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Article: Covid-19 fails to derail Californian nuts
30 July 2020
US domestic consumption has contradicted the most negative sales
forecasts between February and April. Meanwhile, the strong US
almond, walnut and pistachio crop estimates combined with the
strong productions of its main competitors may lead to low
prices.
Almonds
Californian almond shipments reached a record volume in December
2019. Domestic sales totalled 57.48 million lbs, 7.7% more
year-on-year. Exports reached 148.46 mln lbs, 1.5% more.
Year-to-date domestic sales (August-December 2019) were 297.54 mln
lbs, 5.4 mln lbs less y-o-y. International sales increased by 7% to
753.7 mln lbs, despite the trade war between China and the US.
China was increasing its imports of Australian almonds. As a
result, the 2020 outlook looked brilliant when the two countries
started to negotiate a deal in late December.
Most of the big US players reported that prices were falling
between 10-20 US cents compared with last November. Standards were
most recently trading near USD2.85/lb, while sized Californias were
adding only a few cents to these levels. Nonpareil in-shell saw
good demand from Indian buyers coming off the New Year holiday at
USD2.20 per lb. Strong demand for manufacturing is supporting
blanched sliced and slivered at USD3.70 per lb.
The Covid-19 pandemic led to uncertainty. China started its
lockdown on January 23, spreading concerns about the pandemic to
other key importers in the Far East and the Middle East, such as
South Korea, Saudi Arabi or the UAE. Lockdowns in the EU and India
in March worried US suppliers. However, the US domestic sales
tempered the most pessimistic forecasts, as large processors such
as John Sanfilippo & Sons reported in its Q1 financial
statements.
US retailers increased orders to offset panic-buying sales and
avoid shortages.
January and February data revealed strong domestic sales and
exports to most key importers, especially India. Only China,
Vietnam and Hong Kong, suffered deep falls, although less than
expected despite the lockdown and zero tariff enjoyed by Australian
nuts, the Almond Board of California (ABC) reported.
When the pandemic struck the US between March-April, processors,
traders and exporters coped well, with the US ports opened as usual
and plants ready to work, following essential health measures
(gloves, social distancing, masks, etc.). In addition, the general
perception of almonds as a healthy and long-life food pushed up
domestic demand in April and May. International sales totalled
157.3 mln lbs from March-April 2020, 22.6% more y-o-y. to 231.9 mln
lbs.
As a result, the Californian almond industry is ready for a
strong recovery once lockdowns finish and if the negotiations
between China and the US continue at a good pace. However, the
fight against Covid-19 still has no real end in sight, the
negotiations are halted and the USDA launched a record 2020 crop
estimate this May: 3.0 billion lbs, 17.6% more y-o-y. In addition,
Aeofruse and Descalmendra, the main Spanish almond associations,
reported that Spain's almond output may reach another record:
115,633 tonnes, 23% more y-o-y.
As a result, Californian volumes of almonds sold have been
growing, although relying on low prices. Olam, in its latest market
update this May, quoted steam/PPO pasteurised almonds from
USD2.15-2.75/lb for Nonpareil and from USD2.05-2.50/lb for
Californian types. Average organic prices range from
USD5.25-5.75/lb.
Walnuts
The 2019 walnut crop reached around 630,000 (short) tons, 6.8%
less year-on-year, according to the USDA estimate. The Californian
industry coped with the fall in Chinese imports due to the trade
conflict. It closed the 2018-19 (September-August) season with a
9.1% rise in exports (677.1 mln in-shell basis lbs) due to rising
sales to Middle East markets and Pakistan, revealing its powerful
and flexible marketing.
The 2019-20 season may be different. A combination of lower
crop, Covid-19 and weak Chinese purchases, have led to falls in
exports.
When negotiations between the US and China looked to be in full
swing last December, the Covid-19 pandemic burst. The Chinese
lockdown, combined with initial Chilean offers in Gulfood (February
16-20), reversed these positive hopes, leading to the worst of both
worlds: falling volumes and prices.
