California weather during October continued to make it tough on growers, from the start of bloom in February through the growing period and through harvest. The cooler temperatures, along with rain, delayed the crop and will undoubtedly have an impact on the crop when all is said and done. This has resulted in a very delayed harvest crop with many varieties and sizes still not available. While the situation will resolve itself in the weeks to months ahead, for now, availability remains spotty at best.
The Almond Board of CA released the “September Position Report” on October 12, 2023. We saw crop receipts are finally starting to come in as the 70 million pounds from the “August Position Report” grew to 625 million pounds now received year-to-date. This number is still behind the 978 million pounds received at this point last year. While this number will continue to increase, many are of the mind that the crop will not reach the objective estimate of 2.6 billion pounds. September shipments were strong, with 217.7 million pounds shipped for the second month of the new crop year. This is an increase of 15.5% over last year and represents the third strongest September historically. Both export and domestic shipments were up compared to last September. Export shipments reached 154.8 million pounds, up 13.3% from last year’s 136.6 million pounds. Domestic shipments also rebounded, with 62.8 million pounds shipped last month, putting domestic shipments in positive territory for the first time in over a year, 6% year-to-date. As a result, the new crop year is now ahead of last year by 3.1%. Expect October shipments to be the strongest of the season.
Overall commitments have improved slightly from a year ago, with 674 million pounds now on the books compared to 666 million pounds last year at this time. This is primarily driven by export sales, with export commitments at 414 million pounds, up 26.4% versus 327.5 million pounds last year. Domestic commitments are lagging at 260 million pounds, compared to last year’s levels of 338 million pounds, a decrease of 23%.
Harvest Period: October has ended and we are still seeing almonds on the ground waiting to be swept up. In the meantime, we have fought through our third rainstorm of the harvest. This will once again further delay some harvesting operations for a few more weeks.
- While the market has firmed and inched up over the last few weeks, pricing remains attractive for buyers. This combination of firmness along with strong shipments, instills confidence in the almond market for everyone.
- New sales for September were very strong with roughly 270 million pounds added, which represents a 12% increase year-over-year. This increase should translate into strong shipments throughout Q4 of 2023.
- With crop receipts delayed, the industry has used this time to continue to ship out the 800 million pound carry-out, effectively shipping/selling most of it.
- The domestic market is the single largest market for almonds worldwide. While September was a good shipping month for the domestic market, commitments are behind a year ago. These commitments will need to increase to see shipments continue at a strong pace.
- If California does not continue to sell into this market, it could start to lose ground on commitments in the coming months. We may see some markets such as Northeast Asia and even the EU switching to other tree nuts.
- Consumption is still on everyone’s mind as demand remains uncertain. Most markets continue to wait for demand to come in, and whether it will increase in the months ahead.
- Tanzania auctions have started and we have seen good demand for the first flushes. Since mid October, around 20,000 metric tons have been traded, with pricing inching up since the start of the auctions, driven by demand from India for their domestic requirements. Vietnam hasn’t showed real interest yet, but this may change as they need refills of good material to fulfill their commitments until the next NH crops are available for processing during Q1 of 2024.
- There is no major update on the 2024 NH crops, yet. It’s too early to state anything until flowering begins starting at the end of the year in some regions and up to around Febraury of next year in Asia. Overall, weather conditions at this stage are less of an importance, but once flowering starts, it will remain a key element.
- Reduced availability of good quality in-shell will likely continue to put pressure on availability. With that, expect small inch-ups of in-shell pricing that will continue as well.
- Demand continues to be decent - driven by China, the Middle East, and in last few months, in Europe. Consumption in Europe continues to grow at a healthy pace and retailers aren’t shy to offer significant discounts across the region, continuing to boost consumption. Also, the US has started to show signs of recovery as imports in recent months have been quietly strong versus the first half of this year.
- De-stocking continues to be at its peak, and spot pricing has inched up versus origin prices. Especially in Europe and the US, where we traditionally have seen high spot demand in Q4, this will likely continue to put pressure on availability of liquidable grades.
