RM Curtis & Co Ltd Market Report

RM Curtis & Co Ltd Market Report Dried Fruit, Edible Nuts & Seeds

June - July 2018

Inside this issue: Edible Nuts Dried Fruit Seeds

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Market Highlights Brazils - An amazing update to report on Brazils is the interest that has been triggered in South Korea over the past twelve months on brazils. An advertising campaign which promoted the health benefits of brazils to this completely untapped market stimulated demand to such a massive extent that in the course of a single year, South Korea has now become the largest market for brazil nuts in the world!!

Raisins - California is still expecting a larger new crop subject to the weather behaving over the next two months.

El Nino El Nino

Provided no extended very high temperatures and no rains before or during harvest, then a larger crop will relieve the squeeze we have endured this past season.

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EDIBLE NUTS Almonds

Comment

The market is presently waiting in anticipation for the so-called “Objective” new crop estimate which will be released on 5th July.

With Australia similarly committed to bigger production and with 100,000mts within their own sights within 5 years (presently 7580,000mts) we are seeing a massive supply of almonds available now and on-going.

The extent to which this number differs to the Subjective estimate of 2.3b lbs, will for sure determine how subsequent pricing will trend. Over the past five years, the Objective has differed from the Subjective, from zero to 150m lbs +/-, so it would be no surprise if the figure increases to 2.45b lbs but a decrease would be explosive (and also quite hard to believe). Also interesting to report that the May shipments from California were down v May 2017, which is the first monthly reduction on total shipments since last September 2017 (158.3 v 170.7m lbs). It is interesting to see how quickly demand responds to price increases - and while less so in the UK or Western Europe but very much the case in the markets of the Far and Middle East, where buyers are hyper sensitive to price increases and can more easily switch to cheaper alternatives if and as they are available. Spain is also predicting a big new crop (latest figure is 83,500mts) and which goes to prove that their own (and Portugal’s) on-going and intensive programme of increasing planted acreage is (literally) starting to bear fruit. Spain expects to see crops around the magic 100,000mts in the next three to five years.

This however is in direct response to the surge of global demand for almonds in all their forms of food and drink products and on a trend that shows no sign of decline any time soon. While prices can, and do, fluctuate, provided we see no likely weather related major crop disappointments or currency collapses, this should serve to keep almond pricing relatively attractive on-going to both buyers and developers alike. One foot note to this is the extent to where the tit for tat “trade war” with the U.S. and the rest of the world takes us. The E.U. and India both look primed to hike their import duties on U.S. exported goods in response to the U.S. doing the same on imported steel and aluminium. This will not go well for any of us but would and will for sure change the profile of which country buys what volumes if the higher duties drive demand down (which clearly is the intention).

RM Curtis & Co Ltd. 95 Camberwell Station Rd London, SE5 9JJ Phone: +44(0)20 (0)20 7274 6090 Fax: +44 (0)20 7737 1827 Tel: +44 7274 0717 / E-mail: [email protected] www.rmcurtis.co.uk [email protected]

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EDIBLE NUTS Cashews

Comment

Prices over the past month on cashews have been quiet with sporadic buying interest which lends itself to softer kernel and seed pricing. Prices are still at the higher end of the historical price range and as noted elsewhere in this report, cashew producers also need to be aware of where cashews sit on price within the wider nut basket. While cashews have a permanent place on the established range of nut products, their key functions sits within snacking and while snack ranges are diversifying before our very eyes, cashews need to be price competitive to retain their market share.

Forward pricing is balanced between this pressure on origin to compete with other nut products but in the knowledge that there is still plenty of forward buying to be covered from buyers who have been buying “hand to mouth” in the hope for cheaper prices later on. There are some concerns over the quality of the African origin cashew seed which is sold to supplement Vietnamese domestic production. There is also pressure on Vietnamese producers to make sales in order to pay back their loans for the seed that they buy locally and imported. But if the price trend on some other key nuts is for the potential for lower pricing into 2019, then cashew nuts may need to track this trend to avoid losing demand to alternative cheaper products.

RM Curtis & Co Ltd. 95 Camberwell Station Rd London, SE5 9JJ Phone: +44(0)20 (0)207274 7274 6090/ E-mail: Fax: +44 (0)20 7737 1827 Tel: +44 0717 [email protected] www.rmcurtis.co.uk [email protected]

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Comment

Walnuts

California remains positive that their new crop should be bigger than current crop, provided the remainder of the Californian summer is not as crazily hot as it was last year.

