R.M. Curtis Edible Nuts, Dried Fruit and Seeds Market Report: November / December 2009

1. Edible Nuts

Almonds:

This is rapidly turning into something of a complete nightmare scenario driven by huge demand and depleting and nervous supply.
After a huge October shipment figure from California, November proved to be even bigger and at 25% over November 2008, and despite this being largely predictable, prices suddenly leapt into another gear altogether.
Although sales of almonds from California into Europe are stable and actually reduced into the UK, the sales into the Far East and China principally, are off the scale and in unprecedented volumes.
As previously reported, the potential Chinese demand is unquantifiable, and although one would expect them as a nation to price buy like no others, for now their newly acquired taste for foreign goods seems unstoppable and it is becoming impossible to know where and when their demand will end.

Comment: prices in origin are now becoming hard to pin down although it would be safe to say that pricing has increased by over 20% over the past month.  While we would usually express some caution over whether such a bullish trend can be sustained, given the impact of this quantum shift in demand set against the likelihood that a lot of industry demand remains uncovered for 2010 and with December shipments most likely to surpass those of 12 months ago, then we are set to enter the New Year and the pre-bloom nervous Jan/Feb, with a general consensus that almond prices remain (for now at least) relatively well priced against other even higher nut markets and still well below the historical highs, fuelled by speculation and big shipment figures and fast approaching a time where any adverse weather over bloom could ignite a market already primed for further increases.
That said, markets often look the most “bullish” at the top, none of the above might materialise and given a backing off by the Chinese and a perfect bloom, then prices could retrace and fairly dramatically. After all, the crop this year is still big. It’s just that demand for now, is extremely strong so short term, there is only one way “traffic”.
Hazels:

Despite confirmation that the Turkish crop this season is possibly half the size of the bumper 2008 crop, prices have remained relatively stable albeit at the present extremely annoyingly high levels.
“Annoyingly” in that, as previously reported, the Turkish government continues to hoard a vast mountain of inshell nuts from this and the previous 2 crops, and which if released, would rectify this year’s short fall and allow prices to ease if not collapse back to reasonable levels.
While this government intervention has shaped the Hazelnut market for years, the fact that the nuts are “out there” but we cannot get them, makes this unreasonable and unfair, and effectively, the international market is being punished by the hands of a government who favours domestic support over international credibility.

Comment: again however, the prospects for 2010 look likely to be for stable to firm pricing.
The Turkish Lira is strong against the Dollar, the government has no intention of releasing stocks until “apparently” they know more about the    prospects for the 2010 crop and so until unless they release some of their stocks in full or part, the free stocks in circulation are just about equal to the prevailing demand locking prices for now at least within a relatively inflexible traded range.

Walnuts:

While problems were foreseeable into 2010, it was not possible to see quite how dramatic these developments could be.
In brief, the failure of China to produce a crop large enough to service its own domestic market, let alone to have any surplus volumes available for export, has effectively removed China from being a supplier within the Walnut market.
However, their active domestic demand has most definitely re-established themselves as a primary importer of walnuts and extremely strong international pricing over the past month largely reflects China turning its focus on buying exponential quantities in from California and India - and in substantial quantities.
California reports a 50% increase in its exports in November and such is the surge in demand from other destinations to cover their own requirements, that Walnut prices of any and all alternative origins have jumped up considerably.

Comment: all of which points to some tricky and challenging times ahead.
Some reports suggest that some of the earlier cheaper contracts from India might not be shipped (at least at those lower levels) and if there are defaults, then this will add to the nearby demand. Spot goods are becoming increasingly valuable and this will also result in firmer pricing.
As far as prices into 2010, well with one main origin not just off the market but fast becoming a large net importer themselves, and worth noting that with Pecan prices (see below) also firming, this will add another level of domestic U.S. demand towards the presently cheaper Walnuts, then all conclusions are for prices to increase into 2010.
Is there a downside? Possibly, and again it might be linked to a dramatic halt in Chinese demand and a global decline in demand prompted by these higher prices.
Short term however, we can fully expect prices to firm further and from the perceptive of the U.S. with Pecan prices now even higher than Walnuts, history shows that their domestic market will also switch allegiance over to the cheaper of the 2 which will add further fuel to the domestic walnut business.    

Cashews

As previously reported, the price increase over the past 6 weeks was first prompted by the late Brazilian new crop which although coming in now, is fast approaching the rainy season in late Dec and Jan with obvious concerns should they clash.
This upward price momentum however has continued as reports confirm the large extent both to which Indian domestic has risen and additionally the quantities seemingly imported now by China.
With Indian traders buying supplemental stocks in from West Africa and Indonesia, and with China buying heavily in Vietnam, this has pushed up “seed” prices and kernels have been quick to track these increases.

Comment: the Indian and Vietnamese new crops cannot come in quick enough although we still have 3-4 months before we will start to see any first shipments hitting our shores.
If the Brazilian crop is hit by the weather and if the SE Asian new crops have similar issues, then prices could spiral into 2010.  Conversely, if the Indian and Vietnamese new crops deliver optimal supply, then hopefully the present bull run should not last much beyond the end of Quarter 1.

