It has continued to be hot and humid out West for the last two weeks, with temperatures hitting the high 90s to low 100s all week long. The valley experienced a tropical storm as remnants of “Hurricane Hilary” passed through the state on Friday, August 18th, dropping anywhere from 1 to 3 inches of rain in the lower part of the state and interrupting the almond harvest. While there was ample warning of the storm, it arrived sooner than expected. Some growers were unable to retrieve the almonds they had already shaken off the orchard floor, resulting in mechanical drying in some limited cases.
With the crop already delayed, the rain delay will most likely extend the harvest by an additional week, as growers will wait for the ground to dry before shaking resumes. Almonds are safe on the tree, yet additional time is needed to dry everything out. Early shaking and quality testing has indicated a higher level of serious damage in some orchards. Although this is typical for the earliest harvest, it may be higher compared to previous years due to some growers laying off sprays, as consequence to the low returns. Additionally, there are some abandoned orchards in areas that can also lead to infestations, which then spreads to adjoining orchards. Growers have hesitated this week as everyone assesses their orchards following the storm.
This month, the Almond Board of California released the final “Position Report” for the 2022/2023 crop year. Total shipments for the year ended at 2.565 billion pounds, down by -2.63% from the previous year’s 2.634 billion pounds. For the month of July, the industry did end strongly with 187 million pounds shipped. This is the second-largest July in history and should be noted as shipments start to trend up. With strong exports last month, we can expect to see a repeat in August, kicking off the new crop year with a strengthened position. The industry is expecting +210 to 215 million pounds, which will also make it one of the strongest August’s in history. With these current market levels,
The total carry-out will be 791.9 million pounds, down from the carry-in of 836.8 million pounds from last year. The industry stands at 204.9 million pounds of new crop commitments. With the final “Position Report” having been announced, this has opened the door for more sales transactions to take place as we see a great deal of activity following last week’s report.
- Stronger sales will play a role in helping to firm the market levels that may have already hit the bottom. New sales for July were 82.5 million pounds, stronger than the same period last year when 63.3 million pounds were sold.
- With a lower carry-out than last year’s 836 million pounds, now down to 792 million pounds, and an estimated crop size of 2.6 billion pounds, overall supply will be flat to slightly down from last year.
- With market levels at historic lows, this may be the best time to book any Q4 and Q1 needs. The risk of strengthening market levels outweighs further weakening of the market at this time.
- The uncertainty of consumption has caused some buyers concern regarding their future demand needs, leading to hesitancy for some to purchase too far out. As a result, we see hand-to-mouth purchasing continuing early on.
- New crop shipments continue to be in question, as some are also hesitant to sell without fully understanding the quality levels they will have to offer. The net result, however, is underperformance on bookings, which could lead to lower shipments in the first quarter.
- Despite extremely low pricing, the market remains flat, lending credence to lower consumption. Retail prices remain high in the snack nut category as retailers look to improve margins to offset other less profitable categories, sacrificing some volume.
- NH-crop season has fairly ended, and the majority of the in-shell is on its way to processors in Asia. The big “question mark” remaining is whether all of the in-shell has already been traded. On the other side, we noticed that Vietnam’s Kernel exports for the May/July time period has set a new record. Which indicates that the total exports for 2023 may be an all-time high, similar to the 2021 levels.
- With sufficient in-shell currently arriving, we are not seeing many issues on the supply side. However, on the demand side, factors like “financing” and “manpower costs” still remain a factor, which is likely to play a larger role for next season.
- Quality wise, this is not the best crop in comparison to recent years. With some delay in harvest and low demand at the start of the season, this has resulted in longer warehousing in origins. Which has resulted in a lower out-turn than usual.
- Demand remains flat versus this time period last year. With all the global hassle on rising costs, this can be noted as a positive factor. Obviously, cashews remain a preferred consumer snacking choice. Retailers across main destination markets have adjusted their shelf prices, which has supported consumption very well.
- With de-stocking in destination spot markets remaining extremely firm at peak prices and the challenges at the Panama Canal, we will likely see this issue continue. With traditional high-spot demand in Q4, this remains an indicator to watch closely going forward.
