Market Reports

Have Brazil kernel prices hit the bottom ?

On the back of perceived strong demand during the first half of 2015 (shipments were ahead of schedule and all the signs were there for shortage during the second half of the year) many origin shellers went back into the jungle and sourced additional raw seed. Unfortunately there was a dramatic downturn in demand from about August last year (had the final buyers been stock piling product to prevent being caught out by the frequent price increases towards the season ?) and this extra product availability caused prices to tumble by around fifty cents a pound.

The contradiction to all this is that raw seed prices have remained firm at the equivalent of about twenty five to thirty cents higher than the international traded kernel market. As is widely reported we are currently experiencing another "El Nino" cycle and most experts were anticipating delays to the new crop due to heavy rains, flooding, and the consequent logistical issues. In actual fact we have seen a reduction in rainfall which has resulted in the raw seed pods not dropping from the trees and thus there is a reduction in the availability of raw seed.
Because of cash flow implications many shellers have chased the kernel market prices down in order to clear product to before they can buy more raw seed - but how will they react when they go back for raw seed and find the prices significantly higher than the levels they have just sold their kernel stock for ? It is anticipated that many will sit out and produce less thus further adding to what is likely to be an already short production year.

The recent mini revival of the Euro against the Dollar has meant that at current levels there has been strong interest from Europe, and Germany in particular. As such, with good demand, reduced raw seed availability, and reduced production capacity at origin we feel that there is very little, if any, downside to kernel price moving forward.


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