RM Curtis & Co Ltd Market Report

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

April-May 2017

Inside this issue: Edible Nuts Dried Fruit Seeds

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Market Highlights Brazils - Since our last report, the situation on brazilnuts has not improved. In short, it is impossible to fully know yet the extent to which the crops from all the key origins surrounding the growing region have a shortfall – but from Bolivia at least, the report continue to suggest at least a 50% shortfall and possibly even worse. Cashews - Recent news about the likely size and quality of the all-important West African cashew crops, has created some major concerns about the likely trend on this market.

El Nino El Nino

Sultanas - Turkey is hopefully now past the point of the risk of frost damage but (they believe) also heading towards a shorter new crop.

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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

Following the less than ideal Californian bloom, there has been some growing speculation about what that might mean to the size of the new crop – which has been kicked off by the first objective report from Terra Nova Trading at 2.27b lbs.

Despite less than perfect bloom conditions in both key origins, new crop supply should be a match for even increased demand – although any surplus will be pushed and any carry in depleted.

The next and first official estimate comes out on 9th / 10th May and which may be a more cautious number – but most agree that even a slightly larger new crop this coming year will be pushed to new limits given the steady and seemingly unstoppable increase in demand.

When compared with other nut products, almonds are really well priced and with recent increases in hazelnuts, this puts almonds as the most competitive “tree nut”. This must stimulate increased demand which will further push supply so it’s increasingly hard to see any short-medium term price decrease – other than through the currency, which can convert to more attractive levels should Sterling recover against the USD and Euro.

From Spain, they did experience some frost damage during their own bloom and which took the edge off what might have been otherwise a record new crop (and which would also have offset any shortfall from California).

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

Recent news about the likely size and quality of the allimportant West African cashew crops, has created some major concerns about the likely trend on this market. Knowing that Vietnam was reporting both a short and late crop, this meant that the supplemental supply from West Africa was key to making up the shortfall. While these reports from Africa are still largely “anecdotal”, if correct this will create an overall shortage for 2017 and consequently, pricing has increased again of late.

This is of course unwelcome news and has already stimulated some shorter term price reaction as buyers who need shorter term cover have piled in and there are reports of inevitable delays or worse on earlier cheaper priced contracts with and from Vietnam. However, with many buyers uncovered for the rest of 2017, it is hard to see exactly where any pricing respite can come from in the shortmedium term – and/or beyond.

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, most now accept that there is a slim chance that new crop can be bigger than this year’s current crop although arguably, increased planted acreage over the past decade should bring new orchards into play with each passing season. What is remarkable though, is the speed at which this current crop from the U.S. has already sold through, given that it was a record volume (approximately 620,000mts). In part, this goes to show the quality that is reflected in foreign body control and flavour from California in comparison with the traditional sources in India, Eastern Europe and China. It clearly also shows the impact of more competitive pricing from California, whereas when California was not competitive into Europe, their sales were relatively poor.

With every chance of a very limited carry over from current to new season supply, we would expect to see continued pricing strength up to the point of harvest and then receipts at harvest setting the scene for the price trend to follow. Demand, use and application is growing for walnuts – as it is for all other products in this report – so we see no respite in the fundamentals that big crops are now a necessity rather than any sort of luxury surplus, and clearly any weather or quality related issue spells for price inflation. Clearly, currency also plays a key factor as reported elsewhere.

The March shipment report confirmed the extent to which export sales have grown. Inshell export sales YTD at +39.26% and export Kernel sales at + 22.93%.


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Brazils

Comment

As a consequence of this, prices have rapidly increased and any uncommitted stocks at destination have been cleared out. Since our last report, the situation on brazilnuts has not improved. In short, it is impossible to fully know yet the extent to which the crops from all the key origins surrounding the growing region have a shortfall – but from Bolivia at least, the report continue to suggest at least a 50% shortfall and possibly even worse.

Low rainfall and the subsequent poor yield, has set in motion a chain of events that will have dire consequences both for the brazilnut market, as well as for those whose livelihoods depend on it. We hear reports that many of the factories are set to shut down for the season soon (and some already) when this should be happening from September onwards. For those local communities who completely depend on this income, it is simply a disaster.

