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DOMESTIC COMMODITY UPDATES

There is so much going on right now that it’s hard to choose what to discuss. We will try to stay focused on the matters at hand. I for one like to stay away from matters that are affected by the presidents mood, nor do I pretend to understand a New England comeback from 28-3 to win the superbowl! New FSMA regulations is something we’ve already been tackling as we stay one step ahead to ensure that Kaynarfood and its valuable customers are in full compliance, but that’s for another discussion so back to nuts it is… ?

Cashews

There is much anticipation on what may happen in the next week or 2 as packers are returning from holiday. There is plenty business that have not been booked yet and many are holding out for better quotes. We may see a lot of packers bring down their offers in an effort to move what’s left of the crop. They cannot wait too much longer as new crop draws near, usually in March / April. Another factor to consider is the chain reaction of higher prices the last few months. For example, cashews are priced nearly twice as much as almonds in most major supermarkets, which may very well affect consumer use. On the other hand, if new crop is delayed we may be right back to square one.

All of this speculation is based on very real information, but let us not forget a most critical factor. At the end of the day nobody wants to take position in such a volatile market. Most traders and distributors are buying hand to mouth which means limited product domestically which would typically result in a tight market regardless.

We are recommending our valuable customers to book through 2^nd quarter as needed, and at the same time keep their antennas up for market shift (hopefully downwards).

Almonds

Today, As we wait for the Jan shipment report, which may very well show a strong shipment report as predicted, we are seeing a variety of price levels across the board. The market has definitely eased a bit recently and rightfully so. We are in the middle of a huge crop, over 2 billion pounds, and weather reports are pointing to possibly an even bigger crop next season. Even if tomorrows shipment report causes some slight increases which tends to happen, I don’t think it will last. At the end of the day this huge crop has got to sell. Like any good market, there’s always another side of the story. There are those that claim that a wet bloom (which is being reported) may cause a smaller / lesser crop, and they do have some science to back that up.

In summary, Almonds are still at very comfortable levels overall and you can’t go too wrong. Taking some position through 2^nd quarter would not be a bad move.

Pecans

This should really be split into 2 markets. We have the domestic top packers who all claim they are either sold out or extremely limited and their prices reflect such, then you have the smaller guys who have been coming into the market recently with relatively attractive offers with decent quantities to go around. There is definitely much resistance to book at these levels and I don’t blame them. Everything that we are hearing and seeing seems to point to a tight market, possibly throughout the rest of the season. It may be wise to take advantage of today's pricing, but as they say, anything can happen.

Walnuts

We only just began the new season and already supply is short. Quality for the most part has been very good and we are seeing a much bigger shortage on Combos because of it. Market has definitely firmed across the board, but in general walnuts are not overpriced yet.

Mehmet Kaynar

CEO

THE PEANUT MARKET UPDATE

USA

One good thing so far is that the Southeast has received plenty of rain so we will at least start with great ground moisture for the next season.

Cotton price for Dec 17 is just shy of 74 cents showing quite an increase in the past month. Most people I spoke to seem to think that unless cotton come close to 80 cents, it will not change a thing i.e. Peanuts are still the best crop to plant this coming season that is on any base acres. We need to keep an eye on this price the next couple of weeks, although I think the US should still plant a similar acreage as last year.

Market has been very quiet the past couple of weeks.

Current crop prices have creeped up a little with levels of 62 to 64 cents on any cut. As much as there is little supply out there, there is also little demand at least for now.

Quality, especially aflatoxin, continues to be a concern for the 2016 crop. Red tag material saw a run up (with prices on mediums and jumbos in the high 40’s) at the end of January, but demand has disappeared as of late. With the reports of aflatoxin problems in China, it will be interesting to see if demand picks up again or disappears. A big key for red tag prices.

Good volume business was done earlier in the year for 2017 crop with buyers covering part of their books at the 52/55 cents level depending on cuts. This barely covers the us$ 475.- farmerstock cost that shellers have in their books. The question of many is can the price go lower. Depending on the export demand, the US needs about 2.8 to cover demand. So I guess the question is will the price go down if the crop is above 3 million tons. In order for any surplus to be available to the open market, it has to be bought by the shellers. And remember that farmer have 9 months from the loan to basically sell their peanuts. Shellers have no incentive to go and buy more farmerstock at potentially lower prices if there is a good crop, unless they have sold their us$ 475.- book. So, is it possible for prices to go down. My answer would be yes provided we have a good crop, and would only be sometime next year. But going down is relative. A couple cents are definitely possible, but I don’t believe much more than that. And lastly I believe that any potential surplus that could be potentially forfeited would probably fall in the hands of the Chinese. As long as the Chinese continue buying farmerstock, I don’t believe that the US will end up with any surplus. I think the bigger risk if definitely on the upside. With no surplus being carried from the 2016 crop, it wouldn’t take much for this market to jump to 2016 crop levels.

