RM Curtis & Co Ltd Market Report

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

Nov-Dec 2017

Inside this issue: Edible Nuts Dried Fruit Seeds

Market Highlights

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Almonds - California now needs big crops to cope with record and likely growing global demand – when we add in big Australian and Spanish crops, we have enough combined supply to deal with it. Brazils - With next to nothing remaining of current crop – at either origin or destination, we are edging ever more steadily towards the knife edge of when replacement pricing will correct to levels that would better reflect a more “normal” supply.

El Nino

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Cranberries - Cranberry prices are firming presently and due in the main to the unravelling situation in the U.S. The new crop itself is expected to be around 15% down on last year’s crop of 13.6m barrels.

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Curtis are one of the leading UK suppliers of dried ingredients including Edible Nuts, Dried Fruit, Pulses, Seeds and Rice.

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For almost 170 years customers in the Retail, Food Service, Catering and Wholesale, Bakery, Confectionery, Snack and Manufacturing sectors have benefited from our commitment to quality, service and value. 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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R M C urtis & Co Ltd

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EDIBLE NUTS Almonds

The top line theme for 2017 crop Californian almonds so far, is that even with reports of strong demand reflected by high shipments; and with widespread reports on the impact of high insect damage this year to both quality and overall quantity, the bottom line is that the massive crop size is big enough to take whatever is thrown at it. Clearly, California now needs big crops to cope with record and likely growing global demand – when we add in big Australian and Spanish crops, we have enough combined supply to deal with it.

Comment

if there is any concern about crop stress (following big productions) then this is being offset by the scale of new plantings which are coming into play with each year that passes (almond trees can bear fruit within 3-5 years max) and from Spain – they are carrying out an aggressive campaign of planting which will surely see a Spanish crop even from next year potentially producing around 100,000mts (weather permitting). So – prospects for stable pricing into 2018 prevail with the daily currency fluctuations ($ v £ and €) offering the biggest influences ongoing and likely up to Bloom over Feb-March.

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

The cashew market is fully focused on the sequence of new crops which will set the scene for supply into 2018. Positive news from Brazil on their recent crop, would suggest that the U.S. as the largest market for cashew consumption, will satisfy most of its demand from the Brazilian crop and if correct, will reduce the dependency it has had over the past 3 season on Far Eastern production. Assuming all is well from the African crops – and the large supplemental volumes they will then ship out for further processing in Vietnam and India, then decent domestic crops from both these key origins over Feb/ March should/could re-establish sufficient supply to meet the battle weary demand from forward global buyers.

with many buyers largely uncovered from Q2 onwards, arguably any price correction might take a while to materialise as new crop shipments fill up the empty pipelines from March/April onwards.

But we need to look at historical pricing to appreciate that cashew nuts at $5.00/lb +/are expensive and with some other key treenut markets some ways below this pricing, logically forward pricing needs to correct – but strictly weather and currency permitting over the critical next 2-3 months.

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

From California, the news continues to disappoint with reports which confirm earlier negative crop estimates of 10-15% down on last year - combined with news that some Californian suppliers are already sold out and that’s only 2 months into the new season. As a consequence of this sentiment, offers when they are found are few and far between and often offered firm for only short periods. When re-offered, they are invariably higher than the day before.

Prices from the other origins however have been more stable. This situation from California has presented China and Eastern Europe with a favourable chance to compete for business at lower levels although it has to be said that buyers should be aware of what these alternative origins can represent.

China, India and Eastern Europe all have a fairly similar flavour profile to each other - but which is different to California (and Chile). Also in terms of cleaning levels, California and Chile both have specifications which offer greater controls of shell and septa and hence there is a need for UK recleaning which is not required when buying a top spec from California. The message to California is clear. They need to be mindful that by driving their prices to large premiums over their competitor origins, that they are in danger of losing some of their market share ; that many buyers are driven by price and not quality on its own, so the temptation to look for optimal margin should be countered by commercial reality and newly won customer loyalty. For those reasons, although we would like to see Californian pricing stabilise - even reduce in the new year, the present sentiment doesn’t look set to play out in that way.


