Global Outlook 2019 IEG Vu

 
Global Outlook 2019 IEG Vu
IEG Vu

Global Outlook
2019
Global Outlook 2019 IEG Vu
Global Outlook 2019 IEG Vu
IEG Vu

Contents
06	US pistachios will see rising prices despite                                              51      Beef industry shrugs off criticism and maintains growth
     US-China trade war
                                                                                              54      Wheat market at a turning point
10   All eyes on Turkish hazelnuts and the lira
                                                                                              57      Brexit: EU and UK grains and oilseeds
14   Unavoidable global Thompson raisin shortage?                                             58      Global canola/rapeseed supplies to tighten in 2019
18   Pepper prices still falling despite restructuring                                        62      Palm oil ends 2018 on multi-year lows amid bulging stocks
20   Orange juice slowly falls out of global favour                                           66      Cocoa Review for 2017 and Outlook for 2018

26   Apple juice 2018: China sidelined and Poland triumphant                                  68      African supplies depress the cocoa market

30   The scourge of sugar in sweet juices                                                     70      World coffee market faces huge surplus in 2018/19

34   Poorer market uptake drives skipjack prices down                                         73 	The impact of trade disputes and policymakers on the
                                                                                                   sugar industry in 2018
36   Turbulent year for processing tomatoes
                                                                                              75 	World sugar production to fall further in the
39   Thai canned pineapple: How long a buyers’ market?                                             2018/19 season
42   Frozen strawberry and raspberry facing headwinds                                         78      The global sugar balance outlook to 2030

45 	Global processing potato market wrapped in                                               82 	Light at the end of the tunnel for SMP, as intervention
     weather-driven difficulties                                                                   sales dent stockpile

48   All eyes on Asia as ASF shakes up pork markets                                           84      Global butter and cheese exports rise to new highs

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Global Outlook 2019 IEG Vu
Global Outlook 2019 IEG Vu
IEG Vu

Unholy trinity of factors
conspires to upset trade
Politics, exchange rates and weather have been the three major
influences on processed fruit and vegetable production and
trade this year.

The political situation was already complicated, what with western sanctions on Russia and
Russia’s riposte in the form of embargos on a wide variety of agricultural products from
both Europe and the US. This year saw the outbreak of a full trade war between the US and
Europe, the US and Russia, the US and China and President Trump, instigator of most of the
hostilities, also tore up the agreement that would lift sanctions on Iran.

It is not for IEG Vu to analyse the rights and wrongs of the demands and posturing of any
of the parties involved: the situation exists and the industry has to live with it.

Political issues have led to financial problems. The Turkish lira has bounced up and down
like a football, and the comparison is valid because Turkey finds itself being kicked between
the US, Russia and now Saudi Arabia. It has made life extremely difficult for both buyers
and sellers of Turkish dried fruit and nuts. The UK pound remains weak because of the
uncertainty over Brexit and as that uncertainty shows no signs of disappearing before
March 2019, sterling can probably be relied up to weaken further. South Africa’s inflation
rate is pushing up prices of its manufactured products while the rand sinks and key inputs
like energy and steel still have to be paid for in US dollars…

And weather? In 2017, Poland’s apple crop was devastated by a late spring frost. In 2018,
exactly the same thing happened to China. Europe had a long, long heatwave which
affected a number of crops, most notably potatoes, and the price of processing potatoes
for freezing has soared, chiefly because the potatoes have come out smaller than
manufacturers of French fries demand. Greening continues to ravage Brazilian citrus.
Most recently, hailstorms have damaged a variety in Chile’s key O’Higgins growing region.

So this year’s predictions, made by IEG Vu staff in the various product sectors covered in
this supplement are not easy to make. In the past, we are proud that our forecasts have
proven extremely accurate. If this year’s volatility means that our forecasts for 2019 may
be wide of the mark, we hope you will enjoy this Global Outlook anyway.

