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BRAZIL NUT REPORT May 2017

‘’DISASTER
 
My 88 year old father, Terry, who has taken an interest in the machinations of the Brazil nut market all his professional life



To view the previous reports on Brazil nuts, Almonds, Hazelnuts, Pecans, and hot industry news please click on the link below...

November 2015
If sales in the wholesale nut business  are the bell weather for the economy at large then we may soon have more important matters to concern us than the price of Brazil nuts.

September 2014
2014 has been a difficult time for Brazils. Firstly the yearly rains came earlier and heavier and were more persistent  than usual.

August 2013
The Brazil nut crop is very short this year and problems seem to be compounded by shippers defaulting on their contracts.

November 2011
This years season began with much higher than normal prices, then proceeded to rise up to stratospheric levels.

Many buyers held back early in the expectation of a massive crop and falling prices from Bolivia.

 

September 2008
It has been a long cool summer for nut sales.
Cashews prices have felt the chill winds of demand destruction due to over-pricing and more recently an icy blast from the falling purchasing power of the Euro.

February - 2008
Traditionally, this is a quiet time of year for this commodity as the new crop is being collected, transported to the shelling plants and assessed for quality and volume.


August 2007
Like the seas, this market is forever on the move  as the many  factors that drive the price upwards and downwards continuously change.

March 2005
Forward prices have been weak until recently as shippers at origin look to make sales to raise finance for their annual seed purchases

February 2005
This is a market to be brave in. On a forward basis, prices in £ have dropped considerably during the first days of 2005.

November 2004
It is clear that the reason for the current runaway bull market in Brazil kernels is due to greatly increased demand, perhaps 25% on the year.

May 2004
All time highs are being made at the moment as the problems of the past few months start to bite.

March, 2004
Today We see a confused situation with high prices remaining

October, 2003
Prices are steady at the very low levels they have been at for some months...



 

July 2016

The summer doldrums are with us and markets are quiet and slow.

The Brexit currency shock has seen prices for brazils  in sterling terms rise precipitously in the past 3 weeks.

It looks like sterling will not recover for a while so we had better get used to levels back in the 6 something per kilo for wholes.

Back at origin, there is a two tier market developing: A premium for the BRC or equivalent standard and a discount for those  who have not yet got there. Clearly there is now incentive for all non certificated  Bolivian factories to pull themselves up and this can only be a good thing for the whole industry.

Sellers seem comfortable at current price and are happy to be producing and selling steadily. There is no large stock building  up and  burning a hole in pockets anywhere in the supply pipeline.

After last years’ price fall in the fall, due to an influx of raw material before the rainy season, forward orders this year  from October are subdued because buyers do not wish to be caught for a second time.

However this is unlikely to recur this season.  It is a small crop and some fairly sizeable factories are planning early closures, within the next few weeks. They may not open again until February.

We are not necessarily predicting that prices will go crazily upwards but we are going to stick our neck out and say that no serious declines in price are expected until well into next year.

 

November 2015

If sales in the wholesale nut business  are the bell weather for the economy at large then we may soon have more important matters to concern us than the price of Brazil nuts.

As we can see from the latest California almond shipment numbers for October 2015, much of the world has found the recent high price of nuts too much to bear, especially when they are dealing with economic slowdowns in the Far East, Strife generally in the Middle East and deflationary spirals in the West.

We thought that Bolivian production  was just about finished towards the end of Summer but the high price encouraged a second harvest , production has continued coupled with a slowdown of demand.

No wonder prices have weakened significantly lately.  We are 60 cents from the year’s High price

But demand remains resolutely moderate.  Stocks may build until buyers return. Where do we go from here?

We have given up making predictions because the only certain is that they will be wrong, however many scenarios we try to cover.

We have material available for sale, ex store UK. POA.

SEPT 2014

2014 has been a difficult time for Brazils.

Firstly the yearly rains came earlier and heavier and were more persistent  than usual.

This and perhaps a new dam further down the Amazon caused widespread flooding in the collection and processing areas in the Pando region of Bolivia.

We are used to the problems with roads, bridges and ferries going down and causing long delays in shipments
but this time it really is different.

