In West Africa, harvest is complete and the final crop numbers look similar to last year. We can expect another 50-60 mt from the Guinea Bissau crop. Some countries like Nigeria had 30% lower crop due to weather events. Ivory Coast, fortunately, did not have any crop issues.

Overall, quality wise this season can be the quality of this season’s crop was one of the poorest of the last decade. Covid-19 related collection (i.e. shortages in jute bags) issues, logistics delays including trucker shortages and port issues have contributed to the lowering quality. Crop sizes in Asia were also lower this season, with both Vietnam and India reporting lower crops versus last season.

Until mid-July, India was one the key drivers for RCN demand. As the month progressed, India has reduced activity. Vietnam is not covering large quantities of RCN as well, due to the lack of kernel demand from main destination markets.

Consumers remain very selective in their purchasing behavior and focused on their spending. Across main consumer-end products, we notice lower demand which reflects to demand destruction in certain commodities. This resulted in less kernel demand during July, as the industry kept reducing strategic pipelines to execute needs and reduce cost of production. Today, this may look as the most logical way to move forward, but we have seen in earlier years that lowering rotating positions in cashews can impact pricing in the mid run. The cashew supply chain is a very long process and in main destination markets (except India) there is no local crop to fill up last minute needs.

Simultaneously, RCN processors have reduced their capacities as well and some parts of the Vietnam processors are not even operational these days. The cost of production for RCN processor (from in-shell procurement to production into Kernel) are at disparity already and have been for some time. It seems unlikely in-shell prices can further come off as all crops are sold and remain in strong hands or with end processors against their commitments.

Factors to Watch:

Bullish:

• West Africa crops are over and are either in strong hands or required against existing commitments
• Majority of India and Vietnam RCN processors remains uncovered for the second half of 2022
• Northern Hemisphere RCN crops quality remains poor and will not improve for the remainder of the season

Bearish:

• Consumption continues to be lower across major destinations
• US/EU markets are not active in kernel procurement
• Consumer spending remains under pressure

June was the strongest shipping month of the year for the almond industry. With 278 million pounds shipped, it surpassed last June’s shipment of 220 million pounds by over 26%. Historically speaking, it also represents the strongest June shipment we’ve ever seen. This was a strong follow up to May when the industry had shipped 257 million pounds, which was also a new record high for the month of May.

If you haven’t noticed, there has been a trend forming for the almond industry. After a dismal start of the crop year, the last four months have really been a saving grace for the industry having averaged over 256 million pounds. It has shown the resilience of the industry and ability to respond in challenging times.

With one final month left to ship, the industry’s expectation of a carry-out has now shifted from what was once believed to be as much as a billion pounds to a much more manageable 790 million (plus or minus 10 million).

Recently the USDA released a 2.6-billion-pound objective estimate for the new crop about to be harvested. This would be a decrease in production by over 300 million pounds from last year’s 2.9 billion pounds, and a 500 million pounds decrease from the record crop of two years ago with 3.1 billion pounds.

If the crop truly does fall back to 2.6 billion pounds, we should expect supply and demand to balance out sooner than expected.

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In California, nut fill results have started to come in and results are promising for the 2022 crop development. Up and down the state, nut fill looks to be right in line with a normal year. As a result, most industry expectations for the 2022 crop are now between 1.0-1.2 billion pounds. The consensus is that we are likely looking at a crop similar to last year’s 1.16 billion pounds, or slightly short of this. Most sellers are done selling 2021 crop as they do not have any additional production capacity. Interest has turned to new crop sales, where Inshell Ex 21/17 pricing is most heard around $3.55 FAS. Reports continue to pour in from overseas markets that Iran’s 2022 crop will indeed be smaller than last year’s crop, due to frost events. Expectations are for a stable market moving forward. It is important to note that the California crop still has a long way to go before harvest and any significant change in crop outlook can affect forward pricing.

June shipments continued the strong shipment trend with a record set for June at 47,091 tons. This is 15% higher than the previous record for June of 40,955 tons, set last year. We are hopeful that this is a sign of improved supply chains for the entire California tree nut industry, and hopefully we continue to see improvement.

Sales increased in the month of June with 25k tons of new sales versus 13k tons in May. As supply dwindles and pricing remains at record lows, demand for remaining California supply has been strong. The 2021-2022 total supply is estimated to be 86.7% sold. We are confident the final two months of the season will continue the positive shipping trend, given the strong commitments.

The California walnut industry has been able to significantly improve our position heading into the 2022 crop. The 2021 crop carry out was once thought to be more than 160k tons and achieving a carry out close to 120k seemed entirely out of reach, if not impossible. The momentum gained over the last few months is very promising and demonstrates just how resilient our industry is, and we should expect this momentum to carry into the 2022 crop.

Larger 2022 crops continue to be forecasted in both California and China, as growing conditions have been favorable. Global supply will increase significantly in the coming crop year. With this at the forefront of our minds, it is important that the California walnut industry continues to sell and ship as many walnuts as possible, while also keeping a focus on driving new product innovations. Given the low-price environment we are likely to be in for the near term, now is the time to focus on new product development and also market segments with low penetration, such as walnut ingredients.

The USDA released their acreage report on June 30th. According to the report, 2022 planted peanut acres in the U.S. declined by only 2.7% versus 2021. Many in the industry still question the accuracy of the report and feel that when all is said and done, the actual acreage decline will be greater than this. Some have consistently said that peanut acres would be down as much as 10%. In the end, it is likely that the decline is greater than the USDA indicates, but exactly how much is still somewhat of a mystery. We should get a first look at certified acres sometime around the end of July, which should help to provide a little more insight to the actual situation.