Neil Murray
Principal Analyst: Beverages
Agribusiness Intelligence

www.ieg-vu.com                                                                                  IEG Vu | Global Outlook 2019 /   5
Global Outlook 2019 IEG Vu
6   / Global Outlook 2019 | IEG Vu   www.ieg-vu.com
Global Outlook 2019 IEG Vu
US pistachios will see
rising prices despite
US-China trade war
The global pistachio market has been affected by a poor Iranian
crop in 2018, dropping 45,000-50,000 tonnes due to water
scarcity and very far from the peak of 300,000 tonnes in 2007.
The 2019 estimate is not much better, because it is an off-year
for Iran’s nut trees.

By Jose Gutierrez

US growers and processors had to face a       demand, especially Chinese, for pistachio     The world has not been
trade war with China, but the supply          since the 2000s, which has kept prices
shortage has meant they have earned           firm. Turkey is set to surpass Iran as the
                                                                                            able to meet demand,
good revenues in this major market due to     second main origin: its 2017/18               especially Chinese, for
high prices, despite an estimated fall in     (September-August) crop is expected to        pistachio since the 2000s
imports. China used to import around 200      reach 210,000 in-shell tonnes. However,
million pounds annually and international     Turkey is an important consumer and its
players expected a 50% drop in 2018, but      exports are expected to reach only around
purchases were not as low because many        17,000 in-shell tonnes.
Chinese importers used third importer
channels and the domestic demand was          In addition, the 2019 Iranian crop will be
not badly affected by the high prices after   off, and the Californian on. Therefore, the
the new tariffs.                              2019 season is again expected to be
                                              excellent for the US industry. First
The world has not been able to meet           conclusion: lucky American growers and

                                                                                                  IEG Vu | Global Outlook 2019 /   7
Global Outlook 2019 IEG Vu
Meanwhile, the Iranian crop is expected to
                                                                                                    fall by around 250 mln lbs compared with
                                                                                                    the previous season, with California having
                                                                                                    to cover a demand of 850 mln lbs. As a
                                                                                                    result, the 2018 crop marketing year
                                                                                                    would exceed the available supply by
                                                                                                    100 mln lbs, Primex added.

                                                                                                    Sales
                                                                                                    A study of the University of California
                                                                                                    estimated that the US pistachio industry’s
                                                                                                    losses might total USD384 mln due to
                                                                                                    price fall in the long-term after China
                                                                                                    imposed tariffs on US edible nuts.
                                                                                                    However, this pessimistic forecast has not
                                                                                                    proved accurate according to data from
                                                                                                    July onwards.

                                                                                                    The 2018 pistachio sales started in late
                                                                                                    July, ranging from USD4.1-4.15 per lb for
processors in the short-term despite an             The US 2018 crop                                non-EU markets and USD4.20-4.25/lb for
uncertain outlook, not being affected by                                                            EU for raw 21-26 extra, according to Mark
Chinese tariffs.                                    estimate was around 971                         Benjamin of UK trader Kenkko Corporation.
                                                    mln lbs on October 15,                          But by the end of the harvest, the opening
“Prices will be still firm at the end of the        60.5% more than in 2017                         price was set at USD3.70/lb for non-EU
year and in 2019. The global acreage is                                                             and USD3.80/lb for EU until October 4,
close to matching the global demand,                However, first, 50 mln lbs will be needed       according to Primex. “As a result, most
but the Iranian crop fall is creating a             to fill current empty supplies and around       packers did not participate fully at the first
supply shortage of around 100-200 mln               180-200 mln lbs may be held as carry-           round of tenders owed to discounts and
lbs,” Ali Amin of the US company Primex             over stock for the next season.                 large supermarkets covering its annual
International Trading Corporation told                                                              demand,” Amin explained. “A lot of
IEG Vu.                                             Shipments to Hong Kong, China and               demand was covered by the Wonderful
                                                    Vietnam were close to 200 million lbs in        variety at the opening prices, current
The US 2018 crop estimate was around                2017. Many international players forecast       prices ranging from USD4.0-4.1/kg.”
971 mln lbs on October 15, 60.5% more               a 50% drop in Chinese demand, down
than in 2017, California accounting for             from 200 mln lbs. The amount covered at         It is estimated that the industry
99% of the total volume. Primex estimates           the opening price indicates that China’s        committed a good volume during the
that there are around 750 mln lbs                   demand would exceed the estimated 100           first three weeks of October, leaving
available to cover 2018/19 demand.                  million lbs.                                    40-50% of uncommitted supply available

 estimated world pistachio production (in-shell, metric tonnes)
                                                  2017/18                                                    2018/19
                          Beg. Stock            Crop    Total Supply   End. Stock     Beg. Stock            Crop     Total Supply      End. Stock

