RM Curtis & Co Ltd Market Report

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

March-April 2018

Inside this issue: Edible Nuts Dried Fruit Seeds

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Market Highlights Walnuts - From California, the monthly shipment report for February continues to show a decline in the shipments of 12 months ago (down 5.2% on Feb ’17) and cumulatively down 14% season to date. Hazels - We have seen an interesting development in Turkey since our last report, which is that the TMO started to offload some of its current crop purchased stock. Currants - There was a frenzy of buying activity at the start of this new crop season and for those that did buy early, it was a very good call.

El Nino El Nino

Raisins - The rest of this season looks beset by potential availability issues at best and tricky pricing at worst.

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

Please visit our website for more information on our products and brands www.rmcurtis.co.uk

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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EDIBLE NUTS Almonds

In our last report, we mentioned frosts that were reported to have hit some widespread areas of the central growing valley in California, on 3 separate nights of the week commencing 19th February. This highly unusual weather event sent a blast of cold Artic air directly down the valley from north to south, with many growers stunned by how low - and repeatedly so - the temperatures fell. As usual, there was a flurry of activity at the field level to try to disperse the frost (including pumping warmer well water up and into the orchards), followed by pictures and reports showing subsequent damage to the trees - and then speculation that new crop might be between 5-15% down on this year (therefore, something like 1.92-2.15b lbs v 2.26b lbs this year). Clearly this is all speculative and we won’t have a clearer idea until end April when the first annual “TNT” (a California based trading company) releases the result of its own survey and then we have the first official – albeit “subjective” estimate mid May which will provide a further insight into the minds and sentiment of the Californian growers.

Comment

historically, the May estimate is rarely an accurate reflection on the actual crop and has under/over stated in equal measures. With some obvious motivation to talk this price up and the supply down, this estimate should be treated with some caution albeit it still forming part of the cycle of new crop development pricing. The other and more reliable factor are the ongoing monthly shipment reports which report on actual domestic and export sales. There would be little surprise if these reports continue to show record shipments and these could underpin any prospects for a major price decrease on current crop pricing, regardless of the backdrop of a likely new crop reduction. While sometimes, frosts can trigger some extra tree growth which can compensate for some of the damage itself, it would be hard at this stage to deny that these frost events were unwelcome at best and highly likely to have resulted in a new crop smaller than it would have been without it.

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

With no issues reported from Vietnam or India on their new crops (nor from the supplemental crops that largely ship into these 2 primary origins from West Africa and Indonesia), there is still some hope that cashew kernel prices could ease over the course of 2018 since overall supply is probably at its best for years. However, the flip side of this is that there are very many buyers who have been waiting for a better time to forward buy and while the currency will have helped their quest, the market itself if lower can complete this.

in other words, the scale of forward uncovered demand is such that it might well prevent any major price slide depending on the timing and the volumes shown to origin when buyers do start to make their move on this. Global demand for cashews will be changing as snacking ranges and expectations change before our very eyes.

While this may not be the case across all countries, for the UK at least, the role of cashews in snacking is diminishing as other mixes and concepts gradually take over.

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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Walnuts

From California, the monthly shipment report for February continues to show a decline in the shipments of 12 months ago (down 5.2% on Feb ’17) and cumulatively down 14% season to date. In order for there to be an expected 56,000t safe carry over, the industry would need to be shipping around 37,000t each month for the next 6 and while this is possible, the average monthly shipment since the start of this new crop year has been 67,000t. So while these reductions year on year by month are significant, they are also backed up by a crop which is 7.6% down on last year so fortunately, a shorter crop has seen lower demand.

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Comment

as mentioned previously, the uncommitted stock of Californian light halves is still available albeit in volumes which suggest that processors have already forward sold the majority of their inventory. On Pieces - and ‘amber’(darker)/’combo’ (even darker) – stocks are much tighter and processors appear to have exhausted their production and have even started to produce pieces when required from halves. As shelling techniques improve and naturally occurring Pieces volumes diminish, so we can see ahead this likely differential reversal. However and weather permitting, a new crop back close to 700,000t and hopefully larger, could result in the present firm pricing correcting as we head towards and into Q4.


