In West Africa, the remaining flows are only those from Benin and Guinea Bissau. About one-third of Benin crops are expected to arrive, but quality has been extremely low with out-turn not coming beyond 43/44 pounds. Half of the Guinea Bissau crops have arrived and the remaining half are expected in the next three to four weeks. The out-turn remains with 52+ pounds high and priced accordingly. Overall, West Africa crops have experienced a challenging season from unpredicted dry conditions at the beginning, to heavy rainfalls during harvest time. It remains to be seen if La Niña will continue to impact future West Africa crops as well.

Vietnam and Cambodia’s local crops are now in the hands of processors against their commitments. The Vietnam processing industry still needs coverage for their needs in the second half of 2022, playing a role in the market demand.

India is getting ready to cover for their main seasons and has already seen an active in-shell purchase season. Mixed news is circulating regarding the local crops, but it is likely that the majority of these crops are in strong hands.

With the increasing cost of living, including the cost of food items, we have seen lower consumption in main destination markets. The decrease in consumption is a large-scale hit, compared to fresh fruits and vegetables which have had a significant price increase on the shelves. As expected, consumers have reacted, and we must monitor how purchasing behavior will play out for the rest of the year.

The pandemic continues to put governments in a dilemma, and we may see increased restrictions this fall. If restrictions come into force again, we may see consumers shifting back to their 2020-2021 pandemic consumption habits; a return to healthy snacking at home. While the industry forecasts remains unclear, there are signs the coverage pipelines are to be low, hence more activity is expected to happen in the upcoming period.

Factors to Watch:

Bullish:

• West Africa crops are at their end and have traded in average at higher levels versus last year
• India and Vietnam processors will need coverages for the second half of the year production and are waiting for demand to enter
• Supply disruptions, vessel/container restraints and local pandemic restrictions continue to impact kernel production
• Overall, quality of northern hemisphere crops were well below expectations

Bearish:

• Consumption hasn’t picked up in June, and could be disappointing as well during the remaining summer months
• US/Europe markets remain fairly inactive for nearby needs
• Consumers are spending under pressure and may lead to less demand in the near future

The April and May shipment reports have been released from the Almond Board of California, reflecting strong numbers in both months. April shipments were 245 million pounds, and May shipments were a new all-time record for the month, with 257.55 million pounds shipped. This brings total shipments year-to-date to 2,186 billion pounds. While it remains 10.7% behind last year’s record crop of 3.1 billion pounds, we are ahead of the 2019-2020 crop year (2,016.9 billion pounds shipped by the same time period) by 8%.

Just a few short months ago, a billion-pound carryout was in the conversation. Now, with two months remaining, it is realistic to consider 800 million pounds or lower as a possibility.

The weather in California has remained primarily dry. Concerns of the drought are at the forefront of every grower and will remain so until the situation is remedied. We have continued to have some of the driest months on record through the growing season, and many of the water district allocations are almost complete. With two months to go, many growers will be forced to rely on their well water alone, and that may not be enough. Post-harvest irrigation is one of the most critical times, as the trees are at the top of their stress level. Without proper irrigation, this could cause irreversible harm to the tree and next year’s cop.

The USDA will release the objective estimate on July 8th, setting the stage for new crop sales.

While the market has slowed down the last couple of weeks, pistachio pricing remains stable for both current and new crop. Both buyers and sellers seem content to wait for additional outlook for the 2022 California crop development. Also, it seems that most packers are fully sold for 2021 crops, as they cannot fit anymore into the production schedules, due largely to shipping constraints. Buyers have accepted this fact now and are waiting for 2022 crop news and opening pricing to begin making their new crop buying decisions. The next crop updates will be received in July post nut fill.

The most recent industry consensus it that the 2022 crop will be more or less in line with last year’s 1.15-1.20 billion pounds. This is a slightly different tone than the smaller 2022 California crop outlook of 1,036 billion pounds forecasted at last month’s INC. However, as mentioned earlier, the 2022 crop outcome is still highly dependent on nut fill and growing conditions from not until harvest.

While the market has taken a breather for the time being, there is likely to be a void in coverage coming out of both India for Diwali (October 24th) and China for Chinese New Year (January 22nd, 2023). Both markets will need to take coverage sooner rather than later, and we expect this to lead to increased activity and potentially firm pricing in the coming month.

Current price indications are $3.70 per pound FAS for 2021 crop Inshell Extra 21/27, and $3.60-$3.65 per pound FAS for 2022 crop Inshell Extra 21/25.

May shipments continued the positive shipment trend with an all-time record set for May shipments at 57,748 tons. This is 29% higher than the previous record for May of 44,478 tons, set last year. This is undoubtedly a large step in the right direction, and has lowered our carryout projection to roughly 120k tons. It’s worth noting that the revised crop acquisition report, which added 9.6k tons to the total estimated supply, prevented us from lowering the carryout projection even further. The reported purchased commitments have slowed down for the month (13k tons in new sales versus 47k tons in April), but this is most likely due to less inventory being available to buy. The 2021 crop is now 98.3% sold and the total supply 86.7% sold. If the current shipment trend holds, it is possible we get the carryout to just under 120k tons; however, at this point the main constraint remains in getting the commitments on the books to actually ship out.

