November 2020 market report

Australian industry rising to the challenges of 2020

Supply

Global supply expectations have shifted as the season nears completion, with production now forecast to come in slightly below 2019 volumes. While the South African crop is expected to be down 16%, the Australian crop forecast is higher than originally anticipated, and all other origins are on track to achieve projected volumes.

The 2020 Australian macadamia crop is now forecast to reach 42,000 tonnes in-shell at 3.5% moisture (45,000 tonnes at 10% moisture), 15% higher than the original estimate of 36,500 tonnes in-shell at 3.5% moisture (39,000 tonnes at 10% moisture). Growing regions impacted by unprecedented dry conditions have generally performed better than anticipated. The quality of nuts is very good despite the drought conditions leading into the season.

Demand

While it is evident that the current coronavirus led environment is having an impact on imports when compared to 2019, overall demand is ahead of the prior three years. The pattern of buying to shorter horizons has continued due to the ongoing uncertainty caused by Covid-19. However, there has been improvements in sales reported in Q3 (third quarter) in key markets.

Despite this challenging environment, the Australian industry continues to grow its’ market share of kernel imports in many of its’ key markets. In fact, market share in all four of the priority Asian markets has increased, highlighting the quality standing of Australian macadamias and the strong commercial relationships in place.

Australian sales

Australian kernel sales to many of our key markets increased after a softening in Q2 (second quarter) and are slowly returning to pre-pandemic levels. Asian markets are performing well, with China and Other Asia up +30% and +21% when compared to 2019. Sales to Japan are expected to lift in early 2021 now that additional inventories built up for the expected 2020 Olympics demand are reported to have been consumed.

Ingredient sales to the Domestic market have felt the impact of the extended lockdown in Victoria, Australia’s largest manufacturing hub, and the loss of trade experienced by tourism-aligned businesses. However, confidence is improving as restrictions on gatherings are reduced and internal borders are re-opened.

The greatest impact on total Australian kernel sales has been the challenging coronavirus-led situation in the USA. Reports indicate the US economy has contracted resulting in high unemployment rates and Covid-19 containment measures continue to negatively impact the manufacturing sector and reduce foot traffic into food service and smaller retailers. Conversely, sales to larger Retailers remain positive in line with the consumer trend towards home baking and snacking.

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