam crop has almost ended. We anticipate the size will be around 200K m/t.

Clove prices increased following the news that the Indonesian crop will be small this year. Normally Indonesia produces and consumes around 70% of the world production. They may have to import later in the season. This year prices already increased by some 40%.

The Chinese garlic harvest is about to start and is anticipated to be a little lower than last year. This might be a good time to cover your needs. Freight charges are still very high and when buying on FOB basis buyers may benefit from lower rates later in the year. The transport of various products from origin countries is a real challenge.

Due to last year’s locust attack and unfavourable weather in India it’s difficult to find EU compliant goods. To defend their cash crops from failure many farmers increased the use of pesticides. Buyers in Europe have to get used to paying (much) higher prices for EU quality. Certification, quality measures and laboratory costs have become a very serious cost-component.

Attached please find our price-list