California almond orchards are well on their way through the growing season, with larger-sized almonds expected this year compared to the previous last two drought years. The weather conditions are favorable, with temperatures ranging from the low 50s in the morning to the mid 70s in the northern valley and reaching the high 90s in the southern valley. Following the April shipment report and the Subjective Estimate, the market has displayed a weakening trend, with a decline of approximately 10 to 15 cents per pound for various almond varieties and sizes. April shipments totaled 197.26 million pounds, falling short of expectations and marking a significant decrease of 19.57% compared to the previous year’s 245.24 million pounds. Domestic shipments in April were also weak, amounting to 56.8 million pounds, reflecting a 9.0% decline from the previous year. Overall, total domestic shipments to date stand at 544 million pounds, representing a decrease of 6.10% compared to the previous year. Export shipments in April were also affected, with 140.4 million pounds shipped, down by 23.2% from the previous year’s record-setting April shipments of 182.8 million pounds.
The cautious approach of California sellers due to poor bloom weather resulted in lower sales for April, with new sales just under 115 million pounds, a 32% decrease from the previous year’s 168 million pounds. This decline is significantly below the historical average of 142 million pounds in new sales over the past five years for the month of April. Consequently, it is expected that shipment numbers for both May and June will remain low.
The Subjective Estimate for the new crop year 2023/2024 is projected to be 2.5 billion pounds, indicating a 3% decrease from last year’s production levels. Despite the reduction, the industry hopes that this smaller crop size will help align supply with current global demand.
Demand for in-shells has taken a pause driven by lower demand on Kernels. Quality remaining from current NH crops has come off significantly as well. High out-turn in-shell still goes at a premium. The drop in demand and quality will lead to increasing processing costs, which is likely to be charged into final Kernel price.
In West-Africa, the overall crop size is not excepted to be less than last year, but quality remains a clear concern at this period of the season. Low demand will eventually impact the quality due to proper warehousing constraints. In Asia, mixed news are entering the industry that Cambodia crop may end up 10-15% lower versus last season.
As said above, demand remains low for nearby terms. Forwards origin processors are not keen to sell against spot pricing due to increasing costs of production and low out-turn coming in for processing.
Carry costs for processors are also significantly increased, which is reducing forward sales appetite. Furthermore, main destination markets remain sluggish for this time of the year. If shelf prices are coming off during the second half of the year, demand will see a spurt as rotating pipelines are low in US and Europe.
The Administrative Committee for Pistachios (ACP) reported crop receipts for the 2022 crop year remain unchanged at 884,139,54 pounds. When combined with the record 2021 carry-out, the total supply for the 2022 crop year is estimated to be approximately 1,176,356,358 pounds.
The INC projects the incoming 2023 global crop to be 2.25 billion pounds, representing an increase of about 37% compared to the current crop year. The US crop is projected to reach 1.3 billion pounds (+47%), Iran’s crop is projected to be 200 million pounds (+89%), and Turkey is expected to experience a small decline at 190 million pounds (-5%).
Shipments in April remained strong at 82,579,400 pounds, a 22% increase compared to April of the previous year. Year-to-date shipments reached 678,586,783 pounds, showing a 10% increase compared to the previous year. Exports continue to be the driving force, with a year-to-date increase of 18.5%, while domestic shipments are down 5.6% year-to-date compared to the previous year. The expectation is for this positive trend to continue, resulting in the lowest carry-out since 2019.
In-shell pricing remains firm as inventory from the 2022 crop is scarce. There is some uncertainty about how the floods in the Tulare basin will affect the 2023 crop, however, there is an overall expectation of larger 2023 crops from both the US and Iran.
The CWB (California Walnuts Board) reported crop receipts for the 2022 crop year remains unchanged at 747,870 tons. This number has historically been adjusted up by the end of June and we expect the final crop number to be closer to 760,000 tons. Adding in the record 2021 crop carry-out, this would give us a total supply of ~895,000 tons for the 2022 crop year. This is a record total supply for the CA Walnut Industry and 8% larger than the 827,824 tons of total supply last year.
Shipments in April were down 17.6%. This comes after 3 months of strong shipments, bringing the year-to-date shipments to 518,870 tons (+0.5% versus last year). Exports continue to underperformand are the main driver to the overall poor shipment month (-27% versus last year). Unshipped inventory is now estimated to be ~375,000 tons, this is 21% higher than last year when we had 8.3% less total supply. The USDA section 32 purchase is expected to help ease some of the surplus, but additional sales and shipments are needed to help lower the carry-out and bring supply and demand back into balance.
