Monday, October 25, 2010

Weekly Cashews Update

OCT 23, 2010

There was reasonable activity in the Cashew market in week 42. The lower offers were taken out of the market early on. By end of the week, prices from medium packers had moved up to 3.25 FOB for W320 (large packers were able to sell few cents higher). There were some trades in W240 around 3.60 and W450 around 3.10 FOB. Most of the sales were to US & Europe importers for Oct-Dec (some for Jan-Mar). India & China buyers were quiet but they are expected to start buying again in Nov.

RCN market continues to be firm. West African RCN in India traded in the range of 1200 to 1350 dollars (depending on quality). Indonesia RCN is steady around 1500 despite lower quality. Tanzania continued to get surprisingly high prices in their auctions. Brazil reports of crop shortage range from 15% to 30%. This means that almost all origins have had short crops in 2010.

Last fortnight’s lower offers for 2011 deliveries from the importers did not induce any significant business. If RCN market continues to be firm, we feel that the lower offers will dry up soon. We expect some roasters – in USA as well as Europe – will start to buy some quantities if they see firmness continuing for next few weeks. Most of them are very lightly covered for 2011 and may not be able to postpone buying for too long (they will soon have to cover at least the first quarter, if not the first half).

Most buyers have been restricting volume and period of buying because of the wide difference between prices from small / medium processors for nearbys and large processors for forwards. This has meant that they need to buy something every few weeks and each time after a dip, prices have moved up a few cents. So far market has not pierced the 2008 ceiling but it cannot be said with certainty that this will not happen sometime during the year.

Outlook for mid / late 2011 continues to be cloudy – demand trends are uncertain and it is impossible to judge what 2011 crops will be. So, it would be unreasonable to predict long term price movement. But in view of supply tightness (which is likely to continue till Apr/May 2011), it is more or less certain that prices will continue to be firm for rest of 2010 (and even early 2011). There is some chance of a further increase in prices if kernel activity picks up and / or RCN prices continue to be firm.

If there is a big drop in usage in FH 2011 coupled with good or normal crops from Mar/Apr 2011, we could see prices softening. Absence of one or both could mean the opposite. In the meantime, it is reasonable to expect that prices will continue to be firm and will be determined by spot / nearby demand (or interest to sell) till there is a significant change (or a reasonable expectation of a change) in one or both fundamental factors. This cannot happen before Mar. A change in sentiment could also prove to be the tipping point. External factors – economic news, currency movements, etc – also need to be watched.

For the time being, there is no reason to change the earlier recommendation i.e. everyone in the chain (RCN traders - processors – traders – roasters) should cover some portion of their need (to buy or sell) for a few months to avoid being caught on the wrong foot as any change in trend could be quite sharp.

Would be grateful for your comments on market situation, views & forecast on prospects for demand + price trend and any other news or information for better understanding of the market.

Pankaj N. Sampat

Monday, October 18, 2010

You'll be shelling out more for pecans this year

Posted Thursday, Oct. 14, 2010

By Barry Shlachter

Pecan prices are expected to approach record levels this fall, thanks to a slightly off year in production -- down an estimated 20 million pounds or 7 percent from 2009 -- and gargantuan demand from China.

The Chinese appetite for pecans exploded in 2007 when rising walnut prices made them a relative bargain, said Joe Peña, an agricultural economist with the Texas Agri-Life Extension Service. U.S. shipments to the world's most populous nation more than doubled to 25 million pounds, up from 9.2 million the year before.

A decade ago, there was hardly an American pecan on the Chinese market. Last year, U.S. shipments to China soared to 88.6 million pounds, up from 44 million pounds in 2008.

Despite higher prices, the increasingly affluent Chinese middle class still considers the imported nut a bargain compared with a native hickory nut, said Cary Millstein, a U.S.-based pecan buyer for a Hong Kong-based importer, the Welming Group.

And that's music to the ears of American growers, who supply a whopping 77 percent of Chinese imports, with Mexico and Australia splitting the rest.

"It's not a one-time deal," insists grower Danny Davis, a co-owner of the Texas Pecan Co., based in the Central Texas town of Comanche. "This is going to be a lasting market for us."

Peña says that the U.S. pecan market remains strongly under the influence of five large shelling companies but that Chinese demand has kept a steady upward pressure on prices.

The effect will be felt in the aisles of American supermarkets, translating into increasingly higher prices for bags of whole pecans and pieces this year, he predicted. Already, retail pecan prices at one major chain are up 15 percent.

Collin Street Bakery in Corsicana, which sells $35 million worth of pecan-filled cakes a year, said its mail-order prices were set in August before prices and supply were known. As a result, it will absorb the higher cost, spokesman Hayden Crawford said. The pain is mitigated by the fact that the bakery owns the nation's biggest pecan shelling company nearby, he added.

