R.M. Curtis Edible Nuts, Dried Fruit and Seeds Market Report: September / October 2011

1. Edible Nuts

   Almonds:

As previously reported, the record new crop in California looks set to prevent any major price escalation, despite the fact that demand for almonds into last quarter 2011 and into 2012, is likely to be as strong as ever.

Whether this new crop comes in over the 2billion pound level clearly remains to be seen although recent very heavy rains (a “rain event”, no less) might have taken the edge off the later varieties and certainly spooked the origin sellers into a degree of hasty retreat regardless.

With the crop being late anyway, this adverse weather is not welcome under any circumstances but observers are more concerned by the fact that there must be a direct correlation between demand for almonds at these historically “reasonable” levels, and the pricing of all the other nut products, including peanuts.

Comment: due to a variety of factors reported across this report and with the U.S. peanut crop also looking likely to be 30-40% down due to prolonged drought, prices on all nuts (peanuts and treenuts) are extremely firm and historically high.

For this reason alone, we can expect to see strong demand for almonds, especially from the Far East where their economies are largely booming and from the “West” on comparative pricing incentives.

All of which is set against the background that many of the larger manufacturers have not yet covered anything into 2012 (in the hope for lower prices resulting from the big crop), and as usual, anything less than a perfect bloom in Feb/March could bring in consecutive waves of buying interest and speculation both, to drive pricing to much higher levels than we are presently enjoying.

[News update: just received and at the time of writing, the September shipment figures have just been released and show a 10% increase September ‘11 over September ’10. The amazing thing about this is that the late harvest was expected to result in a proportionally lower September shipment figure this year, as there was not thought to be enough new crop available by the time the month was closed. Clearly, this was not the case but it might pre-suppose a giant October shipment figure....]

 

Hazels:

The high prices previously reported, have remained in place over the past month, although pricing has stabilised of late for several reasons.

Firstly, the Turkish Lira along with most other major currencies had seen a major decline over the past month against a strong USDollar, with a drop of 10% recorded over the course of September.

This has offset the strong local hazelnut market on export pricing although October has now seen (so far) a 3% correction as the Lira has rallied from the September lows.

Second, despite the new crop being widely recognized as being unlikely to be much larger than 450,000mts, the major industry buyers have been cautious in forward covering on the basis that the prices are just so high.

Comment: this has in turn created something of a standoff whereby prompt shipments are active as buyers reluctantly cover “hand to mouth” only, and in the hope that there will be some sort of downward price movement in due course.

Quite why that should come though is another matter, as this is a short crop following a previous short crop, and Turkish producers know full well that unless there is a full scale collapse in global demand due to high pricing, that it is only a matter of time before the inevitable demand will have to be “shown” and so they have little reason to lean on pricing, on-going.

Walnuts:

The recent wet weather in California will have done nothing to boost hopes for any improvement on the last estimate of 485,000 short tons for their new crop, although the good news is that China continues to look set to produce a better crop themselves (and by default, less dependent on imports from other origins.

Comment: for the remainder of 2011 however, we fear that the dwindling remaining uncommitted supply will struggle to fully cover the likely open demand for this period, and so we can expect to see strong demand for the first arrivals of new crop and before the impact of increased supply could be felt into 2012. The extent however, to which potentially increased Chinese demand may or may not be covered by its domestic production however, could be key to pricing into 2012.

The other factor clearly is currency, where a further dip into recession could see a rally on the USDollar, as the so-called “safe haven” in uncertain economic times. A further surge in the value of the USD, and then all imported commodity prices could increase on the currency conversion alone.

Cashews

Despite the impact of the recent weaker Sterling/Euro against the USD, origin prices have weakened of late as a reaction to a decline in demand following the record highs experienced this year.

Despite this being one of the key global Snacking lines, if ever there were a good example of high pricing impacting on global demand, we can cite cashews as a prime case.

Currency aside, even lower offers from origin from the earlier highs does not appear to be stimulating more demand, so it is possible that buyers have already switched some of their demand into alternative products and if so, then it is unlikely that we will see these “defectors” reverting to cashews any time soon.

Comment: if the Brazilian new crop delivers a strong supply over the next 2 months, then this should bring further pressure to bear on prices and so we should be able to look forward to even better prices into 2012. Thereafter and as usual, the success or otherwise of the Indian and Vietnamese crops in March/April, will have a predictable influence.

