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Nuts by ofi - Market Report: December 2021

Cashews

On inshells: Southern Hemisphere, 2021 crops: Tanzania auctions are currently in full swing, delay of exports on auctioned quantities continue due to ongoing port congestions and vessel/container availability. This is putting pressure on RCN pipelines, especially in India where local crops are not available for some more time. Mozambique, Brazil and Indonesia crops looks to be reaching more or less same quantities like in 2020 crops.

Northern Hemisphere, 2022 crops: Ongoing rain events in South-East Asia may have impact on the Cambio & Vietnam final crop sizes. This possible crop delay may impact processing capacity before and immediate after the Tet break as any available RCN will be from imports from SH crops or spot sellers.

WAF & India crops are likely not having major impact on any weather patterns related to El Nina, we will not get more clarity on this before end of January.

Overall: Both on Tanzania RCN auction prices and on spot RCN available in processing origins their remains a mismatch on prices between in-shells and kernels.

Vietnam Covid-19 situation is getting better with infection rates back from all-time highs to around 15K cases per day and about 65% of the population is vaccinated. Still we notice more and more smaller processors are getting effected and closing their doors. With new variants coming into play it’s very much unpredictable if Vietnam may/can produce at max. capacity at start of season or need to reduce again like in Jul/Sep this year. Any major capacity reduction will have significant impact on the global kernel availability.

On kernels: Kernel demand remained subdued till end of November. From early December we have seen especially EU industry getting active and eager to cover Q1/2/3 periods, even interests into early 2023 has been noticed. Yet there are no significant sellers for forward periods since new crop pricing remains unclear. US demand remains sluggish but pipelines beyond Jan/Feb looks nil, and with the ongoing delays and container/vessel availabilities from Asia into East- and West Coast we will likely see more activity than usual before Christmas break comes in.

Middle-East demand has picked up largely and currently the most active region for nearby positions. India domestic demand for pieces are strong and China is likely to get ready for the last coverage round for their Tet Holiday requirements.

Overall: We have to keep in mind that the global freight hassle may end up differently from a coverage/demand perspective (both for RCN and Kernels) as arrivals remain delayed and unpredictable (i.e. longer afloat periods, port restrictions/congestions, vessel/container availabilities). Hence planning on usual/strategic pipelines are extremely challenged. And if all arrivals comes in more or less on the same moment we could as well see another period of low demand.

Bullish Trends:

  • Mismatch between price of inshells and kernels continues

  • In-shells keep trading at premium (both on spot market and in new auctions)

  • La Nina weather patterns signals unusual rainfalls to be expected in Cambodia and Vietnam growing areas

  • Omicron variant may impact RCN shipments from Africa during main season, Africa remains very low in overall vaccination rate.

  • EU and US pipelines looks to be thin beyond Feb/Mar, with ongoing delays new coverage rounds likely to come before Christmas Break.

  • Main destination markets like EU and US signaling to come into the market more or less at the same moment, if such happens this will keep feeding the spot market and will let disappear the price pressure in exporting countries.

Bearish Trends:

  • India local and China demand remains subdued
  • Vietnam processors see less spot demand from main destinations and eager to do spot trade before Tet break
  • Inventories in destination markets remains good which may impact coverage interest

Almonds

The ABC released the November shipment report on December 14th, 2021.  Shipments for the month continue to trail last year with 221 million pounds shipped off by –16%  to a year ago.   This now brings us to -15% behind in shipments compared to last year.  This is not due to demand, but rather industry crippling export shipments.   It does not however, matter the reason, but rather the results, and by all accounts, there does not appear to be any short-term fix for improving the shipment situation. 

Many are still working off last year’s supplies and therefore immediate demand has not been necessary.  As we move into January and edge closer to the February bloom, attention will be focused on California weather during the bloom and the Sierra snowpack.  Will it be a good bloom, or will there be issues with weather?  Will California growers have ample water for irrigation, or will restrictions continue to be a factor in next years crop?

Crop receipts appear to be pointing to a 2.9 to 3.0 billion pound crop.  With last years carry-out we will essentially have the same supply as last year, but now behind not only in shipments, commitments are also trending behind.  California will have its work cut out to get the 2021/2022 crop marketed and shipped in the nine to ten months.

Pistachios

Market:

  • Pricing remains stable despite this year’s record CA crop which looks to be complete at 1.16bn lbs.
  • Prices remain unchanged for last two weeks for Inshell 21/27 at 3.60 – 3.65/lb. FAS CA levels. Current offers from HK at 3.65 – 3.70/lb. CIF HCM
  • US 19/22 selling at 30c/lb. differentials with prices between 3.95 – 4.00 FAS CA
  • Market continues to stay stable for Whole kernels since last two weeks. Availability is very limited due to limited closed shell in the crop. Current offers are between 8.60 – 8.70/lb. FAS CA levels
  • We expect kernels and large sized to continue to firm due to lower availability combined with higher demand

Supply:

  • CA 2021 crop receipts look to be finalized at 1.16bn lbs. as November report showed no additional receipts
  • Overall CA crop quality is excellent though large inshell sizes and shelling stock availability is limited
  • Iran 2021 crop is expected to be 298 MN lb. against the 494 MN. lb. of 2020 crop. Reduction in crop from non-bearing trees in off year and impact of frost, in fruiting stage
  • Lower than expected quality in Iran crop; Nut size is smaller and floaters % is high
  • Turkey 2021 crop is expected to be 205 MN lb. against the bumper crop of 617 MN. lb. in 2020

Walnuts

Market:

