The cashew market is seeing a decrease in kernel demand and an increase in RCN demand. Currently, the most active kernel buyers are Middle East and India markets. Strong Indian domestic kernel demand has enabled Indian processors to pay up for West African inshells, and therefore contributing to an increased inshell pricing. Inshell prices are also finding support from delayed arrivals and poor harvest estimates due to poor weather. It is constantly raining in Cambodia and Vietnam; hence the markets expect a lower harvest from these countries. Poor crops are also rumored from India and several West African countries.
The slow pace of arrivals, with the delayed harvest is giving a feeling that the overall crop will be short for this year. We are entering a phase when harvest will be at its peak across most major origins, and we will know in the coming weeks if the demand for inshells will continue. In addition to these issues, we are also seeing high freight cost, which is contributing to an escalating inshell cost for shellers in Asia. The rates from West Africa to Asia has increased severalfold from this point last year.

As stated earlier, buying activity in kernel markets remains subdued, especially in main destination markets such as the US and EU. We foresee both destinations to come in the market soon as their overall coverage levels remain low beyond Q2.

On the other hand, there is too much uncertainty surrounding how consumption will continue considering the impact of inflation has had on the cost of living. Will nut demand remain resilient as they continue to prove their worth of being a healthy and indulgent snack?

Overall, kernel processors see cost escalation due to inflationary pricing of inshells and cost of processing and transportation. Processors face lower selling prices of kernels. We will have to wait and see if the industry will continue to process inshells at maximum capacity or if they will hold back until kernels come back to parity. To reach this parity, should kernel prices move up or should inshell prices fall?

Port and logistical issues continue to impact almond shipments from California, resulting in just 199 million pounds leaving the gates of Californian handlers for the month of February. While this was an improvement over the 177 million shipped in January, and in line with industry expectations, it is worth mentioning this is still 15% lower than February 2021 shipments. Exports were 146 million pounds this month, down 11% from February 2021, while domestic shipments were just 53 million pounds, which is 24% less than February 2021. Total shipments this season now stand at 1.433 billion pounds, down 16% compared to last year. New sales in February were 215 million pounds, which only goes to show that demand for almonds continues to be strong, especially at lower prices, with shipping conditions as the only bottleneck facing the industry. Improvements in March are expected as space has opened for exports on several container ships.

Overall, the industry has sold 78% of the crop and 66% of total supply. At this point last year, the industry sold position was 83% of crop and 74% of total supply. California almond growers cannot stay off the market and must continue to sell to gain a better position. While handlers understand this, a good portion of the unsold position lies in the hands of the call pool. With increased growing costs, expected lower water allocations, and possible lower yields, most growers are unable to get themselves to execute at these low levels. In fact, we are seeing prices rise on harder to find sizes and varieties currently.

While February shipments hit expectations, the industry is still well behind where we need to be to bring the carryout under control. Based on current projections, the carryout looks somewhere between 900-950 million pounds. Additionally, while there is going to be some pockets of the valley impacted by the recent frost events, given the increasing acreage and high carryout predicted, there is no doubt we will be in a situation where total supply for the 2022 crop will be the largest ever that the industry has had to deal with. We therefore are of the view that almonds will continue to trade at excellent values with exception to the larger sizes and specific varieties such as Nonpareil.

The main discussion point at the American Pistachio Growers (APG) conference in San Diego was the substantial growth in bearing acreage and total supply we will see in California over the next five years. Bearing acreage is expected to grow to 523,000 acres by 2026, a 28% increase over the current 409,000 bearing acres for 2021 crop. APG is forecasting seven billion pounds to be harvested between 2022-2026, representing a 60% increase over the four-and-a-half billion pounds harvested in the last five years, from 2017-2021. As a result, the focus of the industry must be on growing markets and demand. The industry should expect some downside in pricing as supply increases, but demand for pistachios remains strong. Also, lower price levels will help to open new markets, including the growing ingredient segment, which should result in overall continued stability we have come to enjoy with pistachio pricing.