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Brazils

Comment

While the overall trend on brazilnuts continues to weaken, there have been some predictable spikes in pricing along the way, as would be expected.

fundamentally, the combined Bolivian, Brazilian and Peruvian crops this year were close to back to normal so pressure on origin stock holders began to build from the start of 2018 if not even slightly earlier.

With prices still higher than before the short 2016-17 crops – but far closer than they were at the heights of 2017, so some demand has been stimulated and into a market where importers have been very cautious about bringing in stocks unsold (in the belief that in a falling market, they would end up selling these for a loss). As those spikes of demand have surfaced, so they have found varying but overall small levels of supply to buy from.

The key to forward pricing will hinge largely on the extent to which global demand has been changed by 2017 market forces and while they will be back on supermarket shelves, for some, the risk of supply from what is at best a tiny crop, will have persuaded them to opt out and into other more stable crops and for that reason, global demand will be lower and likely take some years to fully recover, if ever.


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Hazels

Comment

with the weaker USD against Sterling and the Euro, so we have seen prices at UK and European destinations at very competitive levels during March and also sitting historically and comparatively against other Nuts in the basket.

We have seen an interesting development in Turkey since our last report, which is that the TMO started to offload some of its current crop purchased stock. Having bought around 140,000mts inshell over NovFeb, during March they have since sold around 20,000mts, of which 3000mts was Giresun variety and the remainder Levant/Akcakoca varieties. 15,000mts of this total is reported to have been bought by Ferrero and the remainder by other exporters and processors to cover their own existing sales. The other factor has been the reversal in the recovery of the Lira against the USDollar. Just in the past one month, we have seen a 5% devaluation with the Lira heading back to just below 3.99 at the time of writing and clearly this weakness converts to lower USD based export prices.

This looks to present a strong opportunity to lock in forward cover at good levels while also mindful that the developing new crop is vulnerable to frost up until end April. With warm weather recently across the Black Sea growing region, so growers are nervous of how fast the crop is developing and how exposed it would be in the event of frost. But even without frost, it does look possible that new crop could easily fall short of this year’s 760,000mts inshell and with an estimated 90% of this crop already committed, we could easily see a strong impact should demand increase, stimulated by these prevailing attractive price levels.


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Pecans

Comment

U.S. pecan pricing has been firming over the past month driven in the main by a belief that the second half of 2018 is still largely uncovered by industry buyers and so processors are securing stocks for sale later on. These stocks (mainly inshell) will be kept in cold storage for production as and when needed later but with an expectation of sales coming sometime soon, and in expectation that China will re-enter the market for volume once they have shifted their present surplus, origin stock holders seem more comfortable in acquiring stock than they have for many months.

with Mexico also comfortable to sell across to U.S. buyers – and for those that don’t want to sell, they are also comfortable in waiting themselves for higher prices as and when demand pushes supply. On which basis, the market looks very likely to continue its present upward trajectory with the weaker USD the only respite as both Sterling and Euro edge higher.

Surprisingly so given that the U.S. appears to be committed to increase its interest rates by a further 2% over the course of 2018.


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DRIED FRUIT Comment

Coconut

As always, the prevailing prices on edible oils has a direct bearing on desiccated coconut pricing and in particular, the pricing on palm and soya bean oils. At the start of 2018, palm oil pricing weakened and then met with some strong demand and prices firmed again. Reports that Soya bean plantings and production in the U.S. will be increased this year has resulted in growing pressure on soya oil pricing and provided that crop delivers over the summer, then this would take care of the massive U.S. demand and with more to spare for export.

origin coconut prices have fluctuated in line with these sentiments and after the Philippine volcano scare mid-Jan, prices stabilised and then eased on the back of the optimistic view on oils. Indonesian prices have also edged below Philippine pricing again although recent reports of salmonella issues in the U.S. appear to come from a less than optimal Indonesian source. That is not to say at all that Indonesia has a generic problem - but smaller mills in every origin (also smaller factories behind all commodities when you think about it) with lower standards can distort the price of factories operating at far higher quality standards.


