Almonds market report - Macquarie Group

16 Pages·2014·2.09 MB·English

Almonds
market report
Macquarie Agribusiness
2
Welcome
Welcome to your annual almond grower update from the Macquarie Agribusiness team.
The 2013/2014 season is on track to be a solid year for the Macquarie Almond Projects. The orchard has recovered from adverse
weather conditions in previous seasons and all projects have produced greater than expected yields.
While the strong Australian dollar continues to impact almond prices received by Australian growers, US almond prices have
continued to trend upward due to strong global demand. This upward price trend is anticipated to result in an approximate
25 per cent increase in prices received by Australian almond growers. Based on the early estimates from our processor and
marketer, it is estimated that the almond prices received by the Macquarie Almond Projects will increase from $4.70 per kilogram
received last season to $5.85 per kilogram expected this season.1 The combination of yield and price increases meant that no
grower was asked to make a contribution payment in October 2013.
During pollination in August to September 2013, the orchard did not experience any extended periods of warm weather, which
generally increases fruit set percentages. We currently expect this to have a minimal impact on the 2014 harvest yield, provided
normal weather conditions prevail between now and the harvest.
The team on the orchard continues to focus on improving operations and completing orchard management activities. The
Macquarie Agribusiness team remains focused on the ongoing management of the Macquarie Almond Projects and we
thank you for your continued support.
1 Indicative prices are after processing, marketing and all hulling, shelling and transport costs.
2013 almond harvest update
During the second quarter of 2013, Macquarie Agricultural Across the Australian almond industry, the ’crackout percentage’
Services completed the harvest of the 2013 crop. All almonds of the Nonpareil variety has been lower than in previous years.
were delivered to our processor and marketer, AlmondCo,
This was attributed to a period of above average temperatures
where they were sorted and sized in preparation for processing,
in early January which coincided with the kernel filling of the
marketing and sale.
Nonpareil variety. The average temperature during the period
A return to more favourable weather conditions in the was 42 degrees celsius, with temperatures reaching 46
2013 season resulted in greater than expected yields for all degrees celsius. The crackout percentages for other varieties
Macquarie Almond Projects. The almond harvest commenced were closer to average, as their kernel filling period occurred
in mid February and was completed in mid May. While there after the period of above average temperatures.
were limited issues with rain compared to the previous
A high proportion of the 2013 almond harvest were in the
season, the harvest was interrupted by four rain events which
larger size ranges (22/24 and larger).
suspended operations for short periods of time.
Crackout percentage refers to the weight of the kernel after hulling and shelling as a proportion of the
whole fruit.
Almond sizes are measured by determining the number of almond kernels per ounce. A lower number of
kernels per ounce represent larger nut sizes. The 18/20 size category represents the largest nuts, while the
35 plus category representing smaller nuts.
The graph below illustrates the size of Nonpareil almonds Larger sized almonds typically command a price premium
produced from the 2013 crop from all projects. The Macquarie over smaller almonds. We expect this premium to be more
Almond Projects have again returned a good percentage of prevalent this season with the US crop largely consisting of
larger almond sizes, with approximately 88 per cent of the smaller kernels. The US crop was subject to unfavourable
Nonpareil crop being sized in the 24/27 range or larger. It is weather conditions and water restrictions during the growing
important to recognise that generally, higher yield productivity period which resulted in their Nonpareil crop being heavily
is counterbalanced with smaller nut sizes. With all projects concentrated in the 25/32 size range.
producing record yields this season, our orchard operations
team have been able to achieve high yields without significantly
sacrificing kernel size.
Macquarie almond Nonpareil nut sizing compared to all AlmondCo growers
40%
35%
Macquarie Nonpareil 2013
30%
AlmondCo all growers Nonpareil 2013
25%
20%
15%
10%
5%
0%
16/18 18/20 20/22 22/24 24/27 27/30 30/32 32/35 35/40 40/45
Largest Smallest
Source: Macquarie, AlmondCo.
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Macquarie Almond Projects
The three main drivers of grower returns for almonds are price, Operating costs were lower than expected for the 2012/13
yield and costs. season largely due to the reduced pruning and chemical
costs. The reduced pruning cost was a direct result of the
Prices and yields are influenced by a variety of factors, some
orchard management team controlling tree growth through
of which are outside management control such as exchange
water and nutrition management, while chemical costs were
rate fluctuations and weather conditions. Operating costs can
lower than expected due to the dry weather experienced
be directly controlled by management, and to date costs have
throughout the season.
tracked in line or below budget without adversely impacting
the productivity of the trees.