All things considered, the February shipment report was a step in the right direction with shipments flat to last year and sales for the month slightly higher than sales in January. The message remains the same: the California walnut industry needs to sell and ship as aggressively as possible over the last six months of this crop year to reduce the record carryout we are facing. After a sustained period of downside in pricing, it seems we have finally found a floor to this market and are seeing stronger demand than we have in some time. This is a result of three main factors: (1) China seems to finally be done needing to push more volumes from their 2021 crop into the export market, (2) Chile has entered at higher price levels than California, seeking a premium for their product, and (3) Price levels are at historical lows, signaling a good value for buyers.

While we still do not expect upside on walnut prices anytime soon, stability in pricing is a good sign, as we need strong demand to further reduce carryout. We are expecting a significantly better shipment performance over the last half of this crop year and are hopeful that our carryout projection will continue to decrease.

According to the Federal State Inspection Services, as of February, 3,204,057 farmer stock tons (all but 3,437 tons grading as Segment 1) have been received and graded, which slightly exceeds the total estimated production. The latest USDA NASS Crop Production report estimated production at 3,194,650 tons. Harvested acres were estimated at 1.545 million acres, with overall yield estimate at 4,135 pounds per acre; this remains the second highest national average on record.
Usage and demand are holding steady for now, at an increase of .3% for this crop YTD (August-January) versus last year (increase of 1.99% from last month). Exports are still down for this crop YTD versus last year, with a decrease of 26.88% (August-January). Estimated carryout for 2021 crop is up to 1.142 tons, with estimated total usage to be down 3.7% versus last crop year. Carryout could again increase if the current trends continue.

Commodity futures for December 2022 have taken a bit of a dive over the last week, although they seem to have recovered for the time being and remain strong with corn at $6.63, soybeans at $14.74 and cotton at $1.03, currently. Strong commodity prices and higher input costs will play a part in planting decisions next year, as well as in the price that peanut farmer stock will demand. Prices are currently more attractive for corn, beans and even cotton, but the escalated input costs make peanuts an attractive option. Peanut planting will begin in Florida in the next couple of weeks, with the rest of the Southeast beginning in four to five weeks, depending on weather. We should see US planting intentions released at the end of this month. Initial estimates from state agronomists indicate US peanut acres could be up 2.2%, although these estimates were likely compiled prior to recent Eastern European events.

The market remains very quiet; we have seen minimal activity over the past week with a few buyers continuing to add what they still need for current crop (small amounts) and layering on some for new crop.

Factors to watch include weather leading up to planting, global products and planted acres, demand (both US and export), competitive crop prices, crop input costs, Eastern European conflict impacting various costs, and lingering impacts from COVID on a global level.

Australia, which had earlier projected a growth of 6.6% in 2022 (total crop of 55KMT compared to last year’s crop number of 51.5MT), has now confirmed that the crop will be impacted by the recent severe weather and flooding in New South Wales and Southeast Queensland. The latest predictions reflect up to 10% of the crop may be lost in the regions affected by the recent floods. Fortunately, Bundaberg (which accounts for nearly 46% of Australia’s crop) was not affected and the harvest is already underway. High rains are expected to bring down the sound kernel recovery this year from the affected regions as well. South Africa and Kenya harvest began in March, which is on schedule and no issues have been reported. South Africa is projected to grow 10% compared to the 2021 crop. Crop figures for both Australia and South Africa will be reviewed again in May after the first harvest.

Industry continues to stay long on S4, S5 and S8 selling at a lower rate, while prices continue to stay soft due to lower demand for these grades. On the other hand, demand continues to stay strong for S0, S1L and S1A. Demand from major Australian nut consuming markets was strong until the end of February, especially with inshell shipment forwards being locked in by China; however, in the last few weeks due to a COVID surge and lockdown implemented in the country once again, we are looking at reduced consumption and subdued demand for both kernel and inshells.

With a degree of uncertainty associated with both the quality and quantity of the Australia new crop, coupled with the low demand situation emerging in China and Europe, we expect the inshell market to stay bearish. The market should remain stable in the short run until we have a better forecast on the numbers. For kernels, since the product from Australia and South Africa is expected to be in the market only from July-August, we can expect the prices to stay firm for wholes due to limited availability; while we expect the prices to soften for the pieces due to high uncommitted stock at origins from 2021. Current prices for Style 1L and 4L are between $8.85-$9.05 USD/pound and $7.10- $7.40 USD/pound, respectively.