California temperatures reached triple digits across most of the growing region for a good portion of July. The heat has also intensified for the almond industry as the “Objective Estimate” released by NASS (USDA) on July 12th may produce 2.60 billion pounds of almonds for the 2023/2024 crop year, representing a 1% increase compared to last year’s actual crop of 2.57 billion pounds. This calculation is based on 1.38 million bearing acres, resulting in a yield of 1,884 pounds per acre. The industry will need to take ownership of this data and adjust marketing almonds accordingly.
The Almond Board of CA also published the “June Position Report”, which revealed that crop receipts for this year have peaked at 2.57 billion pounds. This marks a decrease of nearly 12% compared to the previous year when the industry harvested 2.91 billion pounds, and a decrease from the 3.1 billion pounds harvested in the 2020/2021 crop year. June
shipments were disappointing, totaling 186.6 million pounds, down 33% from the 278 million pounds shipped last June. Year-to-date shipments amount to 2.378 billion pounds, indicating a 3.5% decrease compared to last year’s 2.465 billion pounds. With only July remaining in the current crop year, it is likely that the industry will fall short of last year’s total
shipments of 2.634 billion pounds, potentially resulting in a carry-out inventory exceeding 800 million pounds.
Additionally, the industry is behind on new crop commitments. Last year, the industry had already recorded sales of over 236 million pounds of the new crop, and the year before that, it was 326 million pounds. Currently, new crop sales stand at 122.4 million pounds, trending considerably down. With a large carry-out and a substantial crop on the horizon, the pressure is mounting.
- New sales for the month of June were very strong at 155 million pounds, surpassing last year’s 142 million pounds. This sets a historical record for June sales and is expected to
result in robust shipments in the coming months.
- Shipping issues stemming from the pandemic have been resolved, enabling the industry to transport products under pre-pandemic conditions.
- With the “Objective Estimate” behind us, the industry can actively sell the new crop moving forward. This late arrival of the new crop also provides an opportunity to sell
remaining stocks of the current crop. The Almond Board of CA is busy with marketing plans to shore up demand around the world.
- The over-supply of almonds may continue to constrain the market until demand catches up with the available supply.
- Consumer behavior appears to have shifted, with a slowdown in consumption observed across all tree nuts. Merely adjusting pricing may not suffice, as consumers might be
seeking more economical alternatives or prioritizing comfort food over healthier options.
- There will be pressure to make up for lost time. Sluggish sales will compel producers to ensure that no shipping opportunities are missed.
- With the NH-crop season coming to an end, ability to cover high-quality in-shell is limited. Landings and pull-outs in Asia continue to be strong.
- The above bullet point resulted in an upward shift of in-shell prices during the second half of July, which resulted in continued collection of in-shell arrivals by the processors.
- Earlier pressure on high priced in-shell contracts under stress have disappeared and consignments are pulled out at a normal pace again, irrespective of the contracted price level.
- Demand has improved significantly during the end of the second quarter, which also reflected in the strong import figures. For example, EU, after a weak Q1 period. Availability in main destination markets is low and premiums continue for product that is available for immediate collection from a EU/US warehouse. This signals earlier stock depletion in these markets which has the potential in very thin pipeline coverages.
- With the ongoing lower quality arrivals and the delay in execution, it is most likely we’ll continue to see firmness on spot material to continue for some time as promotions on the shelf continue. This will likely further boost consumption.
- With all above developments, we haven’t seen further pressure on kernel prices. WW320 continue to trade in a wide range of $2.40/lb FOB to $2.60+/lb FOB for nearby periods.
Interest to cover far forward remains strong but sellers remain hesitant or would rather wait to see how the SH in-shelll will start trading.
- Destination stock is low and spot demand continues to persist.
- Promotion of cashews has begun in key destination markets, bolstering both demand and the recovery of consumption.
- In-shell prices have started inching up, which will likely reflect the Kernels prices as processors remain under pressure on margins as shell realization continues to be weak.
- First half global consumption shows no increase versus last year. In fact, some regions today are still behind versus last year.
- In-shell arrivals at processing regions continues to be strong.
- The question remains, will consumers continue to accept shelf prices once period promotions have ended?
Global pistachio production is expected to see a substantial increase in the 2023/2024 crop year, primarily driven by larger crops in both the US and Iran. The INC’s “May 2023” forecast projected the global production for the 2023 crop year to grow to 1.022 million MTs, an increase of 37% versus last year’s 747,000 MTs. Global total supply is also forecasted to rise from 1.058 million MTs to 1.238 million MTs (+17%).
World pistachio production has been steadily increasing over the past decade (+46%), and so far, increases in demand have kept pace with the rapid supply growth. So far, pistachios have demonstrated higher price elasticity compared to other nuts. However, with less prosperous economic conditions and lower priced nut alternatives available in the market due to over-supply, consumer preferences could be tested this year.