Macquarie Agricultural Services uses state of the art weed seeker technology which uses lasers to detect
weeds on the orchard floor, thereby allowing chemicals to be applied only to weeded areas. This has allowed
us to reduce the amount of chemical required to control weeds.
This control of operating costs required a dedicated effort by Macquarie commissioned an independent expert report
management, as the cost of major inputs such as fertiliser on the orchard in September 2012 (the SRHS Report).
and electricity increased in recent years. Operating costs for The report provided growers with an assessment of the
the 2013/14 year are currently tracking to budget. performance of the Almond Projects at that time, including
commentary on targeted future yield and operating costs.
A copy of the report is available to all growers through the
investor website. We encourage growers to read the report
if they have not already done so.
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Project updates
Macquarie Almond Investment 2006 (including late growers)
The 2006 project now 750 kilograms per Almond
consists of 289.82 hectares Lot communicated in the
of trees planted in 2006, 2012 SRHS Report.
following flood damage in Larger sized almonds typically
The recent pollination
2011 which affected 23.18 command a price premium over
period was slightly cooler
hectares. the smaller sizes.
and wetter than in previous
During the second quarter of years, with the orchard
2013, Macquarie Agricultural experiencing rain during
Services completed the seven out of the first 14 days
annual harvest of the fifth of pollination. From initial
almond crop. The project observations we expect this
again produced a crop to have a minimal impact on
containing a good amount the 2014 harvest yield for
of larger sized almonds, with the 2006 project. We expect
a large proportion of the yields to remain in line with
Nonpareil crop producing target yields, provided
almonds in the large 22/24 normal weather conditions
size category or higher. are experienced between
The final merchantable now and harvest. Flowering
yields achieved for the 2006 for next season so far looks
project was approximately promising with the trees
781 kilograms per Almond showing good early bud
Lot, 4.13 per cent greater development and growth.
than the revised yield of
Macquarie Almond Investment 2007 (including late growers)
The 2007 project consists of approximately 801 We expect yields to remain Flowering for next season
of two separate almond kilograms per Almond Lot, in line with that of the target looks promising with the
plantings, 183.85 hectares 10.48 per cent greater than yields, provided normal trees showing good early bud
planted in 2006 and 193 the revised yield of 725 weather conditions are development and growth.
hectares planted in 2007. kilograms per Almond Lot experienced between now
communicated in the 2012 and harvest.
The 2007 project once again
SRHS Report.
produced a crop containing
a good amount of larger The recent pollination period
sized almonds, with a large was slightly cooler and wetter
proportion of the Nonpareil than in previous years, with
crop producing almonds in the orchard experiencing rain
the large 22/24 size category during seven out of the first
or higher. Larger sized 14 days of pollination. From
almonds typically command initial observations we expect
a price premium over the this to have a minimal impact
smaller sizes. The harvest for on the 2014 harvest yield for
the 2007 project produced a the 2007 project.
final merchantable yield
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Macquarie Almond Investment 2008
The 2008 project now per cent greater than From initial observations we This is a common
consists of 83.1 hectares of the revised yield of 580 expect the 2014 harvest phenomena witnessed
almonds planted in 2008 on kilograms per Almond Lot yield for the 2008 project in the almond industry
the ‘Margooya’ property after communicated in the 2012 to be slightly below target. where trees that over
3.4 hectares were impacted SRHS Report. It should be noted that the perform in one year may
by the 2011 floods. 2008 project yield increased underperform the next.
The recent pollination
approximately 200 per cent
The 2008 project produced period was slightly cooler
from 258 kilograms per
its third commercial harvest and wetter than in previous
Almond Lot in 2012 to 794
for growers in 2013. The years, with the orchard
kilograms per Almond Lot in
harvest was completed in experiencing rain during
2013. This large 2013 crop
mid May 2013 and yielded seven out of the first 14 days
will impact the 2014 yield
approximately 794 kilograms of pollination.
potential.
per Almond Lot, 36.89
Macquarie Almond Investment 2009 (including late growers)
The 2009 project now was completed in mid 2013 The recent pollination period We expect yields to be roughly
consists of 171.22 hectares and yielded approximately was slightly cooler and wetter at target yields, provided
of almonds planted in 2008 703 kilograms per Almond than in previous years, with normal weather conditions are
on the ‘Margooya’ property, Lot, 21.21 per cent greater the orchard experiencing rain experienced between now
after 7.28 hectares were than the revised yield of 580 during seven out of the first 14 and harvest. Flowering for
impacted by the 2011 floods. kilograms per Almond Lot days of pollination. From initial next season looks promising
communicated in the 2012 observations we expect this with the trees showing good
The 2009 project produced its
SRHS Report. to have a minimal impact on early bud development and
third commercial harvest for
the 2014 harvest yield for the growth.
growers in 2013. The harvest
2009 project.