March data revealed similar trends to almonds. Domestic sales
increased by 18% y-o-y to 18.6 mln lbs in-shell basis, due to
strong demand from retailers to avoid supply shortages during
panic-buying. Meanwhile, in-shell exports fell by 18.7% to 34.7 mln
lbs in-shell basis, mainly due to a sharp fall in in-shell sales to
the Middle East and China.
April data again showed strong falls in Chinese, the UAE and
Indian in-shell purchases. Meanwhile, Spanish, Japanese and South
Korean shelled imports led to a rise in shelled exports. The
domestic sales fell to 14.7 mln lbs (30.9% less y-o-y).
The US trader Primex quoted fca/fas shelled Chandler prices
between USD3.10-3.15/lb for LH80, USD2.902.95/lb for LHP40;
USD2.80-2.85/lb for LHP20. In addition, non-Chandlers ranged from
USD2.70-2.75/lb and Combo HP20 from USD2.60-2.65/lb last April.
Prices stabilised in May.
Pistachios
The Chinese appetite for pistachios enabled the Californian
industry to weather the trade war well. The US and Iran are the
only real global suppliers. The Middle East country has suffered
severe droughts and US sanctions for years, cutting both its yield
and profitability.
Data reveals the Chinese weight: it accounted for around 40% of
the pistachio sold volumes by the US in the 2018-19 season
(September-August).
The scenario changed in the 2019-20 season. The US orchards
spent an 'off-year' and the 2019 production may have fallen by
27.6% year-on-year to 352.5 mln lbs. Iran enjoyed a strong crop and
is set to take advantage of the Californian gap.
Iranian sources revealed that the 2019 Iranian crop ranged from
185,000-210,000 tonnes, exports quadrupling to around 44,600 tonnes
between September-December 2019. Iran's prices firmed last
December, led by California and Turkey, a key importer whose crop
is focused on the domestic market. The Rotterdam importer Pistachio
Investments gave the following prices to IHS Markit: kernels were
around EUR16.00 (USD17.83) per kilo ddp; in-shell naturally opened
28-30s were at EUR8.5-8.7/kg ddp, while the bigger sizes, such as
22-24s, for which there was a very limited availability, were
around EUR9.2-9.3/kg ddp.
US February shipment sales data revealed a notable increase in
domestic consumption, compensating for the fall in exports to
China, which was already holding its lockdown. February sales fell
by 10% in volume to 54.4 mln lbs, leading year-to-date shipments to
392.5 mln lbs, 14.5% less. Seasonal domestic sales rose by 4.4% to
142.5 mln lbs and exports by 22.5% to 250 mln lbs.
Fca/fas in-shell prices ranged from USD4.20-4.30/lb for 18-20
Extra No. 1; and USD4.00-4.10/lb for 21-25 Extra No. 1. Pistachio
kernels ranged from USD7.60-7.85/lb for whole; and from
7.00-7.20/lb for halves and splits.
March data revealed a similar trend. Total sales dropped by 24%
to 65.3 mln lbs this March. Domestic sales increased by 19% y-o-y
to 30 mln lbs but exports fell by 42% to 35.3 mln lbs. Prices were
flat.
April data unveiled falls in domestic and international sales.
Shipments totalled 48.2 mln lbs, 31.6% less. Domestic sales
declined by 19% y-o-y to 19.3 mln lbs and exports by 38% to 28.9
mln lbs.
Industry sources reported that Iranian exports continued to be
strong. International sales reached 88,000 tonnes from October
2019-April 2020, up from 23,000 tonnes in the previous season, but
still far from the 100,000 tonnes in the same period in the 2017-18
season.
Primex reported that the US prices fell by 5-10 US cents per lb.
Importers were slowing orders because they had replenished their
stocks in previous months and consumption is still very weak due to
lockdowns.