RM Curtis & Co Ltd Market Report

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

Oct-Nov 2017

Inside this issue: Edible Nuts Dried Fruit Seeds

Market Highlights

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Walnuts - Earlier reports suggesting the crop might be smaller, appear to have been correct, and with the harvest now under way, we hear that the crop might even be as much as 10-15% smaller than last year. Brazils - This market remains very tricky and balanced on a knife edge until new crop starts to ship and realistically, until it physically arrives at the various destinations and in decent quantities.

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Raisins - The Californian new crop is now reported to be 230,000 short tons (209,000mts) which if correct, would be the smallest crop for years (10 year average is 310,000 short tons (280,000mts).

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R M C urtis & Co Ltd

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EDIBLE NUTS Almonds

Comment

As

The September shipment report detailing Californian almond sales was released on 11th October and showed a total reduction of 5.4% for the month by volume compared with September 2016 (190.6s v 201.6m lbs). This included a -13.6% reduction on domestic sales and -2.2% on export. This was explained in part by the late harvest and slow hulling this v last year but accompanied also by an ongoing commentary that confirms high insect damage in comparison with last (2.35% v 1.24%).

a consequence of this, former pricing in September has seen some correction during October although we need to better see how October has performed without the late harvest having any bearing on this period. The higher insect damage has confirmed in many origin sellers’ minds that the crop will not be any larger than the 2.25b lbs figure, although clearly we will have a better gauge on that over the coming months. We have also seen some strong demand from China for cover needed up until their New Year in February (16th) and if they haven’t covered their needs by November shipment, then they will have literally missed that particular boat. In comparison with other nut products, almonds still look strong value so we have every expectation that demand will continue to grow into 2018. Between now and then however, we have the typically seasonally busy month of November and then the possible quiet before the storm of the next Californian bloom in 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

Pricing on cashews over this past month has been quiet with the fluctuating currency seemingly making the biggest impact. As the next six months play out before us, we will know the likely supply into 2018 from the key producing origins – starting with Brazil, and then West (and East) Africa, India and Vietnam to follow on. At present, buyers are largely holding back on taking further cover into 2018, although many are already covered Jan-March as a security.

With the hope that the key origins will produce good new crops, there is a compelling argument that 2018 can see supply reverting to much healthier levels and on which basis, prices should correct to significantly lower levels. There are already several tiers of prices emerging from those origin sellers prepared to sell – or brave enough to short sell forward, but we need to remember that prices are still very high and fundamentally over-priced.

With decent crops from key producing origins, and set against a cautious hand played by buyers for their 2018 demand, we could easily see prices significantly cheaper come Q2 2018, all being well.

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 early new crop news is quite negative, unfortunately. Earlier reports suggesting the crop might be smaller, appear to have been correct, and with the harvest now under way, we hear that the crop might even be as much as 10-15% smaller than last year. If correct, this would crash the tonnage down to around 615,000 short tons (567,000mts) and which psychologically, has shifted the origin perspective entirely.

In recent years, the pressure has remained on Californian growers and processors to try to keep some pricing stability in order to remain competitive against their cheaper competitor origins of China, India and Eastern Europe. However, with Californian walnut kernels now firmly established in their own right, they are not overly bothered what is happening elsewhere. Despite shorter crops in India and Eastern Europe, China this year has re-emerged as a walnut exporter, and at significantly cheaper prices than California.

That said, the standard Chinese spec is nowhere close to the high cleaning spec of the Californian industry and arguably, there is a gap on flavour that can never be closed. But price is still a major driver and this has got to impact on the level of demand that California has enjoyed in recent years.


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Brazils

Comment

This market remains very tricky and balanced on a knife edge until new crop starts to ship and realistically, until it physically arrives at the various destinations and in decent quantities.

Clearly, provided new crop is back to something approaching “normal” size and once it is physically here in sufficient volume to have replenished the empty pipelines, then pricing has to correct to lower levels.

The weather in the central Amazonian growing region over the next 1-2 months is critical to the timing and quality of the new crop – as well as to the extent to which access to and from the collection and processing points is or is not disrupted by heavy rains.

Likely, this will have started to have happened earlier and for sure, stock holders of current crop will be anxious to have shifted any surplus before it is devalued by a much cheaper new crop offering.

Early indications suggest that the new crops are looking good and for those reasons, buyers are ultra-cautious about what they cover into 2018 – and especially into Q2 onwards when new crop shipments will start to arrive into Europe.

We are already seeing some sliding scale of new crop offers, depending on when they would ship/arrive, and with very much a discount, the further forward into 2018 we look. However, what happens this side of new crop is another story and even with a very much reduced level of demand, we are likely to see spikes of pricing if and as any new demand comes to the market and finds very little to fulfil it.


