Almonds

June brought some of the nicest weather to California, that many of us can remember. With temperatures running in the mid-70’s to 80’s throughout the month, this recent weather has resulted in excellent growing conditions for almost all of the orchards throughout the 1.3 million acres of almonds.

In June, the Almond Board of California released the “May Position Report.” This year’s crop receipts are projected to reach 2.57 billion pounds, reflecting an 11.8% decrease compared to last year’s crop of 2.910 billion pounds. The industry’s performance remains stagnant in comparison to the previous year, with a total of 2.191 billion pounds shipped year-to-date.
The unfavorable weather conditions during the bloom period prompted the majority of sellers to withdraw from the market in February and March. Some sellers are exercising caution in selling too far in advance due to concerns about this year’s crop size, which could potentially result in a more limited supply for the following year. Consequently, the industry feels it is currently lagging behind its desired position. The anticipated carry-out for this year is approximately 750 million pounds, although a preferred carry-out would be below 500 million pounds. This will keep the market in check until the release of the “Objective Estimate” in two days on Wednesday, July 12, 2023.

Bullish Trends:

Market levels remain historically low for buyers to take advantage of the current crop.
Shipping issues call for forward purchasing as there is some concern over a UPS strike looming.
California continues to focus on moving the current crop with an understanding that the new crop will be late and may be lighter than the last crop year.

Bearish Trends:

Despite moderately lower price levels, demand remains subdued at this time. Buyers are requesting shipments further out, while sellers are seeking prompt shipments. This issue needs to be resolved soon.
Delaying the “Objective Estimate” has upset many growers and will only slow the process down for selling the new crop.
Much work remains ahead of the industry in the weeks and months ahead, if supply is going to be diminished to match demand.

Cashews

In-shells:

While entering the tail of the NH crop in-shell season, we see a significant drop in the quality out-turn. With ongoing showers in main harvest regions, farmers couldn’t do a proper sun-drying. The lower demand in recent months forced in-shell traders to store cargo much longer than usual in challenging environments.
In-shell processors have less of a concern as they covered early season majority of their annual needs within the first and second flush. Still, they also have their challenges as in-shell prices moved significantly lower, which puts pressure on their parities.
We started hearing increased numbers of renegotiations from in-shell importers in Asia. The main challenges for the in-shell exporters are delayed execution and high moisture/lower out-turn than expected.

Kernels:

The challenges noticed within the in-shell market can be explained by the lower demand in Kernels for the last 6-9 months. We have seen main destination markets acting with a flashlight system, meaning they buy when they have a need and then straight off the market for some time.
On one side, destination processors claim demand has come off, while the other side, we started seeing significant promotions on the shelf across the globe. It’s likely a combination of factors where financing/warehousing has become a significant cost picture for the industry and therefore continue from a short position or just simply buy hand-to-mouth.
WW320 pricing is at a wide range depending on processor type with nearby shipments sub $2,40/lb FOB to $2,60+/lb FOB. Forward demand remains strong, but Kernel processors currently have no appetite to sell far forward in a most likely bottomed-out market.

Bullish Trends:

De-stocking at main destination markets has made spot availability limited.
Quality of the kernel arrivals has come off significantly and the industry has started raising red flags to Asian processors.
Shell realization has come off further and is at 1/3 where it was last year.

Bearish Trends:

Nearby demand both in in-shell and kernel remains sluggish.
Consumers remain less interested in luxury items, as uncertainty continues in current recession.
In-shell demand hasn’t picked up as expected in the second half of the NH crop arrivals.

Pistachios

Global Pistachio Production is forecasted to increase significantly in the 2023/2024 crop year, driven mainly by larger crops in both the USA and Iran. At the INC in May, 2023 crop global production was forecasted to grow from 747k MTs last year to 1.022 mn MTs this upcoming crop year, an increase of 37%. Total supply is also forecasted to increase from 1.058 mn MTs to 1.238 mn MTs, an increase of 17%.

The transition between current crop and new crop will be interesting this year as there is minimal current crop in-shell left, so pricing is at a premium, and the new crops are forecasted to be much larger this year, suggesting pricing should soften. The USA crop is also 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.

World Pistachio Production has been steadily increasing over the last 10 years (up 46%), and so far increases in demand have kept pace with the increased supply. However, this year may prove difficult as consumption for nuts is sluggish across the globe. If the larger crops do materialize as forecasted, the pistachio industry’s resolve may be tested and it will be interesting to see how leadership responds.

So far, global crops have been progressing nicely with no major threats to production reported in any origin. It’s just beginning to get hot in California, and it will be worth watching the temperature to ensure we do not experience the same issues as last year. Last year, the crop on the trees in California looked promising, but an extended, extreme heat wave just before harvest made it difficult to harvest many nuts from the trees.

Bullish Trends:

2022 crop carry-out’s are minimal.
There is little-to-no good quality inshell left in current crop, leading to a tight transition.
There is likely pent-up demand building in export markets waiting for the 2023 crops to arrive.

Bearish Trends:

USA crop is forecasted to be 47% larger this year.
Iran’s crop is forecasted to be 89% larger this year.
Consumption is sluggish globally across nuts.

Walnuts

The walnut market in May experienced significant developments, with potential implications for the overall supply and pricing. Crop receipts for the 2022 crop year remained unchanged at 747,870 tons, but historical trends suggest an upward adjustment by the end of June, which would result in a record high total supply of around 896,000 tons (+8% compared to 2021). A notable decision was made by the CWB to lower the crack-out rate to 40.1%, a near 4% decrease from the previous running average of 43.9%. This adjustment was driven by the lower quality observed across the state, particularly in light kernel outputs. The new crack-out rate has led to inflated shipment numbers for the current crop year.