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Brazils

Comment

With next to nothing remaining of current crop – at either origin or destination, we are edging ever more steadily towards the knife edge of when replacement pricing will correct to levels that would better reflect a more “normal” supply. Although it is still too early to be sure, reports are suggesting Bolivian new crop to be anywhere from 1520,000mts. In comparison with this year which was 79,000mts, this would clearly be a significant improvement and if the crop is 20,000mts +, then the price correction is coming for sure, and this has already started. Due to the desire to catch prices before they fall, collections have already started and which could result in first new crop shipments late Jan and for a March arrival. Processing factories are trying to buy whatever they can to start production as early as they can – if only to start generating some income from factories that have say idle for the past 3 months.

how this market plays out over the next 3-4 months will be interesting, to say the least. Importers will be ultra-cautious in bringing in any unsold stock under the cloud of trying to avoid holding stock in a falling market. Buyers similarly will be trying to avoid forward covering, as they will be acutely aware that cheaper prices are highly likely to follow. Both of which might result in an interim squeeze when there is little stock physically available as demand is on the look-out for bargains. Ultimately, as the new season shipments arrive to replenish the empty pipelines, pricing will stabilise and likely at levels well below present offers.

But the journey from there from now, will not be without its own fluctuations.


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Hazels

The Turkish government has continued to buy into this new crop and latest reports are that they have either taken physical ownership of or pledged to buy 150,000mts inshell. This is or would be around 20% of the crop if it is 750,000mts as reported and presents a massive financial commitment albeit one that so far has not really achieved its goal. In other words, this was an attempt to squeeze supply and force higher pricing, but while this has encouraged stock holders in origin to withhold product in the hope for higher prices “tomorrow”, this strategy has been destabilised by the depreciation of the Turkish lira.

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Comment

as mentioned elsewhere in this report, the Lira has crashed through its 10 year low and is presently around 16% lower than just a year ago. As hazelnuts and other Turkish products are traded locally in Lira but exported in USDs, this currency adjustment has more than offset the raw material increases and hence we find ourselves with USD pricing from origin at prices lower than when the TMO started to buy. With many buyers uncovered for 2018 periods, and with origin very cautious about offering forward in the belief that pricing will increase, it would seem likely that we will see prices firming into 2018 as and when Demand comes to the market to cover their various needs.


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Pecans

The Pecan market continues to swing pivotally between those who argue firmer and weaker pricing. For the “bulls”, they argue that the Mexican new crop shortage is manifesting itself already by a widespread reluctance by grower stock holders to offer new crop and as a result, prices are already firmer (true). And that given a repeat of last year when 3 large shellers in the U.S. bought heavily into their own new crop, that a repeat of this would again squeeze supply and force replacement prices inevitably higher (possible).

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Comment

for those sitting on the fence, there is a strong argument that in comparison with other nut products, pecans are way too high and in order to stimulate more industry demand, then prices need to drop into 2018. This is an inescapable truth, but as with other products in this report, cash rich farmer / stock holders may hold out for higher prices before any subsequent market forces pressurise them into a reality check.

For the “bears”, their argument is that the Mexican crop is likely to be larger than reports suggest and based on little weather related issues to explain why the Mexican new crop should be so much reduced. So if in fact, the Mexican crop is similar to last year if not max 10% down, then the combined new season production + carry in, should be larger than last year and hence prices should ease.


