RM Curtis & Co Ltd Market Report

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

August-Sept 2017

Inside this issue: Edible Nuts Dried Fruit Seeds

Market Highlights

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Brazils - Prices are still way above the historical average and with a minimum of 8 months before the first new crop arrivals, there will be many more twists and turns. Apricots - Turkish apricot pricing has stalled if not slightly firmed of late – and that despite the new crop in total being a big one.

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Coconut - Unprecedented demand for coconut in all its derivative formats has never been so active and strong, which fundamentally means we are unlikely to see coconut pricing returned to their more familiar and cheaper levels any time soon.

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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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R M C urtis & Co Ltd

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EDIBLE NUTS Almonds

Comment

On the back of this news, prices predictably jumped although for prices from Spain on processed almonds, they were helped by the continued recovery of the Euro v USD (although Sterling has been struggling itself against the Euro of late).

The July shipment report (received 10th August) on Californian almond domestic and export shipments, made for interesting reading. The total shipments made in the month were 153.9m lbs v 138.6m lbs last year (+11%).

Californian prices subsequently also stabilised but it is hard to see much of a further downside in the short term.

Domestic sales were up 14% YTD and +12.6% in July. Export sales were up 17% YTD and +10.2% in July. They look to have shipped 2.1b lbs during this crop year leaving a carry in of just 404m lbs (down 4% on last year).

Given that the crop in 2015 was 1.894b lbs, it’s amazing to see how total global demand for almonds – and Californian origin almonds in particular, is growing at such a rapid pace.

Sep-Nov are typically the busiest shipment months of the year for strong demand – but it has to be said that we are heading into what looks to be a combined record year on supply of almonds from California, Spain and Australia. Demand will be strong but so will supply but as we have said before, these crops need to be consistently big to cope - and for us in the UK at least, the direction of the currencies may be key to the best timing of forward cover being taken.

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

Cashew prices remain stable with buyers covering largely hand to mouth, but with origin reluctant to lower their prices to sniff out additional demand. It is still too early to know how the Vietnamese and Indian new crops will turn out but after 2 successive poor crops, is it too much to expect a decent production into 2018? We hear reports that Vietnam is looking to secure large volumes of Tanzanian seed to bring in to Vietnam for processing over Nov-Jan, and which should provide adequate supply to their export market over Q1 2018.

This scenario presents the likelihood that, other than the fluctuations of the currency, the cashew market itself will likely remain stable this side of the SE Asian new crops and if the African, Indian and Vietnamese new crops (with the Brazilian new crop later this year) are strong crops, then we can only hope and expect to see the long awaited price correction into 2018 positions.

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

The latest new crop estimate on Californian walnuts is at 699,000 short tons (634,000mts) which is only 2% larger than current crop but with a carry in 2% less than last year. Clearly meaning that supply into 2018 will be more or less the same as this year.

Last year, large early sales from California resulted in a fairly rapid escalation of prices into 2017 and we could see a similar pattern this coming season ahead. With current crop all but sold out by now, and with limited spot stock offers at only very high levels if you can find them, the first arrivals of new crop are likely to stay at current crop pricing – at least until the pipelines are more fully replenished.

With reports that Eastern Europe (primarily, Moldova, Ukraine and Bulgaria) are not expecting great walnut crops, a bumper crop and with similarly pessimistic reports coming out of India, so we cannot expect total supply into 2018 to surpass this year and result in cheaper pricing for that reason. California is also expecting a higher proportion of darker kernels this next season than we saw this year when there were more lighter kernels than dark. This is because the summer temperatures in California have been frequently in excess of 100 degrees Fahrenheit and the kernels appear to have been scorched.

Demand for walnuts at these higher levels may also be affected, and judging on the disappointing total supply, we really need a decline in demand to set this present firm pricing trend into reverse.