It is still too early to definitively say what the 2022 crop season will bring. However, it is already clear that overall global supply will be up, driven by a larger crop in China. With this in 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 Peanut Planting Report was released on June 30th, and has the total acreage for 2022 crop at 1,543,000 acres, down just below 3% compared to last year. The May Peanut Stocks & Processing Report shows usage in all major segments (candy, snacks, and peanut butter) down by 5.5% compared to last year. For the crop year to date, the peanut butter segment is down 2.5% versus last year. Total edible usage is down 0.6%.

The 2021 crop carryout is projected to be at least 1.16 million tons (possibly in excess of 1.2 million tons), with total demand forecast to be 3.07 million tons (domestic and export). This equates to a stocks-to-use ratio of 38% (139 day supply).

As of June 19th, the US crop was 97% planted. Overall, the crop condition report was mostly positive, with conditions declining in most states as weather continues to be hot and dry, especially in Texas where conditions are fair to poor. The southeast US has received very little rainfall over the past two weeks and temperatures are soaring to record breaking numbers. There is a good chance for rain the first week of July through most of the southeast growing regions. Significant rainfall will be much needed in the coming weeks for all of the US peanut growing region.

Seemingly, no change in grower sentiment...they remain bullish, as does the market in general. There is little to no farmer stock contracting activity at the moment, nor has there been in recent weeks.

Factors to Watch:

• Near-term/long-term US demand impacts
  
• Ultimately, how many peanut acres are planted in the US (location, variety, etc.)? What price will be paid for uncontracted farmer stock?
  
• Weather in key US growing regions
  
• Global production (Brazil, Argentina, etc.)/planted acres (China, India, etc.)
  
• Export demand (EU and China are very quiet; Brazil’s desperation to move product that would have shipped to Russia has lowered EU demand for US imports, as well as pricing)
  
• War between Russia and Ukraine, and associated impacts on global food supply
  
• Supply chain disruptions/challenges due to various reasons (pandemic, etc.)

The crop growth for the next season across origins is panning out as expected. As mentioned in the last report, we expect a lower crop in Turkey, but the growth in other origins, notably Italy should ensure we have enough crop supply for the coming season. For the current crop, the TMO announced the sale of its last tranche last week at 44 TL/kg ($5.10/kg at current exchange rates), which was slightly higher than the market expectation. A part of that is still unsold, but we expect TMO to carry it over to the next season in case they are unable to sell this tranche. The TL rout continues, and we have seen TL levels of 17.35 to a USD in the last week.

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% higher over the previous benchmark price; clearly an indication of adequate inflation adjustment. The market now expects TMO to announce a price between 50 and 52 TL/kg, which is around 15-20% higher than the current crop prices. We expect open market to trade at some discount though, at least in the early parts of the season. 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 currency will continue to play an extremely important role in determining the levels at which new crop will be available for the market.

The exports this year are notably higher than the last year (300k against 250k last year similar period), but we believe it has to do more with replacement of the Italian short crop and inventory buildup in Europe, rather than a significant increase in demand. We have seen some uneasiness from larger retailers/confectioners to cover for longer periods owing to some concern over demand. However, call-offs for most current contracts are on track. Ferrero, too, seems to have covered its seasons demand and might no participate for the rest of the season. Most retailers are expected to open tenders during July and are expected to increase activity for next crop trade.

We expect adequate supply for the next crop. Demand continues to be stable despite worries and inflationary woes. 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 and expect TMO to set a benchmark considering a possible depreciation in currency during the course of the next season. The currency will continue to play an extremely important role.

Annual crop is expected to be in the range of 270k MT to 275k MT, which is a 10% increase from 2021. Australia estimate now stands at a 10% decrease compared to earlier projections. The new estimate now is 49.3k MT against 51.5k MT last year. South Africa 2022 crop stands at 57.7k MT, an 8% increase compared to 2021, with indications towards 60k MT this year. Kenya is expected to grow 4% (41.5k MT compared to 39.7k MT last year). China was expected to have a crop of 50k MT this year, however there are concerns over reduction of crop by 30% due to lower temperatures, rains and grey mold issues.

With uncertainty caused by the economic situation, the pandemic in China, and war in Ukraine, most buyers of broken kernel styles are only buying hand to mouth; leaving large inventories of smaller kernel style (typically used in baking and confectionery grades). Price gap between the wholes and smaller styles continues to be high.

New crop kernel from Australia and South Africa are expected to be in the market only from July/August; also, the lack of demand from China and the EU has led the NIS market to soften in the last two months and could follow a similar trend if the demand doesn’t pull up. Price for S1L ranges today between $8.90-$9.10/pound and for lower style S4L between $6.75-$7.20/pound.