 The US                      115,507       274,757          390,264       43,084         43,084          437,188         480,272         113,379
 Turkey                       50,000           50,000       100,000        5,000          5,000          232,000         237,000           87,000
 Iran                          3,000       225,000          228,000       30,000         30,000           60,000          90,000            5,000
 Syria                               0         17,000        17,000            0                0         20,000          20,000               0
 Afghanistan                         0         10,000        10,000            0                0          5,000            5,000              0
 Greece                          500            4,000         4,500            0                0          4,500            4,500              0
 China                               0          1,200         1,200            0                0          4,200            4,200              0
 Italy                               0          2,250         2,250            0                0          2,500            2,500              0
 Australia                           0          2,000         2,000            0                0          2,000            2,000              0
 World Total                 169,007       586,207          755,214       78,084         78,084          767,388         845,472         205,379
 World Consumption                                                       677,230                                                         640,093
 Source: INC

8   / Global Outlook 2019 | IEG Vu                                                                                                  www.ieg-vu.com
Global Outlook 2019 IEG Vu
for the remaining 10 months left to the        The pistachio producer added there is a        East fell to 3.3 mln lbs, down from
2019 crop.                                     credit for re-exported product, but his        8.5 mln lbs.
                                               understanding is that the duty applies
There has also been a wide range of prices     both to product shipped directly to China      The prices were stabilised in November, but
with whole kernels at USD6.90-7.20/lb,         as well as that going through Hong             a price rise was expected when the Iranian
halves and splits (large pieces) from          Kong. Moreover, he explained that during       supply finished around February 2018.
USD5.30-5.40/lb and small pieces from          the 2016/17 marketing year, 201 mln lbs
USD5.0-5.1/lb.                                 were shipped from the US to Hong Kong,         Primex quoted that prices for California
                                               and only 12 mln lbs from the US directly       raw in-shell range from USD4.30-4.40/lb
What happens with the available Iranian        to China. Hence, the total value for both      fca/fas for 20-22 extra no. 1; USD4.00-
product? “Iranian pistachio prices have        destinations is around USD750 mln:             4.10/lb for 21-26 extra no. 1;
increased and are now at USD0.20/lb to         massively above the USD39 mln                  USD3.20-3.3.0/lb for closed shell on
USD0.40/lb premium to California               indicated earlier and based on statistics      November 27. Pistachio kernel prices range
pistachios. Most of the available supplies     for direct to China only.                      from USD7.25-7.70/lb for whole and from
of Iranian pistachios will go to markets                                                      USD6.40-6.50 for halves and splits (large
that have a definite preference for Iranian    One US pistachio                               pieces). In addition, Iranian 30-32 was at
varieties and are willing to pay more for
                                               producer raised doubts                         USD8,800/tonne in October.
them,” Amin added.
                                               over initial reports                           “The more luxurious varieties, such as
Amin said that prices would be USD9,050/                                                      Ahmad Aghaie and Akbari 22-24, are over
tonne for California 21-26 and USD8,800/       US shipments and prices                        USD10,200/Mtonne in November. Following
tonne for Iranian 30-32 and over                  California pistachio shipments totalled     these indications, a price rise is expected
USD10,200/tonne for Ahmad Aghaie and              133 mln lbs in September-October 2018,      after Iranian pistachio supplies are depleted
Akbari 22-24.                                     3.6% more than in the same period in the    by February of 2019. Benjamin estimated
                                                  previous year. Domestic and international   that the industry left 40-50% of
One US pistachio producer raised doubts           demand worked well, confirming the          uncommitted supply available for the
over initial reports. “For years, when            optimistic forecast for US growers.         remaining 10 months left to 2019 crop.
duties into China were significantly higher,      Domestic shipments were stagnant at 41
pistachios were smuggled into mainland            mln lbs and exports increased by 6% to      So, the general recommendation is: “If you
            Tradecos_AvisoFoodNews.pdf 1
China through    Hong Kong. Not brought  in12/26/16    11:46 AM
                                                  92 mln   lbs. Asian imports increased by    have an accurate requirements plan, cover
duty free,” he recalled.                          19% to 60 mln lbs although the Middle       sooner than later.”