The flooding of production facilities has limited the volume of material available for shipment and the much higher percentage of wet damaged raw material are seriously impacting on the yield.

The upshot of all this is that with 7 months of consumption to run before 2015 crop starts to arrive,

There are no offers and the crop is exhausted.

Very little unsold material is expected to come to the market in the interim.

 

AUGUST 2013

The Brazil nut crop is very short this year and problems seem to be compounded by shippers defaulting on their contracts.
 
That said, demand is also lacklustre considering the high prices reigning at the moment.
 
However, prices are not likely to fall as the market will be kept firm by importers scrambling to re-buy the
defaulted shipments.
 
At some time in the future, the shortage will be contained by the very high prices and we will see more reasonable prices.
 
Please bear in mind, though that Many factories are closing early or already closed and the 2014 crop will not start to arrive before April.
 
This is a bad situation which seems only to worsen.

Contact us for any requirements you may have and we will endeavour to give you a firm price.

August 2012

At this point it may be worthwhile reminding ourselves about the price movements for 2011 crop.

The low was around $3.20 per lb FOB origin early in the season, rising to a high of around $5.20 during the Autumn.

Since then we have seen a steady erosion at the price, bringing us to a point now where we are now below the low set in 2011.

At these levels, considering the price paid for raw seed, no shipper can make money. We are expecting some of the weaker producers to throw the towel in soon. Whether their production capacity will be taken up by others is an open question.

At the importer level, only the very brave or stupid who shorted the market can possibly have made any money and there has been zero incentive to bring in any material unsold as losses would be assured.

This means that the spot market, both in Europe and USA is very tight despite appalling demand, and showing a premium of 60 – 80c per lb over the nominal prompt shipment price from origin. This premium could conceivably increase in the next few weeks if demand starts to revert to anything like normal conditions.

It is likely to persist until enough unsold stock is weighing on the market to pull prices back in line.

But the catch 22 is that whilst the market is weak, nobody is going to bring in Brazils unsold, so the premium lives on until we hit bottom and turn around with prices starting to tick upwards.

Then shipment prices may well start to take on some momentum as shorts and users with inventories that they have run precariously low are pulled in to cover.

Maybe we will eventually see the shipment price rise to meet the spot premium somewhere in the middle, depending on how aggressive the move up is.

Yes, this is a little speculative but the bottom line is the following:

What harm can buying for your October/November requirements at below the 2011 lows do? If you leave it until you need to buy on the spot you will be paying over $1,700 per tonne more!

Please contact us with your requirements for firm prices below $7,000 / E 5,700 or 4,500 per tonne for whole Brazils..

 

November 2011

This years season began with much higher than normal prices, then proceeded to rise up to stratospheric levels.

Many buyers held back early in the expectation of a massive crop and falling prices from Bolivia. When they eventually bit the bullet and bought, this only added fuel to an already raging fire.

Thus we saw F.O.B. levels start around $3.40 per lb and finish at near $5.20 per lb.

At the moment, the price is the only bearish factor in play. Production has ceased and new crop shipments will only start to get under way in Feb/March 2012, weather dependent. This means arrival April at earliest in reality.

There are pockets of spot stock available in Europe but fierce resistance exists to the sky high prices, so not much is moving at present, however it is very probable that 2012 crop will arrive to bare floorboards. The lack of material in the supply pipeline is bound to keep prices high well into Spring 2012 and maybe further.

'High prices have long arms' so it is logical, indeed, conventional wisdom, that the volume of raw seed collected will be abundant next year. But that was not the case this last year. Several factors are at play: Brazil is exporting considerable volume of in shell for cracking in the far East, especially China. They are also protecting their own interests by clamping down on the cross border trade with Bolivia, who need to import Brazilian seed to keep their factories running.

Incredibly, Brazil is a net importer of shelled Brazil nuts due to the burgeoning demand in their healthy economy.

All of this is written with the backdrop of a wider recession, or worse, possible in the global economy. Only one thing is certain in these uncertain times: People will NOT stop eating nuts!

 

September 2008

It has been a long cool summer for nut sales.

Cashews prices have felt the chill winds of demand destruction due to over-pricing and more recently an icy blast from the falling purchasing power of the Euro.