Pecans:

In short: unexpected weather problems reducing U.S. supply, set against massive demand from China has suddenly and dramatically set an expected weaker market into orbit.
The crop in the States this year was due to be the “on” year, following last year’s expected smaller crop - which follows the predictable cyclical nature of this supply. And then it rained across much of the Southern growing States and although the crop should still be larger than last year and with some carry in, it is smaller overall than expected. And then the Chinese started buying....

Comment: this is a common theme across much of this report. China in its quest for increasing quantities of imported foreign goods has step changed its interest in imported food stuffs and frustratingly, it is almost impossible to quantify the potential to which they could buy.
Previous figures are of limited value since they appear this year to be buying more than ever. Have they now finished buying (in which case, prices should ease back)? Have they only just started? Who can say?
What is clear though, is that China is presently re-writing the statistics and impacting so dramatically on supply that origin sellers are understandably backing off in the full expectation that they will make better / higher prices later on and for now at least, they are probably right.

Pistachios:

With Iran still largely out of the mainstream supply picture, the weight of pressure on a reduced U.S. crop has kept overall pricing high. California reports a 12% increase on its exports YTD although demand for kernels at these historically high levels continues to stifle demand although the main target is for the roasted and salted inshell pistachios which remain in globally strong demand from all snack packers.

Comment: with Cashew and Peanut prices firming at least for the next 3 months, we expect Pistachio prices to also remain stable to firm and given the reduced American crop and the time remaining between now and new crop, it is hard to see how there can be any meaningful respite until next Sep/Oct.

Brazils:  

We reported before that the low pricing during the harvest in Bolivia was likely to result in a poor supply and the impact of this over the ensuing months has seen this validated.
In effect, the availability of current crop this side of new crop in June ’10 will be pushed to the absolute limit and we can fully expect prices to firm on-going.

Comment: with such a small crop overall (at best 20,000mts), it is not hard to see how any shortfall in optimal supply will struggle to cope with strong demand.
Looking at the comparative prices of brazils set against other Nut products with the continued exception of Peanuts, Brazils are now the cheapest nut but with the smallest production.
It is hard to see how prices can weaken from this point.

2) Dried Fruit:

Coconut:

There is little to report on this market.
After the major weather scare in early November proved to be a false alarm (narrowly) the market then firmed on the back of a stronger Edible Oil market.
Prices then eased back and then firmed with news of increased oil/freight rates affecting shipments from the Far East. This though was offset (in the UK at least) by a stronger Sterling although this has reversed in recent days.

Comment: overall, Coconut prices remain for now at both long term and recent historically reasonable levels and given the general bullishness across the market and with Coconut in its various shapes and forms in increasing demand across a variety of various applications within snacking and food manufacture, it is logical that pricing is more likely to rise than to fall.

Raisins:

From California firstly, while the tonnage required to establish the export programme has now been met, packers are reluctant to break ranks and to offer at discounted levels.
While they continue to make a premium from their domestic market and within the realisation that the total crop is much shorter than originally estimated, and with Turkey of late firming again, California is maintaining its present levels although the programme will be able to offer subsidy to exporters and so prices should start to fall or be about to fall.
In Turkey, the total Raisin production was always going to be small and especially as in August, farmers were assuming that Californian production looked set to be optimal.
That said, the now infamous rains which so dramatically spooked the Turkish market in September and October, also produced a proliferation of darker fruit and so there has been a not inconsiderable supplemental supply of type 7 and 8 sultanas offered at discounts to proper Turkish Thompsons over the past month.

Comment: as reported below in Sultanas, the problem the vine fruit market faces is that on the one hand, there is reasonable supply (and lower grade Iranian raisins have also offered another cheaper alternative to California and Turkey) but set against 2010 industry demand which remains largely uncovered.
Prices should have weakened further than they have yet origin sellers remain nervous and cautious in the hope and possible expectation that more markets are generically firmer than weaker.
If Sultanas were to strengthen, then logically Raisins would track at parity or just over, and it is no coincidence that at present, California seems largely more fixated by the Turkish sultana price trend than by the beneficial structure of its own export programme.
  
Sultanas:

Mixed messages continue to continue to affect Turkish prices although the recent trend is firmer than over the past 6 weeks or so.
After the feeding frenzy at the start of the new season, and largely as a result of Turkey realising with alarm that they were lagging some way behind their expected sales and on season to date exports (as buyers looked to switch to anything from anywhere else that was cheaper – including California, China and Iran) prices started to ease back from the highs and despite the generally strong Lira, the UK also benefitted from the similar part recovery of Sterling against the Dollar.
Of late however, prices appear to have hit some resistance. There are reports that the Turkish crop might “only” be 260,000mts which would be 25% reduced on last year (although historically still an average supply).
There is also a growing reluctance by some of the stronger stock holders to sell at lower levels since they themselves paid higher prices earlier for raw material and they are trying to squeeze prices higher to minimise their own losses.