www.ieg-vu.com                                                                                           IEG Vu | Global Outlook 2019 /   9
Global Outlook 2019 IEG Vu
All eyes on Turkish
                                    hazelnuts and the lira
                                    If Turkey sneezes, the world’s hazelnut industry catches a cold,
                                    and the country has suffered a nasty combination of weak
                                    national exchange, high interest rates and a trade conflict with
                                    the US. As a result, prices are stable in liras but unsteady in US
                                    dollars and all international players are taking short positions and
                                    not building stocks.

                                    By Jose Gutierrez

Italian Ferrero, the largest        The last hazelnut market season was           A UK trader noted that, based on the local
                                    pretty stable, after Turkish farmers sold     price and exchange rates, raw 11-13 mm
hazelnut purchaser,                 most of their crop over the September-        levants market quality in jute sacks were in
started negotiations with           December period. A lot of this had been       the region of USD5,700 per tonne c&f
Azerbaijani and Georgian            purchased by the Turkish Grain Board          Europe in January.
                                    (TMO) and some major processors.
growers, planning to                                                              Georgia and Azerbaijan 2018 merged as
acquire a plantation in             Several sources told IEG Vu in January 2018   complementary markets to Turkey. Their
the latter country                  that they were surprised after experiencing   crop reached 80,000 and 65,000 in-shell
                                    volatile pricing in previous three or four    tonnes, respectively: not enough to affect
                                    years, leading all international players to   Turkish business. Italian Ferrero, the largest
                                    take short positions.                         hazelnut purchaser, started negotiations
                                                                                  with Azerbaijani and Georgian growers,
                                    Adam Johnston, of the UK company              planning to acquire a plantation in the
                                    Freeworld Trading, told IEG Vu that           latter country.
                                    farmers were quite relaxed. “They don’t
                                    feel any real pressure to sell. They are OK   The following months saw local prices
                                    with the prices they see in the market at     fall gradually due to the lower quality of
                                    the moment and are not under any              the remaining inventory. There were
                                    pressure to sell stocks.”                     limited offers at TRY20/kg for raw 11.13
                                                                                  mm kernels: most buyers in February
                                    Fluctuations in the exchange rate             were domestic. The price for 11.13mm
                                    between the Turkish lira and the US dollar    levants market quality was USD5,900/
                                    were the main influence on general            tonne c&f Europe in jute sacks gross
                                    market prices.                                weight in February.

