Food and associated commodity price movements for August 2019. Enabling food procurement teams to track the impact of market price movements to reduce their raw material costs.

1. EU and Mercosur reach free-trade agreement
Global Tea Index
US egg prices hit two-year low
Vietnamese prawn exports expected to improve
Plummeting vegetable prices decelerate Russian inflation
World barley production forecast to rise
US pork exports set to rebound
Russia lifts its ban on imports of US peanuts
Brazilian soyabean exports to China down

2. This months most significant price movements across the food & associated commodity markets.

3. EU and Mercosur reach free-trade agreement
Global Tea Index
US egg prices hit two-year low
Vietnamese prawn exports expected to improve
Plummeting vegetable prices decelerate Russian inflation
World barley production forecast to rise
US pork exports set to rebound
Russia lifts its ban on imports of US peanuts
Brazilian soyabean exports to China down

4. The negotiations over a free trade agreement between the EU and Mercosur
(Argentina, Brazil, Paraguay and Uruguay) were concluded on the 28th of June
2019. These negotiations on this historical trade agreement have been on
and off during the two last decades as the impact in both regions' agricultural
economies is likely to be significant. The EU is already Mercosur’s top trade
partner with values of import goods at EUR 44.3bn and export goods at EUR
42bn.
The EU industrial sector is set to benefit from slashing tariffs on cars (currently
at 35%), car parts (14-18%) and clothing (35%), amongst other commodities.
In exchange, the EU will eliminate its current duties on 100% of industrial
goods.
On the agricultural side, Mercosur will open their markets to chocolates,
confectionery, wines and soft drinks. Some EU dairy products like cheese will
also be subject to duty-free quotas. Overall, 91% of Mercosur imports from
the EU will be liberalised. The EU will slash the current import taxes on 82% of
Mercosur exports including tariff-rate quotas on meat (beef, poultry and
pigmeat), sugar, ethanol, rice, honey, sweetcorn and dairy products.
Both markets are unlikely to see any sudden changes in the months to come
as the agreement is still to be signed by all member countries.
BEEF 200,000 tonnes p.a.
99,000 tonnes p.a. (55%
fresh, 45% frozen)
7.5%
POULTRY +400,000 tonnes p.a. 180,000 tonnes p.a. Duty free
SUGAR
EU has been largest net
exporter
180,000 tonnes p.a. for
refining
10,000 tonnes p.a. for
Paraguay only
Duty free. No new sugar
quote will be created for
Brazil.
Paraguay duty free
ETHANOL
New 45,000 tonnes p.a. for
the chemical industry
200,000 tonnes p.a.
Duty-free
(in-quota rate of 1/3 of the
current high duty (up to
€19/hectolitre) will be
opened for all other uses).
HONEY 35,000 tonnes p.a. 45,000 tonnes p.a.
Duty-free (gradual duty
reduction over a 5-year
period).
RICE 100,000 tonnes p.a. 60,000 tonnes p.a.
Duty-free free (gradual duty
reduction over a 5-year
period)

5. The Mintec Global Tea Index remained stable m-o-m in August, as the
decrease in Kenyan prices has been offset by higher prices for tea of Indian
and Sri Lankan origin.
Indian tea prices rose by 5% m-o-m, mainly driven by seasonal trends. The
increase in prices has been stronger than in other years, despite an improved
output compared to the previous season. For the January-May period, tea
production in India increased by 7% y-o-y, but healthy demand in Calcutta
supported the domestic price trend.
In Kenya, tea prices have decreased slightly by 1% m-o-m, due to good
availability in Mombasa auctions, in spite of reduced output. Production from
January to May was at 170,175 tonnes, down by 9% y-o-y. However, exports in
the same period increased by nearly 13% y-o-y, driven by strong demand from
Pakistan. Kenyan tea exports are currently benefiting from the conflict
between Pakistan and India, with buyers from Pakistan shifting towards
Kenyan tea.
The Sri Lankan tea price has risen by 1% m-o-m, as a direct result of lower
crop and record export levels. According to the ITC (International Tea
Committee), Sri Lanka’s tea exports increased by 7% y-o-y to a record 116,526
tonnes, indicating strong foreign demand, especially from Iraq and Iran.
In India, tea prices are relatively at the same price level in
comparison to July 2018, as higher output, increasing by 5%
for the January-May period, relieved the concerns on extreme
weather conditions likely to affect the tea crop yields.

