Newsletter

Currently it is reported that the crop in the main cultivation areas is significantly lower than in previous years. The reason for this is the lack of motivation of many farmers and producers to cultivate Chia. This development is triggered by the extreme price decline in the previous year, after the market was saturated with poor qualities. The Chia boom in 2013/2014 with prices of over 6 € / kg was followed by the crash of the prices to under 1,50 € / kg in 2015.

Many inexperienced manufacturers, some of them even coming from totally different businesses encountered major quality problems due to the constantly increasing requirements from the export markets. A large inventory carryover emerged from this time and some remaining quantities are still offered in Europe. However, since the market is mostly self-sufficient, the number of producers has shrunk significantly over the past 2 years.

Satisfactory harvest results are not expected this year due to persistent rainfall in Argentina and Paraguay, inadequate quality, especially in the organic sector, high uncertainty amongst many producers in South America, which do not know or do not meet the EU directives and restrain demand due to the high price risk.
It remains unclear whether this year the world demand of about 75,000 tons can be covered.

Expected quantities 2017
Paraguay: about 28,000 tons
Bolivia: about 10,000 tons
Argentina: about 4,000 tons
Mexico: about 4,000 tons (harvest already completed)
Nicaragua: about 400 tonnes (harvest already completed)

It was assumed that prices would continue to rise further on, but they began to decrease and finally fell by about 12%. Despite the decline prices were still around 15% higher than the level at end of 2016.
 
Prices varied with smaller up´s and down´s but have been falling noticeably again recently.
Further significant price reductions are unlikely as at the current level the farmers’ incentive to grow guar would be low and this would have a negative impact on the next crop.

The weather forecasts for the upcoming monsoon rain (important for the harvest in October / November) are rather optimistic.
Contact us if there is any short-term need. We deliver promptly from stock.

The time to conclude contracts over longer period of time is favorable.

Fufeng, who is still the market leader has gradually increased prices over the last few weeks, and the others followed immediately, because the long-lasting loss situation was not sustainable for any producer. These multiple price increases are only a first step in Fufeng's view. Supposedly Xanthan gum is still sold under manufacturing costs.

Meihua is currently increasing capacity and will probably be the largest producer by the end of the year.

The demand for Xanthan gum remains at a high level. The gas and oil industry is a strong consumer, as is the case with Guar gum, and also the demand in the food sector is rising.

A few days ago, a slight relaxation was marked by falling freight rates. However, Fufeng has begun a new round of significant prize increases. The other producers will surely follow.

We actually expected this increase for the month of October. We believe, however, that further increases are conceivable in the coming months. We are observing with interest how Meihua will bring the announced additional capacities into the market. There may be a temporary stabilization of the price structure.

We recommend taking into account the current conditions to cover the needs for the coming months.

Dietmar Neupert
5.7.17