10 / Global Outlook 2019 | IEG Vu                                                                               www.ieg-vu.com
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TMO still had stocks to put back and the                                                               These deep changes broke analysis
Turkish lira weakened against the US dollar                                                            fundamentals and nobody was able to
and euro. In addition, the Turkish exporter                                                            predict price trends. And, needless to say,
union’s first new crop estimate was 647,000                                                            the TMO had no solid pillars to establish a
in-shell tonnes, lower than in the previous                                                            pricing policy.
season but still an average crop.
                                                                                                       Prices given by exporters for the 2018 crop
In spring, the Turkish president announced                                                             range from TRY11.25-11.50 per kilo
that presidential and parliamentary                                                                    in-shell and from TRY22.5-23.00/kg for
elections, originally scheduled for 2019,                                                              kernels, the 2017 crop being still available
would take place on June 24. Traditionally,                                                            at TRY20.5/kg. The first prices from Georgia
the market reacts quickly to changes in                                                                and Azerbaijan were considerably higher in
TMO’s policy to fulfil electoral promises or                                                           US dollars in the second half of August.
governmental changes once elections have
taken place. However, prices were                  which meant TRY24.00/kg for 11-13s.                 Turkish hazelnut was steady and the new
unchanged in lira terms at TRY20.5/kg, the         Several sources revealed that price                 crop price was TRY26/kg (USD4.4/kg)
fall in US dollars or euros being due to the       indications on the forthcoming 2018 crop            kernel at the end of October while the lira
weak Turkish currency.                             showed a USD500-700/tonne premium                   was stable at around USD5.8 per US dollar.
                                                   over 2017 crop.                                     The price indications for new crop 11-13
The 2018 crop estimate ranges between                                                                  mm levants were around USD4,920/tonne
550,000-640,000 in-shell tonnes and                Trade conflict                                      c&f Europe for 2018 crop.
plenty of available TMO’s stocked product          The political tension between Turkey and
led to limited offers of 2018 crop. “The           the US in the first week of August, due to          “Nobody in Turkey was able to calculate
Turkish government no longer publishes             the trial of a US pastor, led to US                 the dollar price because when they do a
an estimate but there is one relevant              retaliatory tariffs on Turkish steel imports,       deal, they don’t know at what price they
fact: there is enough supply and all the           steepening the fall of the lira, which had          are going to get the dollars changed back
players know that,” one UK trader told             fallen over 33% since the beginning of the          to. So they were taking a profit margin
IEG Vu.                                            year. In addition, Turkish banking was very         that was covering the risk of change,” the
                                                   weakened and loans in US dollars were               UK trader explained.
The situation remained unchanged after             restricted. Processors from Georgia and
the end of Ramadan (June 14). The new              Azerbaijan tried to keep pace with these            Change of TMO’s criterium
crop was developing well and nobody                trends, maintaining their offers below              In the third week of October, the Turkish
expected that the TMO would make a                 those from Turkey.                                  government announced that the TMO
radical policy change.                                                                                 would pay TRY14.0 (USD0.18) per in-shell
                                                   The Turkish lira hit a low of TRY7.2 to the         kilo for the Levant variety and TRY14.5/kg
Kernel prices for the 2018/19 season were          US dollar and this put the brakes on Turkish        for Giresum from November 1 onwards,
TRY2.00/kg up from those of 2017/18,               hazelnut offers.                                    fulfilling some of its electoral promises in

 Estimated Hazelnut Production (in-shell, tonnes)
                                                 2017/18                                                        2018/19
 Country                  Beg. Stock           Crop    Total Supply   End. Stock      Beg. Stock               Crop    Total Supply      End. Stock

 Turkey                      80,000       750,000          830,000       170,000          170,00           640,000         810,000         110,000
 Italy                       15,000        90,000          105,000         7,500           7,500           115,000         122,500           10,000
 Georgia                      1,000        80,000           81,000         5,000           5,000             80,000          85,000           5,000
 Azerbaijan                     500        65,000           65,500         7,500           7,500             70,000          77,500           5,000
 The US                       3,500        27,000           30,500             0                   0         50,000          50,000           2,500
 Chile                              0      25,000           25,000             0                   0         25,000          25,000           2,000
 Spain                        1,000        19,000           20,000         1,000           1,000             16,000          17,000           1,000
 Iran                           500        12,000           12,500             0                   0         12,000          12,000              0
 China                              0          6,000         6,000             0                   0          9,000           9,000              0
 France                             0          4,500         4,500             0                   0          4,500           4,500              0
 Others                             0      25,000           25,000             0                   0         26,000          26,000              0
 World Total                101,500     1,103,500        1,205,000     1,191,000         191,000          1,047,500       1,238,500        135,500
 World Consumption                                                     1,014,000
 Source: INC

