Weather was favorable for the almond harvest through September. Temperatures have been in the low 60s in the morning hours and rising to the low to mid-90’s in the evening. Growers are busy sweeping the earlier shakes, followed by shaking the varieties still on the trees. This process is going to last well into October due to the late crop this year. This is one of the latest (if not the latest) crops we can recall. Good timing, though, as it has helped to sell off the 800 millionpound carry-in from the previous crop.
The Almond Board of CA released the “August Position Report” on September 12, which represented the first position report of the new crop year. Due to the lateness of this crop, crop receipts are well behind this time last year. For the month of August, only 70 million pounds were received, this is over 73% less than last year when 264 million pounds had been harvested and received by handlers at end of August. This demonstrates just how late the crop truly is. Expect to see receipts continue to lag well into November and December, if not further.
Shipments for August were in line with industry projections at 212 million pounds. While this is a 7.14% decrease from last year’s 228 million pounds, it is still the second strongest shipment month for an August in history. Considering the low crop receipts for the month, one can gather a very high percentage of these shipments came from the previous crop. This may continue to be the case for September as well. Both export and domestic shipments were down compared to last August. Exports shipped 150.6 million pounds, off -7.5% from last year’s 162.85 million pounds. Domestic shipments continue to decline month after month as almond consumption remains down overall. Shipments for August were 61.4 million pounds, off -6.16%, from a year ago. We have to go back 7 years to find a lower August shipment month.
Some of these lower shipments can be attributed to the late crop, which has caused delays in the export of in-shell almonds. Only time will tell if these numbers can be made up later, but no doubt some consumption will have been lost that cannot be recovered.
On a very positive note, despite the lack of support from growers for new crop offers (due to the late crop and concern for crop yield and insect damage), new sales for August remained robust with 256.09 million pounds sold. This represents an increase of over 30% from last August when 195.8 million pounds were sold. This is a very positive trend and may lead to stronger shipments in Q4 of this year. It will certainly take a big bite out of the carry-in, just as the August shipments did. As one can also see below, overall commitments have improved slightly from a year ago, with 621.9 million pounds now on the books, primarily driven by export sales, while domestic coverage lags behind last year’s levels, down by 17%.
- New sales for August were very strong with 256 million pounds added, that’s a 31% increase year-over-year, which should translate to strong shipments in Q4 of 2023.
- With crop receipts delayed, this has provided the industry with an excellent opportunity to reduce the 800 million pounds of carry-in. Since the August shipments of 212 million pounds mainly consisted of old crop, and the new sales of 256 million pounds, a significant portion is likely also old crop, although this is more speculative.
- While the market has certainly firmed up in the last 5 days, pricing remains attractive for buyers and the firmness gives them confidence that the current bottom may have been reached.
- Consumption is on everyone’s minds as demand remains uncertain. Market prices are less of an issue than trying to understand where the demand will come from and whether it will pick up in the months ahead.
- This is especially true for the domestic market, which happens to be the largest market for almonds. What is the almond industry doing to support its own backyard? Without a cohesive plan to address the month-over-month decline in sales, the industry will continue to face challenges.
- Starting off with shipments lagging behind in the first month of the new crop year puts pressure on sales at a time when few offers are available. While new sales were strong in August (which was supported by the carry-in), future sales will rely on new crop offers, and currently, those are being sold on a very limited basis.
- Currently, all eyes are focused on the SH crops. Although it is just reflecting about 10% of global production, these quantities are still needed to bridge the period until the NH crops are available around February/March of next year. Especially for the higher quality standard sourcing regions and entities. It is too early to make a judgment on the quality of the SH crops, as well as how the local governments will decide on price flooring or in-shell export restrictions.
- From the NH crops, there is still sufficient in-shell available in India and Vietnam. The only question mark that remains is the quality as the majority is material from the second and third flush with lower out-turns and higher off-grades.
- We have seen in-shell prices slightly moving up due to reduced availability in material of good quality. Still, this increase has not impacted the Kernel prices as of today.
