Chilies

FEBRUARY 2020

Dear Valued Customer,

Olam Spices appreciates the opportunity to supply you with the highest quality dried paprika and chili products globally. As your trusted supplier, we would like to provide you with an update on recent developments in China, with respect to the coronavirus (2019-nCoV) outbreak and its potential impact on the paprika and chili marketplace.

On January 30, 2020, the World Health Organization declared the outbreak of the 2019 Novel Coronavirus, or 2019-nCoV, a global health emergency. The new respiratory virus was first identified in the city of Wuhan, in the Hubei Province of China.

Today, China produces about 70% of the world’s paprika in the Xinjiang region. From there, the product is delivered to Shandong province, where most of the paprika processors, exporters and speculative holders are located, to service the global demand of paprika for the rest of the year. The country also grows 75% of the paprika that is processed in Europe — especially in Spain.

At this point, we expect that the following factors could possibly create supply chain disruptions from China:

• Growers shifting from traditional paprika to a hotter hybrid variety
• Delayed and limited availability of high-quality paprika
• 2019 year-end holidays in the destination markets
• Early start and mandatory government extension of the Chinese New Year holiday
• The shutdown of processing facilities due to the coronavirus (2019-nCoV)

Even after the facilities open in China, it is expected that labor availability will be limited due to travel restrictions. Shipping from Chinese ports is also likely to start gradually, as many shipping lines have reduced the vessels coming out of China. The stock in destination markets is limited due to these reasons and we could possibly see shortages build in the short term. In addition, we do not anticipate sufficient quantities coming into the market from any major origin until Fall of 2020.

Our team continues to receive inquiries regarding the supply situation due to the coronavirus (2019-nCoV) outbreak and for risk-mitigation solutions in the event of an unexpected supply chain disruption from China.

We would like to remind our customers that US chili and paprika growers continue to set the highest standards of food safety and quality with their transparent seed to factory supply chain. US paprika has minimum issues with toxins (Aflatoxin and Ochratoxin) and pesticides and growers avoid banned chemicals like Chlormequat. Crop planning for the 2020 US crop is currently underway and we expect planting to start in about 30 days.

Customers are advised to contact their respective sales managers for coverage discussions, conventional and organic, as we see a limited availability of product from the US crop until this year’s harvest is processed. We look forward to working with you to arrive at the best possible solution to cover your needs.

As a valued supplier, we will continue to communicate additional and relative developments as they occur.

Vinay Sreekumar
Vice President – Capsicums, Olam Spices