We do not think, however that stocks have built up to unmanageable proportions over the past weeks and with prices  in dollar terms a little more sensible than in June, we think that the nearby Christmas seasonal demand could be lively. There is still much business to do.

Buyers have been able to go on their holidays and relax. Staying away from the market has worked and prices are softer.

Demand seems to be off too, although patchy and hard to quantify: Organic and Fairtrade goods seem to be the worst hit as consumers tighten their belts and consider that 'charity starts at home'  ;  30 to 40 percent off in places.

On the other hand, Chocolate manufacturers are seeing an increase in demand.

For some companies, the aggression of the retail downturn has taken them by surprise.

They have been happy to let their stocks run down over the summer and are confident that they will be able to buy their requirements from an over-stocked spot market this autumn.

We can tell that this is true because many importers are stating that forward orders for the next 6 months are down by 70 to 90 percent.

Compare this to the actual sales slowdown of 0 to 30 percent and we can see the possibility of an eventual shortage occurring.

Unless something spectacular happens to change the course of events, we believe that the above mentioned ' disconnect' will become painfully apparent some time during the last 3 months of 2008.

Why? because importers are changing the way they behave.

Many have suffered capital destruction on an unprecedented scale as they have been forced to deliver cheap cashew contracts against very expensive purchases.

 With an unclear future, not only in specific nut markets but also in the national and international economies, they too have been loathe to make forward commitments without a firm order from their customers.

The above mentioned capital destruction means that they can no longer afford to keep such high levels of stock.

With a weak dollar and strong Euro, importers were doing ok picking off cheap cashew sellers, waiting for the goods to be shipped and then selling them to industry.

But with the resurgent dollar and weak summer demand, and especially the lack of spare funds, all that has changed.  

Funding difficulties have forced importers into a situation where the shipping documents for arriving goods are still unpaid at the bank. These are goods which should really be available ex store at this time of year but they are on the quay.

This represents a bottleneck where cash is king. And some buyers may be able to take advantage of this situation in the short term.

Today, cashew exporters are weakening their price expectations.

But please remember that forward orders are at their lowest levels ever. After the  financial bottleneck is cleared there will not be enough goods to satisfy seasonal demand with a shortfall of up to 50 percent.... If we are right that is..........

FEBRUARY - 2008

Traditionally, this is a quiet time of year for this commodity as the new crop is being collected, transported to the shelling plants and assessed for quality and volume.

 First indications are that 2008 crop will be normal in terms of  the amount collected.

 This is the wet season in the Western Amazon and we are used to hearing stories of roads and bridges being washed away. Transportation difficulties tend to be the norm rather than the exception.

 Except: Due to the weather pattern called ‘La Nina’ bringing large amounts of moist air from the Eastern Pacific, The Andes are suffering unusually high rainfall. This is now flowing into the Amazon tributaries and causing flooding in areas normally spared.

 Nobody can predict how this will disrupt the Brazil nut crop until the story plays out in real time,  but delays are inevitable. At the moment we are looking at up to 6 weeks.

 In the meantime we must humbly eat Brazil nut pie because the shortage we were expecting to bite towards the end of 2007 has not come to pass. This is because demand for xmas sales was subdued, probably due to the supermarkets ignoring this item. Several seasons ago, when in shell brazils became unavailable due to aflatoxin problems, Kernels were promoted as a seasonal alternative. Generally this did not occur during xmas 2007. 

 We do not, however, expect 2007 crop prices to fall significantly as the stocks are in strong hands and we have until at least early May – in a normal year -  for the new crop to arrive in any volume.

 We understand that in times of uncertainty -  which we are certainly facing  in the larger financial  and banking fields – buyers tend to be cautious.

This may explain why so little forward business has been concluded in Brazils. However, with just about every agricultural commodity seeing unusually large increases in price, it is becoming apparent that the falling U.S. dollar is buying less, making it unlikely that we will see weakness in this market any time soon.

 

August 2007  

Brazil Kernel Market Report

Like the seas, this market is forever on the move  as the many  factors that drive the price upwards and downwards continuously change.
 