Shipments were down in June at 86.7 million pounds, an 8% decrease versus last year. However, shipments are still outperforming year-to-date, up +8.5%. Exports remain flat for the month at 65 million pounds (+16% year-to-date), while domestic shipments continue to underperform at 21 million pounds in June (-25% versus last year) and 206 million pounds year-to-date (-8% year-to-date).
Current crop pricing remains firm as dwindling supply of the current crop has led to higher prices for buyers needing immediate coverage. However, early reports of new crop business are coming in much lower. The US crop is expected to be delayed about two weeks currently due to the mild summer we have experienced so far, with harvest possibly not starting until September. This will further complicate the crop transition as overseas markets will need coverage for festival periods.
To date, the incoming pistachio crop across origins has enjoyed positive conditions, with no major concerns reported. California has seen one of the mildest summers in recent memory, and water shortage has not been an issue this year. Should the positive weather continue, we could be in for a high-quality crop. If larger crop sizes do materialize as forecasted, pistachio demand will be tested as it is forced to compete in a market over-supplied lower priced alternatives.
- Shipments are up 8.5% year-to-date, driven by exports.
- There is likely pent-up demand building in exports market waiting for the 2023 crops to arrive.
- 2022 crop inventory levels and carry-outs are minimal.
- Domestic shipments down 8% year-to-date are a sign of declining demand.
- Both USA and Iran are expecting larger crops leading to increased global supply.
- Many lower priced, over supplied alternatives will test pistachio consumer loyalty this year.
The positive momentum seen in May continued in June, driven by the impact of the USDA purchase, resulting in above-average shipments and a projected lower carry-out. While crop receipts for the 2022 crop year remained unchanged at 747,870 tons,
there is an expectation of a slight adjustment before the season’s end, leading to an estimated total supply of 891,000 tons (+7.7% compared to 2021).
Shipments performed well in June, reaching 53,470 tons, a 12% increase versus last year. The strong performance can be attributed to the positive influence of the USDA purchase and the adjusted crack-out rate (40.1%). However, exports continue to suffer, down 19.7% compared to last year (-2.5% year-to-date). This trend is expected to continue as China floods the market with lowcost walnuts. The estimated unshipped inventory now stands at 205,557 tons, a 1.1% increase versus last year, despite having 7.7% less total supply. Forecasts point towards above-average shipment performance for the rest of the season.
Reported commitments in June saw a considerable increase of 23% versus last year, with new sales FTM rising by 12% compared to the same period last year. This growth can be attributed to the positive impact of the USDA purchase and the lower crack-out rate. The sold percentage of total supply is now estimated at 94.2%, a 4.3% increase versus last June.
The carry-out projection remains at 92,000 tons, a 32% reduction from last year’s carry-out of 136,673 tons. The USDA purchase successfully achieved its objective of reducing lower quality combo inventory from the market, alleviating concerns for handlers holding undesirable inventory. The increasing scarcity of lighter walnuts has led to a slight price increase in recent weeks. However, the true inventory levels and their impact on pricing remain uncertain. The incoming new crop is speculated to be one of the best in years, and unless there is a massive reduction in walnut trees, and significant increase in demand, achieving desired pricing levels will be challenging.
Chile: Chile’s 2023 crop was recently harvested and will fall short of expectations. Their 2023 crop receipts will finish around 168,000 MTs, down 10% versus last year’s crop of 187,000 MTs and down 12.5% versus this year’s expectation of 192,000 MTs. Through June, shipments out of Chile are up 22% versus last year, with in-shell shipments leading the way, up 32% versus last year.
China: China’s 2023 crop is forecasted to be flat at 1.4 mn MTs. This is most likely due to the inability to get reliable information out of China. Their 2022 crop carry-out is forecasted to increase to 120,000 MTs. This results in a forecasted total supply of 1.52 mn MTs for 2023 crop, up 70,000 MTs or 5% over 2022 crop.
- Shipments are now up 9.9% year-over-year.
- USDA shipments are going out, resulting in better shipment numbers and lower available inventory.
- Chile’s 2022 crop supply is down and shipments are up.
- CA’s 2023 crop is expected to be one of the largest in years.
- China’s overall supply is forecasted to increase 5% this year.
- Demand continues to decline in developed markets.
Key developments in major macadamia growing regions:
- South Africa: Early projections indicated that South Africa was expected to achieve a macadamia crop of 81,000 MTs in 2023, reflecting a 5,000 MT increase from the previous estimate. As the current harvest unfolds, growers are taking a conservative approach when estimating the total crop yield. However, there are some challenges due to late stinkbug issues, which may impact the final harvest and could be more significant compared to the 2022 season. Lower farm prices are causing concerns among some farmers, potentially leading them to refrain from harvesting due to financially unsustainable price levels. Nevertheless, the Nut-in-Shell (NIS) market is maintaining stable prices.
- Australia: Australia has revised its crop estimate down to 60,000 MTs, with some indications falling below last year’s number of 50,000 MT. The overall crop quality is reported to be very good, and reject levels are down. However, there is a decrease in nut size and total kernel recovery, which could present some challenges to the industry. Australian
macadamia growers and the entire industry are facing a difficult year with soft farm gate prices, the lowest in over a decade.
