Peruvian quinoa is experiencing its worst crisis in 50 years. Both the decrease in planting, due to droughts, and its critical political situation could have a big impact on prices in the coming months. Even though there still isn’t any official estimation on the impact of the drought in terms of affected volume, we can already foresee a much tighter supply from Peru from May onward.
Peruvian Supply
Peruvian quinoa is experiencing its worst crisis in 50 years. MIDAGRI (Agriculture Government Agency) has estimated that at least 21,000 quinoa crop hectares have been lost due to drought, particularly in the Puno region.
The main crop will be 2 months delayed due to the climatic conditions. Usually the crop is becoming available from April onward, but this year this will be from Juny/July onward. Farmers expect a decrease in production of around 35% due to the fact that they were not able to sow normal quantities due to these droughts.
In addition, more lucrative potato and onions prices are causing farmers to switch crops. Despite red quinoa coming in from the short campaign (Oct-Dec), supply for this color has become tight, mostly due to the fact that exporters have been purchasing aggressively again in order to build inventory. All in all, farmers are becoming increasingly reluctant to sell their quinoa at current prices and await further clarity on the state of the incoming crop. It is also becoming harder to find quinoa that complies with European specifications.
Even though there still isn’t any official estimation of the impact of the drought in terms of affected volume, we can already foresee a much tighter supply from Peru from May onward, particularly when the larger exporters deplete their current inventory. Social unrest due to political situation has also affected the regular supply of raw material into processing factories. Access to quinoa from Puno (main production area) is still restricted due to roadblocks.
Bolivian supply
Crop hectarage increased by 20-25% compared to the previous years as farmers were encouraged by good moisture levels in the soil. Furthermore quinoa plants emerged successfully- milder winds had little effect on most fields. Until recently, news about “La Niña” raised concerns among farmers that a prolonged drought was coming, however from December 9th to 11th a good amount of rain – 12 liters per square meter- was reported, alleviating any concerns for the time being. The next great risk for the quinoa crop, frost, comes in January and February, and must be monitored carefully.
We must note that quinoa inventories at the producer level are at its lowest in the past 5 years. Two consecutive under-average crops (’21 and ’22) play an important role in this dynamic. Intermediaries hold most of the available inventory in large country-side warehouses, allowing them to speculate for an increase in prices.
Quinoa smuggling from Bolivia to Peru doubled in November. We estimate that 7-8 loads crossed the border every week, up from 3-4 the previous months. This put more pressure on supply, with raw material prices increasing approximately 5%. In the last weeks of the month.
Global effects
Meanwhile, the global economic slowdown is significantly affecting quinoa sales. In both Europe and the US, high inflation levels coupled with rapidly increasing interest rates is forcing consumers and industries to adjust their budgets and limit expenses. Product turnover at the point-of-sales is being affected as energy costs need to be transferred to the consumer. 2023 is expected to be a tough year, although it remains to be seen to what extent the slowdown will continue to impact quinoa sales. On a positive note logistics and transit times have improved in all major ports around Europe and the US, which has lead to a decrease in freight costs.
Recommendations
For those clients with stable and foreseeable demand we recommend taking a long position for both organic and conventional white quinoa, as Peru’s crop has been strongly affected. Do note that it is highly probable that Bolivian quinoa prices will be more competitive than the Peruvian prices following the incoming crop. A long position is also advised for red and black quinoa considering the tight supply and long lead times to secure the product.