Provided the weather does not spoil the best laid plans, a bigger new crop should also smoke out any residual stocks of current crop to be cleared out before the next harvest. While the industry is largely well covered for the rest of 2018, any buyers with gaps to be filled might get lucky if they stumble across any parcels in origin which processors find to move on.

Predictions so far are looking for a potential 90100,000mt increase or close to, and such a crop of 700,000mt + will surely result in a correction of pricing into 2019. Current crop shipments are still running around 12% lower than for the same period last year and which ties in nicely to the fact that the crop is around 10% down on the season before.

Stocks of Pieces however are still few and far between, and we still hear that some earlier sold Pieces contracts are being fulfilled by halves cut to pieces.

On a wider perspective, while the trade war taking place between China and the USA continues, it is highly likely that China’s imports of Californian inshell will be blocked by punitive import duties. Similarly, Turkey has increased its own import duty on Californian walnuts to 20% and while Turkey can source cheaper walnuts from China or Eastern Europe, this will likely result in lower Californian sales into what has become California’s largest export market (Turkey).


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Brazils

Comment

An amazing update to report on Brazils is the interest that has been triggered in South Korea over the past twelve months on brazils.

Prices overall however, and since the start of 2018, have been on a steady downward trajectory, driven by the arrival of a normal crop following a catastrophically short crop.

An advertising campaign which promoted the health benefits of brazils to this completely untapped market stimulated demand to such a massive extent that in the course of a single year, South Korea has now become the largest market for brazil nuts in the world!! This clearly rode the storm of record high prices last year and which confirmed that this was not a price driven growth but one driven by the background story and the pricing was secondary. With prices now lower, it will be interesting to see if this impacts on volumes to any major extent, but it is possible that this feeding frenzy could be picked up by China itself and then we really would have another dimension to consider. We have seen this before when China focuses on a market such as South African macadamias, resulting in the majority of that crop being bought by China for China. For the sake of the rest of the world, let’s hope that brazils don’t get picked up by such a huge potential market but it’s a little too close for comfort now.

New crop shipments are now well back under way and while spot and nearby prices reflect higher cost prices, as the cheaper replacement prices start to filter through with each passing month, there is a good chance that we have not yet found the bottom of this dramatically corrected market. That said, the extent to which demand for brazilnuts from its traditional destinations will be the same or different than before is yet to be clearly understood. Cheaper prices should stimulate a return of some buyers to re-enter this market and for those who never left, to enjoy some price relief. But for others who were badly caught and burned by such a big price swing last year, they may decide to never return. So we likely need to see how 2018 plays out in order to gauge how much and where from demand will return or not.


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Hazels

Comment

At present, the TMO are still sitting on 80,000mts of their 137,000mts current crop purchase, which is bound to influence their further sales strategy in the period up to new crop, as well as the amount they would want to be further covering into the new season.

The national elections which had originally been programmed for November 2019 were brought forward by an announcement in April to now be held on the 24th June 2018. It is highly likely that President Erdogan’s ruling AKP party will be re-elected in and reference to the hazelnut and other Turkish agri-commodities, it is also highly likely that the government will promise to deliver on intervention policies designed to support prices and to maximise this sectors’ margins and profitability.

In the very short term and for clear political advantage, TMO may well commit to further forward purchasing and which into a shorter new crop, would likely have a predictable outcome on pricing.

With that in mind, President Erdogan was in the Black Sea region during w/c 18th June and confirmed that TMO will be buying into the next crop, although he was not divulging any specific pricing levels.

The other factor is currency - whereby the Turkish Lira is presently still extremely weak against the USD, despite the national elections coming and interest rates running at 17.75%. Clearly, if the currency improves this immediately converts all Turkish export pricing based in USDs into higher levels.


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Pecans

Comment

While the numbers issued from origin are not completely reliable (especially when it comes to how much unsold stock really is in origin cool stores), it does look like bigger U.S. and Mexican new crops, supplemented by a big carry over and the prospects for a bigger South African crop next Feb/March, spells for strong supply into 2019 and the potential for cheaper pricing (currency aside).

Provided the summer weather in the States and Mexico doesn’t throw any surprises at these developing pecan crops, then we are optimistic that the total availability plus carry over into 2019, should be better than this year. It is fair to say that both U.S. and Mexico are increasingly aware that they need to realign their prices to remain competitive within the wider nut basket in which many competing nuts are presently trading and likely to trade at lower levels – and potentially even lower into 2019. Within the U.S. domestic market, many buyers will continue to switch out of Pecans into Walnuts given the price differential and the same applies internationally, where buyers and developers alike will be drawn to cheaper nuts if, and should, Pecans remain at present levels.

