On inshells: The Northern hemisphere crops are over now. We have seen a slight price correction in September for inshells with lockdown in Vietnam. The Southern hemisphere crop in Tanzania and Mozambique crops are projected to be better than last year with no adverse weather impact.

On kernels: There has been a reduction in COVID cases in Vietnam – from 12k to 4k daily. We have seen a weakening of kernel prices (especially on wholes) with aggressive offers from Vietnam. We are also still seeing shipment delays, port congestion and high freight rates that are likely to continue through Q4. There is a healthy demand expected to continue in Q4 in US & EU, as well as from China and rest of Asia as buyers look to prepone their shipments.

Some bullish triggers we’re seeing: A reduction in processing capacity dropped to less than 50% in Vietnam between July & Sep reducing overall Kernel availability. Preponing of shipments by buyers will likely put pressure on spot coverage. We’re seeing healthy demand projections across US, EU & China.

Some bearish triggers we’re seeing: Despite lockdowns, better than expected exports from Vietnam to US & EU in Aug. Covid wave-3 and any future demand impact. Reduction in processing capacity in Vietnam during lockdown leading to higher availability for inshells.

The Almond Board released the September position report on October 12th.   Unfortunately, global shipping issues have finally caught up with the industry.  September shipments were at 227m lbs., and by any other comparison other than to last year, it represents the second largest September shipping month on record.  However, it was below a year ago when the industry shipped 261m lbs.. 

It should not be lost on anyone that with the California drought, this slow down has been by design as we will see a smaller crop this year.  With consideration of shrinking water supplies in California, we may very well see a smaller crop to follow in 2022, as some growers are forced to engage in water management designed to only keep their trees alive as opposed to maximizing yields.  Additionally, where conditions are the worst, we have seen abandoned orchards, older orchards being pulled out, with some no plans to re-plant almond trees.

It is not all doom and gloom, as August (you may recall) was a record shipment month and domestic shipments are up almost 1% over last year to date.  Taking out last year’s record shipments as an outlier due to exceptionally low prices, the industry is still crushing it compared to any other crop year.  In 2020, at this time we had shipped 344m lbs. versus this year we have shipped 435m lbs. +21%. 

Pricing is still a great value when compared to other tree nuts, as well as from a historical perspective.  While higher than last year’s prices, these were unsustainable from a cost of growing/processing perspective.

California is estimating a crop of 1-1.2mn lbs., about 0.2mn lbs. higher than earlier estimates. Nut sizing is lower, forcing the industry to change standard spec from 21/25 to 21/27 for this crop year. Crop quality is excellent, so much so that closed mouth % is at historic low.

Reduction of overall shelling grade will result in kernel supply squeeze. Season opening prices are in the range of $3.75-3.80/lbs. for raw inshell X1 21/27, and $8.50-8/70/lbs. for wholes 80%. These inshell prices are $0.20-25/lbs. lower than last crop ending price and are expected to remain stable due to larger supply. Kernels supply will remain tight, and any increase in natural demand for kernels can increase the prices even further.

Walnut crop harvest started in early September. Arrivals have been slower than past years. Edible yields are in line or higher than last year with fewer mold and insect damage defects. Quality of initial arrivals of Chandler is great, color is lighter than last year with higher edible yield and fewer mold and insect damage defects. Shriveling appears to be a little bit higher but overall quality is better than last year. If the quality continues to come in similar to the initial arrivals, inshell buyers who have been waiting for quality indications will jump into buying mode.

Exports markets have been short on light product. Shipping constraints and concerns remain. Given the quality and inventory situation, the differential between Chandler/ Light and Less

Crop conditions are still looking good.  As of 10/10, the USDA is reporting 70% of the crop to be in good to excellent condition, down just 1% from week prior.  In Alabama, 4% of the crop moved from good to excellent into the fair to poor categories. 