Reported commitments in April were up 2% versus last year and new sales FTM were up 80% versus last April. This is a direct result of the USDA purchase helping move the market in the right direction. The sold percentage of total supply is estimated to be 80.3%, down 5.8% versus last April’s sold percentage of 86% on total supply.
Our carry-out projection has been updated to 153,000 tons (11.9% higher versus last year). The USDA purchase appears to have accomplished the desired objective by reducing the lower quality combo inventory out of the market. We have already seen some positive outlook on pricing, which should be indicative of the lower supply. We expect domestic shipments to finish strong through the end of the season, but will need exports to pick up in order to lower the carry-out.
Developments in May have been in terms of the ongoing harvests in major producing regions. While the global macadamia crop production is expected to increase by 11.7% this year, challenges such as lower farm prices persist, impacting growers and causing processors to adopt a cautious approach. Despite these challenges, the industry remains cautiously
optimistic, anticipating continued growth and the potential for improved pricing in the long term.
Key developments in major macadamia growing regions:
- South Africa: The 2023 crop in South Africa is projected to reach 81,000 metric tons, which is an increase of 5,000 metric tons over that last estimate. The current harvest is underway, and growers are conservative on the potential total crop that will be harvested. Lower farm prices have raised concerns, as some farmers may choose not to harvest due to the unsustainable price levels. This speculation has contributed to stable prices in the NIS (Nut-in-Shell) market.
- Australia: Macadamia production in Australia is forecasted to grow by 9.5% in 2023. The harvest is currently underway, and there have been no major issues reported regarding crop quality. Similar to South Africa, lower NIS prices have put pressure on farmers in Australia. This has led to speculations that the actual crop traded might be lower than the estimated crop this year, which is keeping NIS prices stable.
- Kenya: The Kenyan macadamia industry is expected to grow by 8.5% in 2023. However, ongoing slowdown in kernel sales and unsold inventories, both at origins and destinations, have resulted in a cash flow slowdown resulting in low rate in terms of farm NIS purchases this year. To address this, the Kenyan government has opened NIS exports to boost farmlevel purchases. However, quality remains a key factor to watch out for in the Kenyan market.
In terms of demand, the NIS market has seen increased activity from Chinese buyers, and retailers going in with their new tenders in EU and AUS; indicating growing interest. The lower price point has played a significant role in stimulating demand, even though the kernel market has been slow to pick up. This increased demand has been a positive development for the industry, offering potential growth opportunities.
Furthermore, after the initial shipments from ZIM, MAL; NIS shipments have commenced from origins like South Africa and Australia, and the initial quality looks promising with no major issues reported. However, the prevailing lower NIS prices have adversely affected some farms, making it financially unsustainable for many farmers in Australia and South Africa.
According to the USDA, 72% of the U.S. peanut crop had been planted as of May 28th. Planting season started out a little cooler and wetter than usual in the Southeast and Southwest, so plantings in those regions are slightly behind the 5-year average. Plantings in the Virginia/Carolina region are pretty much on track. Hopefully, the remainder of the crop will get planted within the next 10-14 days.
Back in March, the USDA predicted that peanut acres in the U.S. would be up about 6.7% versus last year. With December 2023 cotton futures remaining relatively weak, actual acres could be up a bit more than this. It seems now that, particularly in the Southeast, most believe acres will be up at least 10%, possibly slightly more. And while this sounds like a large increase, the U.S. industry needed at least a 7-8% increase (with good yields and good quality) just to stay at par with demand. The USDA will publish the Acreage Report on June 30th. While the report is rarely accurate, it should directionally provide a more updated estimate of peanut acreage.
The USDA predicts that carry-out stocks for the current crop will be around 1.1 million tons as of the end of July (the end of the crop year). Although, after all data is captured, the actual carry-out might be slightly less than that, maybe more like 1.0-1.03 million tons. In either scenario, plenty of peanuts to supply the industry until the arrival of new crop, but not an overly burdensome supply by any means. While it’s too early to make any accurate projections regarding production for the 2023 crop, it’s reasonable to believe we could see a crop size in the range of 3.15 million tons (assuming acres increase by 10%+, and we achieve recent historical average yields).
Presently, annual demand for U.S. peanuts (both domestic and export) is in the range of 3.05-3.1 million tons. Therefore, unless acres are up much more than 10%, and/or unless we
see something near record yields with good quality, the carry-out next year would still not be overly burdensome for the industry. Considering these factors, it seems the market is
relatively balanced for now.