China is also presently very quiet and should U.S. pecans be part of the escalating trade war, then this will result in a significant reduction in volumes sold in that direction, at least. Between now and new crop however, we may see two forces at work. Resistance from certain packers to sell cheaper while they have higher priced raw material purchases to protect. And pressure to sell on every packer in the knowledge that they might want to shift current crop before new crop establishes itself at lower levels (hopefully).


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DRIED FRUIT Comment

Coconut

Demand for coconut primarily from the Middle Eastern for the festival following Ramadan (Eid al-Fitr) typically sees strong demand in the month leading up to Ramadan itself. th

With Ramadan this year falling between 16 May and 15th June, we were expecting to see a surge of demand over March-April deliveries and shipments, which largely did not materialise. This was due to existing strong levels of stock at key destinations as well as the continued and surprising decline in edible oil pricing. Palm and Soya bean oil have both continued to weaken with palm at a new two year low on weak international demand - and bumper soya bean production combining to add to the price pressure. With further predictions of Crude oil pricing also unlikely to increase into 2019, this will hopefully control freight rates from both the Philippines and Indonesia.

Prospects for pricing over the remainder of 2018 look to be mixed news: Firstly, July-August is the start of the typhoon season in the Far East and as always, this presents a threat to crops and infrastructure both. Palm and Soya pricing will bounce back at some point and with coconut oil and desiccated coconut pricing all interlinked, this could see an upward price correction in the next few months. Also from the U.S., there were issues earlier in 2018 of salmonella detected in lower quality coconut and this resulted in an immediate downturn in their own demand. This is expected to turn around later this year and would clearly add some considerable weight to any commodity price increases.


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Raisins

Comment

California is still expecting a larger new crop subject to the weather behaving over the next two months. Provided no extended very high temperatures and no rains before or during harvest, then a larger crop will relieve the squeeze we have endured this past season. That said, we then have to see how the growers and packers can resolve their fundamental differences in order for the RBA (Raisin Bargaining Association) to set a workable new season field price. At present, Californian growers want an increase on this year and packer/processors recognize that it needs to be a lower price in order to even attempt to compete with cheaper competitor origins. That said, the situation unravelling in Turkey is looking far from clear. What looked likely to be a shorter new crop anyway (on/ off cycle of a bigger crop being followed by a smaller one) was further damaged by widespread hail storms during May, which combined looks set to produce a new crop of around 280-285,000mts (total including sultanas) compared with 310,000mts this year.

If Turkish prices increase, then California is unlikely to negotiate a decrease in their field price, which could result in both origins firming into the last quarter of 2018 and potentially beyond. With Iran also caught up in the Trump driven trade sanction-fest, it is highly likely that Iranian raisins will also not reach too many destinations in Europe this season ahead, so it is likely that we will see firming prices in the medium term, aside from any major currency adjustment. The Lira is still trading down against the USD, but if that were to recover post the Turkish national elections, then their USD-based export prices would climb in line with this correction.

If Turkey produces around 40-45,000mts of raisins, this will deplete the quantity of sultanas needed to compete – squeezing the price of sultanas and raisins both into the new season.

RM Curtis & Co Ltd. 95 Camberwell Station Rd London, SE5 9JJ Phone: +44(0)20 (0)207274 72740717 6090/ E-mail: Fax: +44 (0)20 7737 1827 Tel: +44 [email protected] www.rmcurtis.co.uk [email protected]

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Sultanas

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Comment

As mentioned above, the situation in Turkey looks to be set for a tricky season ahead. The severe hail damage in May could have taken out about 10,000mts of the developing new crop, as the storm was widespread across much of the extended growing regions. If the crop is to be around 280-285,000mts and Turkey converts 40-45,000mts into raisins in order to strengthen its grip on this market, then there will be an inevitable squeeze on sultana pricing as Turkey will struggle to service its customer base. Turkey’s domestic market is also in growth – as is its domestic alcohol sector and fresh grape export business.

Strong demand and reduced supply would usually have one inevitable outcome.

Cheaper prices from China this season and likely into next will provide some competition to Turkey although for many, this is not really a viable alternative. Chinese sultanas have quite a neutral flavour and can be very sticky, so any saving in cost price can be at least in part given away in breaking the fruit for use. As also mentioned elsewhere in this report, the Turkish Lira saw some strong recoveries against the USD in early June, but has since eased back to levels of 4.75+/- (lows of 4.90 / highs of 3.50 twelve months ago). Should the Lira recovery post elections see the currency make strong gains against the USD, then this will convert to higher market prices, given that these are traded internationally in USDs.

