Overview
The second quarter is a key period in shaping the global macadamia industry for the year as South Africa and Australia’s crop comes to market. Together, these two grower countries represent 44% of expected global production for 2024. Guatemala also begins to ship in this period, but its harvesting halfway point is only around July. The month of May began with increases in average prices for both NIS and kernel macadamia products in reported trades. However, average NIS prices levelled out while average kernel prices continued to climb.
Several dynamics have shaped the month. The rally in Chinese demand for NIS that started late last year has continued into 2024. At the recent INC 2024 international congress, Cheng Lu from China’s CHK Trading explained that the sustained demand was being driven by promotions by online retailers in his country. The price-sensitive Chinese market’s favourable response to discounted offers was good news for cash-strapped macadamia suppliers in Kenya, South Africa, and Australia, whose harvests reach market in the first half of the year. Even though some suppliers still consider current NIS prices unsustainably low for producers and processors there has been improvement. Farmers in Australia, for example, have seen their farm-gate prices double this year over those offered in 2023. Having experienced an extended margin-squeezing period of very low prices with rapidly rising costs, the industry has experienced relief through prices rising together with increased NIS demand. However, the Kenyan government’s temporary setting aside of the prohibition on NIS exports by its industry led to a flood of product from that country early in the year. This meant that major grower countries could not easily push for even higher prices as Chinese buyers bid for bargains, citing high levels of supply.
The month appeared to be defined by supplier preference for quick cash relief from substantial NIS sales above committing volumes to kernel production, which has lower returns, higher costs, and less favourable payment terms. The severe drop in kernel prices in 2023 caused supplier countries to find a harbour in NIS markets. Reduced stock available for kernel markets has then led to steady rises in prices in the face of rising demand from European countries, the United States, the Middle East, and South Korea. While a return to traditional kernel production levels in Australia has reportedly begun this year, the South African industry has been slower to commit to kernel production. This has raised concerns from several quarters that urgent short-term goals in the industry are dominating over the more important longer-term, strategic building of diversified kernel markets. Harvesting in South Africa started later in May than expected, so much of the crop is still out. Wet weather in Australia has also slowed it’s farmers’ harvests. Shipping volumes in reported trades began to increase at the end of the month. It remains to be seen if June will maintain current trends leaving kernel demand unfulfilled or will we see suppliers take up the opportunities offered.
Kernel price trends
Average prices for Style 0 transactions in reported trades declined against those reported for April, while average prices increased for all other styles. Style 1 saw the biggest price increase, now averaging over US$13.00/kg CIF. Average prices for Style 4L have also shown a significant increase. In terms of volume, reported trades were dominated by Style 1, Style 1L, and Style 2 transactions.
NIS price trends
Average prices for NIS sizes in reported trades were either steady with April prices or declined. Volumes were focused on NIS 22+ transactions. In April, average NIS22+ prices in reported trades were US$3.47/kg CIF. May averages show a significant drop to US$3.20/kg.
Immediate Outlook
NIS sales to China are expected to continue to dominate the market in the short term. The industry appears to be focused on the immediate; restoring cash reserves and margins. The fact that there were widespread reports of farmers in Kenya, South Africa, and Australia bypassing processors to export NIS directly to China, shows that cashflow recovery is an urgent priority for farmers too. The INC World Nut and Dried Fruit Congress impressed upon the industry again—having seen price and production recoveries across nut categories—how it needed to be very strategic in its marketing efforts. In the words of one European trader’s reflections on the INCs message: “Collaborative efforts and consumer-driven strategies will be crucial for sustaining this growth”.
The macadamia industry, through the World Macadamia Organisation and other country-level initiatives, is beginning to accelerate its efforts to promote the unique qualities of macadamia nuts among consumers, including its distinction from other nuts on the market. The Australian Macadamia Society, for example, reports that domestic sales in 2023 grew by 17% off the back of intensive consumer campaigns of the benefits of macadamias.
Macadamia demand suffers from the general consumer view that it is too expensive. While kernel prices are raised by the dominance of NIS supply to China, macadamia kernel prices are also affected by other factors including: a longer growth cycle than other nuts, limited optimal growing regions, labour-intensive harvesting processes, and the fact that macadamias are literally a more difficult nut to crack. Direct price comparisons of macadamias with other nuts by consumers remain a hindrance for the industry. In addition to unique production factors that face the macadamia nut, it is also distinct from other nuts in the health properties it possesses. Brandon Hiemstra, founder of the US-based House of Macadamias, recently highlighted the superior health benefits of macadamias:
- Lower carbohydrate content than other nuts, helpful for controlling blood glucose levels.
- Higher concentration of heart-healthy monounsaturated fats than other nuts.
- Lower Omega 6 to Omega 3 ratio than other nuts, helpful for reducing inflammation.
- Lower in oxalates and lectins than other nuts, the high presence of which can reduce beneficial nutrient absorption by the body.
- Higher levels of Omega 7 than other nuts, which is helpful for improved skin and metabolism.
The House of Macadamias maintains that “not all nuts are created equal”. A strengthening of strategic consumer campaigns that draw attention to the unique production cost and health value of macadamias is critical to a positive outlook.
Trade trends
The graphs below superimpose import volume and import value timelines for key macadamia nut markets. The usefulness of this is to compare the up and down trajectories of the line-graphs to get a picture of improving or worsening prices. Where value has a more intensive decline than volume, or where increases in value do not match 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.
