On inshells: It is harvest season for southern hemisphere crops. We are hearing Tanzania auctions are going well and price of inshells are stable, but still higher than where kernels are trading. Mozambique season will start soon and here too price indications are high. Both Tanzania and Mozambique have good crops and there is no adverse news on crops.

Estimates of Mozambique crops are significantly higher than last year, but we have to wait and see if this is actually realized (as we have seen the expectation vs actual mismatch happen over past crops as well)

On kernels: Kernel demand is subdued and there is sufficient inventory across destinations to warrant any serious spot activity to stimulate price increase.

Consumption is healthy across destinations. Chinese demand was slightly below previous months due to restrictions in place. While Q4 is typically good consumption months, we expect buyers to be fully covered and hence we may not see any runup in prices unless there is some serious increase in retail offtake.

Bullish Trends:

• Mismatch between price of inshells and kernels.
• Reduced processing capacity in Vietnam as a result of the above
• Inshells in strong hands and Tanzania auctions continue at reasonably high prices
• La Nina weather patterns indicate wet weather in Vietnam and Cambodia between Dec and Feb which are crucial months for cashews

Bearish Trends:

• Sufficient inventories in destination markets and slowdown in pace of buying activity
• Slower than expected demand for wholes

The ABC released the October shipment report. Shipments for the month were a disappointing 217 million pounds, this is off by -30% from last October, which was an all-time record shipment for the industry. All major export markets were off, shipments for the month were 151.9 million pounds down -35.6% versus last year’s record of 235.9 million pounds. Export now sits at -18.6% in shipments versus this time a year ago. With no fix in sight for the ports, shipping is expected to remain a concern for the foreseeable future. It is obvious now that there is no quick solution that will greatly improve the situation any time soon.

Domestic shipments are also down, however, being able to avoid export issues has helped to lessen the strain. Although freight is still a problem with a lack of availability of drivers and equipment, shipments for October were 65 million pounds, -11.6% versus last year at 73.76 million pounds. It should not go unnoticed regardless, this was the third largest shipment month for an October in history, so not all is lost. Domestic shipments for YOY sit at -3.64% to date. Shipments suggest perhaps that some buyers are still working through old inventory. Regardless this was the lone bright spot in an otherwise weak report for the industry.

The industry now sits -14.6% behind in shipments compared to last year with 652 million pounds having shipped thus far, compared to last years’, 764 million pounds. Last year as most understand was an outlier of a year with an historic bumper crop. Not understanding how the pandemic would ultimately effect demand, last year the industry came out swinging and prices were aggressive. If we compare shipments thus far of 652 million pounds to the 2019 crop of 609.5 million pounds we are doing rather well (ahead 6.5%). Given all the surrounding circumstances, the industry remains healthy with plenty of time match supply to demand.

CA 2021 crop is expected to be about 1.2 bn lb. Overall crop quality is excellent though large inshell sizes and shelling stock availability is very limited. Most processors are offering only 21/27 sizing. Turkey is an off-crop year, and Iran crop was affected by frost damage. Pistachio demand is growing year on year.

Larger off year crop resulted in lower opening prices. Inshell 21/27 X1 prices have stabilized at $3.60-3.70/lb. FAS while kernels 80% are being traded between $8.30-8.50/lb. Kernel availability will remain tight throughout the year due to limited availability of shelling stock and increasing kernel demand. As a result, kernel prices should remain firm.

Receipts as per Oct shipment report are 564k tons as compared to 680k tons, a reduction of 21.5%. Oct shipments were lower by 19%, in line with the reduction in supply. Northern California had significant rain during the last part of Oct, resulting in damage to both quantity and quality. With the reduction in marketable inventory, light kernel pricing is expected to remain firm. However, darker and higher defect product availability may increase causing larger pricing differentials. Light grades are being traded around $3.30/lb. while Light Amber around $2.70-2.90/lb.