RM Curtis & Co Ltd. 95 Camberwell Station Rd London, SE5 9JJ Phone: +44 (0)20 7274 0717 6090 / Fax: [email protected] (0)20 7737 1827 Tel: +44 (0)20 7274 E-mail: www.rmcurtis.co.uk [email protected]

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Currants

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Comment

It is still very difficult to extract offers from Greece.

Current crop is largely already sold out and presently, packer/processors are nervous about offering anything for new crop in case the weather over the summer is as hot as last year and the crop is further reduced for the third year in a row. For that reason, it is hard at present to cost pricing for October deliveries onwards – at least until the exporters feel brave enough to take a view on how supply might play out this year.

It is hard not to sympathise with the Greek processors as their best laid plans for growth have been wrong footed by the weather. Their previous successes in pushing Currants to the Far East and Australia have been largely suspended and now they also see some major defection by the growers into other crops. But with issues pending on sultanas and raisins, a good new crop and some easing of pricing would push Currants back closer into contention with their key competitor products, and give them a chance for some positive market share recovery.


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Apricots

Comment

Malatya in Turkey experienced some very unusual weather over May – some hail storms which are never welcome followed by rain storms and high humidity which has now given some further concerns of fungal diseases.

The weak Lira has of course partly obscured the extent to the local market price rises, as apricots are largely exported and traded in US Dollars.

Local views are that the bumper crop this year of around 150,000mts might now be followed by a crop of less than 100,000mts and predictably prices have climbed as a result.

Any further weather related surprises over the rest of the summer and in the lead up to the start of the harvest in August, will only fuel the negativity further, but even stable conditions will likely not avoid 2018-19 prices trading within a range higher than those we have enjoyed for this past season.


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Seeds Pinenuts

Comment

Prices subsequently stabilised during May with renewed interest for both larger Koreansis counts and also for smaller Siberica specs.

As previously reported, pinenuts are in strong demand with use and application growing the world over. High pinenut pricing (comparative to other seeds) was always a barrier to growth, but increasingly the markets are looking for taste and diversity as much as they are hoping for price stability.

Buyers are beginning to lock in cover now for the remainder of 2018 in the belief that while the currency might offer some respite should the USD weaken, the short supply of the commodity itself is key to the likely firmer trend.

Demand however is also driven by speculation and fundamentally, this remains a high priced commodity with big gains (and equally big risk and potentially big losses) should speculator’s “positions” come good.

For the first four months of this year, we saw strong demand pushing up prices against the back drop of a reportedly short Chinese crop.

Consequently, historically cheap or expensive pricing will trigger speculation as a second tier of trading which is hard to anticipate and impossible to prevent.

RM Curtis & Co Ltd. 95 Camberwell Station Rd London, SE5 9JJ Phone: (0)20 7274 6090 Fax: +44 (0)20 7737 1827 Tel: +44+44 (0)20 7274 0717 / E-mail: [email protected] www.rmcurtis.co.uk [email protected]

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Seeds Comment

Pumpkin

Gloomy news from China of late with reports of strong winds and rains damaging a significant proportion of the developing new crops grown in Xinjiang and Inner Mongolia.

Prices so far in 2018 have been contained by the scale of the large carry over that rolled into this year from last, and was able to mitigate the impact of the shorter crop itself.

This may not prove to be entirely accurate and could be an attempt to talk up pricing, given that this market has languished at similar levels for months now despite expectation for much higher prices this year.

In an attempt to squeeze prices higher, we heard that Chinese plantings for the 2018-19 crop were further reduced (as they were last year) so if the weather has reduced supply further still, then we could be set for some price movements once any surplus of physical stock is depleted.

We thought the same this time last year but the carryover was underestimated. It is highly unlikely that this will be the case into 2019.


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Seeds Sunflower

Comment

Current crop pricing in Bulgaria is firming but this is a natural part of the cycle as we near the end of the season and the remaining uncommitted inventory starts to wind down. As always, the local weather over the next two – three months is critical where either too hot and dry or too cool and wet can cause issues for the forthcoming harvest.

With an increasing pull on Bulgarian sunflower stocks – both from crushers and kernel producers requiring stable supply, the biggest threat comes from the weather rather than any other key factor. This is a big crop with growing demand, but unless there is a major quality issue likely from extremes of weather or temperature, at present the total production remains a match for even a growth in demand.


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