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DRIED FRUIT Comment

Coconut

Pricing on coconut has remained firm since our last report, due to several key reasons: Firstly, demand for coconut shows no sign of waning and in fact, it is the total opposite. The breadth of new product development and conceptual diversity is pretty staggering and increasingly on display at every trade show that comes along. Second, exceptionally strong demand from the Middle Eastern markets has continued to drive strong pricing into the Sri Lankan coconut market, and which has kept this origin at extremely high prices. Beneath which, Indonesian prices are still firm on what is still reported to be a poor supply this year leaving Philippine pricing high - but unusually competitive against its key competing origins.

the other problem which is the hallmark of the coconut market and its supply chain, is the time lag created by the key factories typically being at full capacity for the ensuing 2-3 months. Which means that when you take a long lead time additionally, that buyers need to commit further forward than they might wish to in order to secure stock. And that the physical “spot” market is usually tight with little unsold surplus. For those reasons, even as and when prices start to ease at some point in the future hopefully, there will be a delay in us seeing any benefit at destination.


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Raisins

Comment

The Californian new crop replacement pricing continues to rise, and shows no sign of any reversal in the short term, at least. Both processors and grower/stock holders appear united in their drive to see prices higher and regardless of what if any impact high prices will have on their market share. To be fair, this is an extremely short U.S. crop and strong prices inevitably follow such a shortfall. They also have the firm opinion that those buyers who wish to chase the savings can and will buy from other origins.

while the Turkish Lira has been weak of late and has masked local Turkish market raw material strength, a recent recovery of the TL against the USD will convert directly into higher export prices and if and as buyers cover more - or even the remainder of their forward needs, so this will likely squeeze prices higher. With additional demand also coming into Turkey for reasons outlined above, then short – medium term continued price increases are highly likely.

However, those that have to buy Californian have to pay the market price. But it still feels like a fundamental shift in their mind set and will for sure result in some defection at destination to cheaper sources. From Turkey, the local market is firmer. There are reports that growers have by now sold around 85% of their crops to the processors and those processors will be looking to maximise on their stock investments.

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

Recent figures show that Turkish sultana exports are ahead of last year (new season to date) by around 1500mts a week and which is a clear measure of how much stronger demand is this year given the obvious issues in California and Iran.

2016 sales of Turkish sultanas were largely scuppered by the dreaded Chlorpyrifos problem, so a comparison of YTD ’16 v’17 is misleading.

With Ramadan in 2018 starting early from 15th May-14th June, we would fully expect to see strong demand from the Middle East and North African markets kicking in from March/April and in to which by then, will be a Turkish crop already depleted by strong demand and potentially record sales.

But an increase in sales new season to date is more relevant and tracking the local Lira based prices rather than the USD export pricing better reveals the strength in the local market that has been largely hidden by the currency. Although many larger UK buyers have covered forward into 2018, there are many buyers elsewhere who will look to Turkey to make up for issues on raisins, currants and Iran (reportedly 60-70% short this year) and all of which combined suggests firmer pricing into the new year.

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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R M C urtis

Currants

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Comment

Offers from Greece for forward (or prompt, for that matter) shipments are worryingly few and far between at present. For quantities big or small, it is hard to secure any volumes and there are only limited uncommitted stocks in circulation in the UK and Rotterdam. This is all about the Greek crop this year being significantly reduced by the extreme hot summer temperatures, with the latest figures still suggesting a crop of no more than 17,000mts which is way below the 25,000mts which was expected and largely needed, previously.

as a consequence of this reduction, prices (when offered) are consistently way higher than those we have seen for many years but show no sign of any correction any time soon. The few containers that come to the market from time to time are sold as fast as they are offered, and which is fuelling the greed of farmer/stock holders who are certain they can hold out for higher prices “tomorrow”. With other growers already planning to exit Currant production in favour of more resilient and less labour intensive crops such as olives, so the medium to longer term prospects of Greek currants correcting to more competitive pricing appears to be fading. Worryingly.


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Apricots

Comment

The upward trajectory of the Turkish apricot market appears to show no sign of stabilising any time soon. Despite this crop being a big one and seemingly now fully recovered from the frost ravaged crop of 2014, cheaper pricing earlier on together with strong domestic and international demand on-going, continues to push replacement pricing higher.

even with the weak Lira over Oct-Nov, USDbased export prices were climbing and now that the Lira has started to firm (with some analysts convinced that the Lira is still at least 10% under-valued) so the firmer trend continues and further supported by buyers now covering their 2018 demand where they can from a market with little volume being presented from their own grower/stock holders who are holding out for higher prices as the season continues. It is hard to see how such a healthy crop (150,000mts +/-) cannot comfortably cope with significantly increased demand, but for now at least – with strong demand and trickle fed supply, it is playing into origin’s hands.


