RM Curtis & Co Ltd Market Report

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

June-July 2017

Inside this issue: Edible Nuts Dried Fruit Seeds

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Market Highlights Brazils - As this nightmare crop shortage became apparent over the first 5 months or so of 2017, so many buyers formulated their plans to drop brazils – for this season only and for some, even further than that.

Apricots - Having now past the period in which a late frost can still seriously affect the developing crop in Turkey, we can now start to look with more confidence at the possible forward volumes.

El Nino El Nino

Sultanas - With Turkey predicting a new crop of 280,000mts +/- (v 310,000mts this year), current crop stock holders have withdrawn and/or reduced the volume of their offers but set to higher prices.

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

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EDIBLE NUTS Almonds

Comment

On 6th July, the so-called “Objective” estimate will be released reference Californian new crop and it will be an interesting number to review. There has certainly not been any cause for concern over the past month and a natural phenomenon known as “June drop” (where trees shed some of their immature “nutlets”) has not been of any major worry. With a decent bloom, good irrigation following a wet winter and good weather since bloom, there is nothing to suggest the new crop should be less than the subjective figure of 2.2b lbs - and arguably could be a little higher. But it really would be a surprise if the objective figure comes in much higher than 2.2b lbs despite a growing private conviction that this is likely in the final receipts (known in early 2018).

In the meantime, demand is stable and reflected by a small decrease on total May shipments (170m lbs v 178 in May ’16) although this decrease largely comes from India and China now having little remaining origin stocks of inshell to buy, import and crack for themselves. The key to forward pricing lies both in the fortunes of the currency (many expect a weaker USD but matched by a stronger Euro as investors potentially switch currencies) as well as the extent to which industry buyers themselves switch into almonds from other higher priced nut products. If they can, they will and the differential between almonds and pecans, pistachios even cashews, makes any such a move a smart one – if possible to do so.

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

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EDIBLE NUTS Cashews

Comment

Prices have been stable since our last report albeit settling at what remain historically high prices (made worse clearly by the strong USD). As mentioned elsewhere in this report, we are now midseason and with no immediate respite coming from any new crop any time soon, we need to see a major slump in demand or an injection of supply to ease the firm trend. As is typical of this sort of market conditions, the only bargains to be found come from discounted prompt shipments from packers who need the cash but who when sold, then make way for the market to realign back to the higher pricing that was there before.

This situation is made worse by the belief that there are still a lot of buyers who are in part or whole still uncovered for the remainder of 2017 shipments and so the origins feel under limited pressure to reduce their prices knowing the demand is there and is likely to surface any time soon. This situation is likely to last now until later in 2017 when the Brazilian new crop will be the first new crop to come on stream and typically, mainly to satisfy the giant U.S. consumption. For the UK and Europe, we are faced by no major pipe replenishment until first quarter 2018. On which basis, prices look highly likely to remain steady to firm with a weaker USD and those random cheaper prompt shipments potentially offering the main opportunities to find any bargains.

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

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Comment

Walnuts

This is pure speculation of course, but based on the chances of new crop potentially being significantly bigger than this year.

Offers from California are presently so difficult to find that there is effectively little to no replacement pricing to speak of. Prices are now being set by the extent to which resellers have any surplus to offer but with 5-6 months realistically before new crop will be harvested, processed and shipped to arrive in Europe, there seems little chance of any price respite over this period. The scarce offers from origin which do appear are when growers have miscalculated their inventory and can offer limited quantities for prompt shipment only. At the recent INC Congress in Chennai, serious Californian walnut packers were unwilling to pin their colours to any new crop prices yet, but they were willing to entertain the likely pricing for 2018 supply at some 50 cents per lb (£900pmt +/-) lower than wherever current crop would be today.

For reference: 2014: 517,000mts 2015: 547,000mts 2016: 610,000mts

2017: 650,000mts + ??? Clearly, the programme of increased planted acreage and better weather conditions are delivering better volumes – and they are needed. California has offered solutions to issues that have become synonymous with walnuts from other origins. Those issues are primarily the control of shell and septa to a far tighter degree and for that reason, they deserve to retain their place at the top of the pecking order.


