MSM Monthly Market Report June 2024

Dear Readers,

Welcome to the June 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

The halfway point to the marketing year has been reached. The year has been defined so far by recovering prices, strong demand (for both NIS and kernel products), and growth in supply. This is a much-improved picture off the back of a very difficult 2023 season. NIS supply commitments made by South African and Australian suppliers were largely met during the month of June, leading to an uptick in processing. Price trends seen in March, April, and May, shifted in June.

This year began as a buyer’s market. There was a surge in NIS demand towards the end of 2023 as Chinese buyers took advantage of record-low prices. Buyers emptied out warehouses in grower countries and secured significant NIS commitments in 2024’s outset. Kenya’s temporary lifting of the prohibition on unprocessed macadamia exports caused substantial volumes of NIS to enter the market from that country in the first quarter. The extra supply helped to keep a lid on NIS price increases in 2024 despite the strong demand and absence of rollover stock. The view was expressed at the time that NIS prices would rise by 10% this year while kernel prices might achieve a 30% increase over 2023.

The resulting early focus by suppliers on NIS pushed kernel prices up sharply in the first half of the year. Market conditions as they were at the time meant that NIS still represented a higher return to handlers than processed kernel. Larger, higher quality NIS sizes (especially the 22+ size) were in demand while smaller sizes remained flat in their average prices. With uncertainty over kernel stock availability, European traders encouraged their customers to cover their positions. Larger orders ensuring longer-term inventory recovery were visible in the market. However, by June, as early NIS commitments were largely fulfilled, handlers began to crack smaller sizes (20-22cm) and address kernel demand. The result is an increase in NIS 20-22 prices in June after a long period of being flat, as availability for in-shell purchases has declined.

Kernel price trends

Average monthly prices in reported trades for snacking styles for June increased over those observed in May. In May, only Style 1 prices averaged over US$13.00/kg CIF in reported trades but this month Style 0 and Style 1S prices averaged over US$14.00/kg CIF in observed transactions while Style 1 averaged US$13.47/kg CIF.

Style 4L average prices dropped into June but the number of observed transactions increased reflecting increased supply to meet demand. The industry is reporting substantial interest in halves into June and July. However, with NIS commitments largely fulfilled and with suppliers now addressing kernel demand, the rate of increase in average prices of reported trades has tapered off during June.

NIS price trends

Reported transactions during June only included NIS 20-22 and NIS 22+ sizes. There has been a definite rise in observed average prices for NIS 20-22 in June against average May prices. NIS 22+, which enjoyed early price rises in April and May, declined in average prices during June compared to May. The changes in NIS price trends reflects the growth in supply from South Africa and Australia’s crop coming to market as well as reported processor decisions to crack increased volumes of NIS 20-22 to take advantage of kernel price increases as NIS commitments are fulfilled. Under sustained strong NIS demand, NIS 20-22 prices have risen as availability has decreased.

Immediate Outlook

Despite 2024 prices not matching pre-pandemic levels, their recovery coupled with increased supply represents improved fortunes. A European trader concluded this month that NIS prices are presently favourable for both buyers and sellers. Chinese domestic demand has evolved in the past four years with younger consumers favouring kernel and value-added products over NIS snacking (traditionally the core of Chinese consumer demand). The Chinese macadamia industry has responded with increased cracking of imported NIS. The shift in dynamics has resulted in increased pressure by international buyers to keep a lid on NIS prices to manage processing returns by the Chinese industry, and to keep in step with the country’s price-sensitive consumers. Meanwhile, average kernel prices have also been noted to remain attractive to product innovators and there is growth in the visibility of value-added macadamia products as a result. This also suggests that the current kernel market is beneficial to both buyers and sellers, despite the rise in price.

The result is that the industry enjoys rising prices for key NIS sizes (particularly 20-22cm during June) and kernel styles (particularly snacking styles during June) while demand remains strong. The sentiment in the industry is significantly improved from the end of 2023. There remains a question, however, whether the industry has over-committed on NIS supply to the detriment of satisfying kernel demand. As NIS markets are a harbour for suppliers during price-downturns, it is understandable if the industry did this fearing a repeat of 2023. The absence of rollover stock, significant early NIS commitments, and a possible shortage in South Africa’s supply this year may add to reduced stock available for kernel. Novel marketing strategies by producers in response to low 2023 prices to bypass processors and to market their NIS directly to international buyers has also reduced the stock available for kernel processing. Guatemala’s crop reaches the height of its harvesting during July. With China’s apparent refusal to import macadamias from the Taiwan-supporting South American country, it is not clear to what extent the Guatemalan industry will supply alternative kernel markets this year.

Under the current dynamics, a shortage in supply may keep upward pressure on both NIS and kernel products. This will need to be carefully managed to ensure that NIS demand and, most importantly, the development of high-value kernel markets are sustained.

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.

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. The market expects prices to rise in 2024, particularly for Europe, so trade value may rise faster than volume into the year ahead. Publication of trade statistics lag by some months, trends will only become clearer as the year progresses.

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