According to the USDA, peanut crop conditions as of July 11 were worse this year than any of the last several years for the comparable date. Severe drought conditions remain present in the West, and drought conditions have continued to increase throughout Georgia, the Carolinas and the Delta region in recent weeks. Some good news, however, in that temperatures in the southeast have returned to more normal levels and scattered showers and storms have been more frequent over the last two to three weeks. Weather conditions will become an even more critical factor as we move into August and September. While worse than recent years, the overall crop conditions aren’t alarming by any means at this time, but timely rainfall and somewhat “normal”
temperature patterns will be needed for the remainder of the growing season to maximize quality and yield potential.

As for peanut usage, the Peanut Stocks and Processing Report shows usage by U.S. manufacturers is down 0.6% crop year to date (July – May). The candy segment continues to perform well, up 12.7% for the period. However, usage in the snacking and peanut butter segments is down (3.8% and 2.5% respectively). Exports of U.S. peanuts are also down over 18% for the same period, almost exclusively due to a 65% decline in shipments to China. Elsewhere, the story for exports is more favorable with shipments to Mexico, Canada, Japan and even the EU being up versus last year. For the crop year, the U.S. is on pace to export the equivalent of around 600,000 farmer stock tons of peanuts, which would be the lowest export quantity in several years. It was only two years ago when the U.S. exported just over 800,000 tons. The USDA is now projecting total demand for the 2021 crop to be near 3,061,000 tons, a decline of over 4% versus the prior year. The decline is largely driven by the substantial reduction in exports this year. Carryout stocks of the 2021 crop peanuts are now projected to be 1,175,000 tons.

Factors to Watch: 

• Weather in the U.S. growing regions;
• Any updates or new information regarding acreage in the U.S. (certified acres report at the end of July);
• Peanut production in other major producing countries (China, India);
• Demand, both U.S. consumption and usage trends, as well as current and future export demand;
• Fiscal policies in the U.S., the impact on the U.S. dollar and trade;
• Futures pricing for competing crops...not only current year, but for the 2023 calendar year as well;
• Crop input costs...current year and into 2023; and
• Global conflicts, issues, etc., and the trickle-down impacts they have on demand, food supplies and supply chains.

The crop growth for the next season across origins looks above average. The late blooming has been above expectations in Turkey, and the crop expectation now is slightly better. The crop estimate has improved slightly from a 720-730K range now to 730-740K. Italian crop, too, is expected to be much better this year. However, drought in the last few weeks has raised some concerns on the yield and quality of the crop. We expect to understand the impact in the next one to two weeks.

With good supply expected, and that the demand for the current crop is limited, we continue to witness attractive prices for the old crop. However, availability is limited, as most farmers/manavs holding the stocks expect prices to move up once TMO announces prices for new crop.

For the new crop, the TMO is expected to increase the price to compensate inflation. The price increase announced for tea, which is another important crop in the Black Sea region, is 75%. The market now expects TMO to announce a price between 50 and 52 TL, which is around 20% higher than the current crop prices. We expect open market to trade at a discount though. Overall, we believe the opening levels for the next season crop will be around $5.25-$5.50/kg (raw material price available for exporters). The TL continues to touch new lows, including crossing the $17.50 mark most recently.

The supply availability for next season has given some comfort to the buyers and we expect prices to stay subdued over a longer period. However, if TMO purchases a sizable amount of crop in the early parts of the season and if Ferrero follows suit since the absolute prices are attractive, we should expect prices move up from the current levels.

We have seen some uneasiness from larger retailers/confectioners to cover for longer periods owing to some concern over demand. There have been some reports on reduction in confectionary demand in retail. However, call-offs for the most current contracts are on track. Most retailers are expected to open tenders during July and early August, and are expected to increase activity for the next crop trade.

Our view remains consistent for the last few weeks. We expect adequate supply for the next crop. Demand continues to be stable despite worries and inflationary woes, but we are experiencing some concerns from buyers to cover for longer periods. The next year pricing will now depend largely on TMO prices and subsequently how Ferrero operates. We do not see much downside from current levels as we expect TMO to set a benchmark countering inflation and a possible depreciation in currency during the next season. The currency will continue to play an extremely important role.

We believe current prices are generally extremely attractive, especially for any pending current crop coverage. We might not see too many offers from exporters before TMO releases its benchmark, but if offers are available, even at some premium to current crop, the levels look attractive for mid to long-term coverage.

Annual crop is expected to increase 6.5% from 2021. The Australia estimate is currently down 10% compared to earlier projections. The new estimate now is 49.3KMT against 51.5KMT last year. South Africa’s 2022 crop stands at 61K MT, +14% compared to 2021. Kenya is expected to grow +4% (41.5KMT compared to 39.7KMT last year). China was expected to have a crop of 50KMT this year, however there are concerns over reduction of crop by 30% due to lower temperature, rains, and grey mold issues.

Shipments out of Australia and South Africa have started. First harvest was delayed in both locations; we have received our first set of containers from South Africa and the quality is what we expected.

With current extended lock-downs in China and a higher local crop this year, the overall inshell import demand from China has taken a hit; softening the overall NIS market by 30c/Kg over the last two months.

Most buyers of broken kernel styles (confectionary and bakeries) are only buying hand to mouth - leaving larger inventories of smaller kernel styles building upon from the last two years. The price gap between the wholes and smaller styles continues to widen.