Macquarie Almond Investment 2011
The 2011 project consists of approximately 735 kilograms the orchard experiencing rain experienced between now
19.75 hectares of almonds per hectare, 26.72 per cent during seven out of the first and harvest. Flowering for
planted in 2008 on the greater than the revised yield 14 days of pollination. From next season looks promising
‘Margooya’ property. of 580 kilograms per Lot initial observations we expect with the trees showing good
communicated in the 2012 this to have minimal impact early bud development and
The 2011 project produced
SRHS Report. on the 2014 harvest yield for growth.
its third commercial harvest
the 2011 project. We expect
for growers in 2013. The The recent pollination period
yields to reach target yields
final merchantable yields was slightly cooler and wetter
next season, provided normal
achieved are expected to be than in previous years with
weather conditions are
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Industry update
Water update Factors influencing Australian
almond prices
The managing authority for water allocations for the Victorian
irrigation region is Goulburn Murray Water (G-M Water).
Almond prices are typically set through contractual
The latest seasonal outlook announced by G-M Water on
negotiations between buyers (including food wholesalers
15 November 2013 stated that high-reliability water allocations
and retailers) and sellers (including the major processing and
in the Murray River system had reached 100 per cent. As
marketing companies such as AlmondCo in Australia and its
such, we expect to receive our full current water allocation,
equivalents in the US). Typically, the contractual arrangements
meaning we should not need to acquire additional temporary
are set out on different terms and agreed at different times.
water licenses.
For example, large industrial food companies may be prepared
We continue to monitor the water situation closely and will to take fixed price contracts for 12 months, while wholesale
take any additional action as appropriate. Furthermore, purchasers may prefer to take immediate delivery at prevailing
we continue to adopt measures through our irrigation spot prices.
infrastructure to help reduce our water usage, while not
Generally, the almond industry conducts its negotiations
impacting the growth and yield potential of the trees in
around a monthly spot price which varies between almond
the orchard.
variety and size. The standard benchmark for the almond
spot prices is the price (in US dollars) received for Nonpareil
Quality of the almonds
almonds in the 23/25 size category. While this provides a good
proxy for almond price movements relative to demand and
Almond quality is one of many factors that can drive a
supply, it does not reflect the actual average price received
premium price. Globally, Australian almonds are considered
by growers.
to be of the highest quality and are free of many pests and
diseases that impact production levels in other countries. The actual average price received by growers for almonds
While the harvest was interrupted by a number of rain events, is dependent upon a combination of factors, including the
the wet conditions did not have a significant impact on quality variety, size, quality, Australian dollar versus US dollar and
and overall, the 2013 crop was of good quality. global demand/supply. Typically, the selling period for the 2013
crop will be completed by mid 2014, and we therefore expect
The Macquarie orchard team managed the weather conditions
to receive final prices for the 2013 crop around July 2014.
well, evident by the predominance of higher quality grades
(A and B) of almonds and the low incidence of damage.
Exchange rate
As the benchmark global almond prices are quoted in US
dollars, the price at which AlmondCo is able to market and
sell almonds in Australian dollars is influenced by the prevailing
The Macquarie Almond Investments exchange rate. A high Australian dollar makes our almond
are focused on producing high exports less competitive as they become more expensive,
quality almond varieties. The adversely affecting prices received in Australian dollar terms.
Nonpareil almond is the most Conversely, the weakness of the US dollar has increased the
popular almond nut and generally
attractiveness of US exports and assisted US producers in
commands premium prices.
marketing their almonds.
Approximately 50 per cent of the
trees planted on the Macquarie In June 2013, the Australian dollar fell below $US0.95 for
Almond orchards consist of the the first time since September 2010. As a significant amount
Nonpareil nut variety, compared to of the 2013 crop was sold by AlmondCo before June 2013
less than 40 per cent in California.
the full effect of this drop in the Australian dollar will not flow
through to this season’s prices. Should the exchange rate
however continue its downward trend, this would benefit
prices received for next season’s crop.
