You are here

Market reversal as expectations for ample supplies weigh on markets

1 October 2019

The current provisional estimate for the 2019 planted area stands at 118Kha. However, the 2019 planting went well, and considerably better than the challenges growers’ faced in the previous season. A milder than average winter and a generally warm and sunny early spring led to good planting conditions, with many growers finishing well ahead of plans.

Despite recent weather challenges, with regionalised wet conditions interspersed with hot temperatures, the expectation is for a return to average to good yielding crops. In this light, final production may well be upwards of 5.5Mt.

Due to the perceived surplus for 2019 and availability of supplies, the free-buy market has been falling away since lifting began.

The effect of better yielding crops has been two fold on the free-buy market. Both the volume of material for free-buy has increased, as has the availability of contracted supplies. This is especially true for the packing and processing markets. As a result, there is a greater supply of material for these markets.

Further, although continental Europe is suspected to be short of supply, the degree of this deficit is likely reduced on the previous season.

Looking ahead, unless large scale processors and pack houses meaningfully step into the free-buy market, then prices could remain under pressure.  

Chipping prices have also been pressured. Similarly, better yields have been recorded in the chipping sector, with good bag counts and frying properties facing an average domestic demand.