12 / Global Outlook 2019 | IEG Vu                                                                                                     www.ieg-vu.com
the last elections. Before the                                                                                                                                and “at the end of the day, traders are                                                                                                                           exporter consortium (AHEC), Ismayil
announcement, the private market was                                                                                                                          specialists in international trade rules,                                                                                                                         Orujov, told IEG Vu.
paying between TRY25.75-25.25/kg for raw                                                                                                                      quality product, etc but not in playing with
product. As a result, the price jumped to                                                                                                                     exchange rates,” as Richard van Helden of                                                                                                                         Orujov reported that average prices from
TRY27.5-28.0/kg for graded kernels, up 6%                                                                                                                     the Dutch trader QFN told IEG Vu.                                                                                                                                 farmers for local market were AZN4.40/kg
from the level prior to the announcement,                                                                                                                                                                                                                                                                                       (USD2.58/kg) for in-shell Khachmaz
10% compared with mid-October and                                                                                                                             Georgia and Azerbaijan are different cases.                                                                                                                       variety and AZN3.60/kg (USD2.11/kg) for
23.5% from August. The demand was                                                                                                                             Van Helden explained that the 2018                                                                                                                                in-shell Atababa. The export price for raw
moderate because many manufacturers                                                                                                                           Georgian crop was of very low quality due to                                                                                                                      hazelnut kernels 11/13 Atababa was
were waiting to check if the lira was able                                                                                                                    pests and its industry is trying to compete                                                                                                                       USD5.50/kg in November.
to sustain its gains.                                                                                                                                         with Turkey via low prices. On the other
                                                                                                                                                              hand, Azerbaijan has sold most of its crop to                                                                                                                     “The Azerbaijani market has reacted to the
“TMO has plenty of 2017 crop stocks so it                                                                                                                     Russia and its prices are higher on average.                                                                                                                      lira’s appreciation, not really to TMO’s
is not likely to acquire over 20,000 tonnes                                                                                                                                                                                                                                                                                     policy. However, the reaction took place
of the 2018 production. From my point of                                                                                                                      “From the beginning of the 2018/19                                                                                                                                several weeks after Turkey fuelled
view, prices will be stable in liras,” the UK                                                                                                                 hazelnut season until now, Russia was the                                                                                                                         international prices. Azerbaijan is more
trader explained.                                                                                                                                             main importer of Azerbaijani hazelnuts                                                                                                                            influenced by imports of neighbouring
                                                                                                                                                              because major European buyers, mainly                                                                                                                             markets such as Russia than by global
The Turkish market is reminiscent of                                                                                                                          Ferrero, delayed their buying offers, ,”                                                                                                                          trends,” Orujov concluded.
Argentina’s last debt and exchange crisis,                                                                                                                    the director of the Azerbaijan hazelnut
                                                                                                                                                                                                                                                                                                                                We expect a slight increase in Turkish
                                                                                                                                                                                                                                                                                                                                product prices in 2019, due to stronger
Turkish
 Turkishhazelnut kernel Prices,
        Hazelnut Kernel prices, 2018
                                (USD/tonne)
                                     (USD/fob)                                                                                                                                                                                                                                                                                  demand in the US after the 2018 Oregon
                                                                                                                                                                                                                                                                                                                                crop dropped by 46,000-48,000 (short)
8,000                                                                                                                                                                                                                                                                                                                           tons from an initial estimate of 52,000
7,500                                                                                                                                                                                                                                                                                                                           tons. However, everything will be
                                                                                                                                                                                                                                                                                                                                dependent on the Turkish lira value
7,000
                                                                                                                                                                                                                                                                                                                                against the US dollar. Again…
6,500

6,000

5,500

5,000

4,500

4,000

3,500
                                                                                                                                                                                                                                                                                                                   26/11/2018
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                                                                                                                                                                                 09/07/2018
                                                                                                                                                                    25/06/2018
                                                                                                                                                       11/06/2018
                                                                                                                                          28/05/2018
                                                                                                                             14/05/2018
                                                                                                                30/04/2018
                                                                                                   16/04/2018
                                                                                      02/04/2018
                                                                         19/03/2018
                                                            05/03/2018
                                               19/02/2018
                                  05/02/2018
                     22/01/2018
        08/01/2018