- With the current favorable pricing, main destination markets are showing interest to cover as much going into 2024, whereas origin processors will rather operate from the nearby side. The interest costs simply gives no room for origin processors to market at spot levels going further as WW320 pricing continues to be in the range of $2.40/lb FOB to $2.60+/lb FOB for nearby periods. Another selling indicator will be the SH crops, which we expect to start trading by the end September/early October.
- Destination stocks remain tight and moving fast on main grades.
- Driven by promotions, consumption has improved and is likely to finish better than last year.
- Prospects for the Southern Hemisphere’s crop is still unclear and overall, shell realization continues to be weak versus last year.
- In-shell availability for Asian processors is currently not a concern.
- The current peak consumption season in India is disappointing and not signaling to pick up soon.
- Will rising costs impact consumer behavior and shift into alternative (cheaper) snack items?
The walnut industry is maintaining its favorable trends seen in recent months, encompassing both pricing and shipments. The ramifications of the USDA purchase and the modified crackout rate have effectively reduced the total supply, prompting buyers to cover near term positions. Crop receipts for the 2022 crop year remained unchanged at 747,870 tons, indicating that any forthcoming adjustments are likely to be minor.
July’s shipment figures remained positive, up 47.6% versus last July. Year-to-date shipments are now up 11.6% versus last year. While shipments are on a positive trend, it may not be enough to bring the carry-out to the desired level of under 100,000 tons. Projections for August’s shipments suggest they will remain above average, but fall short of the original forecast. On a brighter note, exports surged by 32.6% compared to the previous July, contributing to year-to-date exports nearing last year’s performance (-1.5% year-to-date).
July’s reported commitments continued to perform well, posting a 10.6% increase versus last year. However, new sales for the month experienced a 7% decline compared to the same period last year. The sold percentage of total supply has now reached 96.2%, marking a 4% rise from last July. Substantial movements are not expected until more information on the upcoming new crop becomes available.
The updated carry-out projection now stands at 112,000 tons, showing a 17.4% decrease compared to the 136,673 tons carried forward from the previous year. While there has been an upswing in demand for walnuts as the crop year winds down, it’s evident that the most desirable inventory is becoming scarce, leading to upward pressure on prices. Consequently, many buyers are adopting a cautious stance, being reluctant to commit to larger quantities at higher prices. The “Objective Estimate”, released on September 1st, will play a pivotal role in shaping sales activities in the upcoming weeks. Reports on the incoming crop have been largely positive so far, and we will continue to closely monitor for developments.
Chile: Chile’s 2023 crop volume is expected to fall below initial forecasts. The crop receipts for 2023 are projected to be approximately 168,000 metric tons, which is a 10% decrease compared to last year’s crop of 187,000 metric tons, and a 12.5% decline from the anticipated 192,000 metric tons for this year. In terms of July shipments, there was a notable increase of 15% compared to the previous year. Current forecasts suggest that stocks will be depleted by the year’s end.
China: China’s projected 2023 crop capacity remains flat at 1.4 million metric tons; however, the actual harvest outcome is yet to be determined. Chinese walnut production is primarily driven by smaller farmers, posing challenges in collecting accurate data. Nonetheless, the increase in labor and capital costs mirrors the difficulties faced by the US industry. Unlike the US, Chinese farmers lack the advantage of years of planning and experience. This circumstance could potentially lead to a reduction in walnuts harvested from more challenging rural areas. For their 2022 crop, the projected carry-out is set to rise to 120,000 metric tons, signifying a 5% increase of 70,000 metric tons compared to the 2022 crop.
- Shipments are now up 11.6% year-over-year.
- Exports are up 32.6% versus last July.
- Chile’s 2022 crop supply is down 10% and shipments are up 15%.
- Global supply for many competing nuts is also increasing.
- CA’s 2023 crop is expected to be one of the largest in years.
- China’s crop capacity remains and expected to grow export market share.
- Crops across origins are reported to be above average. The “Black Sea Exporters Association” has published an “Objective Estimate” of 790,000 in-shells in Turkey. The carry-over in Turkey is expected to be around 170,000 metric ton in-shells – mostly in the hands of TMO.
