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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