There are delays and defaults reported from origin and especially on those contracts sold pre-collection in anticipation of a normal new crop ahead. There may be arbitrations and court cases initiated – but in truth, this will not change anything and it will be next to impossible for those who have been defaulted on to expect any sort of compensation any time soon (or ever). For those that can, they should look to engineer brazils out of their ranges – but for the rest, it looks highly likely that stocks will run out at some point between now and next crop and, unless there are shipments made and physically shipped, it is pointless to talk forward pricing as those new/renewed contracts may not materialise either. This is an unusual and pretty tragic situation – but clearly made worse when there is such a hit on an already small crop even at best.


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Hazels

Comment

The Turkish government – through their agriprocurement agency called the “TMO” – has announced that as of 24th April, they will begin to buy up stocks of current and old crop stocks in order to reduce available supply, clearly designed to manipulate pricing upwards. This is a tried and tested policy that they have exercised in the past, and which culminates in stocks being removed from circulation and which they bring back to market at a later stage when prices are higher. It is not clear if this will be focused on old crop carry over first and/or a mix of both crops – nor if payment terms are 100% cash on delivery or extended. However, short term this means that prices will increase and with a recent recovery of the Lira against the USD, then this also converts to higher Turkish export pricing.

The bloom in Turkey passed relatively unscathed other than some localised frosts in orchards located in the higher altitudes. Which should mean that new crop is better than this year and which should also mean that (weather permitting) by harvest, there should be some additional pressure on raw materials ahead of this improved supply. Clearly the currency plays a large part in this and there are a lot of varying opinions around Sterling heading to Brexit. There are equally divided views on the recovery (or not) of the Lira although post President Erdogan’s referendum in April which narrowly granted him additional powers, this did not bring the direction to the Lira that many expected beforehand.


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Pecans

Comment

Prices remain locked in a stand-off between sellers and buyers and there is no clear view of how this deadlock will be broken. Buyers still need to buy and this is clear because few buyers covered forward earlier in the belief that pricing would drop later on. Similarly, many of the origin Sellers have covered their likely needs up to the end of current crop in the belief that stocks would wind down and so securing cover was the logical way to ensure capacity. Since then, and with the market at this stand-off, buyers continue to largely buy hand to mouth while sellers are mainly unable or unwilling to drop their selling prices, having already and earlier locked in their raw material inshell “input” cover.

This “impasse” may continue for some time and for us collectively in the UK, the currency offers the best shorter term opportunity to take cover as and when Sterling is stronger. With so long to go before there can be any serious view taken on new crop, any longer term view is pure conjecture. However, there is an argument that new crop could or should be better than this (and last) year – but clearly the weather over Q4 will be key to how this plays out.


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DRIED FRUIT Comment

Coconut

What is interesting to see is the explosion in demand for so many different forms and derivatives of coconut.

The coconut market is presently firm and shows little sign of any short term respite. As previously reported, this due to a continue imbalance between supply and demand and with no quick fix. While the Philippines reported issues associated with the Christmas day typhoon, supply seems to have recovered to the point where this has become the most competitive origin and it is the other origins that are usually a discount to Philippines that now seems to be carrying the burden. This is due to the widespread droughts across South East Asia last year and which is now converting to lower yields and poor supply and availability. It is highly unusual to see Indonesian and Sri Lankan prices trading at a premium to Philippines - but fuelled by strong demand for all and every form of coconut and with many origin Mills already sold out for the next 3-4 months, this market is developing into something of a technical squeeze.

This is an extremely “hot” product at the moment and this is borne out by the extensive ranges of products displayed at trade shows over the past few years. Whether it is water, cream, milk, oil or flavoured coconut (over and above the traditional forms of desiccated) there are very many brands and products continually coming to the market and with no end in sight to this phenomenon. Clearly made even more extreme by the weak(ish) Sterling, prices in the UK look unlikely to drop back to the more familiar traded range that we came to expect in previous years, and while these are at best huge crops, the demand from new and existing markets shows no sign of abating.


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Raisins

Comment

From California, the late announcement of the new crop field price at $1100pmt has brought little change to export pricing. Californian processors are making the export pricing they need and despite Turkey being cheaper, California is servicing a market that is prepared to pay that premium. After a cool and wet Californian spring, some are predicting a new crop smaller than this year but between that view and strong and regular demand ongoing, California is under little pressure to lower their pricing short-medium term.

Turkey is also presently seeing some recovery in the value of the Lira v USD, which clearly converts to higher export pricing. With some buyers now covering the rest of their current crop needs and heading towards a potentially shorter crop (and stronger currency), it is likely that we will now see a stable to firmer trend tightening both supply and pricing in the short-medium term.

From Turkey, despite some cool overnight temperatures of late, the crop now looks to be past the point of a risk of frost damage, but it does seem likely that new crop will be smaller than this year and uncommitted stocks of current crop raisins are already showing signs of winding down.