- The harvest has started, and the initial crop flow and quality has not been up to expectations. This has led to a bullish sentiment and reduced supply. We have experienced prices moving up significantly (around 5%) in the last week.
- The TMO has announced a price of 82,5 TL/kg as its sourcing price for next season. This is around 3,15 $/kg in-shells, and around 6,30 $/kg in kernel terms. The open market is expected to trade at a discount given the good supply.
- In a surprising move, The “Central Bank of Turkey” raised interest rates from 17,5% to 25% on Thursday, August 24; against a predicted increase at best to 20%. This move has bolstered the TL, which now is expected to be less volatile in the coming months.
- As prices strengthen, we have seen many buyers preferring to wait for corrections. We still have some demand pending for Q4.
- Inflation has been easing across Europe, but signs of a longer recession, too, are imminent. Most market feedback indicated hazelnut consumption to be steady, but not growing.
- Turkish exports for the season are 296,000 against 338,000 in the same period last year(4th week of August) – lower by almost 12%. The gap has narrowed during the last few weeks, and now the exports are expected to be closer to 300,000, depicting some improvement in buyer sentiment.
- TMO has announced a price of 82,5 TL for levant - 3,15 $/kg as expected.
- Demand continues to be strong in short term for covering pending requirements for 2023.
- Farmer sentiment is bullish due to lower-than-expected yields in some areas and inferior quality of the initial crop harvest.
- Large carry-over, and estimated good crops across origins.
- High local interest rates leading to lower appetite of traders to carry and hold stocks.
- Overall weak sentiment. Purchasers preferring to source in smaller lots for short term.
The pistachio industry is maintaining its positive trajectory witnessed in recent months, with positive performances in both domestic shipments and exports. While current crop inventory retains its firm pricing, intriguing supply and demand dynamics are on the horizon as global production is expected to reach record highs. The 2023/2024 crop year is poised to witness a substantial surge in global pistachio production, primarily propelled by larger harvests in the US and Iran.
According to the INC’s May 2023 forecast, global production for the 2023 crop year is projected to rise to 1.022 million metric tons, representing a significant 37% increase compared to last year’s 747,000 metric tons. Moreover, the global total supply is forecasted to grow from 1.058 million metric tons to 1.238 million metric tons (+17%).
Shipments continued their positive trajectory in July, reaching 59.2 million pounds, a 7.6% increase versus last year. Shipments are now up +8.5% year-to-date. Exports remained the key driver, accounting for 39.9 million pounds (+15.5% year-to-date), with Europe witnessing a 14% increasecompared to last July. Moreover, the domestic market showed improvement with a 4.5% rise compared to the previous year, though it still lags in year-to-date performance at -6.9%. Projections for August shipments indicate sustained strong performance, which would result in one of the lowest carry-outs in recent years. Current inventory prices remain stable, primarily due to the scarcity of uncommitted inventory and the expected shortage in September caused by the delayed crop. However, the forthcoming large new crop has led to notably lower prices for new crop offerings.
California is experiencing an exceptionally mild summer, with no concerns about water availability this year. Preliminary reports from the field suggest a healthy and heavy incoming crop. This could potentially lead to a positive year for consumers, as the larger crop size may translate to affordable, high-quality pistachios becoming widely available. Conversely, this situation could present a challenge for pistachio handlers, as they’ll need to compete with other plentiful, lower-priced nuts to attract buyers.
- Shortages in September are expected due to the projected low carry-out and delayed new crop.
- Shipments are up 8% year-to-date, driven by exports.
- Strong performances in developing markets (ME, Africa).
- Both USA and Iran are expecting larger crops leading to increased global supply.
- Over-supplied alternatives will test Pistachio consumer preferences this coming year.
- Domestic shipments are down 6.9% year-to-date.
Key developments in major macadamia growing regions:
- South Africa: In August, South Africa’s macadamia crop, initially projected at 81,000 metric tons, experienced a slight reduction. Late stink bug issues created some quality concerns, mainly affecting the overall USKR, availability of high-quality NIS and potentially affecting shipment timelines. Additionally, there is lower availability of NIS as most processors sold their positions, causing a slight uptick in NIS prices last month. The lower farm gate prices raised concerns among farmers, some of whom were hesitant to harvest due to financially unsustainable price levels. Despite these challenges, the industry remains resilient.