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Brazils

Comment

It has been an interesting month or so to summarise on brazils and on the basis of there being some price correction due only to the speed at which some buyers have been able to switch out of brazils and into other nut products. As this nightmare crop shortage became apparent over the first 5 months or so of 2017, so many buyers formulated their plans to drop brazils – for this season only and for some, even further than that. While such a crop shortfall happens rarely on brazils historically, this is a crop which will always be comparatively small when set against the ever-growing cultivated and invested crops we see in almonds, walnuts, hazels etc. With demand for Nuts at an all-time high and growing, a crop of 20,000mts or so will always be a risk. Not just on short supply but on growing demand. So for some, this season will be their exit point and it is hard to argue against.

For sure, weather permitting and we will see new crop next year back to normal size and prices will drop dramatically. Likely in early 2018 but certainly over Q2 when new crop starts to ship and arrive. Even now and way ahead of new crop, experts on the ground see very early signs of this likely eventuality but with 6 months to go, brazilnut pricing could still get even messier. Even with recent price corrections, prices are still more than double their recent historical pricing levels. With most of the Bolivian factories shut or shutting, it will then need for whatever stocks importers have been able to secure to feed the rest of the season and even with many manufacturers opting out, brazils will continue to sell into retail channels and maintain an underlying level of demand and the predictable resulting supply issues, in the meantime. Unfortunately, there really is no good news to report nor any likely positive spin to expect, for many months ahead.


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Hazels

Comment

The TMO (Turkish government buying agency) has continued to buy up current crop stocks – no doubt in order to tighten supply but in fact not at a volume that has really achieved its objective.

Latest figures suggest a new crop of 600650,000mts But with a likely carry in smaller than last season (which was 120,000mts) so combined supply overall might be similar to 2016/17 season.

We hear that they have so far bought around 2000mts which while not inconsequential, it is relatively small scale in a crop year of around 580,000mts.

While this might result in some stable pricing at origin (aside from TMO activities) the export pricing is clearly linked to the Lira / USD exchange rate and if the USD is heading towards further weakness, then logically the Lira will firm - as will Sterling and Euro against it too.

We hear that TMO will continue to buy up to and then into new season supply, but their problem is that the pricing they are offering is lower than some of the local traders are willing to pay, so this may explain why the effectiveness of their strategy so far has been so underwhelming. If they increase their pricing into new crop, it will be more impactful – and would need to be more in line with prevailing pricing given that most expect new crop to be larger than current.

So the currency may play the biggest factor on pricing, short-medium term.


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Pecans

Pecans are another crop that really need a better new season supply ahead in order to stabilise and hopefully reduce forward pricing. This season has been dogged by early disappointment over the actual size of the U.S. and Mexican crops and with shellers equally wrong footed, so the major players paid top prices for inshell over the first quarter 2017 and have subsequently been stuck at higher kernel prices as they have protected their earlier investments. While there have been sporadic offers from smaller packers with stock to shift for cash, each time those same sellers sell, so they clear the pitch for the market to then realign to higher prices once again.

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Comment

This has been the cycle of the crop over the second quarter of 2017 but a little like Californian walnuts, so this market needs a good new crop supply flushed into the pipelines for price to correct to more historically familiar levels. Typically, new crop will not start to arrive in the UK or Europe much before December onwards, so over the next 5 months or so, pricing will be driven by availability and the opportunity as it arises for origin sellers to make sales based on a rapidly declining pool of uncommitted inventory. Footnote: one of the U.S. pecan growers’ associations (Tri-State Growers) has just released the first new crop estimate for the U.S. crop at 292m lbs (v this year at 268m lbs). This increase, if correct, is clearly good news but not a massive improvement (10,800mts) to correct the problem.

This report also suggests that Mexico could be smaller than this year (200m lbs v 218m lbs this year) but the missing link is the carry over. Last year was 129m lbs and this year it is hard to see how it can be much bigger. This report therefore is not the news we wanted, but it is still very early in the season and far away from new crop. With 4-5 months to go before the next harvest starts and the weather over Sept -Nov always unpredictable, this market has many more twists and turns to throw at us.