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Hazels

Comment

The Turkish government, through its procurement agency “TMO” continues to buy stocks in the local market and so far have either physically bought or lined up to buy just under 100,000mts, but with plans to further buy an additional 50,000mts to follow on. There are other reports that suggest that strong buying also by Ferrero is further tightening the local market and spooking origin sellers into offering little to nothing forward into 2018 on the basis that they expect prices to be higher later on.

Export sales so far this new season to date are at around 50,000mts (kernels), which is 65% more than last season to date. The good news for those of us at destinations however, is that the crop itself looks to be 750,000mts, which is larger than earlier forecasts and also the Turkish Lira continues to struggle against the US Dollar. Since the start of September, the Lira has depreciated by around 10% and with the USD as the currency of export on Turkish hazelnuts, this adjustment has helped to obscure the actual strength in the local market pricing.


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Pecans

This is a market full of rumours and contradictions, and which will likely need a few months ahead to settle down as the realities hopefully come into play. After the widely reported damage caused by Hurricane Irma in September, there were reports that the pecan crops in northern Florida, parts of South Carolina and Georgia were badly damaged. This was clearly true in specific areas but subsequently, there are those that say that the crop in the S.E. was looking a lot bigger than last year, so this damage only really reduced it back to where it was last year.

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Comment

The other big question mark is the Mexican crop where the rumours and reports put this as a significant reduction year on year – and the impact of which on the total pecan supply between the U.S. and Mexico is totally wrong-footed by such a number. The official numbers put the 2017 Mexican crop at 170m lbs (v 2016 supply at 225m lbs). If this is correct, then the total supply for 2018 including the carry in, is less than at the start of this season (608m lbs v 622m lbs). If however, the Mexican crop is the same as last year (as some claim), then the total moving into 2018 including the bigger U.S. new crop would be +7-10% higher than last year and while this is speculation only at this stage, there is a sense that this is what many of the origin grower/processors privately believe.


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DRIED FRUIT Comment

Coconut

The impact of this bigger demand and volume has clearly also impacted on the capacities of the origin factories, which means that their lead times are longer now than they were.

Coconut pricing remains firm and at least in the shortmedium term, shows no sign of any weakness – other than through the usual currency fluctuations. As previously reported, demand for coconut seems to have nothing but growth ahead. Whether it is flavoured coconut, or further processed: milk, oils, butters and creams - the diversity of products and related brands seems to be growing exponentially and with this trend highly unlikely to reverse any time soon, it is likely to limit any significant price downside no matter how much we want and need it.

By now (start of November), the major Philippine factories are fully booked up on 24 -7 shift patterns until end Dec and with a minimum 6 week lead time from origin to UK, any more prompt demand would need to be filled by stock sitting spare in the warehouses at destination. And which typically trade at a premium to replacement pricing. So even if there is a price correction downwards which doesn’t seem likely anyway, we would be unlikely to see the benefits of that now until end Feb/March ’18.


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Raisins

Comment

The Californian new crop is now reported to be 230,000 short tons (209,000mts) which if correct, would be the smallest crop for years (10 year average is 310,000 short tons (280,000mts). Furthermore, the Raisin Bargaining Association (“RBA”) has just set the new crop field price at $1800/ton compared with $1100/ton last year, and so it is clear why Californian pricing for their new season has opened 40-45% higher than the levels traded pre-harvest. From Turkey, the price increases is all about demand piling into the cheapest origin.

Despite fears pre-harvest over the size of their own new crop, it is more that the Californian price escalation together with a dramatic reduction in the Iranian raisin production, has brought strong demand into Turkey and with a strong advantage, this demand will remain focused on Turkey in the short-medium term.

The rapid escalation of Californian prices has finally stabilised of late, and clearly California is now testing the market to see the extent to which demand will stay loyal to a market trading at such a big premium to more historically recognizable levels. For those that must buy Californian, then they will be forced to pay these sky high prices. For those that don’t – they won’t. For those mainly Middle Eastern buyers who will not be able to cover their needs from Iran – or who won’t like the pricing either way, they will look to Turkey to cover their needs and which logically will keep Turkish pricing firm in the short-medium term, at least. For those buyers of Chilean Flame raisins, replacement prices have firmed of late – but really only on a trend driven by firmer raisin prices everywhere else.

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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R M C urtis

Sultanas

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Comment

As mentioned above in Raisins, the escalating price on raisins (and currants) and the short crop in Iran this year, is piling the pressure into Turkey for those looking for the cheaper prices. Turkey’s new crop is almost certainly at least 300310,000mts and this good crop prompted some of the Turkish processor/exporters to sell aggressively before and just after the new crop harvest. These so-called “short sales” are now causing issues in the local Turkish market, as these same sellers are having to cover in at least some of their earlier sales at a loss (as the local raw material price has increased). Some of these sellers might be reluctant to take the hit, so we could see some price renegotiations – or delays at best or defaults at worst from those reluctant or unable to take the losses.