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Raisins

Comment

March has seen some semblance of stability across the various key raisin origins, for various reasons. From California, they have for now at least, pushed their prices up as high as they can, and predictably then found that very few buyers were willing or able to pay those top prices if they could find alternative supply cheaper. Which they could.

the rest of this season looks beset by potential availability issues at best and tricky pricing at worst. While California might need to correct to find a realistic level, they are in a very short crop so they will not be thinking that way at least until the next crop is nearly there.

From South Africa, they have produced a good crop and have tried to position their prices some way between California and Turkey and have picked up some good volumes at California’s expense.

Similarly, Chile and South Africa might sit too high still but with 5-6 months left before northern hemisphere new crops, they similarly might not see any reason to do so.

From Chile, they report an ok crop but have really pushed their prices as high as they could, ending up between South Africa and California and finding some major resistance since their prices are pitched by pushing for the greatest margin rather than there being a fundamental issue to justify the high pricing.

Turkey is firm in local pricing but a surprising devaluation of the Lira has offset raw material strength. On which basis, stocks are available but for those that need to buy more, be prepared to pay high prices.

From Turkey their cheaper pricing was met by an avalanche of demand – not least from buyers of Iranian raisins who could not cover their needs from a depleted Iranian 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

Comment

Turkish sultanas have been caught in a similar cross fire to the Raisin fundamentals, but specifically to the shortages in Iran and how Turkish sultana prices sit in relation to other vine fruit pricing. The worst case reports on Iranian new crop were in excess of a 50% crop reduction and which automatically sent their prices into orbit and many of the buyers of Iranian sultanas straight into Turkey. Fortunately Turkey had a big enough crop to cope with the early onslaught of demand and enough confidence to sell forward as many buyers locked in their current crop requirements early.

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with additional strong export sales of fresh grapes and continued strong growth from Turkey’s domestic market, the amount of uncommitted stocks that have been coming to the market have been steadily decreasing over the past few months and so we can assume that the majority of this stock is now in the hands of the larger speculators who will be able to monopolise supply over the remaining 5 months of this season. Fortunately, the weaker Lira v USD has offset some of the local market strength (these are largely sold for export in USDs), but we are unlikely to see weakness this side of new crop based on where the remaining unsold stock is held. We also have the shadow of Iprodione hanging over us. This is a fungicide which is and has been for many years widely used on vine fruits and other commodities not just in Turkey but all over the planet. As with Chlorpyrifos in 2016, the EU has implemented a ban on products treated with this chemical from June 5th and which like chlopyrifos, falls in the middle of a crop year when stocks harvested last August would have been treated with Iprodione before then as standard. The timing is therefore un-workable and while the EU seems indifferent to the impact of such a ban and the specifically the timing of it, it again now falls upon each EU member state to set out its own plans to work through this stock to the point of exhaustion. But strictly on the basis that this fungicide will not be used on the developing new crop. This year, the NDFTA trade body, working in conjunction with the BRC, FSA and FDF are putting pressure once again on our government (DEFRA) to agree a period of transition in order for those already treated stocks to be sold through. This is where we stand at present and it has to be the way the only outcome is achieved.

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

Comment

Offers from Greece have been extremely scarce since our last report and when offers are presented, they are at extremely high levels. Again, there was a frenzy of buying activity at the start of this new crop season and for those that did buy early, it was a very good call. Other buyers have managed to lock in stocks of South African or Californian currants but those stocks were also rapidly cleared out too.

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as to where pricing goes between now and new crop in August, it is hard to see how pricing can correct back down other than through a massive currency movement. And even then, we will not see pricing back to recognizable levels until supply has been corrected. The heady days of the big crops of old (Greek currant crops of 100,000mts+) are long gone and never to return as growers have permanently switched out of currant production. High prices this year might have been for some richer stock holding growers but for many, these high prices saw their traditional buyers also switch to other origins, and that could be a permanent move if the quality worked for them. This Greek currant market very much looks and feels like something falling apart in slow motion.