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DRIED FRUIT Comment

Coconut

Origin pricing is stable at present – with currency affecting their export pricing as much as it is our own import pricing. As usual, the prevailing pricing on Edible Oil is a key factor and palm oil pricing has weakened of late as crops start to recover from the 2016 droughts. At the time of writing, it is just after Eid - following Ramadan, and this period both is usually one of strong demand from consumption but also one where workers in origin factories return to work and so supply starts to ramp up.

Indonesian and Sri Lankan coconut is still in shorter supply following the drought last year and of course, overall demand for coconut in all its various forms and derivatives is still very strong.

Currency aside, in a market where the fundamentals are strong demand versus shorter supply, it is hard to see prices decrease in the short term although historically, if the oil pricing does weaken, this can change the mind set of origin coconut mills who see the 2 markets (oil and coconut) tracking each other.


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Raisins

Comment

Californian prices remain unchanged since our last report although there is a growing consensus that new crop could be larger than current crop and this should help to stabilise pricing short term and potentially to bring some pressure to bear over Q4 if new season supply is larger.

On the back of the new season view from Turkey, prices have increased over the course of June and look set to remain firm. The Lira is also steady which is converting a firm local market into higher export pricing although the Sterling recovery of late against the wobbly US Dollar is helping to offset some of those increases.

From Chile, prices have settled following the increases earlier at the start of new season and while demand, innovation and interest for Chilean raisins steadily increases, the crop this year seems to be a match for even increased demand. From Turkey, the market is presently firm due to the view that new crop will be up to 10% smaller than this year. While Turkey is expert in spinning such news, there is a clear precedence for the “on/off” crop cycle, so a reduced new crop would actually be no surprise.

However, a firmer Turkish market will be very much in the minds of the Californian exporters on-going, and will make them less interested in reducing their own selling prices even in the face of a larger U.S. new crop.

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

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Sultanas

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Comment

With Turkey predicting a new crop of 280,000mts +/- (v 310,000mts this year), current crop stock holders have withdrawn and/or reduced the volume of their offers but set to higher prices. This has encouraged those buyers who were short for the rest of current crop to cover their needs and for some, covering up to end Dec ’17 has mitigated the risk of any weather related problems pre-harvest.

Rains during August are not uncommon and when reported, they are often localised but given the impact of an expected shorter crop, any rain damage would be highly inflammatory.

With at least 10,000mts of new crop expected to ship to Russia following resolution of their political fallout last year, and with Turkey still competitive on sultanas against other origins, we would expect to see strong demand fuelling further price increases and even a rain-free August may not set about a significant price correction. Such a price reduction may still come from a currency adjustment (if Sterling gains come from USD weakness) or if Iran and China find themselves priced well beneath Turkey and buyers who can, then switch origins. Time will tell. Another consideration is the introduction by the EU (directive EU669/2009) as of July 1st of a routine check on 5% of all imported Turkish and Iranian vine fruit for ochratoxin detection (ochratoxin being a mycotoxin common to dried fruit and other commodities). The frustration of this situation being that this will introduce a frequent delay through the port (up to 14 days worst case, if similar checks on Hazelnuts are anything to go by) as containers will be held pending these test results and then on-going, there is a risk that if EU port health authorities report a level of findings above their expectations, then they might well increase the regime to a 10% protocol and so on. It should be stressed that ochratoxin is derived from a mould spore which would have to be consumed in significantly large amounts to cause any risk of illness. But these checks will go ahead regardless.

RM Curtis & Co Ltd. 95 Camberwell Station Rd London, SE5 9JJ Phone: +44 (0)20 7274 6090(0)20 Fax: +440717 (0)20 7737 1827 Tel: +44 7274 www.rmcurtis.co.uk [email protected] Fax: +44 (0)20 7737 1827

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Currants

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Comment

This continues to be a very difficult season where the shortfall highlighted at the very start of the season has continued to resonate ever since. As with Brazils (above) – in terms of small crops at best being especially vulnerable to any major volume reduction, Greek currant supply has struggled and will continue to struggle to fulfil demand and existing orders for the rest of this season – and it is very clear that even the bigger packers have struggled to get stock from their farmer / grower suppliers as replacement pricing continued to firm.

