Early Fall Crop Update
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The harvest and dehydration of bell peppers is just finishing up in the main growing areas. Harvest in China’s Inner Mongolia province, the world’s largest producing region, started roughly one week later than normal due to cold weather. The crop in 2013 has been very healthy with good qualities to be expected. The planting area, estimated to be 16,500 acres, is similar to that of last year’s crop. In 2012 part of the planting area was badly damaged by late season rains and flooding. This year we have seen less rain but colder temperatures, which has delayed the maturity of the fruits.
Pricing of fresh raw-material has been mostly stable at lower prices than in 2012. Silva estimates the total output in Inner Mongolia will be slightly larger than that of previous crops. As a result, we are seeing some decline in pricing with the expectation that the current crop will ensure global demand is met while providing for a normal carry-over position into the 2014 crop. Currently the price on dehydrated material is stable and we expect the market to remain stable through the end of the year.
Other producing areas—both in China and other places around the world—are also in production with the exception of South America who will produce again in early 2014. With Inner Mongolia being the dominant producer, other origins are often pricing the product based on the overall market expectation rather than actual costs. The price of fresh raw-material in these areas are higher than what we are seeing in Inner Mongolia this year, leading to reduced production compared to last year. We expect to see a slight premium required for Chinese bell peppers outside of Inner Mongolia and the usual premium for non-Chinese material.
The planting area throughout China's main producing regions—Xinjiang, Gansu, Ningxia and Inner Mongolia—was greatly reduced in 2013 compared to 2012. The planting of tomatoes is largely driven by contracts from tomato paste producers. Pricing is mostly fixed based on these contracts and the decrease in the planting area did result in higher contract prices for fresh material. Dehydration of tomatoes has ended earlier this month and pricing is stabilizing at levels 15-20% above last year’s level. We expect available quantities from 2013 crop to be very limited starting Q2 of 2014. We recommend securing your 2014 tomato quantities soon with your Silva sales contact.
Traditionally the main planting area for Chinese celery has been Ningxia province with two cuts in late summer and early fall. The main market for dehydrated celery is the United States with very limited quantities used elsewhere. The competitive environment coupled with limited growth in prices in the U.S. have made this crop increasingly unattractive for Chinese farmers. We are seeing the smallest planting area in over five years in the main producing area with farmers favoring other cash crops as well as government sponsored initiatives for growing wheat and corn. We therefore expect limited supply and increasing prices out of Ningxia in the months to come. Silva has been working over the last four years with our raw-material partners in expanding our options and we are today sourcing celery from six provinces in China. We did start dehydration together with our partners here in September and will continue throughout China through the end of January. We are in a good supply position although with slightly higher costing as a result of our diversification efforts.