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The graph below illustrates the movements and overall appreciation of the Australian dollar since 2009 compared to its 25 year
average. It can be seen that while the Australian dollar has been trending downward since May this year, it remains significantly
higher than the long term average.
Historical $A:$US exchange rate
$A:$US
1.2000
1.1000
1.0000
0.9000
0.8000
0.7000
0.6000
0.5000
0.4000
$A:$US
0.3000
25 year average ($US 0.76)
0.2000
0.1000
0.0000
1986 1987 1988 1989 1990 1991 1992 19931994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102011 2012 2013
Source: Bloomberg, Macquarie, 2013.
Domestic supply Global demand and supply
The Australian almond industry is anticipated to produce the While Australian almonds are typically harvested during the
largest almond crop on record in Australia for the 2012/2013 months of February to April each year, harvesting of the
season, with early expectations indicating a total production northern hemisphere based US almonds crop typically occurs
increase from 50,000 tonnes to approximately 72,000 tonnes. between May and July. US almonds shipments (sales) for
This is reflective of a number of almond orchards which each annual US almond crop are therefore recorded starting in
were planted several years ago that are approaching or have the month of August through to July each year. For example,
reached full productive maturity. the US almond crop of 2013/14 will be represented by sales
occurring during the months of August 2013 and July 2014.
The Almond Board of Australia (ABA) is anticipating Australian
production growth to continue over the next few years with US almond shipments for the 2012/13 US almond crop
approximately 57 per cent of Australian almond plantings yet (ie from August 2012 to July 2013) were the second largest
to reach full maturity. Based on 2012 planting survey results, on record. More than 1.86 billion pounds of almonds were
Australia’s almond plantings are just over 30,000 hectares, shipped by US suppliers during the year, down slightly on
and as plantings continue to mature, by 2017 production is last season’s all-time record of 1.89 billion pounds, however
estimated to reach more than 90,000 tonnes. significantly greater than the third largest season on record in
2010/11 of 1.66 billion pounds.
The ABA have also observed that Australian domestic demand
for almonds has increased by 73 per cent over the past four Global demand has grown by 9.80% pa during the past six
years, from 0.492 kg per person in 2007/2008 to 0.853 years. US shipments have increased in recent years largely
kg per person in 2012/13. The 2012/13 season alone saw due to growth markets including India, the Middle East and
Australians eating 20 per cent more almonds with domestic China where increasing affluence is driving consumption.
consumption reaching 20,197 tonnes.
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The new 2013/14 US almond crop season commenced in It should be noted that data has been received only for the first
August 2013. Based on published data for the months of three months of the 2013/14 season, so there is no guarantee
August to October 2013 (inclusive) the new 2013/14 US that the trend of all-time record sales will continue, although the
almond crop season has currently experienced a run of season is off to a positive start.
all-time record monthly almond sales, which the Almond Board
of California puts down to increasing healthy eating trends.
Million lbs. Percentage change
Export market
August 2011 - June 2012 from last year
Western Europe 440,456,216 1%
Central/Eastern Europe 56,038,209 19%
Asia-Pacific 494,872,308 30%
China/Hong Kong 22,997,311 41%
India 113,798,550 17%
Middle East 193,183,301 25%
Source: Almond Board of California.
Demand, identified as consumption in the graph below, to full production of mature orchards, as well as difficulties in
exceeded the US California almond crop production in establishing/expanding almond orchards due to their specific
the 2012/13 season. This resulted in a significant rise in climatic requirements for growth.
US almond prices as shown in the graph on page 11 and
Recent drought conditions in California impacted on yields,
demonstrates the strength of the almond industry’s underlying
quality and operating costs for the region. As approximately
fundamentals with global consumption continuing to rise.
80 per cent of the world almonds are produced in California,
Despite the recent industry expansion, growth in supply is these pressures will constrain supply and firm almond prices
failing to meet the rate at which demand is increasing. This received globally.
is largely due to the relatively long time period from planting
US almonds shipments (sales)
millions lbs
2.000.0
1.800.0
1.600.0
1.400.0
1.200.0
1.000.0
800.0
600.0
400.0
200.0
-
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
Source: Almond Board of California.
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