Growers have gotten initial bids of $4 to $4.50 a pound for good quality, shelled pecans for the high-end gift pack market, Peña said. (Depending on the size of the nut "meat," in-shell pecan prices can run 40 to 65 percent of the shelled price.)

The Chinese don't bake with what they call mei guo shan he tao -- literally, "American mountain peach pit." And they don't eat them in their natural state or candy them.

Instead, they process the pecan as they do a native hickory nut: cracked slightly by hand by row upon row of workers, then marinated in vats of flavored brines, which vary by region. They are dried, packed in cellophane bags and sold as a healthy snack food, Millstein said.

Many are purchased directly from Texas, New Mexico or Georgia growers by Chinese importers, who can scoop up an orchard's entire crop.

That doesn't always make them friends in the industry.

"The first time they'll buy through an American broker," said Wade Railsback of Granbury Pecan Co., himself a broker. "The next year, they'll go around them and buy from the grower, cutting out the middleman."

The commerce has gotten so rich that the big shellers, hurt by the higher prices, are looking to get into the China trade themselves, industry sources said.

They may have to wait in line.

"Everyone with a fistful of dollars is becoming an importer," Millstein said, referring to widening Chinese commercial interest as he drove from Alabama to Texas to look over the harvest. "The Chinese will speculate on a hot crop. A lot of speculators are coming into the market to compete with the real big suppliers."

U.S. growers aren't worried about China busting their windfall by growing its own pecans and flooding world markets, as it has with garlic and tilapia.

Larry Grauke, a USDA research horticulturist who has visited his Chinese counterparts, is betting against competition from Asia anytime soon.

The Chinese have known about pecans since American missionaries brought over some trees more than a century ago. But instead of using rich bottom soil like U.S. growers, the Chinese have tried -- with little apparent success -- to grow pecan trees on hillsides as they do their native hickory, Grauke said.

"Climatic, soil, pest and cultural conditions are all different," he added. "I don't know of any commercial plantings that are bearing."

Barry Shlachter, 817-390-7718

Walnut Market Update

Saturday, October 16, 2010
The walnut harvest is now well underway throughout the state. Initial receipts indicate that this will be another record crop but it remains to be seen if the final objective estimate of 510,000 tons will be reached. Using data from the southern counties, the trends for the major varieties are currently as follows:
Ashley down 7.8%
Chandler up 6.0%
Hartley up 31.0%
Payne up 1.7%
Serr up 51.4%
Tulare down 18.7%
Vina up 9.2%
Other up 9.2%
For Chandler and Tulare, the number of orchards that have completed harvest is quite small and those numbers may fluctuate greatly in the coming weeks. Still, given these adjustments to last season’s production and adding an extra 5,000 tons to account for new tonnage, we are looking at 480,000 tons plus whatever adjustment needed for Howard variety, of which I have no data. It is still early and we may make the 510,000 crop estimate but at the moment, data from the south seems to indicate that we may fall slightly short of that number.
Kernel color is fabulous this season and meat yields have climbed back up from last season’s poor kernel yields. If one were to assume 2 percentage points more on edible yields across the board, the additional kernels would be the equivalent of roughly an additional 21,000 tons. Size on Chandler walnuts is down considerably with early deliveries averaging 49.1% jumbo – well short of the 54% indicated on the objective estimate. Typically, the younger trees tend to harvest later with higher percentages of jumbo and so while it is hopeful the jumbo percentage inches up over the harvest the reality is that we have a very poor jumbo percentage this season on Chandler. Early deliveries of Hartley (60.6% jumbo) and Tulare (80.0%) varieties show reduced jumbo percentages as well although the Tulare size seems to be a manageable issue.
Harvest started 10 days late in the south and that trend seems to have been constant throughout the state. The lateness of the new crop coupled with the relatively low carry-in has reduced the opportunity for sales in September to set a very low number for the first month of reported shipments.
September shipments were off 33.5% from last season’s record setting number. I expect October’s shipment number to also be off from last October’s due to the following reasons:
5414 East Floral Avenue, Selma, CA 93662 Ph. (559) 834-1555 Fax (559) 834-1759
1. The lateness of the crop is going to set the initial shipment date for each major inshell variety back substantially.
2. The Chandler variety lateness will also affect kernel shipments although to a lesser degree as customers who prefer Chandler walnuts are able to substitute for earlier varieties due primarily to the very good color on many early deliveries
3. The anticipated small size of inshell and especially Chandler will slow down the rate at which loads of inshell can be processed and packed, reducing the overall throughput at the processors.
4. Cargo ships are mostly booked up at this point and if there were any extra loads that could be made and offered at the last minute, many of them might have to be rolled into November.
Reason #3 above is one of the more important issues to look at. Back in 2005, the industry had a record crop of 355,000 tons. This season’s estimate of 510,000 tons is a 44% increase in industry production in just 5 years. There has not been a corresponding increase in packer capacity over that same time period. Granted, there have been some new processors over that time period and some existing processors have upgraded their plants, but not to the tune of 155,000 tons of additional product. Much of the capacity increase has been in packing inshell nuts and running inshell lines more hours per day and a longer inshell season.
Kernel availability has been affected by this bottleneck and offers for kernels for prompt shipping are very difficult to come by. This shortage can be solved by one of two ways – queuing or raising prices for early shipments. Queuing is preferred by people who tend to be first in line and upsets those who are not given priority and frustration can already be seen from brokers and customers who are always shopping their volume out. The option to make a few extra dollars can be tempting by offering a load or two at a premium, but care must be taken to avoid pushing the market up for the short term and setting up a falling market that ends up cutting overall consumption.
Export demand into China, both Hong Kong and mainland China, has been very strong. Turkey, the second largest market for inshell walnuts, continues to show strength in their markets and old crop inshell is gone and Ramadan consumption has left the country without excessive inventories. Korea, the only major export destination that had large forward inventories seems to have worked through their long supplies and demand for new crop kernels is starting to increase. Inventories in Europe are low, but shipments of traditional inshell varieties into Europe will run into difficulties as those are traditionally a Christmas item and the shipping window for those is now compressed. Japan’s demand appears to be consistent with last season and for the moment the favorable exchange rate vs. weak US Dollar is countering resistance to the high prices.
Prices have firmed approximately $0.15 on inshell cracking varieties, $0.10 on Hartley inshell since opening prices and kernels have jumped $0.25-0.30/lb. Historically, market prices have been sustainable at levels even higher than the current spot levels, but should prices continue to increase there would be a chance of movement slowing in certain sectors, primarily domestic consumption or other countries where the higher prices are not being offset by a falling dollar relative to their local currency.
Mike Poindexter
Poindexter Nut Company