So far this year we have seen a relatively quiet and orderly increase in prices by more than 35%.  But it is questionable whether the calmness is set to remain in place. 
 
2007 crop appears to be much  shorter than last year as  producers are reporting difficulty in securing sufficient raw in shell material to meet the annual demand of about 25,000 m.t.   
 
Here is how the numbers compare:
 
2006:
 
Carry in from 2005 :  3,200 m.t.
Bolivian Prod/n :      17,600 m.t.
Peruvian Prod/n         2,400 m.t.
Brazilian Prod/n         2,400 m.t.
 
Total:                         25,600 m.t.
 
 
 
2007:
 
Carry in from 2006: 1,600 m.t.
Bolivian prod/n      14,400 m.t.
Peruvian prod/n       1,200 m.t.
Brazilian prod/n       1,600 m.t.
 
Total:                        18,800 m.t. 
 
 
So it is beginning to look like supply will be down 6,800 tonnes or about 425 containers or 25%  this year. 
 
The shortage appears genuine. Even at the much higher prices which are reigning now,
we are finding difficulty in obtaining offers from origin and most suppliers will not even hazard a counter.
 
However, second hand sources may be willing to take profits on their earlier purchases and with the summer lull now fast approaching, it is possible that we may see a cap  on the market at current levels for the next few weeks.
 
Price considerations aside, we think that exhaustion of supply is a real possibility later this year.
First 2008 crop arrivals will not  start to trickle in until during April.
 
It may be that the rise in prices so far will destroy demand for  the missing 25% of the crop.
We  saw demand destruction during the short crop of 2005 but prices then  peaked at  more than 50 % above   the current level and  also  the dollar was much stronger then. Although we have seen $ strength recently due to the bond market inferring higher interest rates, we consider that the greenback will resume its slide before too long as more central banks start to hedge their reserves into alternative currencies.
 
If you agree, you may wish to consider keeping your forward nut purchases in dollars . 
 
If you have not already done so, we suggest that  a serious look at cover for last quarter 07 and first quarter 08  for your Brazil nut supply is essential.

In our humble opinion buyers need to have a good hard think as to whether they can continue to pay higher and higher prices for their supply, because if they can not, someone else will.

If you want to stay in :

Book, book forward, book forward as far as you can.

Remember who told you first. Look at our previous reports. This market has more bull in it than Pamplona. We have nothing to offer you at the moment, if you do decide to make a move, contact us and we will try to help.

March 2005

Brazil Kernel Market Report

Forward prices have been weak until recently as shippers at origin look to make sales to raise finance for their annual seed purchases.

But those needing to buy spot in the next few weeks will not find themselves benefitting from this situation.

Stocks in European warehouses have never been so low and replenishment is not on the horizon.

There is nothing unsold afloat, nothing on our books due to be shipped for at least another week which means a continuing hole in the supply for at least 6 weeks.

Then, for ' a while ' anything that does come afloat will be sold whilst on the high seas. We can not predict how long that ' while ' will be, but only after the pent up demand backlog in Europe is resolved

Expect the premium spot over March shipment to increase in the next few weeks, even if, as now looks possible, the forwards themselves start to firm up in the interim.

We do have very limited amounts of stock to sell.

February 2005

Brazil nut Market Report

This is a market to be brave in. On a forward basis, prices in £ have dropped considerably during the first days of 2005.

We can now offer at £ 2.75 per kilo ex store for June onwards arrivals.

In the meantime spot, also is a little easier at £3.90 per kilo ex store.

Prices for the first half of this year are on a sliding scale between the two.

Do not be fooled, however into thinking that these prices will continue into the coming months, there are specific reasons for the current weakness which have the potential to disappear like the morning mist.

Firstly look at the situation from the shellers point of view.

They only have eyes for the supply side scenario and with seed prices at an all time high, they need to make sales in order to finance this years operations. Accordingly they have been offering lower and lower during January in order to make a start whilst, worldwide, buyers have been taking a breather whilst they literally take stock of the situation. To be fair, prices were overdone in the last quarter of 2004 and a correction has been overdue.

High prices have long arms and, accordingly, this years crop is certain to be a large one as rainforest inhabitants break their backs to cash in on the high seed prices.

