Saffron Price Prediction 2022-2023
Predicting the saffron price based on the previous year’s price patterns in early harvesting time, in October, and middle farming year, April, and later in that farming year, Aug-Sept, won’t be so hard. Every year, the price of old crop saffron decreases, while the new crop is sold at a higher price range, compared to the year before. The prices of new saffron crop decrease gradually once we are getting closer to the end of harvesting time. This is mainly due to sudden supply and production pressure during this 40-day harvesting period, while the demand is distributed throughout the year. The yearly price pattern shows that the market will probably experience another price rally in April-Jan, depending on local and international market demands. Considering the market changes and conditions in the previous 3-2 years, can we trust such price predictions?
What international or local conditions have changed the saffron price patterns? The four factors below are influential in saffron price pattern changes:
- Coronavirus Pandemic
- Local climate changes (In Iran)
- Local economic conditions in Iran
- Commercial laws and regulations for Iranian exporter companies and traders.
With the spread of Covid-19, starting from China and shortly after to the whole world, saffron global markets faced one to two years of downtrends in the total demand rate.
With the extensive quarantine in China and other European markets, and the increase in the Coronavirus epidemic in India, which are the main Iranian saffron exporting destinations, the global demand for this product decreased by 60 percent compared to the previous years. This trend was improved, a year after the outbreak of Coronavirus, and it is anticipated that the market is back to normal by mid-2023.
The decline of saffron global demand paused the price increase for short terms, during the years 2020-2021, on a local and international scale. Now, if the Coronavirus pandemic ends in 2023, according to WHO statement, India and China markets will start placing orders at higher volumes. This will result in an increase of saffron market demand which subsequently leads to an increase in global saffron price.
Now, we need to wait and see how the new export policies to China, which require all exporting companies to get a registration code from China customs, may affect Iranian saffron export to this country. Based on our data, so far, only 10 companies, out of a total of 60 Iranian saffron export companies, got a registration code from China customs. While, 50 saffron exporting companies were not successful in getting the registration code due to improper and rigid policies of the Iranian government, which led to a decrease in saffron export to China by 50 percent. Therefore, it is essential to immediately review the Registration Code Requirement policy or take any action to facilitate the procedures.
2-Local climate changes
According to the Iranian agriculture organization’s official statistics, the farms under saffron cultivation have expanded till 2021-2022, leading to an increase in saffron production during the last 5 years by 7%. According to official statistics, Iran produced up to 400 tons of saffron in different types, during 2020-2021, which was an exemplary record. What happened the next year, during 2021-2022, which led to the 65-70% decline in saffron production?
We invite you to review the reasons for the huge decline of saffron production in 2021 in our previous market insight post “Iran Saffron Production Report 2021” in great detail.
The Saffron plant lasts for several years, therefore; any climate changes will affect the saffron plant and corm for many years. As a result, we may not have a great chance to quickly go back to the 2020 harvest rate. Based on what we learned in “Iran Saffron Production Report 2021” the decline of rainfall in 2019 and 2020 and long warm summers in 2020 had the reverse effect on the well-being of saffron bulbs and production performance in 2021, which resulted in the decline of saffron production up to 65-70%, compared to 2020.
However, we hope the moderate levels of rainfall in 2022 will have a positive effect on the flowering of saffron farms in October 2022. On the other hand, some farmers have been discouraged to pay attention to their saffron farms for the local bad economic situation.
To predict Iranian saffron price only based on climate change factor and regardless of other influential factors, we may consider two scenarios for the next year:
- Reduction of production volume compared to 2021-2022: This will lead to a decrease in saffron supply on a global scale. As discussed earlier, since climate changes will have a longer influence on saffron growth and well-being, it is more likely to experience a sudden local and international increase in saffron prices in 2022-2023.
- 30 to 40 percent increase in saffron production compared to 2021-2022: With respect to the increase of rainfall in the last year, if we have the chance to improve the production volume to 200-220 tons in the year 2022-2023, we probably won’t experience lack of supply. The amount of warehoused saffron by farmers, companies and marketers, plus, export demand rate ensures that market won’t fail to supply adequate product. Thus, the market won’t experience price rallies such as in 2021-2022. However, taking other factors into account, the market may experience price increase despite production volume growth.
3-Macro-economic condition in Iran
International sanctions and trade limitation with other countries, plus improper local policies in managing economic indexes, such as inflation rate, has led to more than 50% local price inflation for most goods and services. Based on statistics, more than 5 million people make a living from the saffron industry, directly and indirectly. The only way to compensate for the living costs of workers and farmers, who are deprived of governmental support, is to increase the working wage. That is why the working wages during harvest time have multiplied in recent years, as most of the procedures such as saffron harvest, stripping, drying, etc. are done by hand, and in a non-mechanized way.
As a result, we can expect to experience a 40-50% increase in labor wage for saffron production during the new harvest time.
4-Central bank policies for Iranian saffron exporter companies
It is clear that a great part of Iranian saffron production is exported to more than 52 countries. Therefore, in case Iranian saffron exporters are discouraged from trading saffron, surely, many people involved in the saffron supply chain will experience hard days. That is why improper policy making, and making obstacles to fair trade of Iranian saffron will decrease our overall performance in international markets. Iranian traders suffer from improper governmental decisions and policy-making processes, in addition to international sanctions.
Dual rates of exchanging foreign currencies to Rial and requiring exporters to bring back the export revenues to the economic cycles are examples of main export obstacles, which had the reverse effect on the legal export of saffron. More specifically, saffron exporters are discouraged from exporting saffron with a sudden increase in custom value rate from $400-$500 to $1500-$1600. This made it economically unjustifiable for exporters and international customers to deal with the increase of saffron value by 3 times.
Finally, the implementation of a new law, called VIRTUAL WATER, has increased the export costs, for no justifiable reason. According to this policy, traders should pay a 0.5% water duty related to the consumed water to produce goods.
Such water duty policy should be applicable to products like mineral, industrial and chemical products, not for agricultural products such as saffron and other herbal medicines, which require a minimum water supply. These are vivid examples of improper governmental policy-making strategies.
This blog post reviews the most influential factors on the price of saffron and explores how they may affect the new crop global saffron price. Considering all the above-mentioned factors, two main scenarios are possible for Iranian saffron prices in 2022-2023.
- Significant increase of saffron price starting from the harvesting time
- Gradual increase of saffron price in relation to supply and demand, plus, macro-economic factors in Iran.
Supposing the improvement of Coronavirus (the first factor) by 2023, predicted inflation rate in Iran’s economy (the third factor), and fixed policies made by the central bank of Iran, the only variable factor, with the most potential to increase the saffron price, remains to be varying saffron production volume due to climate changes.
As a result, this can be interpreted as:
- The production volume in 2022-2023 will be decreased greatly compared to the last farming year. As the amount of warehoused saffron volume has decreased in recent year, a sharp rally in prices will be expected, starting from the beginning of the harvest time.
- In case, the estimates show that production volume has increased by 40% compared to last year 2021-2022, there will be a gradual saffron price increase, due to high inflation rate, labor costs, saffron custom value, and tax rate during the current year.
SunLand company, as a producer and exporter of saffron with years of brilliant experience, tries to provide expert solutions and consultations for their customers, helping them to make wise decisions in purchasing saffron from Iran. In addition to that, SunLand tries to resolve concerns regarding the supply of saffron relying on its large saffron production capacity and a good network of trusted local farmers.