Concerns raised at the recent SAMAC information day have taken the shine off the industry success.
With pandemic-triggered transport and logistics problems, aggravated by war in Ukraine, the average price in the USA has decreased some 23% from the high of $18,36/kg kernel in 2019 to $14,20 in September 2022. Shipments of Nut-In-Shell (NIS) to China/Hong Kong/Vietnam have also seen a drastic reduction in first half 2022. Processors in South Africa and around the world held unsold stocks of both kernel and NIS at the end of 2022, with the new crop harvest beginning within 4 months.
However, it is not all doom and gloom. Figure 1 traces the price history of all macadamia nuts imported by the USA from 1987 to September 2022 (US$/kg kernel wholesale price paid for the standard 11,34kg gas flushed vacuum packed box containing raw macadamia kernel). The average price over 36 years is US$10,80/kg kernel. Figure 1 clearly shows the good ride the macadamia industry enjoyed globally since the last price “crash” in 2007. Between 2014 to 2022, the global macadamia industry enjoyed a price above $14/kg kernel for an unprecedented lengthy period of time,
Figure 1 also highlights the main drivers of macadamia price fluctuations. Comparing these price fluctuations with South African production trends (Figure 2) and global production trends (Figure 3), it is clear that we have never had a price decrease as a result of any over production. All previous price “crashes” and even the present price “slide” (compare the present price correction of 23% over 3 years to the 48% decrease from 1988 to 1991, 33% from 1997 to 2000 or the 42% decrease from 2005 to 2007), have been caused by international financial and economic catastrophe.
The yellow line in Figure 2 shows actual production as tons of DIS nuts from 1979 to 2022. The red line is a projection using the number of trees planted in SA from 1976 per age of tree with an estimate of yield per tree for each tree age. This projection model predicts actual production with an accuracy of 95%. The projection model predicted 2022 South African production at 69 900 tons DIS while actual production was 70 139 tons. The model predicts production of 77 700 tons DIS in 2023, 132 000 tons DIS by 2027 and 187 000 tons DIS by 2030.This sharp increase in projected production is due to the accelerated rate of planting, with 12 million trees planted since 2015. While finding markets and creating processing capacity for these increasing volumes seems a daunting process, we should be encouraged by our achievements after the 2007 price crash.
Price correction
The stress currently experienced in the industry caused by the price correction over the last 3 years is probably aggravated by the fact that almost 80% of present growers and processors have never experienced a price decline like this. The stress would be a lot worse if the price were to drop to the low of US$6,55/kg kernel.
Figure 3 shows global macadamia kernel production from 2001 to 2022 and projected to 2017, emphasising that there is no inverse relationship between production volume and price. The average price of USA macadamia kernel imports increased from $6,55/kg in 2007 to $18,36/kg in 2019, while global production increased from 30 000 tons in 2007 to 58 000 tons in 2019. A 2,8-fold increase in price despite production almost doubling over the same period. Figure 3 also highlights the dominance of Africa (with South Africa at 29% of global kernel production in 2022) as source of macadamias being maintained at about 43% of global production through to 2027 (presently 44% of total) in the face of the increase in Chinese production, expected to grow their market share from the present 17% to 32% of global production in 2027.
Noted expert in the macadamia industry, Philip Lee visits macadamia orchards in the Lowveld.
Good profits
South Africa will continue to play a leading role in the global macadamia nut industry. Our farmers produce better yields on average than other producing countries. Farmers focusing their expertise and energy in striving for average yields of 3 tons DIS per hectare (one ton of edible kernel per hectare), while keeping tight control of their costs will always make good profits. Even at the present price of $14,20/kg kernel (equivalent to farm gate price of R54/kg DIS at 30% SKR) – there is still much magic in macadamias.
Read the full article here: redsunhort.co.za/the-south-african-macadamia-industry/
Philip Lee is the owner of CompleteLee Nuts Consulting and has provided advice on all aspects of macadamia nut production from “seed to supermarket” for over 45 years. He has clients in over 15 countries around the world and is driven by his goal to transfer the skills necessary to ensure profit optimisation in every aspect of macadamia nut production. He can be contacted on email: fillipuslee@gmail.com or Cell +27 61 227 3007.
