MSM Market Report: 17 – 21 June 2024 | Week 25



Dear readers,

Record low prices experienced in 2023, in a context of rapidly rising agricultural input prices, compounded margin and cashflow pressures for producers. It is no surprise then that producers around the world have adopted novel marketing strategies to restore viability and liquidity to their operations. However, the fragmentation of macadamia marketing can miss opportunities that advance the industry as a whole.

A trading platform allows for collaborative marketing of product while still retaining the business independence of participating suppliers. It enables larger and more consistent order fulfilment while also providing suppliers with much less risk than marketing product directly themselves. Buyers are vetted and the legal playing field is levelled. Ultimately, trading platforms offer a more secure path towards improved margins for suppliers, and consistency of supply for buyers.

Consider reading this article in which I outline the benefits of the MSM trading platform to macadamia product marketing that builds a future for the industry. Engage with us on how your business can benefit, we’d love to hear from you.

We trust you find this week’s market review helpful.

Latest macadamia transactions

The two graphs below compare the most recent five-week period (Weeks 21-25) with the five-week period that preceded it (Weeks 16-20). While Style 0 and Style 1 average prices continued to show strong increase in reported trades, average prices for Style 1L and Style 2 in the five-week comparison declined or stabilised.

NIS 22+ average prices declined in the most recent five-week period after a fairly long period of price increases. Supply of this size has increased limiting its upward price movement. Stratamarkets reports that recently lack of availability of NIS 20-22 is driving the smaller size’s prices up, as shown in the graph below. Sustained low pricing of NIS 20-22 over the past few months eventually led processors to divert some stock to kernel processing.

Market sentiment

Increasingly NIS demand from China is being used for its domestic processing of kernel and value-added products to meet emerging preferences of younger consumers. The growth of Chinese processing capabilities will limit NIS wholesale prices globally as the country’s processors seek to retain margins on value-added sales into a price-sensitive domestic market. Globally, buyers are sensing the limits of supply for both NIS (imported by China for cracking) as well as for kernel (other markets). While improved demand from China since late 2023 has been accompanied by better prices bringing some relief to growers and handlers around the world, it has also resulted in a sharp drop in global stocks. Additionally, there are concerns now that South Africa and Australia’s 2024 crops, which represent over 40% of global supply, may not sufficiently boost supply to meet market demand.

The global potential of kernel supply has also been constrained as growers have adopted novel marketing strategies to restore viability and liquidity to their operations after 2023’s record low farm-gate prices. Significant numbers of producers in key countries such as Kenya, South Africa, and Australia, have by-passed processors and exported NIS directly to China in efforts to restore margins.

In certain cases, this has made it difficult for processors to secure sufficient stock for kernel processing. Another emerging trend is a new focus by producers on domestic markets, at the expense of delivering to processors. While still largely small-scale in South Africa, producers have looked to do their own processing of value-added products for local markets. In Australia, award-winning consumer campaigns have pursued growth in the domestic market.

Meanwhile extreme weather events including destructive heavy rains and flooding have affected southern Guatemala and southern China, both important macadamia growing regions. A tropical storm off Central America has been the cause of Guatemala’s storms. At least 6,000 people have been evacuated from their homes. The Guangxi Zhuang Autonomous Region in the south of China has been hit by storms last week causing flooding, power outages, and landslides. Meteorologists in China’s Central Meteorological Bureau expect the rains to move northwards towards Yunnan province. 50,000 people have been evacuated from their homes so far.

Trade trends

In a recent article celebrating South African agriculture’s Q1 2024 export performance, economist Wandile Sihlobo highlighted the role of government in securing export expansion in strategic markets. Improved domestic logistics and port performance is key to the government’s role as is securing trade agreements, which can make South African products more internationally competitive. Presently, South Africa has concluded the following agreements to facilitate trade:

  • The Southern African Customs Union (SACU), concluded with Botswana, Lesotho, Namibia, and Eswatini.
  • The Zimbabwe-South Africa bilateral trade agreement.
  • The SACU plus Mozambique (SACUM) Economic Partnership Agreement with the United Kingdom.
  • The Southern African Development Community (SADC), concluded between 15 Southern African countries, allowing for duty-free trade between 12 of them.
  • Through SADC, South Africa participates in the Tripartite Free Trade Agreement with the East African Community, and the Common Market for Eastern and Southern Africa (COMESA). The agreement bringing 26 countries together.
  • The African Continental Free Trade Agreement (AfCTA), which creates a single market between 55 African countries and eight regional African blocs.
  • South Africa’s members of BRICS+ leads to regular opportunities for co-operation and benefit. The close relationship with member countries also leads to bilateral agreements and arrangements.
  • Preferential trade agreement with Mercosur (consisting of Argentina, Brazil, Paraguay, and Uruguay).
  • Preferential trade agreement with India.
  • The SADC Economic Partnership Agreement with the European Union, providing preference market access for 32 agricultural products from South Africa.
  • Agreement with the European Free Trade Association (with Iceland, Lichtenstein, Norway, and Switzerland as its members).
  • South Africa is a key beneficiary of preferential trade with the United States through the latter’s Africa Growth Opportunity Act.
  • The World Trade Organization’s Generalized System of Preferences gives South Africa “developing country” status and therefore preferential access to the EU, Norway, Switzerland, Russia, Turkey, the United States, Canada, and Japan.

In tense international and domestic political times, Sihlobo called on the South African government to carefully strengthen existing trade relationships while building on opportunities offered through new relationships in BRICS+.

In The News…

20 June 2024: Trade agreement helps Marquis Macadamias crack the Indian market.

19 June 2024: Real-time e-commerce platform could revolutionise mac trade.

19 June 2024: Macadamias: the situation is improving.

14 June 2024: Australia, Japan set to further strengthen horticulture trade.

13 June 2024: La Nina weather 65% likely to develop in July-Sept, says US forecaster.

13 June 2024: El Niño is dead. Here’s what to expect in the coming months.

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