I'm afraid that if you are looking for any further bearish news in this report, you will be disappointed.

Last years crop was also brought in under historic high price circumstances and it has all been sold.

The crop size is only 30 to 50,000 tonnes, compared with ten times that amount for Hazels, for example. So even a sizeable increase in supply is relatively insignificant compared with other major tree nuts.

And have you seen the price of Almonds and Hazels.?

If you normally have forward cover for tree nuts, have to have them for your production, and are waiting, hoping, praying even, that prices will fall in the coming months because it always has in the past, then in my humble opinion you will be disappointed and wrong footed.

The reason for the high prices is not poor crops but a huge groundswell of increased global demand for these products following a plethora of news confirming that eating nuts will improve your health.

We have heard from some customers that brazil nut sales to the supermarkets are up by 100% year on year.

Brazil nuts, as you will be aware, are the best natural source of Selenium. Eating 2 brazil nuts per day, as more and more people are learning, can help to prevent cancers, heart disease and a raft of other disorders and illnesses. In the early stages of HIV infection, the virus neutralises Selenium in the body and it is becoming recognised that taking a supplement of this trace element can actually conquer aids!.

Divide the largest possible Brazil nut crop by 365 and share it out 2 nuts per person. How many people can be fed? answer about 22 to 25 million. This compares to a world population of 6.4 billion.

On a slightly less ethereal note, suppose you were a nut mixing operation, at current forward prices, wouldn't you be planning to put in as many brazils at half the price that Almonds and Hazels are at.

In short, do not expect the current low prices to reign for too long, take cover before it is too late.

November 2004

Brazil nut Market Report

It is clear that the reason for the current runaway bull market in Brazil kernels is due to greatly increased demand, perhaps 25% on the year.

It appears that This nut has been promoted from 'Whole food' to 'Health food'. The recent and ongoing press articles encouraging people to eat 4/5 brazil nuts per day if they want to keep healthy is keeping sales of packed brazil nuts high at the supermarkets.

The increases in price have, until recently been absorbed to a greater extent by suppliers to the supermarkets and a great deal of pain has been felt.

Additionally the word on Brazil nuts' health giving properties has spread worldwide and fresh demand is springing up in places as diverse as Israel and Morocco.

Not that the supply has been any smaller than usual, indeed 2004 crop may be one of the largest on record as prices were historically high when the raw nuts were collected last winter.

In other words, the jungle was scoured for nuts last year, It is unlikely that supply can increase significantly in 2005.

The free on board price is now at $4.00 per lb. The historical high, prior to this year was $2.10 . At the moment there is no let up in the demand.

The big question is whether and by how much these higher prices will dampen demand in the longer term.

Our guess is that there has been a paradigm shift in demand which will not put healthy eating buyers off and that higher prices will be the norm for brazil nuts.

Macadamia nuts have been selling at between £7 and £12 per kilo for many years.

The total crop size on Brazils is 30,000 m.t. Compare to Hazelnuts, for example 500,000 m.t.

High prices will definitely rein until at least May 2005 as the first shipments of new crop during Feb/March will be snapped into the jaws of a market bereft of stock.

Only when the supply pipeline is refilled later in 2005 will we see what longer term effect higher prices are having on the overall demand situation

May 2004

Demand outstrips supply

All time highs are being made at the moment as the problems of the past few months start to bite.

The small crop has been repeatedly delayed by late rains, industrial disputes in production, civil strife, bridges down and port strikes.

All this comes at a time of unprecedented fresh demand from the U.S.A. (healthier eating) and many other countries with developing middle class economies and populations looking to eat and snack healthier.

The Sunday times recently listed Brazil nuts as the top anti - ageing food of all.

Raw seed arrivals from the primary rainforest will soon slow dramatically as the Amazon rivers, currently filled with Andean snow melt and seasonal rains starts to drop. No self respecting commercial barge owner will sail on a falling tide, especially if the tide is annual.

So the situation is difficult to say the least. Spot prices are around $2.60 per lb ex store. Afloat around $2.35 per lb F.O.B.