As reported elsewhere, the recent weakness of the Lira against the USD has, in part, obscured the actual strength of the local Turkish market where stock holders are now confident that if they don’t sell today, they can sell at a higher price “tomorrow”. If latest reports are correct, and if the Iranian new crop is as much as 50-70% down on last year, then such a shortfall of around 75,000mts of demand is coming Turkey’s way, and if correct, would push even such a decent crop of 310,000mts +/- to its limit before this new season is over.

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

This continues to look very much like a market which will be problematic for the rest of this season.

It is hard not to feel very sad and sorry for this battered industry.

If the expectations for new crop in Greece were around 25,000mts, then the crop itself looks to be closer to 17,000mts.

Their sales into new markets has stalled and while the high pricing that has predictably followed might reduce demand from traditional destinations, this will likely have a longer term impact on those growers for whom this will be the final straw.

This reduction came not only from the hail and rain storms pre-harvest, but from the ultra-hot temperatures endured across all of Greece and surrounding Southern Mediterranean countries for much of this summer 2017. The Greek farmers have limited means to cope with such a ferocious and prolonged weather system, and the crop was literally frazzled on the vine.

We hear reports that growers are starting to look to produce crops that have less sensitivities to temperature, water and pests. Crops like Olives, which are more resilient and less cost and labour intensive.

Seasons like this one will not only damage the present, but also the future.


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Apricots

Comment

Since our last report, origin pricing has continued to firm in response to keen levels of international demand - together with additional demand on the local market from export/processors covering their earlier higher priced sales. The weaker Lira of late again is obscuring these raw material increases, and there seems little sign that this currency trend will reverse any time soon.

The Turkish crop is big this year, and if correct at 150,000mts +/-, this should be more than able to cover even increased demand stimulated by the cheaper pricing. In the short term at least, it looks likely that the rebound from the lower pricing that followed the harvest will continue, but once any remaining demand for 2017 has been covered, we may see some relief early 2018 and before the news, views and speculation surrounding the developing 2018 crop starts around the flowering in the spring in Malatya.


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Seeds Pinenuts

Comment

Chinese pinenut prices have continued to firm since our last report – and especially on the smaller Sibirica variety. The reasons being several: Firstly, that the crop in northern China is reported to be smaller than earlier expectations, and any surplus stocks available in the UK and Europe are being cleared out in anticipation of firmer prices ahead.

Donald Trump is expected to pay a visit to China later this year and the expectation that he will push for further trade embargoes on North Korea is fuelling the above speculation. But aside from that, there is strong and growing demand for pinenuts internationally as well as domestically, so any indication of a crop reduction set against such strong demand, will always stimulate firmer prices.

Second, domestic demand for pinenuts in China is growing strongly and with such a vast population and potential consumption, this is an increasingly important consideration. Finally, with a sizeable amount of “Chinese” production coming from imports from North Korea (as well as from Russia) to supplement their own production, there are rumours that should China bow to pressure from the U.S. and reduce or stop their own trade with North Korea in order to levy more pressure on Kim Jung Un, then this would clearly put a further squeeze on pinenut supply 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

Demand at present for pumpkin seed is slow and surprisingly so given that we know that supply into 2018 has been reduced by China in an attempt to squeeze supply and push prices higher. While higher prices into next year seem highly predictable, the pace at which buyers are forward covering and supplemented by the high levels of current crop stock still circulating in the European markets, has stalled the upward price momentum - for now, at least.

This is the case on AA Shine skin pricing, at least. For GWS, it is a different story. There is stronger demand both internationally and from the Chinese domestic markets, for what is effectively considered now to be a premium pumpkin seed. The reduced plantings and strong demand looks to combine to create a likely problem ahead and there are already those that predict that new season supply will run out before the end of 2018. This could be one to watch.


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Seeds Sunflower

Comment

Although edible oil markets are firmer overall – and with sunflower oil clearly tracking the trend – supply of Bulgarian sunflower seed kernels for the new season looks to be good with an “above average” new crop production reported. As a result of this strong production, sunflower seed prices have stabilised, with the added benefit in the UK of a slightly stronger Sterling trading up against the Euro (weakened of late by events in Catalonia).

Demand for sunflower seed however looks likely to increase as its uses and applications evolve and diversify on-going. This is a cheap seed in an expensive wider “basket” (of dried fruit, nuts and other seeds) and if oilseed prices also continue to firm, then this will likely impact on kernel prices. While the currency is clearly an important factor, the raw material itself is unlikely to weaken any further as we move into 2018.


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