New crop harvest really cannot come quick enough for many Greek exporters, although this is still five months away. In the meantime, there is obviously very little spare stock in circulation, and if buyers need any additional cover this side of new crop, they would be best advised to try to cover this requirement much sooner than later.


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Apricots

Comment

Having now past the period in which a late frost can still seriously affect the developing crop in Turkey, we can now start to look with more confidence at the possible forward volumes. It is still estimated that the carryover could be somewhere between 10-20,000mts and if new crop is minimum 100,000mts, then supply into Q4 should easily be a match for even increased demand.

With the Turkish Lira pushing against the USD at 3.50 but with the chance of further gains as the USD wobbles internationally against other currencies, apricot pricing is stable but with the possibility of the 100,000mt new crop supplemented by a max 20,000mt carry over, resulting in some further weakness towards the back end of 2017.

On which basis, there are already some sporadic but aggressive speculative forward prices being mentioned from origin, while more stable suppliers are only willing to offer further forward at current crop replacement prices.


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Seeds Pinenuts

Comment

Pinenut pricing remains attractive and that’s despite the weaker Sterling still struggling to break out of the 1.20s against the USD. While this remains an expensive commodity in comparison with most of the other seeds in this category, this price adjustment can only drive innovation and demand behind and for pinenuts. At the cheaper prices, it would usually also stimulate some demand from speculators who might view this as a chance to profiteer as prices recover. However, the strong supply this year is now thought to be likely to be repeated in this coming new crop, and if there are two successive big crops, then the same speculators might take a view to actually sell forward (in the hope of covering such a position later on) and such a manoeuvre would only service to bring further pressure to bear.

One train of thought is that the new crop Sibirica variety might not be as big as this year and given that Sibirica delivers more of the smaller kernels than the larger, then this should mean some price strengthening over the coming months. However, this is offset by others anticipating increases in the 2017 Korainensis crop (which typically provides the larger kernels) so this observation might be neutral other than a possible precursor of a narrowing of the differentials between larger and smaller sized pinenuts into 2018.

RM Curtis & Co Ltd. 95 Camberwell Station Rd London, SE5 9JJ Phone: +44 (0)20Tel: 7274 Fax: +44 +446090 (0)20 7274 0717(0)20 7737 1827 www.rmcurtis.co.uk [email protected] Fax: +44 (0)20 7737 1827

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Seeds Comment

Pumpkin

We reported in our last edition that Chinese pumpkin prices were starting to firm and this price trend has gathered pace over most of June. This is primarily due to a growing conviction that the Chinese growers will deliberately plant fewer seeds for the new season supply in order to increase the price levels. And they can do this safe in the knowledge that the Chinese authorities will offer subsidies to incentivise this while the growers can also plant other crops to replenish their income.

This is a tried and tested way to manipulate prices and this has prompted some strong demand from international buyers who needed to cover the remainder of their 2017 demand. With this increased buying interest, so Chinese stock holders have then been able to increase their export selling prices in the meantime and this long before the reduced new crop is even on the horizon. “Job done”, we would imagine they would be thinking!


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Seeds Sunflower

Comment

Other than currency factor (sunflower seed is exported and traded in Euro, primarily), pricing on Bulgarian sunflower is likely to remain stable in the short-medium term – maybe longer. For certain, demand is growing and short of any natural or political disaster, supply seems to be able to easily match it.

Continued stability on Bulgarian sunflower seed prices with the main factor affecting any volatility of prices coming from the exchange rate rather than any other factor. Short of any major adverse weather pattern over AugSeptember, and we should see new season replenished by another big crop of which the amount graded out for human consumption is still outweighed by the larger volume produced for oil crushing.

With the continued threat/promise of an increase in UK interest rates, this is keeping Sterling stable presently although there are those who still gloomily predict that Sterling will struggle against the Euro in the medium term. This they say, is because investors may get behind the Euro rather than the Dollar with political stability in France and Germany outweighing the recent instability in the UK just as we begin Brexit negotiations. So – good news potentially for those products imported in USDs and perhaps the opposite for products sourced in Euro.


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