USDA Peanut Stocks and Processing: quite a decline this past month. Let’s wait to see if forward numbers correct this downtrend.

Dec 16 vs. Dec 15: Peanut candy up 24.73%, Peanut snacks down 25.48%, Peanut butter down 6.28%, Total edible down 7.23%, Inshells down 12.21%

Aug-Dec 16 vs. Aug-Dec 15: : Peanut candy up 12.87%, Peanut snacks down 8.53%, Peanut butter up 3.29%, Total edible up 1.49%, Inshells down 14.03%

Exports update:

Dec 16 vs. Dec 15: 59’982 mt vs. 31’770 mt (up 89%). Biggest volume increase coming from China/Vietnam with 29’100 mt exported vs. 6’447 mt a year ago.

Aug-Dec 16 vs. Aug-Dec 15: 207’307 mt vs. 155’524 mt (+33%). Biggest volume increases coming from The Netherlands +44%, The UK +89%, Mexico +27%, China +201% and Vietnam +42%.

Despite this continued increase, I still believe we will see overall exports decrease for the season with exports to China and Vietnam probably falling January forward.

Argentina

Little left on 2016 crop. Most of what is left lower is low quality. On the other hand, demand has been quiet lately.

Rain has been plentiful so far for the new crop. Some parts have actually had too much water but not a concern so far.

Prices are still in the us$ 1550/1575.- level for raw 38/42 and 40/50 + us$ 180.- for blanched. Demand though seems to have slowed down with the good progress of the crop with buyers thinking that prices will go down if the crop continues to its positive development. Prices certainly can go lower but when one thinks about Argentina, one always has to worry about the weather during harvesting.

Brazil

Brazil has had plenty of rains for their new crop with actually some fields in some areas being flooded. In general though the crop is doing very well. But with harvesting soon to start, rains need to stop.

China

China is slowly coming back from their Chinese New Year. It will be interesting to see what directions the Chinese market takes for the period of March through July.

Despite earlier reports that the Chinese crop was in the 15 to 17 million tons, many believe that the crop is actually much smaller than that supporting the current firm prices.

Several things to note:

• The exchange rate of the RMB vs. US$ has raised the cost of importing peanuts by about us$ 40/45.-.  
• Several problems on the quality of US peanuts entering China. There are reports that some farmerstock was rejected by CIQ in China due to very high aflatoxin levels. This makes one wonder how much appetite there will be for red tag material, although most of that material tends to go through Haiphong. Although makes one wonder how this will impact any material going to China and how they will buy in the future. One thing for sure demand for red tag material has somewhat disappeared lately; not sure yet if it is a market reaction or just because of the Chinese New year.
• Part of the firmness of the market can be possibly attributed to slow arrivals from Senegal. Senegal, despite earlier reports, had a shorter and more immature crop than expected, and they also impose3d an export tax.
• Most manufacturers are tight on stocks which could results in an increase in prices in the short term. Thereafter it is a matter of the demand.
• Lastly China has been more active this year in exporting peanuts considering their competitive prices.  

South Africa

The latest crop estimate issued on January 26, 2017 estimates now a planted area of 45’400 ha vs. 22’600 has for the previous year.

Despite late rains to start the planting season, the weather has been favorable so far. If the weather continues to cooperate, South African could have a 55’000 mt crop which would welcome after several disastrous crops.

The Almond Board of California has released the January Position Report with shipments of +165.80  million pounds compared to +129.4 million pounds last year for an increase of +28.3 percent.  Shipments came in slightly higher than what the industry had original been predicting. Thanks

YEAR TO DATE SHIPMENTS:  We are now at +1.116 billion pounds compared to last year at  837 million pounds for an increase of +33.4 percent.

                                Percent up Year to date

USA                       +15%

Export                   +43%

CHINA                 +40%

Korea                    +46%

India                      +54%

Germany             +31%

Spain                     +20%

Turkey                  +176%

UAE                       +69%

CURRENCY: The dollar remains strong against most currencies.  The 1 Euro is at 1.07 dollars.