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

As mentioned above, Turkey is hopefully now past the point of the risk of frost damage but (they believe) also heading towards a shorter new crop. There were few reported problems during flowering, but this view is based on large crop followed by shorter crop, if current crop was 310-320,000mts Turkey is arguing that new crop could be 270-280,000mts. This new crop number is based on sentiment – but it is enough to encourage Turkey to raise its prices and supported by the conversion into USDs from Lira as the currency continues to creep higher.

Demand is also quite strong and active as (for the UK at least) despite the weak Sterling, UK delivered prices are still competitive historically and offer good value against raisins and even better value against currants. China has been offering sultanas at similar levels to Turkey but they have struggled to regain some of the market share they won last year. Turkey continues to represent the best value and quality on sultanas and despite the negative new crop stories presently circulating, such is the impact of intensely increased planted acreage, they might still find any new crop deficit less than they would have us believe at this stage.

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

There is also speculation about the likely size of any carry in.

Historically, Malatya - which is the apricot growing region in Turkey, can and has experienced frost damage even up to end June - but it is unusual. However, until we reach then, the Turkish processors will remain understandably cautious on taking a view on the potential for the new crop. That said – so far, so good. From recent reports, from the way the crop is shaping up it is looking good for 2017 crop and that despite earlier held opinions that the large current crop should logically be followed by a smaller one.

At present, the calculations are that there is approximately 35,000mts of current crop still unsold, with an expectation of further current crop season sales of 25,000mts – meaning a 10,000mt carry over. Others believe the true number for the carry in will be closer to 20,000mts so clearly another good 100,000mt new crop plus 20,000mt carry over, should secure ample supply for the 2017-18 season (weather permitting). Meantime, the Turkish Lira continues to edge higher again the USD, which clearly converts to higher export pricing on the exchange.


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Seeds Pinenuts

Comment

As previously reported, pinenut pricing continues to remain stable with the currency fluctuation affecting ongoing pricing as much as any other factor. With pricing generally realigned to more competitive pricing on a trend which started end 2016, the competitive UK and European levels are there despite the overall stronger USD.

Another factor which was a driving force behind pinenut pricing in recent years was the amount and extent to which origin speculators would trade behind the trend – sometimes even establishing the trend itself. With pricing realigned to lower levels, this is not presently a market which is attracting such commodity speculation.

This has clearly stimulated greater levels of demand but clearly Supply is more than a match for this.

Lower pricing set against strong supply doesn’t lend itself to strong speculative buying or selling, so for now at least, this market is not being supported in either direction from the origin traders.

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

It now looks almost certain that China will decrease its pumpkin planting for new crop in an attempt to reduce supply and draw in more demand in order to squeeze pricing higher into 2018. The sentiment behind this has already started to stimulate some forward demand for the remainder of 2017 and this will likely confirm China’s farmers to continue with this approach. If they plant soya rather than pumpkin, they get a lower return per kilo but a much higher yield per hectare, so such a programme of rotation works for them on several levels.

While other origins such as Argentina and Eastern Europe look to build their programme of planting of pumpkin in order to neutralise China’s monopoly, China might be trying to make what they can, while they can. However, if these “emerging” origins of pumpkin seed can ultimately offer the trade alternatives and cheaper ones, then China might be facing a similar situation to their Sunflower growers who these days only have a limited percentage of the international kernel trade.


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Seeds Sunflower

Comment

Bulgaria is facing a future of some division between those quality processors who have bought into the standard, quality and requirements of many of their existing and potential Western European and UK customers – and those that have not and who are operating basic systems, which will leave them behind. Not behind the crushing industry standards, but certainly behind the sunflower seed kernel minimum standards.

This can be to the factories they run – or the systems behind them, but clearly for some Bulgarian processors, the investment in quality systems and even I.T. is a step too far.

Supply this year overall from Bulgaria does appear to be lower than in previous years and with very strong demand for oil, this is creating something of a squeeze. Made the more significant when the number of processors, who are serious partners, start to charge more for the infrastructure they have been able to fund. With demand for seeds overall on an upward trajectory and with sunflower seed still priced well across the basket, apart from the element of the currency conversion, it would seem logical to expect origin pricing to have at least bottomed out and potentially start to climb. Bulgaria might feel that it has paid its way in buying its market share. Now it follows that they might start to monopolise this situation and see if they can engineer pricing higher to achieve better returns.


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