Weekly Cashews Update

OCT 16, 2010

Cashew market was extremely quiet in Week 41 – October has been much quieter than normal. Some processors sold W320 around 3.20, W450 around 3.10, SW around 3.00 FOB. There was fair interest for W320 around 3.20 FOB for Oct-Dec shipments but very few sellers. Large processors in India & Vietnam offered (and sold) some volume in the last two weeks – W240 around 3.60 and W320 around 3.30 FOB. Despite the relative quietness, large processors are not inclined to reduce prices to make sales.

After a month of good activity, Indian domestic market was quiet and prices drifted a little lower. The next big round of domestic activity for winter & marriage season is expected from mid Nov (after the Diwali festival). Vietnam processors expect good activity from their equivalent of domestic market (China) during Oct/Nov.

No fresh news on supply side. If arrivals in Indonesia do not improve in next 4-6 weeks, fears of a big shortage (quantity and quality) will be proved right. Brazil continues to be a question mark – some people say crop may be around 250,000mt. It is to be seen whether late start to the crop means that big a shortage or whether crop extends into Feb/Mar compared to the normal end of collection in Jan. Very high prices (about 15% higher than kernel parity) are being paid in Tanzania auctions. It seems that prices will not ease till the local processors have covered their requirement. Too early to talk about Mozambique as shipments unlikely before Jan.

On the back of some low priced purchases from few processors for Oct-Dec and probably with a view to getting some more sales on the books for 2011 deliveries, some importers have reduced their offers for FH 2011 – they are offering W320 around 3.35 C&F. This has not induced any significant buying - roasters seem reluctant to buy until they have an idea of retail offtake trends. At the same time, the lower offers from importers are not spooking origins to reduce their prices – processors are concerned about RCN prices (tightness of supply may not allow prices to come down even if kernel demand is slow).

It is difficult to estimate demand trend – there are some who feel that the high prices will mean a big decline in usage in EU & USA. Others feel that the impact may not be much since prices of almost all nuts are high. Although promotions will be for products which are more abundantly available, the base demand will certainly be there – all that is available will be consumed. Until supply improves significantly, price will be determined by periodic bursts of buying & selling (volatile in the current range).

If the RCN prices do not come down in 2010 and if the Brazil crop is as bad as feared, kernel prices will continue to be firm till mid 2011 (unless there is a big decline in usage in first quarter 2011 – a single digit decline will not have much impact). Even in the second half of 2011, kernel prices will soften only if Northern crops are very good and RCN prices decline significantly.

