News from the Field: Fall Crop Update
In our fall crop report, we'll look at the current market for bell peppers and tomatoes, make a brief assessment of expected developments of our winter crops, and look at the conditions within various regions of the globe that Silva utilizes as raw material points.
The east coast of China has not seen very favorable weather during the late spring and summer. We have seen dry conditions in the northeast while the southeast has been seeing higher than normal rainfall. Although spring and summer crops mostly have fared well, it raises concerns for upcoming winter harvests of carrot, spinach, cabbage, and leeks. It is too early to predict the real impact on dehydrated quantities, fresh yields, and pricing. We remain cautiously optimistic that late 2015 and early 2016 will remain fairly stable in terms of pricing. The recent devaluation of the Chinese yuan is providing some buffer for expected smaller upward movements in raw-material costs.
We also want to cover the 2016 crop developments on bell peppers and tomatoes in the north and northwest of China. We are quickly approaching the end of the production season in these areas and our Silva China team has spent the summer supervising productions and conditions at our raw-material partners.
The market on green bell pepper has risen sharply over the last two months. A sharply reduced planting area in Shanxi, the main planting area for green bell peppers, combined with environmental controls imposed by the Central Beijing Government ahead of the September 3rd 70th WWII anniversary, have resulted in a very limited production. Other planting areas have produced some additional material but pricing remains very firm. We see pricing 30-50% higher than in 2014, with potential for additional increases as the market tightens during the second quarter of 2016. We expect the market to end up very tight with limited supply during Q2 and Q3 of 2016.
Harvest and production of red bell pepper is currently ongoing in Inner Mongolia, Gansu, and Xinjiang. Our estimation is for a total production of roughly 60-70% compared to last year. A reduction in planting area (65,000mu in 2015 compared to 90,000mu in 2014) as well as a reduction in the number of producing facilities due to environmental controls imposed by the local government in Inner Mongolia has contributed to a reduction of total output. However, carryover stocks from the 2014 crop remain at healthy levels. The weather has been largely cooperative this year, with a normal production season generating good quality raw material. We have seen the first few nights with frost over the last week. With the first onset of frost we typically see the production winding down. It is anticipated that we will only see one more week of dehydration as the availability of fruits will dwindle following a few nights with frost.
In short, we see a red bell pepper market with sufficient quantities to support global demand. We would expect average pricing in 2015/16 to be similar to the market in 2014/15. We see a market with slightly lower offers early in the season compared to last year. However, based on produced quantities we believe that future softening will be limited, resulting in a very similar average price level compared to that of last year.
The dehydration industry is benefitting from a strong tomato planting based on the requirements from the tomato paste industry. Silva is seeing good quality from all planting areas (Gansu, Xinjiang, Inner Mongolia, and Ningxia) and quantities are larger than last year. Yet, farmers’ expectations for fresh prices remain fairly high based on pre-contracted volume with the paste industry. We expect the increase in quantity of both fresh and dehydrated material to have an effect on price with 2015/16 pricing moderately lower than what we have seen with material from 2014 crop.
As we look into the crops throughout much of Europe, there are many crops that have seen difficulty due to adverse weather conditions this growing season. Earlier in the season, low rainfall was seen and up to 40-50% reduction occurred in some areas. The summer weather then brought very hot temperatures and also high winds, which intensified the drought-like conditions. These conditions limited the harvest yields of items like carrots, green beans, red beets, and many herbs like cilantro, chives, parsley, and dill.
Within Israel, the sabbatical year had a large impact on available raw material as the fields are at rest under these religious guidelines. The Jewish calendar just reached the new year, however, and this sabbatical year is now over. Moving ahead, this region for crops like parsley, cilantro, and dill and other herbs will open up for use in our production of kosher certified ingredients.
Other areas of note include portions of northern Mexico that experience heavy rains during the summer months. Crops like jalapeno and other chile peppers from this region were affected and low yields were seen. Various regions Silva utilizes for raw material throughout South America experienced stable weather and balanced crop yields, we are happy to report.
Silva’s Raw Material and Quality Control groups continue to work each day internationally, to monitor both raw material availability and also the quality of the raw material we bring into Silva’s finished good production facilities within the US. For any further discussion, please get in touch with your sales contact.