- Overall, cashew prices remain favorable which clarifies the high demand from retailers globally to cover as far as possible into FY24 and even as early as FY25. Availability still remains a challenge as the next NH crops (accounting for 85+% of global crops) is not available before March of next year for production and May of next year in destination markets. With in-shell floor pricing unclear currently, and many further challenges for the processor, (cost of production, high interest rates, etc.), it looks highly unlikely Kernel prices can soften much further in near terms.
- Destination stocks remain tight and main grades are moving fast.
- Consumption continues to grow in major markets.
- Kernel demand improved significantly across the globe compared to the past few months.
- The first batches of Tanzania in-shell auctions have not impacted Kernel prices significantly as of now.
- India consumption remains below expectations. Diwali demand has been flat versus last year.
- Retailer forecasts and promotion strategy for next year remains a question mark. Will they continue to promote cashews or continue to add their incurring costs to the shelf prices?
The 2023/24 season is upon us and with a new crop also comes the hope of carrying over the positive momentum shown in recent months and getting returns to sustainable levels. The USDA has revised the NASS crop estimate from 790,000 tons to 760,000 tons. This was due to the previous forecast overestimating the total bearing acres. The revised bearing acreage stands at 375,000, reflecting a 6% reduction compared to last year. As expected, the crop has been about two weeks late this year, particularly for earlier varieties, but reported quality has been very positive. This has likely emboldened handlers who have held firm on pricing, resulting in limited trades, as buyers are hesitant to purchase at high prices with the expectation of a significant price drop in the near future.
September shipments were strong at 42,073 tons, marking a 6.2% increase compared to the same period last year. This further solidifies the commitments observed in recent months, primarily driven by unshipped USDA product. This is reflected in the strong domestic shipments, which were up 16.9%, reaching 31,417 tons. Export shipments underperformed at 10,656 tons, down 16.4% compared to last September. It is important to note that tariffs in Turkey have increased to 15% from 4%. Shipments to Turkey were down -78% in September.
Reported commitments in September were 154,739 tons, down 2.57% compared to last year. Similarly, new sales saw a decrease of 2%, totaling 112,477 tons. The reported commitments and new sales can likely be attributed to the remaining unshipped USDA product and discounted old crop sales. We expect commitments to increase as prices soften.
The coming weeks could be defining for the walnut industry. While handlers have tried to maintain firm prices, uncertainties stemming from higher interest rates and the state of global affairs could pose new challenges and limit options.
Chile: Chile’s 2023 crop volume is expected to fall below initial forecasts. The crop receipts for 2023 are projected to be approximately 170,000 metric tons, which is a 9% decrease compared to last year’s crop of 187,000 metric tons, and a 12.5% decline from the anticipated 192,000 metric tons for this year. Shipments for the month of September were down 11% versus last year, but shipments are still outperforming by 8% year-to-date. Chile has made significant gains in India and Turkey.
China: China’s projected 2023 crop capacity remains flat at 1.4 million metric tons; however, the actual harvest outcome is yet to be determined. Chinese walnut production is primarily driven by smaller farmers, posing challenges in collecting accurate data. Nonetheless, the increase in labor and capital costs mirrors the difficulties faced by the US industry. For their 2022 crop, the projected carry-out is set to rise to 120,000 metric tons, resulting in a forecasted total supply of 1.52 million metric tons for the 2023 crop, signifying a 5% increase of 70,000 metric tons compared to the 2022 crop total supply.
- Shipments are up 6.2% year-over-year.
- Most sellers continue to hold firm pricing.
- CA crop quality is the best it has been in years.
- Commitments are down 2.57% and new sales are down 2% (year-over-year).
- Exports are down 16.4% (year-over-year) and continue downward trajectory.
- Global affairs and high interest rates could limit export selling opportunities
- The harvest in Turkey has commenced across all growing regions. The initial crop flow and quality, though, have not been up to expectation. This has led the local market to believe that the overall crop will be much lower, and thus has created a bullish sentiment amongst the farmers. The TMO announced a price 82,5 TL/kg as its sourcing price for next season; but have not received much stock from the farmers at these levels.