  • Market remains slow. As a result, pricing is soft with good deals to be had against firm interest/bids
  • We are seeing two main reasons for weak demand:
  • Entrance of China into main markets
  • Shipping issues resulting in increased price and quality risk
  • There is much less light/premium quality product available so these grades should hold firm
  • However, lower quality grades should continue to soften due to increased availability

Supply:

  • The November shipment report showed receipts of 675,000 tons, slightly larger than the forecasted 670,000 tons
  • As 98 to 100% of receipts are usually received by November, we expect this crop to finish between 675k and 690k tons

Peanuts

The 2021 U.S. peanut harvest is essentially complete. As of 12/15 , 3,133,730 farmer stock tons have been graded by the Federal State Inspection Service. The quality of the crop can only be described as excellent….about as good as anyone could hope for. Out of the tons graded thus far, only 2,322 tons are grading as Seg 2/3. Comparatively speaking, in the ’20 crop 19,504 tons were graded as Seg 2/3, and in the ’19 crop (which none of us will soon forget) over 58,000 tons were graded as such. For the most part, temperatures were favorable for the majority of the growing and harvesting season and moisture was generally plentiful (in some cases almost too plentiful) this year. 

The result appears to be a very high-quality crop. Heavy rainfall in some areas of the southeast (particularly Alabama and Florida) likely had some negative impact on potential production, and in some areas elsewhere yields are a little lower than usual (primarily on irrigated acres). Overall, however, there aren’t too many negatives to be mentioned about this past growing season and the crop that has been produced.

Based on the latest USDA World Agricultural Supply and Demand Estimate (WASDE), carryout stocks of U.S. peanuts will be approximately 974,000 tons at the end of the ’21 crop year (July 31, 2022). If true, this would equate to about a 112-day supply of peanuts, or a stocks-to-use ratio of 31%. Considering the quality of the ’21 crop is very good (as previously mentioned), there’s no concern regarding peanut supply.

Factors to Watch:

  • Costs of competing crops and input costs
  • Global demand trends and continued impacts from COVID
  • Supply chain disruptions, increased transportation costs, etc.
  • Weather trends in the U.S. as we move into and through the next planting and growing season
  • 2022 peanut production in key producing countries (China, India, Argentina)

Hazelnuts

The Turkish Lira continues to dominate the headlines, as we continue experiencing very low trade volumes across the Hazelnuts market. The TL dropped to a lifetime low of 17,50 TL to a $ (against 11,50 a month ago), when some relief measures were announced by the Turkish president to stabilize the currency around the 12,50 mark on 21st of December.

Market Report

  • The market breadth continues to be extremely thin. We have seen almost no activity in the last few days owing to the TL volatility.
  • The crop size of 780-800K in Turkey is evident. However, we believe around 60% of the volumes are now traded and in the hands of exporters.
  • On the flip side, the Italian and Oregon crops have been lower than normal. The Italian crop especially has come down from a 140K last year, now to an expected 50K. We continue to see many large Italian buyers active in the Turkish market this season.
  • The quality of the current crop though has been sub-par; with an increase in rotten kernels. We expect availability of a good quality crop to dwindle in the latter half of the season.
  • We have already seen the principal buyer mopping up around 150K inshells and 50K kernels – historically, its highest procurement. This might indicate better demand in the chocolates and spreads segment, as well as coverage for longer term anticipating quality issues.
  • The TMO now has sourced around 100K inshells, and now has announced to stop its sourcing. It is expected that TMO will take a call on selling the product only post February, where some indications on the next crop are available
  • Demand continues to pick up as lockdown ease globally. We have seen most large European and Global confectionery industry covering for their season requirements.

Our View

The market will take a few more days to arrive at a stable level amid all the currency volatility. Though the current USD levels are attractive, we expect demand from the EU market to be thin, and thus we do not expect much market appreciation. We now await the next trigger to the market around February, when we will have first indication of the flower count, thus the next season crop.

Macadamias

2021 final arrival estimated at 237k MT (Inshell). Australia, which reduced their projection earlier from 50,770 MT at the beginning of the year to 48,500 MT by Sep have now reportedly closed the season with 51,500 MT inshell at 3.5% moisture which is 10% increase over 2020 crop of 46,900 MT. South Africa lowered their projections to 54,174 MT and this looks to be the final receipt number for the year, +11% over 2020 final crop. Yields have been lower than expected due to cyclone and unseasonal rains. Hawaii closed its macadamia production for the season 3% lower to last year at close to 18KMT and China is expected to range between 29K-30KMT for the year. Lower yields seen in China inshells this year, it is expected to improve as more and more trees approach maturity

Disruptions caused due to supply chain bottlenecks across the globe has been a common issue and is challenging the industry. This is reflected in the global demand numbers for macadamia kernel imports, where Asian markets have grown significantly (Japan and China/ Hong Kong up 19% and 15% respectively), Europe has been stable, and USA dropped by 21% compared with the year before.

Both South Africa and Australia are finishing their 2021 supplies and the next year crop are approaching the flowering stage. In Australia, preparation for the 2022 season is now well underway, and all regions have experienced excellent flowering and good levels of rain at the right time. Also there have been no major surprises reported from SA. Next 2 months will be critical for the crop, firm estimates will be available by January next year. Initial estimates are expecting 3% to 5% growth in major growing countries and overall crop size to be around 245,000 to 250,000 MT (inshells). We expect the inshell market to stay bullish in the short to medium run as supply remains limited against the demand picking up after covid for the festive seasons. Current prices for Style 1L and 4L are between 8.9 to 9.1 USD/ lb. and 7.2 to 7.8 USD/ lb. respectively.

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