6. The UK imported fewer dairy products in June according to a report from
AHDB, as imports of butter, cheddar and specialty cheeses fell by 40%, 13%
and 9% respectively, when compared to June 2018. However, the total volume
of imports between January and June in these sectors remained higher
compared to the same period last year.
The most recent decline in imports is a consequence of stronger import
volumes prior to the original Brexit date in March 2019, due to companies
building up their stocks in preparation.
Additionally, strong results from the UK’s domestic dairy industry further
hampered dairy imports in June.
The UK’s dairy exports also dipped in June, with butter exports down 39% y-o-y
and cheese down 7% y-o-y. However, looking at year-to-date results, the UK’s
butter exports between January and June rose moderately by 15%, with cheese
exports up 7%.
The UK’s dairy exports also dipped in June, with butter
exports down 39% y-o-y and cheese down 7% y-o-y

7. On 21st August, the US Department of Commerce (DOC) removed the
antidumping duty imposed on about 31 Vietnamese warmwater prawn
exporters. Those companies had previously been subjected to a 4.58% duty – to
account for what US prawn producers believed to be under disadvantage with.
This is likely to be beneficial for Vietnamese prawn producers and exporters as it
would increase the favourable conditions for Vietnam’s products. In addition,
Vietnam is likely to have a higher competitive advantage compared to other
markets such as China, which has been hit by the amount of protectionism put in
place by the US market.
Vietnamese exports of prawns to the US increased by 5% y-o-y between January
and July 2019, despite the antidumping tariffs being in place. The growth in
exports is mainly driven by a reduction in US prawn inventories and reduced
exports from India, Thailand, and primarily China (due to the ongoing trade
tensions with the US).
Mintec prices for Vietnamese prawn (blacktiger) are down 2% y-o-y between
January and August 2019. However, prices should start to recover slightly over
the next few months, as there are signs of improvement in demand according to
the Vietnam Association of Seafood Exporters and Producers (VASEP).
Mintec prices for Vietnamese prawn (black tiger) are down
2% y-o-y between January and August 2019.

8. London Intercontinental Exchange (ICE) cocoa prices decreased by 4% m-o-m,
as of 5th September 2019. The increasing price trend seen on the global
market between April and mid-July 2019 reverted due to ample supply from
West Africa. According to Ivory Coast’s (the leading producer of cocoa bean)
custom data, the country exported 1.41m tonnes of cocoa between the start of
the 2018/19 season (1st October 2018) and the end of June 2019 – a 7%
increase y-o-y. Growing volumes of cocoa exported to the rest of the world are
a direct result of a bigger output in Ivory Coast. Exports of cocoa products
(butter, liquor and powder) also increased by 5% y-o-y at 338,000 tonnes.
According to the International Cocoa Organisation’s (ICCO) latest estimates, the
global cocoa production should reach 4.85m tonnes in 2018/19, a 4% increase
y-o-y, mainly driven by the increasing crop in Ivory Coast, Cameroon and
Ecuador. Likewise, cocoa grindings, representing the cocoa product demand,
are forecast to increase by 4% compared to the previous marketing year, driven
by Asian demand. The increasing demand for cocoa products counterbalanced
the price decreases since August. As a result, prices on London ICE have
stabilised at an average level of 2,100 USD/MT since the beginning of
September.
According to the International Cocoa Organisation’s (ICCO)
latest estimates, the global cocoa production should reach
4.85m tonnes in 2018/19

9. Cabbage, carrot, potatoes and beetroot are a few of the most consumed
vegetables in Russia and account for a significant share of the consumer
shopping basket. As per the Federal Statistics Services (FSS), the increase in the
prices of these commodities indicates the inflation rate in Russia.
Real disposable incomes in Russia have been falling since 2014, therefore, the
demand for cheaper vegetables has been increasing. The demand for cabbage,
a staple of Russian diet, has been spiralling for a couple of years, resulting in
inflated prices for the vegetable. Mintec cabbage prices soared 365% y-o-y in
May 2019, the highest since 2015. A similar price trend was also seen in some
of the other vegetables. The annual inflation and food inflation rate in Russia
were at 5.1% and 6.4% in May respectively.
However, the warm weather in the country resulted in the early harvest of the
vegetables, pulling their prices lower from June. Both annual inflation and food
inflation eased to 4.7% and 5.5% respectively during the same period and has
been moving down since then. As a result, Mintec prices for Russian cabbage in
August (end) have plummeted by 50% q-o-q (compared to the start of June).
Similarly, Mintec carrot, potato and beetroot prices in Russia have weakened
44%, 35% and 46% q-o-q in August.
Mintec carrot, potato and beetroot prices in Russia
have weakened 44%, 35% and 46% q-o-q in August.