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Brazils

Comment

This has been a very complex season so far, from the starting point of the Bolivian and Brazilian crops bring depleted to the tune of 50-60% minimum. From around March this year, prices rapidly escalated to record highs amidst many contract defaults and/or renegotiations. The speed with which the industry has responded though has been decisive. Where possible, buyers have either looked to reduce the percentage of mixes including brazils or in other cases, dropped them out completely. This rolled out across all the traditional destinations has resulted in a significant price correction from the earlier highs. Although prices are still way above the historical average and with a minimum of 8 months before the first new crop arrivals, there will be many more twists and turns before then.

The questions clearly, between now and new crop, is what stocks exist where and in what quantities. Other than the balance of any remaining unshipped but existing contracts, there seems to be little to nothing left at origin to cover. The factories have effectively closed for new business into new crop and therein lies the problems to the local communities in origin whose incomes have been cut way shorter and in line with the short crop. Many companies have offered aid in financial support and Bolivia and Brazil both have offered opportunities to construction contractors to offer manual work to repair or build improved infrastructure where it is most needed. On the expectation that a “normal” new crop should provide more recognizable prices, so there are already some speculative new crop offers way below the prices available on current crop and if current crop balance stock physically run out at destination, then this market could very easily spike again long before we get the final respite from new crop stocks arriving from April 2018 onwards.


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Hazels

Turkish prices have firmed of late – and even without the predictable threatened intervention by the Turkish government. The reason for the price increase is in part due to the recovery of the Lira which recently finally broke back through the psychological 2.50 level (against the USD) and this clearly converts to higher export pricing. Also – recent and late rains across much of the Black Sea growing region has created some issue on the nuts laid out to dry and this has slowed down early new crop production as well as reduced the overall volumes coming to the market. This has prompted some sizeable international and localised buying from exporters covering their earlier short sales and from larger international industry buyers making their move to cover their Sep-Dec requirements.

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Comment

Against the background “threat” that the Turkish government may still step up its own procurement of new crop stocks in order to squeeze supply and pricing both, it looks likely that in the short-medium term, we will see prices firmer than weaker. Recent news suggests that the Fed may further delay any increases to the U.S. interest rates, and this may see some further weakness in the US Dollar. That said, should the US/North Korea posturing escalate in any major way, then this would likely see a USD recovery – (amongst many other way more serious problems…)


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Pecans

Comment

In terms of the developing pecan crops (spread across many of the southern U.S. states and down into Mexico), the damage has been minimal and arguably heavy rainfall (provided it dries out before harvest) is no bad thing.

The big news at the moment is the impact of Hurricane Harvey on the southern Texan coastline and the horrendous flooding in and around the Houston area. The terrible impact on lives, homes and infrastructure have been widely reported and while the Port has been closed, so there have been some major delays to shipments and damage to containers waiting for shipment. While Houston is not the only southern port that pecans are shipped out of (alternatives can be Virginia, Charleston, Savannah even Miami), Harvey is and has caused some delays in traffic although the humanitarian impact will last way longer.

Latest new crop Mexican reports that the biggest growing area (Chihuahua region) is up to 40% down on last year - but this this is disputable and others say maybe “only” 10%.

Weather aside, other reports suggest the U.S. new crops could be 10% up on last year – so overall, there looks to be some parity between this year and last. However, between now and end Dec, increasingly limited availability from the tail end of current and the start of new crop does suggest stable to firmer pricing, and in the hope that we could see some price correction into 2018 if demand falters after a year of high pricing.


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DRIED FRUIT Comment

Coconut

As per previous reports, unprecedented demand for coconut in all its derivative formats has never been so active and strong, which fundamentally means we are unlikely to see coconut pricing returned to their more familiar and cheaper levels any time soon.

There remain many frequent but sometimes negative stories behind the huge growth in demand for coconut but countered by as much positive PR about the benefits.

Especially so with the weak Sterling, for those of us in the UK.

Each time we attend a trade show, it is remarkable how many coconut raw material and finished goods offers are available in a myriad of brands and product and packaging types.