Pecans:

The same prolonged drought across the Southern U.S. States, will have taken a similarly heavy toll on the likely new crop production as mentioned previously on peanuts, and combined with the on-going influence from the Far East, it seems likely that the present high pricing will be sustained well into 2012.

Comment: we already hear reports that China alone might have already committed to up to 20% of the likely new pecan crop and this year better than last year, we now know that their demand will run up to and beyond Chinese New Year. With a seemingly ever-growing application for Pecans across a wider range of sectors (unlike Cashews where the primary destination is Snacking) and with the Far East seemingly now hooked on this product, it is hard to see the huge decline in demand needed to send this market into a downward price trend.

We can therefore expect to see prices for now at least, maintained at a traded range with fluctuations derived from the exchange rate, more than any other factor.

Brazils:

It seems that ever-worsening news is the only news we can report this side of new crop next summer.

The combination of exponential increases in South American “domestic” demand as well as a historically reduced supply and (again) wider application for this nut into a growing myriad of destinations, has combined to send pricing of late into the realms of £7500-£8000pmt for bulk packs. While we rarely quote specific prices in this report, the significance of this pricing in any historical reference is truly unbelievable and makes it progressively unlikely given a total crop from the 3 (Brazil, Bolivia and Peru) origins combined potential of 20,000mts +/- at best, that we will EVER see prices back in the £2-3.00/kg that we enjoyed for decades.

Comment: to make mattes even worse, with so far to go before any possible respite from the new crop, the possible highs between now and then don’t bear thinking about but what is for sure, is that prices have zero reason to correct – bar an incomprehensible collapse of the USDollar....

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2) Dried Fruit:

 

Coconut:

The forward “prognosis” on coconut at least, shows for some optimism (unlike many of the other products in this report).

As we have detailed previously, the escalation of prices this year was a combination of a climbing Coconut Oil price, set within a market that for most of the year was largely devoid of any surplus stocks and with little to no forward industry cover in place, each time a shipment arrived, it was cleared immediately into the “ravenous” spot market.

Seemingly with each passing month, the pipe lines were incapable of being adequately topped up, and hence this situation was unable to be reversed.

Comment: even now, with a weaker Oil market producing weaker replacement prices, the spot market still has not started to reflect this as the stocks afloat and nearby were bought earlier and at higher prices and it looks like we will need to get past the Christmas demand before the incoming stocks start to outweigh demand.

On this basis, we should start to see prices correct in early 2012, although it is also worth noting that (as with other products in this report), forward orders are largely uncovered by the industry as we have as one, been looking for some price relief from the highs experienced this year.

In other words, prices should drop but there is a whole load of worldwide demand as yet completely uncovered for the New Year....

Raisins:

It is starting to look increasingly likely that Raisin prices for the remainder of this season will be high and probably higher than present levels (bar an inexplicable collapse of the USD).

While California has previously set its pricing once again for this season without any export subsidy, and while reports continued to suggest that any declines in export trade would be more than offset by increased demand from domestic wineries, the recent rain “event” (it rained...a lot) appears to have taken the edge off any prospects for an optimal (albeit late) production, and will only service to fuel imminent increases from exporters who saw little reason to sell into this market before the rains.

From Turkey, the shorter sultana crop will predictably now reduce the prospects for a large Raisin production, and if anything the good weather at harvest will have largely removed the prospects of any sizable quantities of darker fruit overall.

Comment: for the UK and European destinations, the strong Dollar has certainly not helped and while this was previously offsetting the weaker Turkish Lira of late, the recent rally of the Lira at a faster rate than any possible Sterling or Euro recovery, means that the “currency factor” is strongly working against us, presently.

Sultanas:

 

What a difference a few months can make!

In the summer, the prospects of a bumper crop in Turkey looked increasingly positive with good weather and the potential of extra volume coming from the newer planted vineyards, all creating a very positive outlook for the 2011/12 season.

Scroll forward 3 months and prices are on the rise.

Whether this new crop ends up well above 250,000mts or not, for now this is unimportant. Turkey surveys the other producing countries and concludes that with issues on supply from China, South Africa, Iran, Australia (and generally on raisins and currants as well) that there is really no reason why Turkey should need to sell anything other than gradually higher.

Comment: while Taris has offered a price for new crop raw material that is in some respects, lower than some expected, the fact that they are offering cash deals means that they are cleverly getting the lion’s share of farmer stock and at what might end up being a cheap price while the background to this, is that a lot of this raw material is being kept back by the producers in the hope that they might be able to sell higher later on.