Crop conditions are still looking good. As of 11/7, approx. 79% of the overall crop is reported to have been harvested at this point (84% in the SE), which is on par with last year’s pace of 76%, but behind the 5-year average of 82%, for the same date. According to the Federal State Inspection Service, 2,472,025 farmer stock tons have been received and graded as of 11/10, with all but about 1908 tons grading as seg 1. Harvest should be wrapping up for the most part in the week or so.

Much cooler conditions have moved into all areas. The risk of frost & freeze comes much more into play now that we’re into November.

The latest USDA NASS Crop Production report came out this week, reducing estimated production (again) by 25k tons from their October estimate (and almost 197k tons from the original Aug report) to 3,121,250 tons. Harvested acres remain the same at 1.533M tons. Yields in AL & FL were reduced again. OK & TX also had reductions, while yields in NC were increased again. They’re still projecting 4,400 lbs. per acre in GA, which would be the 3rd highest in history. Overall yields were reduced (again) to 33 lbs./ac from Sep report (and 111 lbs. from the original report in Aug) to 4072 lbs/ac (2nd highest national average on record). There are some who still believe this average yield to be high and think total production will be closer to 3M tons.

Global interest (especially from the EU) for US peanuts has increased, particularly due to the supply chain issues from port congestion, container shortage and escalated freight costs, mainly in South America and China.

Factors to Watch:

• Weather for the remainder of harvest
• Final global crop production, particularly US & China
• Demand, both US and export
• Competitive crop prices for calendar ’22
• Impacts from COVID (prevalence of cases and how government mandates might impact the economy)

The TL meltdown has dominated the trade for the past few days. It has dropped to its lifetime lows of 11,10 against the $ on Thursday 18th Nov, following a fresh round of interest rate cuts. We have seen almost no activity in the last few days owing to this volatility. Overall, we have witnessed heightened trading activity during peak season – arrivals have been good in the Turkish local market, and so has been the coverage from the European market. The crop size of 780-800K in Turkey is evident.

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 have thus seen 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.

The Georgian crop quality too has been reported substandard. Though the export from Georgia, especially to Italy, has increased; we have also seen an increase in rejections due to poor quality. https://east-fruit.com/en/news/hazelnuts-exports-from-georgia-official-trade-data-looks-good-but-is-not-reflecting-the-whole-picture/
Post the TMO support price of – 26,50 TL/kg was declared, the principal Hazelnut buyer started sourcing a price of 25 TL/kg the following week. This has formed a firm support to the market in TL terms for the last 2 months. 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 too has sourced around 75K inshells. We expect TMO to hold almost 100K + inshells by the end of December. 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
With significant part of the crop now already traded (or in hands of TMO), the effect of the large crop has been seen off. We expect the local market to move up following the currency depreciation; but we will also observe demand slowly waning off. While currency will continue to dominate the market price, the next trigger for the market shall only be in the new year, once news around the blooming of the plants starts circulating

The global macadamia nut forecast for the crop now stands at 227K MT calibrated to a global standard of 3.5% moisture, same level as that of last year. Australian macadamia forecast stands at 48K MT and South Africa at 54K MT. As per WMO’s latest forecast the crop is expected to be double in 4-5 years and triple in the next decade reaching 660K MT by 2030.

Market now seems to be moving on from the impacts of Covid-19 when most of the ingredient users like cookie manufacturers closed with little to no tourism. With ingredient styles like S5 and S8 priced lower, it should have a positive effect on the consumption, which is much needed for a growing Macadamia crop. Celebrations for the double 11, double 12 and Chinese New Year season is expected to keep the demand up. For Wholes, most business for the year is done but the spot market is quite active. Only a very limited qty of small size wholes, S1A, from SA and KEN are under offer now. Contracts for next year’s crop has started; nuts are in the flowering stage and so far, no major surprises reported.

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 and festive seasons. New offers for 2021 crop: NIS SA: 5.65-5.75 USD/kg, AUS$5.70-5.85 USD/kg. S1L are trading at 9.0-9.15/lbs. FAS for AUS and S4 at 7.50 -7.70/lbs. FAS for AUS