With the inshell crop season complete in the northern hemisphere, the focus has now shifted towards kernels. After a slight correction in May, prices have been moving up steadily. There is now a growing concern about the COVID-19 situation in Vietnam and its potential impact on the supply chain.

On inshells: The Northern hemisphere crops have been harvested and are slightly lower than last year. We have seen an increase in prices over the last few weeks with demand from India returning. The inshell offers are also limited right now and with the lockdown in Vietnam, there is likely going to be less focus on inshells in the near term. The larger issue in the season continues to be logistical delays and higher cycle times.

On kernels: With the lockdown announced in Vietnam, kernel prices have jumped up sharply over the last couple of weeks. The government of Vietnam has put the entire southern region in a two-week lockdown, as COVID-19 daily cases surpass 4,000. Spot availability is very limited now as there is now a panic to ship the existing backlog as well as advance future shipments. If the current situation continues, then we are likely to see spot shortages at destinations through Q4 as well. Overall demand is projected to be robust in the second half across the US, EU, and Asia.

Processing is back to normal in India with COVID-19 situation stabilizing. Kernel demand is very healthy as large institutional buyers are back in the market to cover for the second half of the year’s demand, especially as they’re now preparing for the festive season.

In June the industry shipped 220.5 million pounds, exceeding last June’s shipment of 175 million pounds with a +25.7% increase. This brings the total shipped for the year to 2.669 billion pounds at +21.7% ahead of last year. With one more month to go, the industry is on track for shipping over 2.88 billion pounds and the carry-out is expected to be somewhere between 600 and 610 million pounds. An additional 108 million pounds of new sales were added on for the month versus 90 million pounds last year. Demand continues to be strong as we approach the finish line.

An additional 95 million pounds of new crop sales were added on to bring the total to 326 million pounds. Last year at this time the industry had 458 million pounds of new crop sales on the books. Growers are resolute that new crop pricing must improve in order to be sustainable. Additional drought concerns continue to grow and California continues to have record temperatures that are expected to continue throughout the summer months.

The biggest news to report is the NASS objective estimate number of 2.8 billion pounds forecasted for the 2021 crop harvest. The estimate is 400 million pounds less than May’s subjective estimate of 3.2 billion pounds and the general industry expectations of around 3.0 billion pounds for the 2021 crop. It is important to note that even with a 3.0 billion pound crop, this would represent a 3% increase in overall supply, while shipments will finish up over 20% year over year for the 2020 crop.

This has sent a disruption through all trading markets and in some cases, we have seen pricing pressure run up by $0.40 to $0.60/lbs. depending on size, grade, and variety thus far. Even with the higher price levels quoted today, almonds continue to be a great value. It is also important to note that while these new price levels may seem high, they are only high relative to the recent time period. If we compare last 10 year pricing there were only two periods when prices were lower than this. One being during 2020 on account of COVID-19 and the previous period in 2016 after the huge market crash. The markets have been active since the release of the Objective Estimate.

US: US pistachios shipments are 14% up year-to-date. The US almond objective estimate being lower than anticipated has raised concerns for other tree nuts crops in California. Iran is reporting crop damage due to frost in the early part of the year. Inshell prices have increased by about $0.15 to $0.20/lb. in the last month. Though the industry will have about 200 million lbs. carryover into next year, it is not a concern considering the 2021 crop being an off-year. Strong demand across markets and prices for the new crop are expected to open at levels higher to current ones.

Iran: Iran’s 2020 receipts were 420 million lbs., however Iran shipped record volumes in 2020 and is expecting to have record low carryover. Increased prices are expected to remain firm.

US: Shipments remain strong, with June also recording an 11% increase over previous year. The year-to-date increase is now +16% over the previous year. The industry is sold out on light kernels and halves. Carryout is expected to be lower than what was estimated earlier. Most markets have limited stocks. Some may even have stock out scare if the new crop gets delayed due to shipping challenges. The crop objective estimate is still a few weeks away. Meanwhile, prices continue to firm up.

Chile: The 2021 crop is now 85% sold or committed. Shipment issues persist due to container availability and COVID-19 led productivity constraints. Prompt shipments are not available. Prices have increased by 25-30% from the start of season. The industry expects to be completely sold before the start of the US crop.