- Australia: Most Australian processors have indicated that the macadamia crop estimate would go down to 45,000 metric tons, slightly below last year’s 50,000 metric tons. The good news is that the overall crop quality is excellent, with lower reject levels. However, there is a decrease in nut size and total kernel recovery, which presents some industry challenges. Similar to South Africa, most processors in Australia have sold their NIS positions, leading to commitments that couldn’t be fully met due to the smaller-than-anticipated crop. Australian macadamia growers faced a challenging year with soft farm gate prices, the lowest in over a decade.
- Kenya: In Kenya, persistent issues include a slowdown in kernel sales and unsold inventories at both the origin and destination. The High Court’s also decided to suspend the government’s move to lift the NIS export ban. Quality remains a vital factor to monitor closely in the Kenyan market as the industry navigates these challenges.
- China: According to the latest projections from the Chinese government, this year’s estimate for dried NIS is 56,000 metric tons, making China the second-largest macadamia growing region. Trail collections have commenced, and the season is expected to be in full swing by the final week of August. China’s NIS prices have remained stable due to the lack of low USKR NIS from Australia and South Africa. The opening prices are expected to be on par with SA and AUS pricing.
Demand: The NIS market has seen a robust surge in demand from China, particularly following the lifting of lockdown measures earlier this year. China continues to drive exportsfrom all major origins. While demand for kernels from the US has been modest, there is promising growth in demand from Europe and Asia, driven by new product development, especially for “Style 1” macadamias. These “Style 1” nuts, typically combined with “Style 4” to make “Style 2” and used in coated nuts in China, have contributed significantly to stimulating demand and generating growing interest in macadamias.
In conclusion, the macadamia industry faced challenges and opportunities in August. Growers and stakeholders are actively addressing these issues and exploring avenues for growth. Despite the hurdles, the industry remains resilient, adapting to the changing market dynamics with a positive outlook for the future.
FSA certified acres came out in August, with planted acres at 1,641,197, a 13% increase from planted acres in 2022. Taking into account there was a big increase in acres in Texas, we estimate harvested acres to be somewhere between 1.575 million and 1.6 million. Obviously, it is too early to tell how many failed acres there will be or where the yield will end up, but final production will most likely end up anywhere between 3.1 million and 3.2 million farmer stock tons. With U.S. demand holding up fairly well in the 3M-ton range, plus increased export interest, and an estimated ~1.024M-ton 2022 crop carry-out, production within this range will be sufficient, but not enough to create excessive surplus.
Up until now, overall, the US crop condition has been very good. However, it has recently became extremely hot and dry across the peanut growing area, with record high temperatures in many areas. Soil moistures are plummeting and there are little rain chances in most areas for several more days. This weather is certainly something to keep a close watch on over the next couple of weeks. The U.S. kernel market for 2023 crop has continued to be fairly quiet, with most shellers comfortable in their current position, and most buyers holding out expecting a large crop and lower prices. Due to availability and lack of offers through December 2023, redskin kernel prices have firmed up, with new crop prices coming up to meet current crop prices (low $0.60’s). Blanching slots are also extremely tight through December and offers are limited, thus resulting in an increase in prices ($0.80 +/-). New crop prices from January forward seem to be around $0.60, with limited offers.
Possible Bullish Factors:
- The unknown quality for the U.S. crop – With the extreme heat and lack of rain, continued drought conditions will cause yield and quality issues, which could drive the prices higher.
- Anticipation of increased export demand – How much additional European demand will come to the U.S. as a direct result of the reported ~30% reduction in Argentina’s crop production? Will China be a factor for the new U.S. crop? At the present time, their peanut production is expected to be up this year (back to more normal quantities).
- If the upward trend in cotton futures continues, there could be a possible reduction in peanut acres for 2024, as growers may choose to plant more cotton versus peanuts. This
could cause a tight peanut market, thus an increase in prices.
Possible Bearish Factors:
- U.S. demand – Current usage, particularly in the snack and candy segments, seems to be trending down slightly.
- If yields are higher than average, resulting in a crop size larger than 3.2M farmer stock tons, with good quality, we could eventually see a decrease in prices.