GENERAL
As the world economy continues to recover from the recession, the majority of
commodities have recorded price increases in the year to May 2010, with non-food
commodities having broadly shown greater upward year-on-year price movements
than food commodities. Whilst for some commodities, like pulp and paper products,
this increase has been driven by production or stock levels, other commodities have
been subject to renewed speculative activity. However, in most markets prices have
not yet reached the highs of 2007/08.
- Against the $, sterling opened the month at 1.46, dropped mid month and rallied to
1.47 as at 15th June.
- Against the Euro, sterling opened the month at 1.17, and has continued to increase
to 1.20 as at 15th June.
CRUDE OIL
The price of Brent crude oil fell sharply during May by 17% as energy prices fell as
concerns over the stability of European government debt spilled into the energy
markets. There are worries about long term demand in Europe and Asia. The
wholesale price of diesel fell by 14%.
FATS AND OILS
Vegetable oil prices ended the month mixed as global consumption of the major
vegetable oils is expected to exceed total production in 2010/11. Rapeseed oil
continued to trend upwards whilst Soyabean oil prices fell by 3% due to improved
crop volumes. Palm oil prices have started to fall and Olive oil futures rose by 2% in
Spain.
DRIED FRUIT
RAISINS - Perhaps as a response to California’s significantly increased exports this season from
a similarly reduced total crop, the implementation of the export program has been
torturous and once ratified, “only” covered the period up to end May.
A new program for the period June-September has not been proposed and packers
are waiting on USDA sign off.
While Californian raisins report a 23% increase in exports, so bizarrely does Turkey
report a 23% decline, and so the size of the Turkish new crop in addition to this carry
in, is fast becoming increasingly significant.
SULTANAS - There is a difference of opinion on the potential size of the Turkish new crop.
Recent reports suggest that the crop itself is significantly more “patchy” than would be
optimal, and reports suggest a figure of 280,000mts would take supply from optimal to
average. For that reason, (and clearly in the UK made worse by the weak Pound
against Dollar) prices have stabilised and although no one suggests that prices should
climb back significantly, for sure we have seen a sense of cautiousness return with
origin sellers for now at least, reluctant to offer lower until the new crop picture is better
assessed in the coming weeks.
CURRANTS - Although the widely reported news continues on Greece’s on-going battle to stop itself
falling into complete economic collapse, the problem on Currants is more about
availability rather than any other fundamental. It is recently reported that uncommitted
stocks, even in the hands of the larger packers are running increasingly tight and
although there is no suggestion that contracts confirmed earlier will not be honoured,
the quantities of remaining “free stock” appears to be fast diminishing. For the UK at
least, the origin strength has been offset by the weakness of the Euro against the
Pound and prices remain stable.
DAIRY
Butter prices continued to move upwards over the past month with the largest
increases of 20% seen for EU origin,due to very tight supplies in the market in
general; New Zealand butter was also up 11% as supplies from Oceania are reported
to be very low.
Price increases continued in the powder sector; however, these rises have been more
moderate. WMP continued to rise by 8% whilst SMP was up 6%. Milk production in
the northern hemisphere is expected to fall seasonally from May onwards which
should continue to support prices. Whey powder was down slightly across the
markets. UK cheddar was up a further 3% as increases in price have been
implemented to match the returns available from other dairy products. Cream was
sharply up 14% as it is moving in line with increases seen in butter.
COCONUT
Once again, the on-going impact of the weak currency since our last report has
continued to squeeze UK prices seemingly ever higher. Given that Sterling alone has
depreciated by 12% since the (recent) highs in early 2010, and set against reports of
drought reducing production in the Philippines and a recent period in which origin
sellers were fully committed, thereby reducing UK stock holdings and creating a time
lapse between the end of “buffer” uncommitted stocks and likely replacement, this
has resulted in prices jumping significantly from the lows seen at the start of this year.
PAPER
Prices for pulp and paper products continued to rise across Europe due to very low
stock levels and improving industrial demand. EU NBSK pulp prices continued to
move upwards World stock levels of pulp were reported to be at 25 days, 2 days
lower than the stocks held in March. The average price of testliner rose by 5% in the
EU, with kraftliner, fluting and Cartonboard rising by 6% on average in the EU.