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Apricots

Comment

Underlying Turkish apricot prices remain firm, albeit stabilised of late by the 5% falls of the Lira v USD in March. Supply of free stock appears surprisingly tight given that this was initially reported to be a crop of around 150,000mts and which has increasingly appeared to have been an over-statement. Even with increased demand stimulated by the cheaper prices this year, 150,000mts should have been more than a match for this – especially when you put the disastrous 2014 crop of 10-15,000mts in comparison.

and as we also know, this crop is susceptible to frosts as late as May-even June, so weather watchers are nervously assessing the rate of growth triggered by a warm Malatyan spring, and fearing what could happen worst case, if the temperatures were to drop.

And predictably, there are many who assess that a shorter 2018 crop would also block any chance for a price drop this side of Q4.

Our Turkish supplier is now struggling to find offers for more raw material so either this crop is already exported, or sitting in strong speculative hands in origin – or the crop was less than we thought and the strong sales have already wiped out a significant amount of supply and that with still 5 months to go before the next harvest starts.


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Cranberries

Comment

This has been a strange year so far on Cranberries and looks likely to remain so for the rest of 2018 and quite possibly beyond. A combination of short crops in the key origins and a drop in demand for cranberry juice offset by a significant growth in demand (and application) of cranberries for consumption, has unexpectedly continued to push prices up – and that despite the slow recovery against the USD by Sterling and the Euro. This strong demand has pushed the origin processor’s factories up to their full capacities, and which has predictably affected shipment lead times and a subsequent clearance of spot parcels which had been bridging the gaps.

these delays are now running up to around 12 weeks later than they should be, and this is a seriously long gap when there is insufficient spot stock at destination to service the gap. Buyers should be aware that there is every likelihood for prices to continue to firm across 2018 and for those setting budgets for 2019, further chances that forward prices could be even higher.


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Seeds Pinenuts

Comment

Amidst the on-going political posturing that has resulted in North Korea (NK) marginalised to all – even China but Russia, it seems that NK had already shipped large quantities of pinenuts across the border to China in late ‘17 / early ’18. This surplus, on top of the Chinese domestic carry in resulted in there effectively being a surplus of stock set against weak demand including domestic, once the purchasing from Chinese buyers for their New Year had been covered.

as expected, Chinese home grown demand has started to pick up post their New Year holiday, supported by additional international interest from buyers who have held off from buying but now see this as an opportune time to re-enter the market. Following a recent visit to Beijing by Kim Jong Un, it is possible that the trading relationship between NK and China might improve, but more stocks flowing into China from North Korea would likely be needed to meet demand rather than it being a surplus.

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

Exactly as per Chinese pinenuts as above, a reduced supply for 2018 was obscured by a strong carry over and these surplus stocks appear to still be in place long after the end of the Chinese new year festival and holiday. It now appears there is a little more pressure on origin prices as those stock holders still sitting on stocks are looking to offload their surpluses and this in a market which is presently short of buying interest.

there are many though who feel that we must now be close to or even at the bottom of the market. We know for certain that China has reduced its new season plantings, so once this carry over surplus is gone - and at best guess, there cannot logically be more than another 2 months’ worth – then the market could quickly realign to higher prices as the impact of reduced supply applies to the largely uncovered remainder of 2018.


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Seeds Sunflower

Comment

Prices on Bulgarian sunflower are stable albeit for the UK buyers, slightly improved by the stronger Sterling / Euro cross rate. We are now half way through this season and while stocks in origin of uncommitted stocks may well be dwindling, the belief is that many buyers are already forward covered given that this is a relatively low price commodity and there is little to lose or to gain in forward covering a commodity which is amongst the cheapest set against the other seeds in this basket.

as always, the weather this summer will be key to the prospects for the 2018 new crop although the huge scale of production seems to equip this crop to withstand all but extreme weather events. Where pricing can change will be within the demands of our industry in terms of preference of the calibre of the producing factories. As mentioned before, there are relatively few quality processors in origin, and typically, those that spend the money in investing in systems and technology will understandably look to differentiate themselves from those that do not. This 2 tier system by supplier investment, accreditation and capability, is already establishing itself.


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