April 2008 - Crop Update - Europe
Over the last two years, Sensient Dehydrated Flavors has tried our utmost to communicate how we see developments within the European and Global Agricultural industry, most specifically in relation to Dehydrated Vegetables. We believe we have portrayed an accurate overview of these developments and have been able to provide reliable information, enabling you to make rational and realistic decisions in respect of your Dehydrated Vegetable purchases.
Sensient has recently concluded all negotiations with farmers in France and Holland. With the continued growth in demand for BioFuels, increased energy/fuel costs and the strict demands placed on the farming community by the vegetable processing industry, negotiations were very difficult. Land is scarce and farmers have a greater choice in what they will grow and whom they will grow for. Sensient successfully negotiated and secured the land necessary for our production and stable supply. However, in line with the vegetable processing industry (frozen, canning, other conserves) we had to pay significantly more than last year’s contracts. Cost increases vary by vegetable, ranging from 5% to as high as 25% over last year. The positive effect of this is that Sensient will be in a position to honour, as usual, delivery on Contracts and commitments that we have with you, albeit at higher pricing over 2007. Our strategic objective is to provide you stability of supply and realistic, predictable and transparent pricing policies and avoid speculative positions.
The result of increased Raw Material pricing coupled with increased energy costs forces us to increase prices. These adjustments will differ by vegetable, but should be estimated in the range of 5-10%. We sincerely believe these increases are modest compared to other food ingredients and we are convinced this is a positive effect of our strategy of full supply chain control and sustainable relationships with our farmers and agricultural partners.
Overall, Sensient continues to work on long term, sustainable relationships with both our farming/agricultural supply base and our customers. We have proved, in a very difficult agricultural market, that we are able to continue to offer high quality materials and manage customer needs in respect of honouring Contracts.
At this stage it is too early to give detailed crop information. We can report, however, that weather conditions need to improve to complete our planting plan. Heavy rains and snow that recently fell in early April have delayed plantings. This is not necessarily a problem, provided the weather stabilizes to allow the crops to catch up.