- Prices moved up from 75 TL/kg before the season started, to peak around 100 TL/kg for inshells before cooling down now towards 95 TL/kg. Ferrero has announced a price of 95 TL for in-shells and would give a floor to the market for some time.
- Crop news from Italy and Azerbaijan are not very good. However, even with a lower than expected crop, we believe the supply for the season is adequate – especially with a large carry-over and demand concerns.
- As prices touched almost a 5-year high, we have seen many buyers preferring to wait for corrections and only cover for immediate requirements.
- Some spot buying from buyers to cover their immediate need, and short covering from exporters has prevented the market from correcting any further.
- Turkish exports for the season that ended in August are 298,000 against 340,000 in the same period last year – lower by almost 12%. This year, we expect demand fundamentals to be tight, especially in Europe. We have seen tender volumes drop from previous years of large global buyers.
- Inflation in Turkey remains high, and locals are using hazelnuts as a hedge against rising costs.
- The largest buyer is yet to cover their demand – they are expected to step in as prices correct.
- Farmer sentiment of “short crop” has been very strong – fueled by short covering by exporters and some spot demand.
- Prices still look inflated, and a larger correction looks imminent.
- High local interest rates (almost 50% now) are leading to lower appetite of traders to carry and hold stocks.
- Overall weak sentiment. Purchasers preferring to source in smaller lots for short term.
The 2023/24 pistachio crop is nearing the end of its harvest, and it’s increasingly likely that it will set a new record. The INC’s May forecast had initially predicted a 1.1 billion pound crop, but crop receipt trends are now pointing to a crop size of 1.5 billion pounds. This would represent a significant 70% increase over last year’s crop and mark the largest pistachio crop in history. The total crop receipts to date stand at 1.2 billion pounds, already 35% higher than the final 2022 crop size of 884.1 million pounds. The larger than expected crop size has led to a 15-year low in pricing, a trend that may continue as future crops increase in size.
Shipments for the month of September totaled 61.1 million pounds, a 7.3% decrease compared to the same time last year. Domestic shipments were 20 million pounds, down 4.4% and exports were 41 million pounds, down 8.6%. The year-over-year lower performance can be attributed to the delayed crop, which was approximately two weeks behind schedule. Furthermore, a substantially lower carry-in of 163.8 million pounds(-54% versus last year), resulted in reduced inventory in circulation, impacting the shipment trends.
Initial offering prices came as a shock to many, as opening pricing was lower than expected. This prompted buyers to secure their positions and handlers to reach comfortable initial sold positions. As a result, prices have firmed up 10 cents since opening levels. However, if the projected 1.5 billion crop materializes and is not met with significantly higher demand, there is potential for prices to soften in the back half of this crop year.
- Carry-in inventory at lowest in years (-54% versus last year).
- Low opening price levels resulted in large sales for the industry.
- Heavy shipments expected in coming months reflecting healthy demand.
- New crop is expected to reach record high of 1.5 billion pounds.
- Competition from Iran in overseas markets.
- Lower priced nut substitutes.
Key developments in major macadamia growing regions:
- South Africa: Initially forecasted at 81,000 metric tons, the crop experienced a slight reduction due to late stink bug issues affecting quality and availability of high-quality NIS (nut in-shell) and shipment timelines. Lower availability of NIS raised concerns among farmers, some of whom hesitated to harvest due to unsustainable prices. Despite these challenges, the industry remains resilient and committed to its current crop.
- Australia: Most Australian processors anticipated a decrease in the macadamia crop estimate to 45,000 metric tons, slightly below the previous year’s 50,000 metric tons. While crop quality remained excellent, there was a decrease in nut size and total kernel recovery, posing challenges for the industry. Similar to South Africa, Australian processors sold their NIS positions, leading to commitments that couldn’t be fully met due to the smaller than expected crop. Soft farm gate prices made this year challenging for Australian macadamia growers.
