At a first glance it’s been a very challenging year for the cashew sector. Kernels traded for a consecutive year at disparity, with unclear forecasts from destination markets leading processors to sit on higher inventories (both in In-Shell and Kernels) and the continued global hassle on freights & cost of production.
In-shells: Tanzania auctions are nearing their end. Both India and Vietnam continue to cover. The pace of the auctions are behind last year’s volumes traded by end of December, this being said we also see a lower crop receipt vs. last year. Mozambique in-shell exports will start officially by 7th of January and local processors signaling the need of more in-shell against existing commitments. The crop forecast is not exceeding 85K MT of in-shell vs. 95K MT last year. For the NH crops the weather conditions continue to be favorable, same on the nearby forecasts. Vietnam & Cambodia had some excessive rainfall in isolated areas which doesn’t look to impact the crop development at this point. The weather risk period is not fully over though, but so far so good.
Kernels: Pricing continued to increase during December due to high spot demand for main snacking grades from all main destination markets. The question remains if this is driven by absolute consumption needs or to refill the very thin pipeline. The stronger currency in Europe has led to additional interests for 2023 requirements, but since the pricing for new crops remain unclear, the Kernel processors likely will wait post Tet break before going into larger forward commitments. This will be also a period for them to make a better judgement on the new crops.
November was a short shipping month for the industry due to the holidays. The industry shipped 204 million pounds for the month, putting us -4.28% behind a year ago with 835.6 total pounds shipped versus 873 million pounds shipped by this time last year.
Perhaps more importantly, sales commitments now stand at 691 million pounds, representing 41% of the crop shipped and/or sold. To be comfortable, the industry would like to be at or above 54% sold, which has been the average over the last five years.
493 million pounds were received for the month, bringing the total year to date receipts to 2.15 billion pounds, which is -7.00% behind total receipts of a year ago. The industry is expecting a final crop size between 2.50 billion pounds and the Objective Estimate of 2.60 billion pounds. With the addition of the historic carryout of 836.8 million pounds at the forefront of every packer’s motivation to continue selling. The last thing the industry will want is a repeat of this size a carry-out so sales and shipments will be heavily prioritized the rest of the crop year.
Forward pricing outlook will depend heavily on the upcoming 2023 crop bloom in February. While bloom weather outlook is still too far away to tell, California has been repeatedly pounded by storms over the last couple of weeks, brining much needed rain and snow.
The Administrative Committee For Pistachios (ACP) released the November shipment report on December 15th and showed California 2022 crop receipts of 884 million lbs. This should be the final 2022 crop size and is about 25% lower than initial expectations and 24% lower than last year’s crop of 1.16 billion pounds. This year’s carry in was 354 million pounds, 70 million pounds larger than last year’s 284 million pounds. Considering the smaller crop and larger carry in, total supply for 2022 crop is 1.238 billion pounds, which is 212 million pounds or 14.6% smaller than last year’s total supply of 1.450 billion pounds.
Quality of this year’s crop was poorer, with higher percentages of shelling stock. As a result, good quality Inshell has been harder to find out of California. Iran also harvested a much smaller 2022 crop and offers from Iran have been nonexistent into overseas markets the majority of this crop season. Limited availability of good quality inshell from both US and Iran has led to a firm inshell market, with recent trades reported as high as $3.70 FAS for Inshell Ex 21/27. However, kernel markets remain soft due to higher amounts of shelling stock.
Now that the calendar has turned and we have entered into 2023, there is already industry talk of the potential for a much larger 2023 crop. Chill updates have been circulated, showing winter growing conditions have so far been nearly ideal. Bud set and growth also looks good and early talk is for a 2023 crop with the potential between 1.20 billion pounds and as high as 1.40 billion pounds.
This will be an interesting year for the industry to navigate with low availability of good quality inshell remaining from 2022 crop, but much higher availability likely to be harvested this fall.
The 2022 crop harvest is now complete and current crop receipts for the 2022 crop stand at 727,539 tons. November receipts historically have represented between 95% and 97% of final crop size. With this in mind, we expect the 2022 crop to finalize somewhere between 750,000 tons and 765,000 tons. This will be larger than the Objective Estimate of 720,000 tons, and smaller than the California handler’s unofficial Subjective Estimate of 790,000 tons.
With the record 2021 crop carry out of 136,663 tons, the California Walnut Industry is tasked with moving the largest total supply of Walnuts we have had in any one year. This is a challenge in the face of global economic uncertainty and slowing demand for nuts. That being said, Walnuts are currently priced to move, with price levels lower than all competing nuts. We are starting to see some positive effect of low prices with Domestic shipments up 8.4% YTD.
We expect a tight trading range and price stability for the foreseeable future as downside is limited due to record low price levels being below cost for growers, and upside is limited due to large supply needing to be moved.
The December USDA crop production report was again unchanged from the previous month. They still show estimated production at 2,885,500 tons (harvested acres at 1,411,100 acres and yield at 4090 lbs per acre). As of December 27th, FSIS National Tonnage Report shows 2,760,596 total tons graded, with just 4328 of those tons graded as Seg 2/3.
Harvest is complete. Yields and mature kernels are showing down this year, seemingly due mainly to widespread TSWV and other environmental factors (above avg temps and lack of moisture during after planting (during flowering & pegging) and lack of moisture with cooler than average temps just before harvest (at peak maturing time).
From a demand standpoint, usage by U.S. manufacturers ended the year (Aug ’21 – Jul ’22) down .6% vs. year prior. As of the Nov ’22 report, total edible usage is down .6% YTD (Aug – Nov ’22). The USDA is showing final carryout stocks of 2021 crop to be 1.181 million tons, 20% more than the carryout from prior year and the most since the 2018 crop. The latest WASDE report remains unchanged from last month, projecting carryout stocks for 2022 crop to be 1.052.7M tons, which represents a comfortable supply.
As per the latest reports from AUS, the AUS crop seems have recovered well from the adverse weather conditions reported earlier in April when the estimate was reduced to 49K MT. However, lower losses and higher yields than expected, new plantings in the largest growing region of Bundaberg contributed to an increased crop number of 53K MT +3% YOY.
2022 crop harvest has been mostly concluded in most the regions. Most regions except for Hawaii showed an increase in the crop number. SA was at 68.5K MT which is +4K MT than the earlier revised estimate. KEN at 45K MT (+3K from earlier estimates).
China has indicated a crop well over 60K MT for the season, which is 1.9x from last year. However, there are many reports which are indicating a 20% lower number.
Destinations continued to stay long as buyers assess their inventories resulting in lower NIS prices from most processors as they look to reduce carry over position and overall working capital.
Continuing from the last report, we had predicted that the market will run up as availability of crop slowly reduces, owing to the significant tendering to the TMO and that the principal market player has bought most of their annual requirement. The TMO now has physically accepted 175K MT inshells, but now have stopped its sourcing. The principal buyer has been reported to source around 150K inshells and another 50K of kernels. It was expected that the market softens once the principal buyer discontinues its procurement – however this has not materialized. Due to lower availability and some spot demand coming in from European buyers, we have seen local market run up almost 20% in the last 1 month.
Turkey shipped 98K MT of hazelnuts between September 1st and December 4th. This is 19% down on the 120K registered in the same period last year. We have seen a large substitution of natural demand from other origins like Azerbaijan and Georgia. We can also attribute this to lack of demand early in the season. Azerbaijan and US prices continue to be lower than Turkey. The TL continues to be stable around the 18,60 level.