FDL - UK : market report, HONEY

Since our last report, the main factor influencing the honey market has been the continuing weakness of the US Dollar against virtually all currencies. The practical implication of this weakness is that prices for US Dollar- denominated honey will rise. There is, however, an assumption that, by waiting, end-users will be able to buy honey at cheaper prices. Given the current market situation, it's not quite as easy as that! Other than foreign exchange movements, the main factors influencing the international honey market are the very difficult crop situation in China and the increased demand being focussed on Argentina. Brazil remains out of the European market.

China

It seems that this year's Chinese crop is the worst in the last 10 years. The crop has now come to an early end in the southern and central areas of the country. The vital province of Jiangsu, which normally produces approximately 8,000 mt annually, has now had a confirmed crop of only 1,000 mt. The other important provinces of Hubei and Anhui both report crops approximately 40%-50% of normal (to 6,000 mt each). Prices have risen by approximately $ 200/mt since the last report and are likely to strengthen further over the coming weeks. Offers are very scarce, and defaults (especially for old crop material) are now virtually inevitable.
What has now happened is that the Acacia crop has now failed in Anhui, Henan and Shaanxi, although we need to wait further for the crops in the more northerly Liaoning and Hebei provinces to occur. The Acacia crop is of importance to the Japanese buyers, who have a particular preference for light, liquid honey, and they are now focusing their attention on the lighter polyfloral crops, thereby pushing prices further upwards. (This factor will inevitably lead to higher prices for the forthcoming Eastern European Acacia crop, which, until now, has enjoyed good growing conditions).

And now there is one further complication: recently enacted domestic legislation has resulted in bad quality (adulterated honey or honey containing antibiotics) not being permitted to be sold into the domestic market. From now on, only good quality honey (largely in accordance with EU legislation) will be permitted to be sold into the domestic market. This has resulted in domestic demand now being added to the pressure from Japan, USA and Europe. It is too early to be definitive about the quality of new crop Chinese honey as we have not undertaken sufficient raw honey analysis at this time. The new crop, currently being processed, will be ready for our batch analyses within the next two weeks.

Clearly prices will increase moving forward but it would be naive to ignore the fact that Chinese honey must remain fully competitive when compared to other origins' (especially, of course, Argentina). There are significant higher analysis costs for Chinese honey than for any other origin, and the price must reflect this. In our March 2006 market report, we mentioned the fact that Chinese honey would increase in price as a direct result of the EU ban on imports of Brazilian honey, which, next to China, offered the cheapest honey. The Brazilian ban, plus the very difficult crop conditions, have resulted in the higher prices now being demanded by China. So far, the differential between Chinese and Argentine honey remains interesting for buyers...

Argentina

The 2006 crop is now known to amount to 85,000 mt, which is, as ever, an increase over earlier estimates, which started out at 70-75,000 mt, and then which increased to 80,000 mt in March. Therefore, other than the slight increase in crop size, there is nothing much surprising on the Argentine supply side. The crop has, of course, now come to an end. On the demand side, the absence of US demand in the Argentine market, noted in our March 2006 report, has now changed: given the problematic crop in China, there is now regular demand originating from the USA for max 50mm. (Usually the Americans buy only the lighter grades - max 25mm / max 34mm - so their purchase of max 50mm reflects the difficulties of sourcing this grade elsewhere, particularly, of course, China). Germany continues to buy all grades of Argentine honey, and, in the first three months of 2006, over 10,000 mt was shipped there. 30,000 mt in total has been shipped out in the period January to March 2006, with a further 10,000 mt estimated to have been shipped out in April 2006. USA took 7,000 mt between January to March, and UK and Italy 2,200 mt each. The April 2006 statistics will be released very soon.

Eastern Europe

As mentioned above, the forthcoming Eastern European Acacia crop has enjoyed good growing conditions. As normal, the crop is expected to become available at the end of May/beginning June 2006. Sellers will inevitably (and with due reason) look to push prices upwards in the light of the failure of the Chinese Acacia crop. However, it is still too early to be definitive about the size of the crop. The polyflora crop will follow in June/July but no details are yet known. However, it seems that the good growing conditions will help the polyflora crop as it seems to be helping the Acacia crop. Old crop supplies of Eastern European polyflora are limited. In the meantime, until such time as the new crop is available, prices for Eastern European polyflora will mirror Argentine levels.
In conclusion, we are unable to bring any better news to honey buyers. Prices will continue to be firm for the next few weeks, at least. The only factor working in favour of the buyers is, of course, the weakness of the Dollar, which most commentators believe will certainly continue.