10. After a three-year low, global 2019/20 barley production is forecast to rise to
152.3m tonnes, up 9% y-o-y, mainly due to a rise in harvested area from the top
producers. Global consumption is also forecast to rebound this season from its
two-year low, driven by anticipated higher global supply.
EU barley consumption is forecast at 54.7m tonnes, the highest volume since
2016/17, as improved weather conditions favoured crops this year. Barley
consumption by Saudi Arabia and China, the two largest importers, is expected to
increase significantly - around 8 million tonnes (+17.6% y-o-y) and 7 million
tonnes (16.7% y-o-y) respectively.
The Saudi Grains Organization (SAGO) has recently bought approximately
780,000 tonnes of feed barley, with supply coming from Australia, EU, the Black
Sea region, North America (not including Canada) and South America.
Mintec feed barley prices have been trending at a discount to feed wheat since
mid-June, encouraging further consumption. However, this discount has recently
narrowed due to the continued decline in wheat prices, following abundant global
supply, which could result in buyers substituting barley for cheaper grains.
Mintec feed barley prices have been trending at a
discount to feed wheat since mid-June

11. The three-month average price for EU pork (May-July) has jumped 18% against
the previous three-month average (February-April), exceeding Mintec’s previous
forecasts. Supplies of slaughter-ready pigs were falling short of demand in May,
especially in leading producing country Germany. Similarly, the May-July average
price of US pork has increased significantly, by 27% against the previous
average (February-April). Prices have followed usual seasonal patterns, with
domestic demand rising over the past three months.
Intensified demand from China for EU and Brazilian pork, has caused prices
from these regions to surge. As a result, EU prices are at a premium on
international markets. The Brazilian pork value has surpassed prices in North
America.
From weather to political, all the factors impacting the pork market have been
analysed to provide a market outlook for the next three months. Mintec’s
market outlooks (schedule) provide insights on factors shaping the market
dynamics of various commodities, providing the opportunity for market
participants to stay ahead of factors that will impact procurement decisions.
Please visit our Mintec Analytics platform to find out more.
Prices have followed usual seasonal patterns, with
domestic demand rising over the past three months.

12. The Russian agency Rosselkhoznadzor (The Federal Service for Veterinary and
Phytosanitary Supervision) announced in August that Russia would lift its ban on
imports of US peanuts, on a condition that shipments meet safety and quality
requirements.
The ban was previously introduced on 1st May 2015, due to excess
concentrations of cadmium in the consignments of US peanuts to Russia. Only
after more than four years, the agency has decided to remove the ban.
The confectionary industry is the main consumer of peanuts in Russia,
accounting for almost 70% of all peanut imports, with the rest being acquired by
retail services. The move by the Russian authorities will be a welcome news for
US peanut exporters who have had higher import tariffs slapped on their product
by China.
Meanwhile, the Mintec price for US peanuts delivered to the EU fell slightly m-o-m
by 1%, and is down by 4% y-o-y.
Meanwhile, the Mintec price for US peanuts delivered to
the EU fell slightly m-o-m by 1%, and is down by 4% y-o-y.

13. Brazil exported 4.1 million tonnes of soyabeans to China in August, down 40% y-
o-y, according to the Secretariat of Foreign Trade of Brazil (Secex). The sharp
drop is associated with rising competition from Argentina and the African swine
fever impacting Chinese demand for animal feed. Nonetheless, China still
accounted for 77% of Brazil’s total soyabean exports in August.
Brazil is currently benefiting from the trade tensions between the US and China,
as the demand for US soyabeans shifts towards South American suppliers,
resulting in price drops of US soyabean. Mintec US soyabean prices fell 3.7% in
August compared to the previous month, driven by weak demand. However,
rising soyabean prices in Brazil amid higher domestic crushing demand have
caused stocks to reduce. Therefore, Brazilian soyabean supply may be limited
towards the end of the year, forcing major exporters to search for other
providers.
Besides China, other major markets for Brazilian soyabeans are the Netherlands,
Spain, Thailand, Turkey, Japan, Vietnam, Iran and Mexico. Brazil is forecast to
export a total of 76.5m tonnes of soyabean in 2019/20, about 350,000 tonnes
less than previous season.
Mintec US soyabean prices fell 3.7% in August compared to
the previous month, driven by weak demand.