This will in turn bring in local speculators and could whip this one up against the previously likely run of play.

This really could be one to rally in the short term and in the run up to January, by which time we might hope to see some indications that the crop size might have been underestimated and prices ease over the quiet period over Jan and Feb....

Currants:

Unfortunately, this market looks set for a difficult time for the remainder of the season.

A combination of a reduced new crop and for the UK at least, a relatively weak currency against the Euro (which makes little sense to me at least, given the economic carnage across the “Eurozone”) and the fact that the crop appears to have been largely pre-sold already, combine to create a distinctly gloomy prognosis for the coming season ahead.

Prices from origin are being increased on a weekly basis and with little to no alternative, and with strong demand from the industry to cover what we can from where we can, there is a strong likelihood that this crop will be fully sold long before there can be any respite from the 2012 crop next August/September.

Comment: on the basis of which, we would recommend that buyers strongly consider covering their needs for the season, as even now our own forward supply options appear to be rapidly drying up...

Apricots:

The excellent new crop in Turkey which must be at least 150,000mts (2010-2011 crop: 75,000mts) had a predictable reaction on prices at harvest, but the weaker pricing then hit some resistance and re-bounded.

Predictably, the Turkish apricot industry lost a huge amount of its export global market last year, and not helped by unprecedented levels of defaults and loss of credibility as prices raced to crazy highs and beyond.

This in turn resulted in some destinations literally turning off the tap but these have been switched back on by the price correction.

Comment: this however, starts a chain reaction which goes along the following lines:

First, at the first sign of price resistance, the Turkish sellers beat a hasty retreat in the hope that this might attract other buyers in to cover their needs.

Second, as the buyers start to show their hands, so it stimulates some levels of speculation to fan those flames....

Third, with the recent recovery in the value of the Lira against the Dollar, so this also equates to higher export pricing....

All of which suggests that we have hit and bounced off the bottom of the corrected market but logically, the sheer size of the new crop even with some destinations re-awaking from their dormancy, might cap the potential price recovery...

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3) Seeds

Pinenuts:

Despite the bar being raised by the Chinese to rigorously police and segregate the varieties, in order to police, contain and hopefully remove the dreaded “pine mouth” from the export trade, this has been offset by the prospects of a good and strong new crop and which has already resulted in a steady price correction in anticipation of much better availability into 2012.

Comment: if the conclusion to this grim period is that some of the less scrupulous Chinese producers were indeed mixing the Pinus Armandii into the residual stocks of Pinus Koraiensis just in order to fulfil old sales or new contracts at stratospheric pricing levels, it truly is a sad indictment of their trade. However, with Chinese prices now back in familiar contention and trading again below Pakistan for the time in a long time, and with China committing to putting right this particular wrong, then we could see 2012 prices drop further once this new crop starts to come in volume at the start of the New Year.

However, be warned that as importers are and have been for a while reluctant to bring in unsold stocks in a potentially further declining market, that we might encounter technical shortages on supply between now and those first arrivals of new crop....

Pumpkin:

China also reports favourable prospects for its new crop of Pumpkin seed, where in hindsight (predictably), and at just under historical pricing highs, China decided to reclaim some of the acreage which they had previously redeployed for better yielding, yet far lower priced crops such as Soya beans...

Comment: this move should ensure optimal supply at least into 2012, although it should also be considered that Pumpkin along with most other Seeds, is seeing exponential growth in its application across all food sectors, and so with cheaper prices to further stimulate its development, we are most likely to see industry demand climbing further into 2012...

Sunflower:

...similarly, Sunflower pricing is unlikely to drop back on the basis that its pricing remains competitive against other major seeds in this basket and its application is similarly “mushrooming”, so to speak.

Comment: the proliferation of applications of Sunflower over the past 5 years +, guarantees its place amongst those lines that can safely and predictably see growth.

They are a rich source of Vitamin E, and B-complex vitamins such as niacin, thiamine, riboflavin and pyridoxine.

They are a strong source of Anti-Oxidants, Proteins and Minerals and rich in poly-unsaturated fatty acid and mono-unsaturated oleic acid.

Who could ask for anything more?!

Mark Setterfield – October 2011

If you have any queries or questions about any of the issues raised in this report or indeed, about any of the products in our range, please do not hesitate to call.