Shipments performed well in May, reaching 71,175 tons, which represents a 23% increase compared to the previous year and a 70% increase compared to the eight-year average of 42,000 tons. The strong performance in shipments can be attributed to two main factors: the shipments associated with the USDA purchase and the adjusted crack-out rate, which significantly increases the in-shell equivalent shipment volume. Exports, although still underperforming, showed improvement compared to April shipments (-8.6% versus last year). Unshipped inventory is now estimated to be 265,434 tons, this is 5.7% higher than last year when we had 8.3% less total supply. The USDA purchase continues to exert a positive effect on shipments, resulting in a significant boost of 20% beyond our initial forecast. Combined with the adjusted crack-out rate, we anticipate an above average shipment performance for the remainder of the season.

Reported commitments in May saw a considerable increase of 25% compared to last year, with new sales FTM rising by 13% compared to the same period last year. This growth is attributed to the positive influence of the USDA purchase and the lower crack-out rate. The sold percentage of total supply is now estimated at 91.3%, a 4.6% increase compared to last May.

The carry-out projection has been revised to 92,000 tons, a 32% reduction from last year and a substantial 60,000 tons decrease from last month’s projection of 152,000 tons. The USDA purchase has achieved its objective of reducing lower quality combo inventory from the market, providing relief to handlers who previously faced uncertainty due to holding undesirable inventory. Lighter walnuts are becoming increasingly scarce, leading to a slight price increase in recent weeks. However, the true inventory levels and their impact on pricing remain uncertain.

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. Chile’s carry-out is always minimal, resulting in a total supply of 170,000 MTs, down 10% from last year’s 189,000 Mts.

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.

Bullish Trends:

The USDA recently closed a very large bid, helping to ease the supply concerns.
Shipments are now up 23% year-over-year.
Chile’s 2022 crop has come in lower than expectations.

Bearish Trends:

CA has a record total supply this year.
Lower crack-out rate appears to be artificial and not widely accepted.
China’s overall supply is forecasted to increase 5% this year.

Macadamias

Significant progress has been observed during June, primarily driven by the ongoing harvests in major macadamia-producing regions. The global macadamia crop production is forecasted to achieve a remarkable growth rate of 11.7% this year, however there are persistent challenges posed by lower farm prices.

Stakeholders, including growers and processors, are treading cautiously, fully aware of the potential impact these challenges might have. Nonetheless, the industry maintains an outlook of cautious optimism, foreseeing sustainable growth and potential price improvements in the long term.

Key developments in major macadamia growing regions:

South Africa: Projections indicate that South Africa will achieve a macadamia crop of 81K metric tons in 2023, reflecting a 5K metric ton increase from the previous estimate. As the current harvest unfolds, growers are adopting a conservative approach when estimating the total crop yield. Lower farm prices are causing concerns, potentially leading some farmers to refrain from harvesting due to financially unsustainable price levels. Consequently, the Nut-in-Shell (NIS) market maintains stable prices. Initial harvest quality has been satisfactory, with the majority of shipments already dispatched to various destinations. However, reports suggest an increase in USKRs during the June harvest, which could further limit the availability of high-quality NIS from South Africa.
Australia: Anticipates a notable growth of 9.5% in macadamia production for the year 2023. The ongoing harvest has not encountered significant issues regarding crop quality. Similar to South Africa, Australian farmers face pressure due to lower NIS prices. Speculation indicates that the actual traded crop might fall short of this year’s estimate, contributing to price stability. Sub-par crop yields in Bundaberg could potentially impact the forecasted growth for Australia in 2023, with estimations suggesting a harvest even lower than that of 2022.
Kenya: The Kenyan macadamia industry is expected to witness an impressive growth rate of 8.5% in 2023. However, a slowdown in kernel sales and unsold inventories, both at the origin and destination, has resulted in a deceleration of cash flow. Consequently, the rate of farm NIS purchases is lower this year. Local industry participants estimate that less than 70% of NIS will be harvested. Although the Kenyan government’s endeavor to boost farmlevel purchases by opening NIS exports earlier this year aimed for success, the expected results have not yet materialized. 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. In Australia, retailers are actively engaging in new tenders, whereas the EU and US markets continue to witness sluggish activity due to inflationary pressures on their economies. The lower price point has played a pivotal role in stimulating demand, despite the kernel market exhibiting a slow uptake. This indicates a growing interest in macadamias. The increased demand presents positive prospects for the industry, offering potential avenues for growth.

Shipping Update: Following the initial shipments from Zimbabwe (ZIM) and Malawi (MAL), NIS shipments from origins such as South Africa and Australia have commenced their arrival at the intended destinations. The initial quality of the shipments appears promising, with no significant issues reported thus far.

Bullish Trends:

Robust demand from China, particularly following the easing of lockdown restrictions, stimulating the NIS market.
Encouraging initial shipments from various origins, including South Africa and Australia, showcasing promising quality.
Growing interest and increased demand in the macadamia industry, driven by lower price points.

Bearish Trends:

Lingering challenges from lower farm prices affecting growers in South Africa and Australia.
Possibility of a reduced actual harvest in Australia compared to estimates due to poor crop yields in Bundaberg.
Cash flow slowdown and unsold inventories in the Kenyan macadamia industry leading to lower NIS purchases.

Peanuts

United States:
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.

Hazelnuts

Supply side:

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.

Demand side:

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.

Bullish Trends:

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.

Bearish Trends:

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.