Generally speaking, the U.S. peanut crop continues to develop quite favorably. As of 7/19, 72% of the U.S. peanut crop was reported to be in “good to excellent” condition. The reported crop conditions are very similar to those last year at the same time when 71% of the crop fell within the same classification. Only 3% of the total U.S. crop is considered to be in “poor” condition at this time, and less than 1% is considered to be in “very poor” condition. We’re at about the halfway point of development for much of the crop. The southeast U.S. growing region, particularly areas in the heart of growing belt, has continued to receive frequent (and sometimes heavy) rainfall. Year-to-date rainfall for much of the southeast growing region is now several inches above normal. In some areas, the frequency of the rainfall has prevented growers from applying the usual field treatments and supplements, but as of this time that doesn’t appear to be a substantial concern, at least not from a widespread perspective. Weather in the coming days for the southeast is projected to be a bit warmer and drier than in recent weeks, which is actually somewhat welcome news.

There are no substantial new developments regarding acreage or crop production. The USDA will provide the first “official” crop production estimate in August, but recent releases of the WASDE report, as well as the Oil Crops Outlook report have likely provided some insight to what they’re thinking. In those reports, production of the 2021 peanut crop has been plugged at 3.23 million FS tons. This is based on harvested acres of 1,596,600 and yield of about 4,050 lbs. per acre, which would be the 2nd highest average national yield ever recorded. Assuming the acreage estimate is accurate, and based on current crop conditions, production of this scale is definitely not out of the question. However, as mentioned before, we’re currently only about halfway through the growing cycle for much of the crop, so growing conditions can change.

Carryover into the next crop is notable of around 70-80K inshells in Turkey. The Turkish new season crop is also expected to be around 790-800K MT inshells – a 3rd successive year of an above average crop.

The new crop is expected to arrive by the 2nd week of August. The weather has been conducive for good kernel growth. We might see some shortages of the Giresun variety, but overall, most regions should yield a better than average crop.

Some of these gains might be reduced due to the lower Italian crop. We also expect a lower US crop. Due to this, we might see some support to the market during the first few weeks if TMO, Ferrero and the Italian processors all buy in the market. However, overall supply would be more than adequate for the next season.

All eyes now are on the TMO – they are expected to declare a price benchmark this week. Some reports mention that the declaration might be delayed until the 2nd week of August, when the President is expected to visit the Black Sea region. Some bullish elements believe the TMO might be under some political pressure to increase the benchmark to as high as 25-30% over the last year.

However, most market players believe that the TMO will take in cognizance the high carryover and a record crop and will moderate the increase around 15-20% over last year.

Demand continues to pick up as lockdowns ease globally. Turkish exports are still lower compared to last year, but now have caught up to the average export figures.

The TL remains volatile and is also playing a major role in determining prices

The TMO benchmark usually forms a base price. This season we might experience long periods of prices around these levels. The initial weeks the prices might stay firm due to imminent demand, but the latter half of the season we should witness subdued pricing on account of a large crop size.

Australia: Given the favorable weather conditions after receiving good rain in December and early January, combined with new plantings coming into bearing, the 2021 crop is predicted to reach 50,770 MT NIS at 3.5% moisture compared to 46,900 MT last year.
South Africa: The 2021 crop is expected to be 49,000 MT, the same as 2020.
Kenya: 2020 crop is likely to close at 39,750 MT, at 10% NIS moisture content/37,000 MT at 3.5% NIS moisture content (7% above 2019 closing of 37,200 MT/34,700 MT). For the 2021 crop, the precipitation and sunshine has been good, and the nut quality is expected to be better than last year. Based on the recent year’s plantings and with new trees coming to fruition every year, the 2021 crop is projected to reach 45,300 MT/42,250 MT.

Chinese demand for macadamias picked up briefly due to Lunar New Year celebrations but the market has subsequently become more subdued again as prices are felt to be on the high side. Prices for S0 and S1 are firming up but at the same time prices for pieces (S4 and below) are adjusting downwards with a differential much higher than last year.