With the new Chia season just about to begin a lot of questions regarding the expected quality and prices are being raised.
In general chia prices are determined by quality, demand and the production volume. Contrary to other food products such as coffee or cacao it lacks the continuous price feedback of a stock market, which makes it a highly speculative crop.
So how will the three determinants quality, demand and production volume influence the Chia price this year?
Let’s start with the easiest one to predict, the demand:
Taking the import figures between 2012 and 2014 of the three biggest Chia importers (USA, Australia, EU) as a reference, it can be observed that the demand in Chia has rapidly grown over the last years. Even in 2013, when the supply ability of Chia was historically low and thus prices rocketed, the demand in chia increased sharply. Therefore, there is little to no reason to suggest that the demand in Chia will decrease.
The second and third determinants, the production volume and quality, are always highly dependent on the weather conditions of the main Chia exporters. The table below illustrates that in 2014 the main Chia exporters were Argentina, followed by Bolivia and Paraguay.
During the last months, especially some regions in Argentina but also regions in Paraguay experienced somewhat heavy frost. This is to effect both the quality and the supply ability of two of the main exporters of Chia. Due to heavy rainfalls the weather conditions in Bolivia were not perfect for growing Chia either. However, the negative effects that frost has on Chia are much worse than the negative effects that heavy rain has.
Conclusion
With the supply ability mainly of Argentina and also Paraguay, two of the main exporters of Chia, almost certainly being lower than in the previous two years, the Chia prices are very likely to increase. A similar situation than what is expected now on the supply side could be observed already in 2013, when Argentina also suffered bad weather conditions. In 2013 the trading price (FOB) for chia reached 7,000 to 12,000 US dollars per ton but dropped to 3,000 USD in the third quarter of 2014. A similarly sharp increase than in 2013 is not to be expected. Nevertheless, Bolivian experts still expect the price to increase by roughly 30%. Additionally, by the end of the new season, when the supply ability diminishes further, buyers will likely pay the costs with a considerable price increase. Therefore, it is strongly recommended to contractually ensure buying quantities in order to make sure to pay the same price all over the season.