The message regarding demand is rather mixed. According to the latest Peanut Stocks and Processing Report, peanut usage by U.S. manufacturers is down 2.5% crop year-to-date
(August–April) versus last year. Usage in the candy segment is down 7.7%, while usage in snacks is showing down 12.6%. (It wouldn’t be surprising to see an “adjustment” from the
USDA in the coming months for the snacks segment. The reported usage for March and April is substantially below last year (40+%), so it seems some data might be missing?) Usage in
peanut butter is up 3.6% crop year-to-date. Exports of U.S. peanuts are down 5% crop yearto-date (through March), but it’s anticipated that shipments for the April-July period will be
stronger than last year due to increased sales to the EU, as well as increased shipments to China (from sales made earlier this year).
The kernel market is relatively unchanged in recent weeks.There has been some interest, though generally not in large volumes, from some U.S. buyers who have been looking to
take some additional current crop coverage for Q3/Q4. Most of the “volume” interest has come from EU buyers looking to take coverage through the end of the calendar year (and
in some cases, beyond). Argentina has concerns with their crop this year and it appears their production could be down by as much as 25%-30% versus last year. This has caused a number of European buyers to look to the U.S. for offers. Inquiries have been frequent, and it’s likely that a decent amount of volume has been confirmed with shellers who still have
current crop to offer, and who are confident in selling into the EU.
Key factors to watch for as we move forward:
- June 30th Acreage Report: The information won’t be completely accurate, but it should provide better insight regarding peanut acreage.
- Weather during the growing season (June–September) - Current forecasts lean towards a warmer than normal temperature in all growing regions. Rainfall is predicted to be above
normal in the Southeast region, the Delta region, and Virginia/Carolina region, but below normal for west Texas and New Mexico. A good portion of the crop in the Southeast is being planted later than usual, so harvest will be later as well (certainly later than last year). Weather during the September/October time frame (during harvest) will be a very important factor this year.
- The quality outlook for the U.S. crop - It’s too early to speculate now, and weather (mentioned earlier) will obviously be the major factor in determining the outcome. The U.S. has now had 3 consecutive “good quality” crops. Will we be fortunate enough to see a 4th?
- U.S. demand - Current usage seems to be trending down slightly.
- Export demand - How much additional European demand will come to the U.S. as a direct result of the crop issues in Argentina? Is the situation in Argentina as dire as it
appears? Will China be a factor for the U.S. new crop? At the present time it would appear the answer is “no.” Peanut production is anticipated to be up in China this year (back to more normal quantities). Will demand from Mexico and Canada (the top export markets for U.S. peanuts) continue to be strong?
- Keep an eye on 2024 crop cotton futures - Cotton has been weak for a while now, which helped to encourage peanut acres this year. A run up in cotton prices will, and always
does, have a direct impact on peanuts.
- The value of the U.S. Dollar.
- The currency has tumbled from the 19,50 level to almost 21 TL/$ level post the election. The local commodity prices have not moved up yet - the USD prices to almost 5 $/kg in
the local market.
- The INC has published its expected supply data, and all pointers are for a good crop across all origins.
- TMO is still carrying 135,000-140,000 in-shells. It seems unlikely that they will liquidate any crop this season. Balance market (between farmers and Manavs) is also carrying around 70,000-80,000 MT crop.
- Next season’s crop is now estimated to be in excess of 800,000. The frost period during late March has not affected the crop significantly.
- We should safely conclude that supply for next year will be more than adequate. INC numbers predict a similar carry over for next season end, but the consumption has to significantly increase for that to realize.
- Turkish exports in for the season are 235,000 against 280,000 in the same period last year (3rd week of May) – lower by almost 18%.
- Larger confectioner’s demand has been stable this season. However, we have seen tender volumes from mid-size/small-size players go down. Also, purchasers have preferred to keep positions open for a longer period in expectation of price drop.
- We have seen the largest demand drop from the mid-sized/small-sized confectionery and bakery segments. Retail and large confectionery brands have also had concerns, but
most have sourced almost equivalent to previous years. Overall, we believe that the demand has reduced in lower single digit percentage over last year.
Now that the cold spell has been seen off, we believe the crop estimate will be close to 800,000 metric tons for next season. The supply for next season looks to be more than adequate. TMO will not be able to sell all its purchases this season and will carry substantial crop into next year. It will be interesting to see TMO approaches the next season – that
should form the guidance for next season price.
Going forward, election outcome can be a major trigger, especially for the currency. Wider opinion is that the incumbent will fail to get 50% votes to win the majority outright, and we
might see a runoff. If the incumbent returns to power, we might see the sentiment drop further resulting in some more pressure on currency. In case the incumbent loses, we might
see an improvement in sentiment for some period, and thus seen as a favorable sign for the currency. However, the new economic policies can then determine the future course for the currency. Fundamentally though, we all know that the inflation and interest rates gap is too much for the currency to stay stable.