- Kenya: Crop has decreased marginally by 3% in 2023 to 41,000 metric tons. Government continues to ban exports of NIS from Kenya. The lower kernel price has forced processors to reduce NIS buying and slow down cracking. Quality remains a vital factor to monitor closely in the Kenyan market as the industry navigates these challenges.
- China: According to the latest projections from the Chinese government, this year’s estimate for dried NIS is 56,000 metric tons, making China the second-largest macadamia growing region. Trail collections have commenced, and the season is in full swing. We will have a better picture in November once the harvest is over. Growers are estimating an improvement in SKR by 1% point this year with an average around 29%. China’s NIS prices have remained stable due to the lack of low USKR NIS from Australia and South Africa.
Note: New macadamia origins in Africa also emerged as major suppliers in 2023. Quality from these origins has been stable, though SKR remains lower compared to South Africa and Australia.
Demand Trends in 2023: Overall demand for Macadamia has dropped in 2023 due to drop in consumption and poor economic conditions. Demand for Kernels from the US has been low due to inflationary pressure leading to a price drop during the first half of 2023. China is currently the major active market driving the price of macadamia. Good NIS demand from China New Year drove the prices up, resulting in disparity between Kernels and NIS. A few major grades like S1 & S4 inquiries have also started to come from the SE Asian market. Australian macadamia demand has increased significantly after a short crop in 2023 and increase in domestic demand in Australia. Demand of Macadamia for the rest of the year will continue to be strong, mainly driven by New Year consumption. Macadamia price for next year will depend on how the demand from China persists in the coming months.
Harvest is a little over half-way complete, and in the next 2-3 weeks, will be near completion. FSA Certified Acres reported planted acres at 1,644,034 for October. The USDA estimates harvested acres to be 1,598,800 with a yield of 3,908 pounds/acre, which would produce a total of 3.124 million farmer stock tons. However, taking into account there was a big increase in acres in Texas, likely resulting in less harvested acres than estimated, and that yields in the SE are coming in much lower than anticipated. Final production will probably end up closer to 3 million farmer stock tons than 3.124 million.
Also, with this crop, we are seeing aflatoxin and seg 2’s & 3’s, something we haven’t had to deal with for a few years. These issues will even further reduce edible product available. However, it is still too early to know to what extent. US demand is holding up fairly well in the 3 million ton range and we have seen increased export interest. Though we have an estimated ~1.016 million ton 2022 crop carry-out, production between 3 million and 3.1 million tons will be just enough to get the US to the 2024 crop, but certainly not enough to create a surplus. Anything less than 3 million farmer stock tons will cause a shortage, especially with the quality issues.
Activity in the US kernel market for the 2023 crop has ramped up a bit over the last month, with buyers looking to add a layer for the first half of next year as well as cover any shortage for the remainder of this year. Most shellers are comfortable in their current position, and not eager to offer. Offers through December 2023 are extremely limited, with some materials unavailable. Blanching slots remain extremely tight into Q1 of 2024, and offers are limited to non-existent through the end of this year. With the forementioned quality issues as well as the unknown cost of remaining farmer stock yet to be contracted, kernel prices have crept up into the mid to upper $0.60’s, with limited offers.
Possible Bullish Factors:
- The apparent quality issues so far with the US crop - The US experienced extreme heat and lack of rain during the growing season, causing drought conditions in some areas. Those areas are seeing yield and quality (damage and aflatoxin) issues, which have driven up the prices of the remaining farmer stock as well as shelled kernels. Whether these escalated prices remain is yet to be determined.
- Anticipation of increased export demand - How much European demand will remain in the US and for how long? Will China be a factor for the new US crop? Their peanut production is reported up this year (back to more normal quantities) and their economy is still sluggish.
- If the upward trend in cotton futures continues, there could be a possible reduction in peanut acres for 2024, as growers may choose to plant more cotton versus peanuts. This could cause a tight peanut market, thus an increase in prices.
Possible Bearish Factors:
- U.S. demand - Current usage, particularly in the snack and candy segments, seems to be trending down slightly.