MARKET: There was a flurry of activity in mid to end of January with International and Domestic markets participating in buying resulting in a strong level of new purchases/sales of +159 million pounds in January.  The prices were stable in late January and then began to firm with the stronger demand levels.  Prices have become firm this week due to the onslaught of rain we continue to have combined with warmer weather.  The warm weather is advancing the bloom.  Some trees in the Southern part of the valley are pushing buds and even a few flowers have emerged.  The weather forecasts are predicting rain for the next few days followed by a few days of warm sunny weather in which the trees will advance closer to blooming, followed by a period of 3-5 days of more rain showers during the bloom.  Growers are cautious with the on- coming rains and the potential impact on the bloom.  The warm rains are melting the snow pack quickly which is causing flooding issues in the north valley.  Prices should remain stable to firmer.

FEBRUARY- looks to be another strong month for shipments again with some industry expects predicting another increase of 10-15% over last year.

GULF FOOD: Please plan to visit our booth in Dubai February 26- March 1, 2017.  US Pavilion-S3-C24 and S3- C26

Kaynar Food Commodities

The California Almond Board has released the December shipment report with shipments of +156 million pounds compared to last year  135 million pounds for an increase of  +15.4 percent.  New sales during the month of December were at +103.9 million pounds during the month of December.

YEAR TO DATE SHIPMENTS:   +950 million pounds compared to 707 million pounds last year for an increase of +34 percent.

               

                                Percent up Year to date

USA                       +12.9

Export                   +45.85%

CHINA                  +49%

Korea                    +44%

India                      +41%

Germany             +26%

Spain                     +21%

Turkey                  +180%

UAE                       +111%

CROP RECEIPTS:   Now at +2.06  billion pounds compared to last year’s crop of  1.85 billion pounds for an increase of +11.44  percent.  It appears the final crop will reach approximately +2.10 to +2.12 billion pounds. 

CURRENCY:  The dollars continues to strengthen against most major currencies.  The 1 Euro is at $1.05 dollars.

RAIN:  The major story in California is not almond shipments but the volume of rain we have received during the past week!!!  All rivers are near flood stage in the northern California areas.  Snow is arriving into the high Sierra mountains.  In some areas up to 10 feet ( 3 meters) of snow will have been received during this two week storm.  Ski areas in Tahoe now have a base of 80 inches to 110 inches of snow.  Some areas in northern California are experience flooding which goes back almost 100 years.  Here are some updates for you:

Area                      Rain Season to date        Normal to date   Last year            Average Annual Total

Sacramento        15.57 inches                       8.25 inches          5.76 inches          20.27 inches

Thus we are double our normal pace for rains this year and almost received 75% of our annual totals already!

Reservoirs are filling at a record speed:

Area                      Percent filled     Compared to Normal Level at this time of year

Shasta                   78%                        122%

Oroville                69%                        110%

Folsom                 64%                        128%

Reservoirs are above averaged filled already for mid-January.

MARKETS: During the month of December many markets were extremely active in buying for their first quarter needs.  Middle East, Europe, India, and USA were all active in buying in December.  Prices have eased slightly during the past few weeks which has stimulated more demand. With each additional rain, ore growers/packers have been motivated to sell some of their inventories.  Most packers are reaching a 70% sold position on this crop and 60% sold overall for the industry when including the carry in.  By April/May the industry will begin to run light on good quality Extra #1 and NP Inshell as both have been heavily sold already.

JANUARY: Most packers are expecting stronger shipments in January this year compared to last year.  We could see shipments up 15-25% over last year.

December Walnut Monthly Shipment Report:

December of 2016 compared to December  2015 Shipments- December   2016 shipments were +67,083 Inshell equivalent tons compared to 67,418 Inshell equivalent tons last year. Representing an increase of  less than 1.0%.   So basically flat

Year to date Shipments 2015/2016 vs. 2014/2015 Marketing Year- Inshell Equivalent Tonnage for the 2015/2016 crop is 357,476 compared to 277,559  last year.  Representing an increase  of + 79,917  inshell equivalent tons or +28%  !

 CROP RECEIPTS-  Receipts are 678,825  tons as of  December 31st  2016.  The CASS Crop Estimate was at 670,000 Inshell tons.