- Demand has started to pick up in main destination markets. Europe is ahead in consumption figures versus last year at this time. This indicates that consumers have continued to snack their favored nut. Promotions have also been supportive for these results. Furthermore, in the US, and after a long period of less imports and negative consumption figures, we noticed off-take has started to pick up again and is getting corrected.
- De-stocking is at peak prices in main destination markets. This will (most likely) keep supporting the spot pricing and we may encounter slight increases as we enter into Q4 where last minute orders are at normal practice and will need to be monitored closely.
- Cashew prices remain favorable where WW320 pricing continues to be in the range of $2,40/lb FOB to $2,60+/lb FOB - depending on the period, quality, and quantities. This is being observed by retailers and brands as they intend to cover as much as possible on forward positions up until the end of FY24. For Kernel processors, the challenges remain
unchanged - increasing costs of production, high interest rates significantly impacting their carry-costs and increased spot in-shell pricing. All of these factors do not leave Kernel processors much room to ask for a premium to hedge their forward commitments.
- Consumption has improved and is ahead in Europe, driven by promotions. US has started to pick up as well.
- Crop prospects in the Southern Hemisphere are still unclear and overall shell realization continues to be weak versus last year.
- Destination stocks remain tight and is moving fast on main grades.
- India is still off versus last year during this time, and main consumption season is coming to a close.
- Spot in-shell availability for Asian processors is still decent.
- Recent inch-up in in-shell prices have not changed for the moment the sentiment in Kernel pricing.
The 2022/23 walnut season finished strong, surpassing shipment expectations in August while maintaining firm pricing on available inventory. However, expectations are running high as the walnut industry braces for another record crop in the 2023/24 season, with the USDA’s forecast standing at a significant 790,000 tons. Initial reports from growers point to a delayed, but healthy crop this year. Prices for the new crop have held steady, but are expected to soften considerably if the predicted large crop materializes. This could potentially result in another challenging year for the walnut industry.
Shipments finished strong in August at 55,441 tons, up 51.6% versus last year. This was primarily driven by domestic shipments at 37,345 tons, which were up 81% versus last year, likely tied to the tail end of USDA purchase commitments. Exports also performed well at 18,096 tons, up 13.6% versus last year, and ending in line with last year’s total export shipments ( -0.7% year-to-date).
Reported commitments in August remained relatively stable, showing only a slight increase of 0.76% compared to the same period last year. However, new sales for the month saw a significant uptick, rising by 70.5% versus last year. This increase is likely a result of sales related to the remaining old crop and purchases by buyers in need of immediate coverage, driven by this year’s delayed harvest. Sold percentage of total supply now stands at 98.4%, a 4.8% increase versus the same time last year. Pricing has held firm thus far, but completed trades have been relatively scarce, likely because buyers are awaiting a potential price drop in the coming weeks.
The updated carry-out estimate now stands at 98,000 tons, a significant decrease of 27.8% compared to the 136,673 tons carried over from the previous year. The USDA purchase effectively reduced inventory in the market, although it hasn’t tackled the core issue facing the industry: oversupply and stagnant demand. Export demand is also on a declining trend, constituting 52% of the total supply this marketing year, a 10% decrease from the 62% it represented in 2016. This decline in export demand coincides with the growth of walnut exports from China, highlighting the shifting dynamics of the industry.
Furthermore, the walnut industry is facing intensified competition from other nuts that are also experiencing substantial growth in crop size. The USDA’s objective estimate of 790,000 tons was notably higher than what many were hoping for. If this estimate materializes, it could lead to another challenging year with poor returns for growers, underlining the persistent struggle with over-supply and evolving market dynamics.
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. In terms of August shipments, there was a notable increase of 12% compared to the previous year, accounting for 65% of the total crop. Commitments show crop to be 86.7% sold and current forecasts suggest that stocks will be depleted by the end of the year, underlining the strong demand for Chile’s walnuts in the market.
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. Unlike the US, Chinese farmers lack the advantage of years of planning and experience. This circumstance could potentially lead to a reduction in walnuts harvested from more challenging rural areas. 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.
