Dear Readers,
Welcome to the July edition of our MSM Monthly Market Report. These monthly reports give a broader summary view of market dynamics to complement the weekly reports we release. The weekly market reports and updates help you stay ahead of the curve with timely, easy to consume updates. All in all, our reports seek to uncover the latest trends, developments, and market insights shaping the world of macadamias. Our commitment to keeping you informed remains steadfast.
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Overview
Stock shortages have returned for the first time since 2021. That year marked the beginning of demand decline that resulted in the macadamia price collapse in 2022 and 2023. Rapidly growing supply meant that for the first time the global industry was faced with unsold crop by the end of those marketing seasons. The recovery of demand and prices this year have come with welcome relief for suppliers. It is a recovery period that began with buyers for China (and Hong Kong and Vietnam) taking advantage of record low prices at the end of 2023 to clear out suppler warehouses. Six months into 2024 and talk has again returned to that of shortages. Growers still believe that farm-gate prices are below sustainable levels and seek further increases towards the levels of previous years. However, there are several trends noticeable this year which suggest the global macadamia market is changing rather than returning to what was considered normal. These new developments are already having an impact on price trends.
The first development to note is that the decline in prices of 2023 has facilitated macadamia product innovation. In previous years, NIS snacking over new year celebrations accounted for 90% of China’s macadamia nut consumption. It was reported at the INC’s 2024 World Congress earlier this year that this had dropped to 60% as younger consumers entering the market were preferring products year-round. Lower prices have enabled more in-shell imports being processed into value-added products preferred by these younger consumers. The China-focused online agricultural news outlet, Produce Report, anticipates that the kernel snack market and the food ingredient market for macadamias will grow by 700% (to 8,000mt, measured on a kernel basis) and 600% (to 8,000mt) respectively between 2022 and 2027.
The NIS snacking market, on the other hand, is only projected to grow by 115% (to 28,000mt) in the same period. Chinese buyers are therefore reluctant to allow supplier prices to climb too much as this will threaten margins for local processing and product manufacture. Elsewhere, products with macadamia ingredients have grown in visibility in the United States and Europe, while macadamia consumer campaigns in Australia have won marketing awards. The big drop in kernel prices has stimulated demand and incentivised product development.
A second development to note is the increase in new sources of NIS supply. Earlier this year, Kenya’s government temporarily lifted that country’s export ban on unprocessed macadamias. The ban was put in place to force local processing of nuts, thereby retaining both value and jobs in Kenya. Under the price collapse Kenyan farmers have been struggling; the lifting of the prohibition saw farm-gate prices rise by five times. It also led to substantial volumes of NIS becoming available on the market. It is not clear whether Kenya will reinstate its ban on NIS exports before its harvests are ready in the first quarter of 2025. Meanwhile, China’s own crop is expected to grow this year. China and Vietnam’s crops are still to come to market in the fourth quarter of this year. To a lesser extent, but still significant, grower groups around the world took to exporting NIS directly to China, bypassing processors in pursuit of better prices. The increased supply is also assisting to keep NIS prices measured in their recovery.
Suppliers have favoured NIS contracts in this recovery season, and to a large extent the market has been unable to equally serve recovering kernel demand. Holding relatively low inventories over the past few years during excess supply, European buyers have struggled this year to cover their positions as demand for macadamias intensified under low kernel prices. The result has been a strong rise in kernel prices.
Kernel price trends
Average Kernel prices for July continued, for the most part, to rise. Compared to June, average prices for Style 0, Style 1, and Style 4L were higher in observed transactions. Average prices for Style 1L, Style 1S, and Style 3 declined month-on-month. There have also been increases in the average prices of ingredient styles in reported trades. Prior to June there has not been much movement in the prices of Style 5 and Style 6, but they have increased between July and June.
NIS price trends
Average NIS 22+ prices declined in reported trades against those observed during June. Similarly, average NIS 20-22 prices declined on the previous month.
Immediate Outlook
Enabled by new developments, NIS buyers have been able to keep a lid on rising prices, despite the strong recovery in demand. As suppliers committed extensively to NIS contracts in this recovery season, the increasingly better-priced kernel market largely remains underserved. NIS demand is still projected to grow at healthy levels, but the market outlook suggests that value lies in kernel sales. The growing price premium between NIS and kernel also increasingly favours a shift in handler kernel/NIS marketing split towards processing. Crop volumes may not have grown as much as were expected this year, but supply is projected to show growth in the years to come. Given the new developments, it may benefit suppliers to use growing supply to diversify into new kernel markets around the world while still continuing to service the critically important NIS market. A more optimal, agile marketing mix will prevent suppliers from being overly dependent on NIS markets, unable to effectively service higher value kernel markets. Confirmation of the size of China’s crop, which enters the market in the final quarter of this year, together with market signals from NIS buyers in the first quarter of 2025, will give a sense of how urgently suppliers need to respond to new developments in global macadamia trade.
Trade trends
The graphs below superimpose import volume and import value timelines for key macadamia nut markets for the past 20 months. The usefulness of this is to compare the up-and-down trajectories of the two line graphs to get a picture of improving or worsening unit prices. Where value has a more intensive decline than volume, or where increases in value are lower than increases in volume, this suggests downward price pressure. For the first time in these monthly reports, graphs for Japan, South Korea, Spain, and the United Kingdom are also now included.
The trade trends for major import markets below show that downward price pressure on products supplied to China intensified from the end of 2022 whereas kernel products supplied to Europe experienced downward price pressure later into 2023. Downward price pressure on products supplied to the USA occurred prior to the 20-month period covered in the graphs. Publication of trade statistics lag by some months, so trends will only become clearer as this year progresses. For the two most recent months, almost all graphs show value rising faster than volume (or declining slower than volume), suggesting better supplier prices.