 

Comment:  there is also a growing tonnage and at higher pricing being traded at the Bourse as processors look to secure additional stocks at these lower levels and this together with the perception that the international industry is still largely uncovered for its 2010 requirements, is starting to produce a sense that we have for now, seen the bottom of the market.
It is unlikely that prices can be talked back up to the hysterical highs during and after the September rains, but it is also likely that for now, the declining prices have hit some resistance and prices will probably remain stable to firm into Jan. Good weather in Turkey in the spring and we may see some longer term and well needed optimism creep back into this market. 

Currants:

With a prevailing nervousness hanging over the Raisins and Sultana markets, there should be no surprise that Greek Currant pricing remains stable to firm.
It looks like we might be set for another year of port strike disruption at Piraeus and recent data showing the depth to which Greece is struggling within recession can only support this view.

Comment: with a reduced crop made worse by the impact of subsidy dis- incentivized producers and with logistical disruption on the cards for 2010, it is unlikely that we will see any major market weakness other than for the UK buyers who may see some recovery in Sterling should the Euro continue to weaken.
Recent falls both against the Pound and Dollar reflect the negative economic state of “Euroland”, and as un-politically correct as this might sound, for UK importers at least, Europe’s misfortune is to our benefit.

Apricots:

The pricing trend on Turkish apricots for the remainder of this season is looking increasingly “bullish”.
The latest figures show that 45,000mts have so far been exported since the start of the crop with 10,000mts consumed domestically.
It is further estimated that at least 15,000mts has been sold forward - all of which totals 80,000mts.
If the total new crop was 90,000mts plus 15,000mts carried over from old crop, this theoretically leaves just 25,000mts to cover any new and uncovered demand between now and September ’10.

Comment: this may well be just enough and the 90,000mts estimate has itself dropped from earlier higher estimates - but if true, then demand will push supply to the wire by the time of next harvest.
The remainder of uncommitted inventory appears to be largely held now in strong hands in Turkey, and who will not necessarily be under huge pressure to release stocks for cash. On this basis, we would expect prices to remain stable to firm for the remainder of current crop and especially if the Turkish Lira amazingly can retain its standing against the Dollar.

 

Prunes:

Prune pricing has continued to offer good value with reasonably availability and UK prices seeing the benefit of the generally stronger Sterling over the past few months (although this seems to meet strong resistance itself at 1.65 +/-  $/£)

Comment: Chile and Argentina are now fully sold out, and so the prospects for price stability up to the South American new crops in May depend upon the quantities of unsold stocks still in circulation.
Both France and California continue to lose substantial export ground against the cheaper South American supply, and have undoubtedly for now at least, lost their strangle hold on Prune supply.
Both Chile and Argentina continue to plant additional acreage and so - weather permitting – look set to remain a competitive alternative to their more expensive traditional “cousins”.  

3) Seeds

Pinenuts:

As if 2009 was not a bad enough year in Pinenut “folklore”, it looks like 2010 may not be much better.
While Chinese prices had historically traded within a (Sterling) range roughly from £4.00-£12.00/kg, prices are presently just short of £30.00/kg and with the potential on the larger kernels at last to trade even higher.
While demand has to fall, the innovation of products using or consisting of Pinenuts over the past few years has stimulated a huge increase in global demand and with another short year ahead, it is hard to see how prices can correct to their former levels.

Comment: China has another short crop and there continues to be only a trickle of supplemental stocks coming over the border from Russia and Siberia.
Importers have resisted from forward buying both in disbelief that this could be sustained and not wanting to be holding stocks if and when the market fell.
So far, the falls have still not materialised and while a drop in demand is sure to happen, the reduction in supply seems set to block any major price correction.
    
Pumpkin:

Similar to the above, we look set to see another frustrating year in the Pumpkin market.
While we had assumed that China would take full advantage of the prevailing high prices and reclaim some of its lost acreage to regain its former optimal Pumpkin crop, this has not been the case and the overall Pumpkin growing acreage looks set to remain 40% lower than in 2008 and previous seasons.

Comment: to make matters worse if they possibly could be, the principle European premium crop in Austria virtually failed this year and clearly turned even more demand towards the depleted Chinese production.
Prices have subsequently traded back up to the highs seen earlier this year and seem set to trade higher still throughout the course of 2010.

Sunflower:

With demand for Seeds growing in a seemingly endless new and traditional variety of applications, Sunflower continues to look extremely good value in this particular commodity category.
Although there is reasonable supply available from both China and the U.S., the expectation must be for a considerable increase in demand at the expense of the historically, hysterically strong Pinenut and Pumpkin pricing.

Comment: we should expect to see firmer Sunflower pricing into 2010.

Mark Setterfield – December 2009  

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.   

On behalf of all of us at RM Curtis, for those of you who are existing customers, we thank you for your on-going support and let’s hope for better and more prosperous times into 2010!

Happy Christmas and a Happy New Year!