Foreword
Dear readers,
Hindsight always provides the best perspective. In markets which lack transparency, such as the macadamia industry, hindsight and experience is often all that is available to small and medium processors when facing new marketing seasons. Given the experience of 2023, with visibility of market dynamics as they were, could we have foreseen how things would look in July 2024?
Many talk of suppliers who over-committed on NIS contracts in the first quarter and who are now struggling to fulfil those orders. This means they cannot commit to new NIS contracts at July’s better prices and are unable to fully take opportunity of supplying kernel at significantly improved prices. But conditions in the first quarter were such that cashflow needs were urgent, NIS demand was intensified, a record crop was expected, and kernel prices were still low, offering little in the way of returns.
While the current market for suppliers is improved over 2023, early processor decisions could have been assisted through market transparency.
Looking ahead, China’s harvest in the final quarter of the year is expected to be its biggest yet. This will shape international demand of in-shell purchases for the 2025 marketing year.
But in what way and with what impact? Will Kenya return its prohibition on NIS exports? And what does all this mean for Australian, Kenyan, Malawian, Guatemalan, and South African first quarter 2025 commitments?
The MSM trading platform is designed to increase market transparency, improving access to information and allowing for quicker responses to market signals. Such marketing agility is more vital than ever in today’s shifting global trade terrain.
Reach out to us and learn about the ways in which it can benefit your business.
Macadamia Price Trends
The two graphs below compare the most recent five-week period (Weeks 24-28) with the five-week period that preceded it (Weeks 19-23). The kernel comparison graphs show a drop-off in the rate of increase in average prices
The rally in NIS prices has slowed, although average prices for NIS 20-22 in the comparison periods do still show a slight increase. The July period is characterised by uncertainty of stock availability with some suppliers still focusing on fulfilling earlier commitments, some preferring rather to crack than supply NIS, and others waiting out the market.
Market sentiment
Processors in South Africa, Kenya, Malawi, and Australia have either fulfilled first quarter contracts or are working hard to do so, depending on the extent of NIS commitments made early this year. Suppliers experienced record-low prices (especially for kernel products) last year while NIS demand from China intensified at the start of 2024. At the same time, record production levels in 2024 for both South Africa and Australia were anticipated. Conditions in such a buyer’s market incentivised suppliers to enter into significant commitments for NIS, given the risk of a repeat of the previous year and the low returns anticipated from kernel supply.
After a six-month period involving many dynamics, however, processors will be clearer now on whether their first quarter decisions have been on the mark.
The flood of NIS supply from Kenya this year meant in-shell prices experienced muted recovery. Meanwhile, in June and July processors who have fulfilled earlier commitments, cracked nuts that could have been available for NIS export. As a result, average NIS price increases have intensified recently after a long period of being flat as there are indications of supply shortages. Earlier in the year, unmet demand caused kernel prices to rise steadily as suppliers opted for the secure returns and better cashflow terms of NIS contracts. It is now understood that both South Africa, Malawi, and Australia’s harvests are not as high as expected, limiting processor access to product.
Kenya has had little stock available for kernel. This access has further been limited by direct NIS marketing from producers.
Suppliers who committed significant volumes to NIS production in Q1 2024 will be struggling to fulfil orders due in July/August in light of production shortages. This also prevents them from considering new NIS bids, a reality which started driving prices upwards slightly since June. Still processing committed stock, many suppliers are not able to access these improved prices. Suppliers who opted for a more even NIS/kernel split will have met Q1 2024 commitments but have been entering into new kernel contracts rather than NIS, or they are observing the market before committing to further contracts. All this is reinforcing a sense of a shortage of stock at the moment.
Buyers for Chinese markets, however, will not show concern at the reduced availability of NIS offers at this mid-year point. China’s own production is expected to be the largest yet and the possibility of this will help buyer’s retain their power in the market and keep further price increases limited. As South Africa and Australia finish off their harvest period, all eyes will turn to China and the production volumes generated there. As its domestic market is increasingly supplied locally, this could change the nature of demand for NIS imports in 2025.
In The News…
10 July 2024: Central Co-op announces the UK’s first 100% Fairtrade macadamia nut product.
10 July 2024: Ofi June Nuts Market & Crop Update.
9 July 2024: Macadamias: AMS revises crop forecast amid weather challenges.
9 July 2024: Australian Macadamias enter Indian market thanks to trade agreement.
9 July 2024: Australian agriculture outlook 2024: Horticulture.