                                                            raw 11/13 mm, c&f Europe                                                                     levants standard 1, 13/15, exw UK

Source: IEG Vu

        1 vs. 7.5                                                                                                                                                                                                                          ◆ One Goodpack MB5 holds 1,500 liters vs. one
                                                                                                                                                                                                                                             200-liter drum
                                                                                                                                                                                                                                           ◆ It takes 7.5 drums to equal the capacity of one
                                                                                                                                                                                                                                             Goodpack MB5
                                                                                                                                                                                                                                           ◆ 6,000 liters per pallet space with Goodpack vs. 2,400
                                                                                                                                                                                                                                             liters with drums
                                                                                                                                                                                                                                           ◆ MB5s have 90% more efficient empty storage vs. drums

                                                                                                                                                                                                                                                                                                                                               www.goodpack.com

www.ieg-vu.com                                                                                                                                                                                                                                                                                                                            IEG Vu | Global Outlook 2019 / 13
Unavoidable global
                                    Thompson raisin
                                    shortage?
                                    The global dried vine fruit market has faced a blurred scenario in
                                    2018, facing a combination of lower crops in main exporting origins
                                    such as California and Turkey and strong exchange fluctuations in
                                    Turkey and Argentina, both important exporting markets.

                                    By Jose Gutierrez

                                    The 2018 global dried vine fruit market has      India, China and Iran are expected to reach
The global supply                   been characterised by three key points: a        284,000 tonnes. However, China and India
shortage will continue,             fall in the US Thompson supply, rising prices    are set to consume most domestic
especially for Thompson             and the weakening of both the Turkish lira,      production and Iran has to face US
                                    due to its high debt ratio and US tariffs, and   sanctions. Emerging exporters such as
raisins, due to smaller             the British pound, due to Brexit                 Argentina, Chile and South Africa expect to
crops in California                 negotiations. Turkey is the largest global       enjoy higher production due to favourable
and Turkey                          raisin and sultana supplier and the UK the       weather and of course, to take advantage
                                    main importer of Turkish product and a key       of rising prices.
                                    European consumer.
                                                                                     Argentina
                                    The updated data shown at the                    Argentina’s vineyard area totalled 220,000
                                    International Seedless Dried Grape               hectares in 2017. This acreage has
                                    Producing Countries, held in Windsor (the        experienced a gradual fall since 2011 due
                                    UK) on October 26, revealed the global           to the high percentage of trees over 15
                                    supply shortage will continue, especially for    years old; 65% of the total. The area of San
                                    Thompson raisins, due to smaller crops in        Juan is the largest raisin origin, its growing
                                    California and Turkey, both main global          area totalling 16,800 hectares.
                                    exporters. However, the world’s available
                                    product estimate was around 1.15 million         Carlos Huertas, director of the raisin
                                    tonnes, 3.6% more than in 2017. Crops in         processor and exporter Frutandina, noted:

14 / Global Outlook 2019 | IEG Vu                                                                                  www.ieg-vu.com
“There will be an area fall because many      are leaving grape production,” Camilo                                                                                                                               respectively. However, Chilean exporters
small growers will leave their plantations    Rosales, export manager of the dried fruit                                                                                                                          are increasing their market share in Asian
due to high-interest rate credits in          and nut exporter Natural Chile, noted.                                                                                                                              countries due to their growth potential
Argentine pesos after the IMF’s                                                                                                                                                                                   and profitability.
intervention. However, I am optimistic        The export average price increased by
about the long-term trend because the         10.8% to USD2.26 per kilo fob for dark                                                                                                                              The 2018/19 crop is expected to reach
area of San Juan now has a new dam and        raisins and by 7.1% to USD4.5/kg in                                                                                                                                 between 61,000-67,000 tonnes, flame
plenty of water and electricity.”             H1 2018, compared with average prices                                                                                                                               variety accounting for 67.6% of the total.
                                              in 2017.
The 2018 raisin crop totalled 52,000                                                                                                                                                                              South Africa
tonnes, 70% more than in 2017, when           The main importers are the EU and the US,                                                                                                                           The 2018 South African dried vine fruit crop
production suffered severe frosts. Flame,     with a market share of 42% and 18%,                                                                                                                                 reached 71,072 tonnes, 8% more than in
Thompson, Arizul, Fiesta and Superior
varieties accounted for 51%, 15%, 14%,        Thompson Seedless
                                                       seedless Raisin
                                                                raisin prices,
                                                                       Prices, cif
                                                                               cif UK
                                                                                   UK (USD/tonne)
                                                                                      (USD/tonne)
12% and 8% of the total crop, respectively.
                                              4,000
Exports totalled 48,000 tonnes worth
                                              3,800
USD92 million, 97% more. South American
countries accounted for 67% of the total      3,600
exports and the US for 25%.                   3,400