In our earlier report we suggested that when the supply pipeline started to fill, prices would start to fall. At the time of writing the shortages are still reigning with only a few containers afloat unsold to ease the situation.

The big news is on the forward market where the discount on future months is rapidly reducing into the future, now higher prices have been established through till the end of this year as it becomes apparent that supplies will dry up completely before the end of this year. This will inevitably affect 2005 crop in a similar way as no material will be arriving between December and April. So 2005 prices are now beginning to firm in line.

Thinking forward, raw nut prices will be very high at the start of 2005 crop. This may force some, or maybe more than some of the smaller shippers out of business as they do not have the funding to buy. This may, again, cause problems but this time in production capacity.

All in all, the two major Bolivian producers have played a clever hand of cards, they are in the driving seat for the foreseeable future, the only question marks being:

1) How much more will be collected since high prices have long arms?

and

2) How much will the high prices rein back demand?

To answer Q1: There will be more collected, no doubt but this is limited by the non existent communications infrastructure in the jungle. A normal crop is around 30,000 tonnes. Compare to the Turkish hazelnut crop of 500,000 tonnes. Lets say a miraculous 50% increase in Brazil supply is achieved, this is still only 45,000 tonnes.

Q2: £1000 per tonne increase is only 10 p on a 100g supermarket pack where they are charging £1.37 per pack. inelastic when people are looking for the healthiest of foods.

March, 2004  

Today We see a confused situation with high prices remaining in place for spot material, whilst forward prices decline sharply as we move forward.

The question is, how much material will it require to refill the supply pipeline and when will the pressure be relieved?

Shipments have been made in March. These will start to arrive in the next few weeks, however we believe that they will all be spoken for until late April/early May.

At origin, there are two conflicting stories depending upon the availability of raw nuts from the jungle.

Firstly, In Riberalta, Bolivia, due to the high prices paid by the strongest two shippers, many of the smaller processors are not able to procure green nuts and are asking for extensions across the board for deliveries from March/April to Sept/Oct to go forward to 2005 crop.

However, the stronger (and larger) two shippers have paid fancy prices for their material and appear to be holding prices up in the hope that they can control supply.

They may be successful, but the odds are against high prices remaining in place throughout this season as 'high prices have long arms' meaning that the collectors in the jungle have every reason to find and sell as many nuts as they can find whilst prices at the factory goods inwards door remain high.

Brazil will play a more active part in this years scenario as they gear up to produce more brazil kernels and sell into the higher prices.

We expect prices to go into serious decline from May/June onwards as buying interest fades into the summer and the supply pipeline fills.

Demand
All the above assumes a steady pattern of demand with a tailing off of new orders as the price increases. We think this may be the curve ball in traders expectations in the future as more and more exports to the hugely populated countries of China and Russia continue.

We have stock in all positions and would be glad to assist with any specialist grades which you may require.

October, 2003

Cashew Nuts
Prices are steady at the very low levels they have been at for some months.

Demand has been lacklustre whilst supply is increasing due to increased yields from new types of tree.

We are not expecting any large increases in price in the foreseeable future. The cashew trade worldwide needs to find new places to sell to and to promote increasing sales in it's traditional markets.

As prices fall, the pro rata processing cost becomes a higher percentage of the overall cost. This will serve to put the brakes on further falls.


Almonds
The Californian crop is estimated to be 920 million lbs, this is slightly more than earlier predictions of 880 million but has not changed market sentiment.

April shipments were high, continuing the trend for increasing exports helped by the weakening dollar.

Although dollar prices are considerably higher, due to the decline in the U.S. currency, almond prices remain the same in Europe as last year.


Hazelnuts
Prices remain stagnant whilst demand is lacklustre.
2003 crop is expected to be normal. No big changes are expected in the market.


Pecans
Always a high priced item due to its popularity with the American domestic market and long delay between planting and reasonable crop yield. No fall in prices is expected imminently. Buy now to secure forward supplies.

Paragon Commodities Ltd.
Millhouse
31 - 38 East Street

Rochford
Essex
SS4 1DB

Phone: +44 (0) 1702 872494
Mobile: +44 (0) 7710 315837
Email: info@paragoncommodities.com

NUT!
     
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