                                                                        

DOMESTIC SHIPMENTS: Year to Date: 9,545  Inshell tons compared to last year’s 10,570  inshell tons.  Representing an decrease  of (9%)!

EXPORT SHIPMENTS: Year to date: +309,952  inshell tons compared to last year’s of 219,295  inshell tons.  Representing an increase of +41% !

NOTABLE WALNUT SHIPMENTS BY COUNTRY OF DESTINATION

December  2015 / December 2016

Inshell:                                                                                 Shelled:

China: -19,27%                                                                 Germany:   +5.22%%

Vietnam:  31.96%                                                             Spain: + 43.45%

India: + 122.28%                                                             China: +93.40%

UAE: + 201.72%                                                                   UAE: + 82.83%

Pricing:    Prices continue to rise over the last few weeks on both inshell and kernels.   Most packers are very well sold on both Chandler/ Non- Chandler Kernels and Inshell.   A few packers are even reporting that they are getting very low on all inshell varieties and only have a few loads of shelling stock left to sell until they will be completely out.  Both Howard and Tulare Inshell are almost sold out for this year. 

LHP Chandler 80’s started out this season at the level of $3.50 per lbs  FAS and have now moved up to $3.80 per lbs FAS

J/L Chandler Inshell started out at $1.25 FAS in the beginning  of the season and have now moved up to $1.40-$1.45 FAS. 

Market has definitely strengthened on very good demand.

Market: The Non- Chandler variety color was very good this year and a lot of that material has either been committed or sold up to now.  Pricing  for both Chandler and Non- Chandler 20’s, 40’s and 80’s have increased the last few weeks with very few offers and a lot of demand coming from the United States  for both Q1 and Q2 shipments.  Turkey and India continue to buy both Jumbo and Jumbo/Large Chandler Inshell for shipments in January and February. Demand has been strong from both of those countries the last few weeks. Chinese New Year will start in late January and it is unknown at this time when they will be back in the market to buy both kernels and inshell.

We would recommend to look to book your needs for Q1 and Q2 at this time as it does seem this market is getting low on much of its inventory.

Domestic market updates

Cashews:

While we’ve seen some very active trade during the first week of the New Year, things seem to have calmed down a little this week. I’m not really referring to prices but it may ultimately affect prices as well. We’ve gotten used to a new trend that has become the norm…. prices ease with a nickel or a dime and everyone buys. Then prices move right back up and everyone withdraws and this keeps happening over and over again and again…

At this point, nobody is really believing that we have a chance of significant relief at least until new crop comes around. It’s also too early to know how the incoming crop will look like… will it be on time? Will it be a large crop? Will the quality be there? And the speculation goes on and on… If there’s one thing that we need to learn from the past 2 years, it’s that one cannot rely on all this speculation! Smart buyers are covering at least some of their May-Sep needs not to be caught with their pants down! These buyers are arguing that it pays to have product on hand even with the risk of having paid a few extra pennies rather than experiencing last year’s saga again! I personally couldn’t agree more with them, especially when considering that even if the market does drop I don’t believe it’ll be very significant until we pass the bottleneck period… and who knows when/if that will actually be!

Pecans:

This commodity is beyond confusing! Prices are sky high and will very likely sustain themselves for the remainder of the crop year. Although we’ve seen some desperate sellers out there (very few) that are willing to sell at somewhat below the market, I don’t think this will affect much and it’s definitely not across the board. Those offers are coming up sporadically and if you can find ‘em, grab ‘em! I’ve seen some reports predicting a down market and I beg to differ….

Walnuts:

January is usually one of the quietest months of the year, yet we’re still seeing a lot of interest coming in from all directions. Shipments are very strong and buyers are afraid of an additional price increase. Prices are still at a very comfortable level and our advice is to book all needs thru Aug/Sep if you haven’t yet.

Almonds:

The biggest losers out there are those people that decided that God decided to abandon California after taking care of them for a few thousand years J… Just remember how those panic stricken reporters were scaring the guts out of us with those historic drought articles (according to Trump it must have been CNN J). The almond growers loved it and took us for a good ride based on those reports. Now if you’re following the news, California is drowning in rain/snow. Reservoirs are filling up faster than ever, rivers are flooding many areas, and snow keeps accumulating on the mountain peaks.

On the other end, almonds shipments are strong again and buyers are not so hesitant to purchase. I would call this a sideways market with no significant changes on the horizon.