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Cranberries

Comment

Cranberry prices are firming presently and due in the main to the unravelling situation in the U.S. The new crop itself is expected to be around 15% down on last year’s crop of 13.6m barrels.

Earlier estimates were around 12.7m barrels but this has now been downsized to 11.6m. This new season, processors are expecting to deplete all of their stocks of “SDC” (Sweetened Dried Cranberries) grade and which will likely result in replacement pricing firming on-going.

interestingly, as global cranberry juice concentrate demand declines, so demand for SDC is increasing and with the likes of “emerging” new markets like China offering massive growth potential, so the squeeze on availability appears to be inevitable and certain to push pricing higher on-going.

(please note that the grade used in Concentrate production is different and more plentiful than SDC).


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Prunes

Comment

There are increasingly positive prospects for a strong Chilean new crop prune production for 2018. Following a near perfect bloom and subsequent fruit set, the amount of fruit that is developing on the trees ahead of the harvest in Jan/Feb seems abundant and the leading producers are reported to be gearing up for a positive harvest and a crop size similar to this past year. With no frost damage reported over the past few months and with the risk of this now behind, the path now seems clear towards a crop which should allow for Chile to consolidate its status as a key producing origin of Prunes worldwide.

there will however be strong competition from California. From a reduced crop in 2016 of just 48,000mts, the new crop was reported to be back up to 95,000mts albeit with little to no carry in. If Chile can match its 2017 crop production, then they should be looking at another crop of around 76,000mts and currency aside, the potential for stable albeit competitive pricing for 2018 supply.


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Seeds Pinenuts

Comment

Chinese pinenuts prices have stabilised of late following strong increases over the past 2 months. As previously reported, these increases came about from a combination of reduced supply ; very strong international and domestic demand, plus the continued political instability in North Korea bearing heavily on the prospects of additional supply which traditionally is sold into China for further processing and re-export.

with USD weakness of late, this has converted to some small price correction but still settled at comparatively high levels. With Chinese New Year in 2018 falling on 16th Feb, the strongest demand presently is Chinese domestic and some hold out for further price correction once that seasonal demand has been covered. While China clearly consumes pinenuts year round, their spike comes for New Year so we can expect a pause in consumption to have some bearing on pricing at least for a while. However, with international demand growing, it could be that any drop in pricing presents an opportunity to forward cover rather than the start of any significant downward price trend.

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

As previously reported, while there appears to be every chance that 2018 pricing on Chinese pumpkin will be firm once their reduced plantings convert to reduced supply into the European (and UK!) markets, until then we continue to enjoy strong supply with good stock levels in warehouses across the various destinations more than ample to feed on-going demand.

if this reported surplus at origin and destination carries over into Q1 2018, then any such increase will be pushed further out. But for now, helped by a sluggish USD, prices seem genuinely good value given the increase in use and application of pumpkin but with very many buyers still largely uncovered for their 2018 requirements, an upward price correction is inevitable but maybe more in the medium to longer term as it stands today.


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Seeds Sunflower

With Bulgarian new crop now safely sitting in the processor’s silos, supply for the season ahead is secure. Stable regional weather produced a solid production and while demand for kernels and oil will surely continue to increase on-going, Bulgaria has enough of a crop to cope with whatever comes its way.

Comment

with Sterling stable to firmer against the Euro of late (although this is daily affected by the increasingly gloomy mood swings resulting from Brexit negotiation progress – or otherwise), Bulgarian sunflower pricing continues to look great comparative value set against most other products within the seed “basket”, yet these relatively vast consecutive crops are able to absorb even this continually increased demand.


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