- Shipments are now up 14% year-over-year.
- Lowest carry-out since 2020.
- Chile’s 2022 crop supply is down 9% and shipments are up 12%.
- CA’s 2023 crop is expected to be one of the largest in years at 790,000 tons (+5.3%).
- Exports continue downward trajectory as China’s market share grows.
- Global supply for many competing nuts is also increasing.
- 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. Prices have moved up from 75 TL/kg now to around 100 TL/kg for in-shells in the last 3 weeks.
- Crop news from Italy and Azerbaijan are also 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 that we have some concerns on demand
- The TMO has announced a price of 82,5 TL/kg as its sourcing price for next season. However, the open market is trading at a much higher level.
- Some spot buying from buyers to cover their immediate need, and short covering from exporters has added fuel to the bullish sentiment.
- As prices have strengthened and touched almost a 5-year high, we have seen many buyers preferring to wait for corrections and only cover for immediate requirements. We still have some demand pending for Q4, though.
- Turkish exports for the season ending in August are 298,000 against 340,000 in the same period last year (4th week of August) – lower by almost 12%. This year too, we expect demand fundamentals to be tight, especially in Europe. We have seen tender volumes drop from previous years from large global buyers.
- Farmer sentiment of “short crop” has been very strong – fueled by short covering by exporters and some spot demand.
- Ferrero is yet to cover their demand.
- Inflation in Turkey remains high, and locals believe Hazelnuts are a good hedge, leading to hoarding.
- Prices are at a 5-year high.
- Overall weak sentiment - Purchasers preferring to source in smaller lots for short term.
- High local interest rates (almost 50% now) leading to lower appetite of traders to carry and hold stocks.
The 2022/23 pistachio season concluded with positive shipments into emerging markets signaling a positive increase in consumer preferences for pistachios. Expectations for the 2023/24 crop year indicate a substantial increase to global pistachio production, mainly driven by larger crops in both the US and Iran. The International Nut and Dried Fruit Council’s (INC) May 2023 forecast projected a significant rise in global production for the 2023 crop year, reaching 1.022 million metric tons, a 37% increase compared to the previous year’s 747,000 metric tons. Furthermore, the global total supply is forecasted to increase from 1.058 million metric tons to 1.238 million metric tons, representing a 17% growth.
August pistachio shipments remained steady at 69.3 million pounds, showing only a marginal increase of 0.2% compared to the same period last year. However, when considering the entire year, the total shipments concluded on a strong note, reaching 901.5 million pounds. This represents an increase of 7.8% compared to the 836.5 million pounds reached at the end of the previous year. The primary driver of this year’s growth in shipments has been exports, which finished at an impressive 652.4 million pounds, representing an increase of 13.7% year-over-year. In contrast, domestic shipments continued their downward trend, concluding at 249.1 million pounds, reflecting a year-over-year decrease of 5.2%.
The pricing for the current pistachio crop remains firm, with limited market activity as buyers adopt a cautious approach, awaiting more information about the quality of the incoming crop. Initial reports point to good quality, though there are indications of lower than expected yields. We will continue to monitor the situation as the season progresses.
The estimated carry-out stands at 163.8 million pounds, making it one of the lowest in recent years. This has heightened anticipation regarding how pistachios will perform this year, especially within a market experiencing increased competition from other nuts and consumer belt tightening.
- Shipments are now up 7.8% year-over-year, driven by exports.
- Carry-out inventory at the lowest in years (-54% versus last year).
- Pent-up demand from sideline buyers awaiting new crop quality and quantity.
- Domestic shipments are down 5.2% year-over-year and on a downward trend.
- Overabundance of lower priced nut substitutes flooding nut market at a time of consumer belt-tightening.
- Both USA and Iran are expecting larger crops leading to increased global supply.
