South African Macadamia Exports Off to a Flying Start but Low Prices Threaten the Industry

Published Aug 3, 2023
South Africa's 2023 macadamia season is on track for record exports, with volumes already reaching 9,896 mt (on a kernel basis) in the first half of the year, significantly surpassing previous years. However, the industry is facing the lowest prices in recent history due to increased production in South Africa and other countries and competition from China's expanding domestic production. Weak nut prices globally further exacerbate this. Lower prices have incentivized a surge in imports from China, but at current price levels, the industry is under significant financial pressure.

Good Start to the Export Season

South Africa's 2023 macadamia season is shaping up to be a record in terms of production and exports as the industry continues its rapid expansion. On the other hand, prices have fallen to their lowest levels in recent history, leading to industry uncertainty. The harvest started in February and will wrap up in August. As these nuts pass through processing, the peak export months are from June to October. Exports in 2023 started well, with cumulative exports from January to June already reaching a massive 9,896 metric tons (mt) on a kernel basis. This is much higher than the 5,429 mt exported over the same period in 2022 and the five-year average of 6,129 mt.

Source: South African Revenue Service (SARS)

Chinese Demand Returns, Fast Growth in the Middle East

Chinese demand has been particularly strong in the first part of the season. South Africa exported 11,688 mt of in-shell and 1,535 mt of shelled macadamias (equivalent to 5,275 mt on a kernel basis) in the first six months of the year to China and Hong Kong. This is a massive increase from the 1,303 mt on a kernel equivalent exported in the first six months of 2022 and also the highest on record over this period. Chinese macadamia imports have been strong since the latter half of 2022, as Covid-19 restrictions were finally relaxed. This is good news for South African exporters, as demand from the United States (US) has been weaker than in 2022. South Africa exported 1,910 mt to the US in the first six months of 2023, down 5% year-on-year (YoY). Exports to Europe were 1,663 mt, up 43% YoY.

The Middle East has been a lucrative market for nuts since 2022. Where nut consumption in many other regions slumped, Middle Eastern demand has increased. South Africa exported 384 mt of macadamias to this region, triple the exports of a year ago and a sixfold increase from the five-year average. So while the Middle East remains a small market, it is experiencing rapid growth to the benefit of the South African macadamia industry.

Source: SARS

Record Season on the Cards, but Low Prices Continue

It is shaping up to be a record season for South African macadamias in terms of exports and production. The latest estimate from Macadamias South Africa (SAMAC) pegs the crop at 77,659 mt (~24,850 mt on a kernel basis), up 13% from 2022 production. However, this projection is 5% lower than the initial forecast of 81,556 mt due to heavy rainfall and ensuing pest infestations that have deteriorated crop quality and yield.

In addition to these challenges, the industry is grappling with falling prices. Since the start of the year, the average export price has plunged by 47%. Export prices have fallen below USD7.00/kg, far from the 5-year average of USD 15.13/kg. While low nut prices are a common trend across the industry, the drop in macadamia prices is unprecedented. This dramatic price decrease is largely due to expanded macadamia production in countries like South Africa, Kenya, Malawi, and Australia, and intensified competition from China's swiftly growing domestic production.

Source: SARS

While the suppressed prices have driven higher demand from China, macadamia farmers are finding it hard to turn a profit at the current rate. Looking forward, South African macadamia production is anticipated to double in the next five years as new plantations mature and start producing commercially, a process that typically takes about seven years. However, the industry could face severe financial pressure if prices do not rebound to previous levels by the following season.

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