USDA NASS October Crop Production report came out this week, reducing estimated production by 28k tons from their September estimate (and almost 172k tons from the original Aug report) to 3,146,125 tons.  Harvested acres remain the same at 1,533,000.  Yields in AL & FL were reduced, while yields in NC & SC were increased. They’re still projecting 4,400 lbs. per acre in GA, which would be the 3rd highest in history.  Overall yields were down 37 lbs./ac from Sep report (and 78 lbs. from the original report in Aug) to 4,104 lbs./ac (2nd highest national average on record).  There are some who believe this average yield to be high and think total production will more like 3M tons.  Only time will tell.  So far, quality seems to be good with little aflatoxin issues. 

As of 10/10, approx. 28% of the overall crop is reported to have been harvested at this point (34% in the SE), which is just slightly ahead of last year’s pace (26%), but behind the 5-year average (40%) for the same date.  According to the Federal State Inspection Service, 715,170 farmer stock tons have been received and graded as of 10/14, with all but about 583 tons grading as seg 1. 

Rain swept across the South last week with some areas getting 10+ in., which caused major harvest delays. The weather forecast for the next several days calls for sunshine and cooler temps in most areas.  Harvest will be at full speed with the continuous sunshine.  No concerns today with tropics but will need to still be closely watched over the next 2 – 3 weeks.    

Calendar ’22 futures prices for competing crops remain strong (cotton $0.90, corn $5.20, soybeans $12.10).  Cotton futures have been on the rise lately.  This competition will cause farmer stock prices for ’22 crop to remain very firm, as the risk for decreased peanut acres could be realized.

The Turkey crop is expected to be 800K inshells. The initial arrivals are pointing towards crop size confirming these expectations. This is the 3rd successive crop of an above average crop. The Italian and the Oregon crop through are expected to be lower wiping some gains out of the higher Turkish crop. The crop arrival peaked during late Sept/ early Oct, and now we see the arrival gradually decreasing.

The TMO has declared a floor price of 26,5 Tl/kg inshells; which is around 53 TL/kg kernel. However, with a high supply pressure, and that TMO is unable to absorb this supply, we are seeing market trade below the TMO levels – around 49 TL/kg

The TL has depreciated off late with reduction in interest rates and the recent sacking of the deputy Governors of the Turkish Central Bank. The TL is trading @ 9,60 to a $ - its historic lows.

The European market is covering the crop aggressively, giving support to the market. We are observing good breadth in the buying.

Our view is that the local market is now trading close to its season lows, given the differential with the TMO price. We will see more and more farmers now queuing for tendering their stocks to TMO. We also expect the local price moving up in case the currency depreciates.

The global macadamia nut forecast now is estimated to be at same level to last year. Australian macadamia forecast was revised down to 48K MT at only a 3% year-on-year growth while South Africa crop estimates were revised to 54KMT against an original forecast of 57KMT. Hawaii closed its macadamia production for the season 3% lower to last year at close to 18KMT and China is expected to range between 29K - 30KMT for the year.

Demand seems to be picking up especially since major economies have opened after Covid. Demand for larger size NIS into China has been steady keeping the NIS prices stable to bullish in the last couple of months. On the kernel side, we are seeing strong demand in the retail and snack sales in most markets. Demand for S5 and S8, ingredient styles, has also now started to show a strong recovery due to the reopening of food service trade, particularly in the USA although overall imports to US fell by 27% y-o-y impacting the domestic supply by 17% y-o-y.

We expect the inshell market to stay bullish in the short to medium run as the demand picks up supply remains limited and short than initial estimates. We have already started to see a decline in number of offers for wholes as most handlers are committed for the season. Industry continues to sell its long position on halves with prices moving up and lowering the differential between wholes and halves. Current offers NIS SA: 5.90-6.00 USD/kg, AUS$6.10-6.20 USD/kg. S1L are trading at 8.90-9.10/lbs. FAS for AUS and S4 at 7.50 -7.70/lbs. FAS for AUS. Ken continues to stay at 30-40c lower differential in kernel terms compared to AUS prices