Of late however, we have seen further price escalation in Sri Lanka with standard desiccated products trading significantly higher and on the back of poor crops, factory finance issues and even staff shortages. This has sent a ripple effect into Indonesia and Philippines where prices have also started to firm on the sentiment and as we heard for the peak season for demand Sep-Nov and with the ever-present threat of storms and typhoons to consider, it is starting to look like coconut pricing overall can easily firm even further over the last 3-4 months of 2017.

No doubt ANUGA in Cologne in Germany will be no exception. Until or unless the bubble bursts on the interest that is sky high for all things coconut, this market looks set to remain at historically high pricing, unfortunately.


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Raisins

Comment

From Turkey – and as reported below in sultanas, despite some earlier reports of a reduced total crop and some recent rain damage, it looks like the total new crop reduction may “only” be max 20,000mts and for raisins, they may even dry down a larger quantity of fruit into raisins (same grape ; different process) in order to consolidate their market share and to squeeze sultana pricing at the same time! From California, prices are firm. Regardless of the likelihood that their prices will end up way higher than Turkey, California reports a shorter crop and a drive to increase the field price for raw material by $500pst over the $1100 price agreed last season.

For these reasons, each market looks to establish themselves in their own right and levels, independently of each other. Turkish prices may firm on the back of the Iranian crop shortfall. California will remain firm and likely firmer as they settle on a higher field price. Chile looks to remain stable up to their own new crop in early 2018 with the currency being the biggest influence.

Last season/this year it took until Feb (6 months in to the new season) before the price could be agreed, but this time round, it is both expected to be much earlier but with both processors and growers aligned to a higher base price. From Chile, prices are stable. Despite an initial surge of demand and higher pricing at the start of the season, origin prices have dipped back to their earlier levels with only the currency to blame for the conversion to higher delivered pricing.

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

A more recent Turkish new crop estimate has now increased the likely size to 300,000mts (from 280,000mts) and this despite recent pre-harvest rains reported, but which appear to have been largely localised. This increase (and it could end up 300+) means that while there will be a smaller total availability going into new crop than this time last year, with a difference of 30 -35,000mts, which may end up larger if as-yet-unknown sales of fresh grapes into Russia are back to where they have been historically (up to 10,000mts). So there’s a deficit for sure and if, as reported in Raisins, the growers do lay down a marker by producing a larger volume of raisins at the expense of a smaller amount of sultanas, then this difference could be exacerbated.

With Iran having a crop supposedly 50% down due to extreme summer temperatures and associated irrigation issues, then we can easily see increased demand and reduced supply into and from Turkey keeping prices high into the new season, at least until the end 2017. Buoyed further by a stronger Lira (v USD) of late and also by some strong local buying from processors covering their earlier short sales, the trend certainly looks firm in the short-medium term.

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

After high temperatures across all of the key growing regions for currants in Greece this summer, there were very strong rain storms late July with further hail storms in the Vostizza region which combined, are reported to have reduced the total crop by around 20%. As a result, new crop opening prices have immediately jumped over the inflated levels of old crop and while this may be a fair reflection on reduced supply, it is sad and serious news for the Greek currant industry.

After a poor 2016-17 year, all hope and expectations were for a good crop to follow and with it, cheaper prices and more chance of Greek processors to reignite their export business into the Far East, which had to be shelved after this poor year just finished. With currant prices trading closer to Turkish vine fruit pricing in 2014-15, Greece saw a significant opportunity before then to offer a genuine alternative to sultanas and raisins and supported by strong and well researched health claims. So this further reduced supply for the year ahead and likely higher pricing on-going, will damage this fragile industry in a number of equally negative ways.


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Apricots

Comment

Turkish apricot pricing has stalled if not slightly firmed of late – and that despite this new crop in total being a big one.

Two other factors have seen some price strength of late.

