It is time to stock up on marzipan?
The nut market has divided between peanuts, of which
supplies are ample and prices depressed, and tree nuts, of which the reverse is
true – particularly for hazelnuts and almonds - according to Singapore-based agricultural
commodities trader Olam International.
And it will need either an improvement in weather or seed
varieties to change the situation.
For peanuts, the "the market is really oversupplied", said A
Shekhar, the Olam finance director, noting a jump of 25% to 5.21bn pounds in
production in the US alone last year, where output is expected to grow further
this year, to 5.78bn pounds, boosted by extra sowings as farmers switch from
"It has taken cotton,
"If you look at the farming economics today, cotton producers
are roughly losing Sing$14 ($10.60) an acre, corn producers are about
breakeven, peanut unirrigated producers are making up Sing$78 per acre, and
irrigated peanut producers are making about Sing$220 per acre," Mr Shekhar said.
Besides changes to the US farm support regime, the economics
reflect "the launch of a fairly revolutionary variety" which has "dramatically
With Argentine peanut production, and Chinese sowings, also
higher, "peanut prices are under serious pressure".
Peanut prices, which in the US are trading at 22.5 cents a
pound, are "in a down cycle", he said.
However, for the so-called "noble" tree nuts, prices have
been soaring, making cashews, at Sing$3.70 ($2.80) a pound, a relatively cheap
For hazelnuts, "we are seeing lifetime-high prices", Mr Shekhar
said, underlining the dent to output last year in Turkey, the top producing
country", from frost.
Hazelnut prices, which stood at 11-12 Turkish lira a kilogramme
in late 2013, are now trading at nearly 39 Turkish lira ($15.15) a kilogramme.
"That is a phenomenally high price," but one for which "there
might be some moderate upside" given that "there is really very little pipeline"
of hazelnut supplies.
"The pipeline is very dry and therefore before the next crop
starts, there will be very little inventory to service ongoing demand."
'Price to be higher'
And for almonds, prices are at a "historical high", thanks
to the drought in California, which is responsible for 80% of world output, Mr Shekhar
(US farmgate prices of almonds for 2014-15 are estimated at
$3.50 per pound, "the highest recorded as far back as 1970", according to the
US Department of Agriculture.)
Mr Shekhar said: "US production [for 2014-15] is estimated
to be about 1.85bn pounds compared to a little over almost 2.1bn pounds the
"Given the drought situation in California, prospects for a
better crop next season is also quite low.
"So I think we will see structurally the market price to be
Indeed, one of the problems for the almond market is that there
appear few areas outside California able to grow almonds, which Mr Shekhar termed
a "very finicky" crop.
"It cannot be grown if temperatures dip below zero degrees Celsius,"
or crops "will have issue with the bloom.
"At the same time, it needs contrasting temperatures between
daytime temperatures and night-time temperatures."
Almond production also "needs certain kind of wind speed" –
ie not too strong to deter the bees needed for pollination.
"The only places you can produce it is, the US, Spain,
Australia and a little bit in Italy," he said, although adding that there are a
"lot of factors that results in California remaining, even if there was a
drought, the most important producer of almonds going forward".
Meanwhile, almond consumption is growing at 8-10% a year.
The result for Olam has been "exceptional margins and
And it looks difficult to see that changing, unless El Nino
brings rain to California, or the researchers who came up with the "revolutionary"
peanut seed make headway with noble nut varieties as well.