News from the Field: Summer Crop Update

July 8th 2014 Comments
Summer Crop Update 2014 2

Moving into the summer months, the Silva global team is monitoring the plantings of bell peppers and tomatoes after having supervised and observed the spring harvest of spinach. Our partner growers have largely finished a satisfactory harvest of spring crop spinach. We are seeing good qualities from the 2014 spring crop, with stable fresh raw material pricing—with the exception of German-grown spinach where a wet start to the season resulted in disappointing yields. Slight price increases are to be expected from other origins in Europe, as well as China, due to overall inflationary trends in the opportunity cost of land (Europe, China) as well as continued increasing labor costs (China).

The limited spring harvest of carrots in China did not generate enough material to significantly change current market sentiment. Pricing continues to remain at all-time highs with limited availability of raw material. We do not see any significant change in supply or price until after the onset of winter crop carrots in late November/early December. Additional raw material will be available in late summer from northern growing areas in China, but we deem this supply insufficient to offset accumulated demand and provide a significant change in overall pricing. The limited European carrot supply is largely sold out with new crop available in October/November.

The current bell pepper planting is predicted to be roughly 80% of that of the 2013 crop. We estimate, based on available carry over from 2013, that pricing will remain stable with a spike in price of new crop raw material in September of 2014. Pricing should then soften back to current levels during late fall/early winter, assuming we have favorable weather conditions between now and harvest.

Weather patterns have become increasingly volatile over the last decade, but so far we have seen no notable events this year. The most common weather issue affecting bell peppers is the first frost in the northern parts of China. This frost has a two to three week variability when we can see a substantial impact on harvested and processed quantities depending on the arrival of the first frost. With the first frost, most fields are harvested to protect the peppers. With an early frost, therefore, you see an increase in the amount of green bell peppers produced, as the fruits are not left on the plant to gain full maturity. The total production of red bell peppers then decreases about the same amount as the increase of green bell pepper supply.

Summer Crop Update 2014 1

In addition to the traditional planting areas for bell peppers in the north and northwest of China, bell peppers are also produced in northeast China but the vast majority of processed peppers in this area are green. This planting is promising as current availability is limited and pricing is high. Overall, we expect availability to be good and costs to soften during Q4 2014 from the current high raw material mark. Yet, the record low raw material costs we saw during Q3 and Q4 of 2013 is not expected to return.

Tomato planting is significantly larger than last year, but the main demand for tomatoes is from the tomato paste industry. Early indications suggest that China, after years of over-production of paste, has regained some equilibrium and we expect demand from the paste industry to be strong. Prices for the tomato dehydration industry are largely dictated by the raw material costs in the paste industry. Our current assessment is for slightly increased supply of tomatoes for the dehydration industry, but with initial raw material costs above those of last crop. As the harvest progresses, we believe the increased supply will have a calming effect on fresh pricing and therefore estimate pricing structure of tomatoes to be similar to 2013. It should be noted that currents stocks in China are limited and prices have risen 10-20% during Q1 and Q2 of 2014.

Our team will continue to monitor crop conditions throughout the world and throughout our product line. In time for our next newsletter, we will be able to share additional information regarding bell peppers and tomatoes—with early reports for fall crop carrots, together with an assessment of late summer/early fall harvest of celery.