All the estimates appear to be around the 150,000mt level – which when compared with the frost ravaged 2014 crop, clearly goes to show how well this crop has recovered. The weather over the Malatyan summer however wasn’t ideal and there are equally varying reports as to the extent of the quality of the fruit with some saying up to 50% of the crop has been affected by rain and hail damage over the course of the period up to harvest. For those of us who buy diced apricots, this is no issue and for those buying larger whole fruit, it might be more so, but this is a big production which should more than cope with whatever demand is thrown at it. Another issue is that growers in recognition of the sheer size of the crop, have sulphured as much fruit as they can in order to safe guard the quality and shelf life of such a volume.

The first being that there has been some very strong local demand from Turkish processors who are and have been buying stocks in order to fulfil their earlier sales. And second, the Turkish Lira has finally broken back through the 3.50 level to the USD for the first time since December 2016, and as apricots are traded in USDs, so this has converted to higher export pricing. With prices realigned to more competitive levels, so industry demand will predictably increase, so in the short to medium term, we would expect pricing to remain stable to firm as the profile of renewed demand at cheaper pricing becomes clearer in the weeks and months ahead.

This – we are told, may cause some problems for processors to select the right quality to ship within EU limits in the short–medium term and some processors are already having to lay on an additional pre-processing drying stage, in order to allow for the sulphur to dissipate.


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Seeds Pinenuts

Comment

The good news continues to circulate on the new crop Chinese “Koreansis” material, although more recent reports suggest it may not be quite as big as earlier expectations.

....which may ultimately, result in increases to pinenut pricing itself.

This has prompted something of a mentality change as forward sellers have slightly increased their offers and enticed some demand from buyers who are still happy to lock in cover at levels below budget and in comparison with pricing for this product 12 months ago.

In comparison also with other products in the “dried fruit, nuts and seeds” / “DFNS”) basket – where pinenuts are now cheaper than some of the nuts such as pistachios, macadamias, pecans and cashews...

It is hard to see how global demand will not be stimulated by such strong comparative pricing – but it is also a stimulus both for trade speculators to buy into this market, confident in the likely prospects for firmer pricing. And for origin collectors to withhold part of their new crop stocks from the market as they receive it, in the belief that they may make a better price later on.

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, low pricing over 2017 was always going to prompt Chinese growers to plant less – and safely so, in the knowledge that with government subsidy and the ability to rotate to other crops, they would not be left out of pocket. Recent information has put the reductions as follows: Shine skin: down 25% GWS: down 70% This is significant and while strategic by China, it will have the desired effect of subsequent higher pricing.

As a consequence of this, there is some strong interest in 2018 deliveries and it is only because there will be a strong carry in from this year’s bumper crop that will delay the inevitable increases, that prices have not already risen higher than they have. Pumpkin (as also Pinenuts) are both exported from China in USDs and it is worth making the comment as a foot note, that with the worrying escalations between the U.S. and North Korea and the importance with which the Chinese relationship with North Korea plays in this, that the currency factor both in origin and all China’s destinations may also play a key part in pricing on-going.


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Seeds Sunflower

Comment

Despite recent rains pre-harvest in northern Bulgaria, the weather conditions over the summer months have been good and so another good sunflower seed crop is expected (with the harvest now starting). With the supplement of another carry in, we continue to see general price stability with some sporadic weakness aside from the impact in the UK at least of Sterling struggling against all international currencies but especially against the Euro.

As previously reported, there remains in Bulgaria a wide cross section of suppliers operating to a wide cross section of standards. From those who still operate a highly agricultural perspective to their sunflower production to others who are investing in higher levels of machinery and technical infrastructure and who therefore look to recover higher margins to pay for such a long term investment.

It may also be worth mentioning that China reports a 30% reduction in their own sunflower seed crop and clearly to reflect that they have zero intention of competing with Bulgaria at lower pricing levels. China has its own market effectively, with its own buyers who buy that origin specifically but on this basis, it does not look to want to present any challenge to Bulgaria any time soon.


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

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