- Kenya: Similar issues continue in Kenya, with a slowdown in kernel sales and unsold inventories both at the origin and destination. As a result, cash flow has decelerated, and some processors are refraining from buying NIS. Industry participants in Kenya estimate that less than 70% of NIS will be harvested. The Kenyan government’s efforts to boost farm-level purchases by exporting NIS earlier this year have not yet yielded the expected results. Therefore, quality remains a crucial factor to closely monitor in the Kenyan market.
Demand: The NIS market has experienced a robust surge in demand from China, particularly following the lifting of lockdown measures in January. Demand from China continues to be the major driver of exports from all major origins. On the other hand, demand for kernels from the US remains lackluster, but there is a promising increase in demand in Europe and Asia due to new product development, particularly for style 1s, which are usually packed with style 4 to make style 2 are used in coated nuts in China. The lower price point has contributed significantly to stimulating demand and generating growing interest in macadamias.
Overall, the macadamia industry is facing both challenges and opportunities, with growers and stakeholders actively addressing the issues and seeking avenues for growth.
- Robust demand from China is stimulating the NIS market.
- Initial shipments from various origins, including South Africa and Australia, are showing promising quality and reinforcing positive prospects.
- There is growing interest and increased demand in the macadamia industry, driven by lower price points and new product development efforts.
- Some challenges from lower farm prices are affecting growers in South Africa and Australia, leading to concerns about financial sustainability.
- There is a possibility of a reduced actual harvest in Australia compared to estimates due to poor crop yields in Bundaberg.
With the crop in the ground, weather throughout the growing season is the most critical factor for now. Much of the crop was planted later than average due in part to the weather being cooler and wetter than usual, as well as most heeding the advice of experts to help combat tomato-spotted wilt virus.
The Southeast US, where ~65% of US peanuts are planted, has been receiving a surplus of rain over the past couple of weeks, some areas seeing nearly a foot of rain in a matter of days. The SW and Virginia – Carolina’s region also finally received some much needed rain. Though off to a slow start, with progress behind schedule, the US crop is in overall good condition so far. USDA has predicted 1,547,000 acres planted this year, which is ~6.7% up from planted acres last year. Despite the USDA estimate, most believe plantings to be up from last year about 8 – 10%, which, with average yields, would result in production somewhere between 3.05M and 3.2M tons. With US demand in the 3M-ton range, and the estimated ~1M-ton 2022 crop carryout, production within this range will be sufficient, but not enough to create excessive surplus. US kernel market for 2023 crop has been fairly quiet lately, with most shellers comfortable with current position, and most buyers holding out expecting a large crop and lower prices. Kernel prices are stable and haven’t moved much in a while, with current crop being in the lower .60’s and new crop being in the mid-to-upper .50’s.
Possible Bullish Factors:
- The unknown quality for the U.S. crop – As with every crop, greatly depending on weather, there is the possibility for bad quality, 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 U.S. new crop? At the present time, their peanut production is expected to be up this year (back to more normal quantities).
Possible Bearish Factors:
- U.S. demand – Current usage, particularly in the snack and candy segments, seems to be trending down slightly.
- Possibility of the crop size being larger than predicted, with good quality, we could see a decrease in prices.
- Crops across origins including Turkey, Italy and Oregon are looking good, and with the approximate 200K carry in Turkey, supply is more than adequate.
- On June 22nd, the Turkish central bank’s monetary policy committee (MPC) brought in a policy rate cut far lower than most economists were expecting, hiking the rates by 650bp to 15% from 8.50%. Following the rates announcement, the USD/TRY rate has traded beyond 26 TL/USD – a fresh low for the TL. We expect local market to move in
tandem post the Bayram holidays.
- The TMO has declared a 68 Tl/kg price for their next tranche. The USD prices have come off from the highs earlier this year and have slid below the 5 $/kg level for the first time since November 2022. The availability of product, especially in-shells, remains limited.
- We have seen wide covering for the Q3 demand in the last 3-4 weeks, as price has deemed to be attractive. We had anticipated a much busier June, and we see the trend to continue into early July as well. Germany, the largest market for Hazelnuts is still under a recession – consumption across nuts being hit. For Hazelnuts though, consumption of the larger and premium brands seems in-tact.
- Turkish exports in for the season are 254K against 297K in the same period last year (3rd week of June) – lower by almost 15%. The gap has narrowed during the last few weeks, and now the exports are expected to be closer to 300K, depicting some improvement in buyer sentiment.
- TMO expected to increase price levels for fresh crop in July.
- Demand picking up as many fence-sitters are covering for their balance demand of 2023.
- Farmers unwilling to sell at lower levels, thus limiting short term supply.
- Large carry-over, and estimated good crops across origins.
- Some important consuming countries still under recession, thus uncertainty continues.
- Continued economic policies and resultant TL depreciation.