Key developments in major macadamia growing regions:
- South Africa: A slight reduction was seen in South Africa’s Macadamia crop due to late stink bug issues. The crop is estimated to be around 78,000 metric tons for 2023. Quality of NIS was impacted by stink bug resulting in higher USKR and lower availability of good quality NIS for shipment. The farmgate prices were also low during the harvest season resulting in lower harvest from farmers. NIS price is increasing in the global market since August as processors are short of good quality NIS.
- Australia: Processors are estimating a lower crop in 2023 - for example, 50,000 metric tons versus 45,000 metric tons in 2022. Processors witnessed the softest farmgate price in more than a decade which has impacted both the growers and processors. A major portion of the crop was traded as NIS resulting in lower availability of kernel. Overall quality of the crop was excellent with lower rejects and an increase in higher quality grades upon processing.
- Kenya: Similar issues continue in Kenya, with a slowdown in kernel sales and unsold inventories both at the origin and destination. Cash flow has decelerated due to lower kernel sales, and some processors are refraining from buying NIS. The High Court also decided to suspend the government’s move to lift the NIS export ban. Quality still remains a vital factor to monitor closely in the Kenyan market.
- China: Harvest season has started in China with on ground report estimating a 65,000 metric ton crop. The drastic increase in China’s crop has placed China as the second largest macadamia growing region followed by South Africa. Growers estimate an improvement in SKR by a 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. The opening prices are currently at par with South Africa and Australia pricing.
Demand: 2023 has been a year with weaker demand globally owing to poor economic conditions, rising inflations and extended covid lockdowns in some of the biggest key markets. As a result, at its peak, we saw up to a 60% price correction in the “styles” compared to September 2022.
The robust demand from China has resulted in a surge in NIS price. Majority of the crop from Australia and South Africa was committed as NIS into China within 3-4 months of harvest which helped in keeping the NIS prices stable in a weaker kernel market.
Demand for kernels from the US remains lackluster and witnessed a sluggish activity due to inflationary pressures on the economy. In Australia, retailers came in late compared to other years due to outstanding contracts. However, since the end of Q2, there has been a promising increase in demand in Europe and Asia due to new product development, particularly for “style 1s”, which are usually packed with “style 4” to make “style 2” and used in coated nuts in China. 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.
The demand for macadamia nuts is expected to remain strong for the remaining of 2023, driven by the Chinese New Year, festive seasons and the overall increasing popularity of plant-based diets and the growing demand for healthy snacks.
Harvest has begun, and within 2-3 weeks, it should be in full swing. The crop conditions have been reported as declining, with the majority of the crop in fair to good condition. However, it is too early to determine the overall quality.
FSA certified acres, reported in August, showed planted acres at 1,641,197. USDA estimates harvested acres to be 1,599,800 with a yield of 3,953 pounds/acre. Considering there was a big increase in acres in Texas, we estimate harvested acres to likely be a bit lower than that estimate. Obviously, it is too early to tell how many failed acres there will be or where the yield will end up, but final production will most likely end up somewhere around 3.15 million farmer-stock tons. With U.S. demand holding up fairly well in the 3 million-ton range and increased export interest, and an estimated ~1.016 million-ton 2022 crop carry-out, production in this range will be sufficient, but not enough to create excessive surplus.
The U.S. kernel market for the 2023 crop has continued to be quiet, with most shellers comfortable in their current position, and most buyers holding out expecting a large crop and lower prices. Offers through December 2023 are extremely limited, with some materials unavailable. Prices through December are in the low-to-mid $0.60’s, regardless of the crop year. Blanching slots remain extremely tight through December and offers are limited, with prices around $0.80. New crop prices from January forward seems to have crept up into the low $0.60’s, with limited offers, due to the unknown cost of remaining farmer stock yet to be contracted.
Possible Bullish Factors:
- The unknown quality for the U.S. crop - The U.S. experienced extreme heat and lack of rain during the growing season, causing drought conditions in some areas. Those areas are expecting yield and quality (damage and aflatoxin) issues, which could drive the prices of the remaining farmer stock as well as shelled kernels higher.
- Anticipation of increased export demand - How much European demand will remain in the U.S. and for how long? 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) and their economy is reportedly 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.