Like the last six months, the next few months will continue to be difficult – spot / nearby demand will have significant impact on price and this will determine forward quotes as well (unless there is a reasonable cushion, processors will be reluctant to sell). Till supply increases or sentiment changes, everyone in the chain (processors – traders – roasters) will have to adjust their strategies to have some cover for a few months to avoid being caught on the wrong foot.

Kindly let us know your comments on market situation, views on future trend + prospects and any other information + news

Pankaj N. Sampat

Opinion Prices looking up for raisin growers

By Don Schrack Published on 10/15/2010

It takes a special breed to be a grower. What with the fluctuations in f.o.b.s, paying sky-high prices for fertilizers and crop-protection chemicals and an often uncertain labor pool, gray hair can come early in life.

Then there’s fickle Mother Nature.

Don Schrack
Staff Writer

For most grower-shippers, her impact often dictates whether a farmer will be around for another year.

A too-short dormancy period, lack of rain, a freeze — all of them can spell disaster before the season begins.

Rollercoaster weather

It is the end of the season, however, that concerns California raisin growers.

The first week or so of October was a rollercoaster for them. With about 15% of the crop still drying on paper trays in the vineyards, the month was just two days old when rain hit the central San Joaquin Valley, the epicenter of this country’s raisin production.

Temperatures stayed low, but wind helped the drying.

Near-record prices
The picture brightened considerably by mid-month. Growers and packers agreed on a near-record price for the dried grapes — right at $1,500 a ton. That’s the highest price in a couple of decades.

As recently as 2002, the per-ton price paid to growers was about $750.

The reserve from last season, another ingredient in the raisin price formula, is at its lowest level in 30 years.

Then there’s the production dip in other raisin-growing countries.

Expect higher prices

The fallout for retail, foodservice and their consumers will be higher prices.

The reason is that supply and demand have equalized, said Gary Schulz, president of the Raisin Administrative Committee, Fresno.

After years of overproduction, thousands of acres of California vineyards have been pulled and replaced by other commodities — or housing developments — or converted to table grapes.

The committee’s 2010 forecast is 293,000 tons, down a big chunk from the 400,000 produced eight years ago.

Exports a factor
Helping the demand side of the scale is foreign buyers who are particularly fond of California raisins.

Exports now gobble up nearly half of the average year’s volume.

Domestic buyers will have to open the purse strings a bit to stay in the bidding.

At last check, about 80,000 tons of 2009 raisins were still in reserve.

Placing orders well before the holiday crush could mean capitalizing on last year’s lower prices.

The higher prices of the 2010 crop may very well stick around — at least into 2012.

The administrative committee, which determines what percentage of the crop will be released for immediate sale and how much will be held in reserve, has concluded all of the 2010 crop will go on the market; no reserve

Monday, October 04, 2010

Weekly cashews update

OCT 2, 2010

Cashew Market continued to be quiet in Week 39 – there has been very little export activity from India for more than six weeks now. Some processors in Vietnam have been selling at lower levels e.g. W240 around 3.50 and W320 around 3.25-3.30 FOB but volume has been limited. The large processors in Vietnam and India are at least 10 cents higher and they are able to make some sales at the higher levels. Brazil processors are very quiet. In the last few days, there have been reports of some importers offering at lower levels for 2011 deliveries but origins are not prepared to follow. Indian domestic demand and prices continue to be very firm and this situation is likely to continue atleast till end of the year.

Nothing new to report on RCN front. Spot RCN prices continue to be firm. No clarity about Indonesia & Brazil crop. No movement in East Africa. Vietnam and India processors access to new RCN is limited to max 175,000mt (including small quantities from 2010 West Africa crop) until the Northern crops start in March 2011.

USA & EU buyers seem to be content to buy limited quantities “as needed”. They are reluctant to take forward positions due to uncertainty of demand trend – especially because prices are on the higher side of the long term range. Processors also are comfortable with regular sales of small quantities as they have seen prices moving up with each round of buying (and at all times, there has been some market which has been active). At some stage, trend will change and prices could come down but this is unlikely to happen in short or medium term.

Tipping point will be when there is a big improvement in supply or a big drop in usage. Impact of high prices on usage will not be known until Mar/Apr 2011. Supply cannot increase till May/Jun 2011. At this time, it is impossible to predict either. Trend of regular activity for spot / nearbys will keep the market volatile. Small events can create large price movements. Wide range of prices at any given time will become the norm.

Until there is some indication of demand trend for 2011 or easing of supply tightness, market can be expected to hover around current range.

Would appreciate your comments on market situation, views & forecast of trend in coming weeks + months and any other info + news

Pankaj N. Sampat