Australia’s Nut Industry Council has forecast the value of the country’s annual tree nut exports to rise to US$1bn by 2020.To help meet this target, the peak body - which represents the almond, chestnut, hazelnut, macadamia, pecan, pistachio and walnut sectors – has campaigned for improved market access conditions for the industry, including the Korea-Australia Free Trade Agreement (KAFTA).
Australia’s almond and macadamia industries have already moved to leverage opportunities in the lucrative South Korean nut market following the announcement of the bilateral trade deal in February.Under the agreement, an 8 per cent tariff on almonds, Australia’s largest nut export category by volume, will be eliminated. Almond Board of Australia (ABA) chief executive Ross Skinner says this will allow the Australian industry to leverage a greater share of South Korea’s A$160m (US$146m) almond market, which has traditionally been dominated by US supply.
“The FTA will place Australia almonds in a similar position to the Californian product, which have not been paying a tariff in South Korea,” Sinner says. “Consequently, a number of the industry’s marketers have identified South Korea as a growth market for Australian almonds and will be attending the Coex trade fair in Seoul later this year to grow their business.”
Australian macadamia exporters are also eyeing opportunities in the northern Asian market, with the with a prohibitive 30 per cent tariff set to drop to zero over the next five years under the terms of KAFTA. The Australian Macadamia Society (AMS) has announced plans to increase its promotional spend in South Korea from the beginning of 2015.
“At the moment the Australian industry is sending around 50 tonnes per annum into South Korea but we expect this market to grow to around the same size as Japan, currently our third largest market, with the reduction of the tariff,” AMS chief executive Jolyon Burnett explains. “Like Japan, we expect South Korea to be a kernel driven market, with the majority of imports used in confectionary. Having said that, South Koreans are quite adventurous consumers, so there may be an opportunity to develop the snacking side of the market.”
Chinese potential
Burnett says the macadamia industry will also continue to develop its presence in China, where nation-wide consumption remains below 1,800 tonnes per annum, most of which is supplied by domestic production. In a bid to drive category growth in the People’s Republic, AMS aims to dispel misconceptions about macadamia kernels.
“Unlike the majority of markets in Asia, China has shown a preference for in shell nuts,” Burnett tells Asiafruit. “Our research suggests consumers see in shell as being fresher and safer than shelled kernels, which is not necessarily the case. There is certainly an opportunity for education around this point, as the sheer weight of China’s population means even a small cross-section of the market represents significant value.”
Growing demand
The push for market development is being driven by a growing global demand for tree nuts, which continues to outpace supply. As the world’s largest producer of macadamias and second largest producer of almonds, Australia appears well positioned to capitalise on the increase in demand.
Realising this potential, a number of foreign firms have moved to acquire stakeholds in Australian tree nut operations, including Swiss group Adveq who recently completed the purchase of 18,000ha of almond orchards in Victoria, currently operated by Olam Australia. Skinner expects this trend to continue.
“There is great potential to continue to expand Australian almond production as world demand is being constrained by global productive capacity,” Skinner says. “Supply in the short to medium-term will also be impacted by the drought conditions in California. The result of this is a steep rise in returns and the ABA believes this will stimulate new plantings from investors within and outside Australia.”
Pricing structure
However, Burnett warns a high level of demand could be a double edge sword for some sectors, stressing the importance of maintaining pricing structure.
“Nuts are substitutable products,” Burnett says. “If we tried to name our price our customers and consumers would just turn to another, lower-cost nuts category. We have worked hard to establish markets in Asian and around the world over a number of years, which has resulted in strong demand for our offering. To maintain this demand we are trying to find some balance with our pricing.”
Solid outlook
On the production front, both the almond and macadamia industries are forecasting solid seasons. The almond crop appears to be slightly down on last year’s record harvest of 78,600 tonnes, which helped export sales rise 132 per cent over the course of the season.
“Early indications are that the 2014 crop will be visually appealing,” Skinner explains. “The harvest currently underway has been interrupted by rain that has delayed the shaking of trees for short periods since the seasons commenced in February. The quality is very good, although the nonpareil kernels are a size or two smaller than last year, while the pollinator varieties have good crops with excellent kernel size.”
For the macadamia industry, this season appears to be a return to normality after the country’s major growing regions in northern New South Wales and southern Queensland were bombarded by inclement weather last year, including ex-tropical cyclone Oswald. The crop forecast is around 40,000 tonnes in shell, up on the 35,200 tonnes produced last year.
“Last year, most of the damage was done immediately after Oswald hit, where we experienced a run of wet weather,” Burnett explains. “Flooding meant we couldn’t get onto our orchards to pick up the nuts that had fallen on the ground and repair the damage done. You wouldn’t say it’s a bumper crop this season but we’ve had dry, reasonably good growing conditions which should see volumes return to traditional levels.”
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