                                              3,200
The 2019 crop estimate is similar to
2018’s production due to lack of frosts       3,000
and hailstorms.
                                              2,800

Traditionally, Chilean
                                              2,600

processors had to
                                              2,400

compete with the wine                         2,200

                                                                                                                                                                                                                                                                                                                                                                  19/11/2018
                                                                                                                                                                                                                                                                                                                                                     05/11/2018
                                                                                                                                                                                                                                                                                                                                        22/10/2018
                                                                                                                                                                                                                                                                                                                           08/10/2018
                                                                                                                                                                                                                                                                                                              24/09/2018
                                                                                                                                                                                                                                                                                                 10/09/2018
                                                                                                                                                                                                                                                                                    27/08/2018
                                                                                                                                                                                                                                                                       13/08/2018
                                                                                                                                                                                                                                                          30/07/2018
                                                                                                                                                                                                                                             16/07/2018
                                                                                                                                                                                                                                02/07/2018
                                                                                                                                                                                                                   18/06/2018
                                                                                                                                                                                                     04/06/2018
                                                                                                                                                                                        21/05/2018
                                                                                                                                                                           07/05/2018
                                                                                                                                                              23/04/2018
                                                                                                                                                 09/04/2018
                                                                                                                                    26/03/2018
                                                                                                                       12/03/2018
                                                                                                          26/02/2018
                                                                                             12/02/2018
                                                                                29/01/2018
                                                                   15/01/2018
                                                      01/01/2018

industry for raw material

Australia                                                                                                                                        South African Origin                                                      Californian Origin
The 2018 dried vine fruit crop totalled
17,000 tonnes, 30.7% more than in
                                              Source: IEG Vu
2017, sultanas accounting for 48.4%,
sun muscats for 16.3% and currants for
                                               World Sultana and Raisin Supply 2018 (tonnes packed weight)
10.4%. The producing areas are the
southern states of South Australia, New        Country                                          Estimated                                                     Estimated                                                                        Estimated                                                             Total estimated
                                                                                             physical stock                                         production Northern                                                              production Southern                                                                    available
South Wales and Victoria. Australian
                                                                                               31/08/2018                                                   Hemisphere                                                                       Hemisphere                                                                  product for
exports are expected to reach 4,876 tonnes                                                                                                                   1/10/2018                                                                       28/02/2018                                                                   marketing
in 2018, 31.5% more, mainly to Germany,
                                               Greece                                                                                                                                                    2,000                                                                                                                                        2,000
Italy and Vietnam.
                                               Iran                                                                                                                                                  80,000                                                                                                                                          80,000
Chile                                          Turkey                                                                  25,000                                                                    261,000                                                                                                                                      286,000
Traditionally, Chilean processors had to       USA                                                                     68,000                                                                    210,000                                                                                                                                      278,000
compete with the wine industry for raw
                                               Indıa                                                                                                                                             140,000                                                                                                                                      140,000
material, restricting its grape varieties,
although growers are modernising their         Uzbekistan                                                                                                                                            45,000                                                                                                                                          45,000
plantations and focusing on beverages and      China                                                                                                                                             190,000                                                                                                                                      190,000
fresh and dried product.
                                               Argentina                                                                 1,000                                                                                                                                                       52,000                                                          53,000

The 2018 raisin crop totalled 56,000           Australia                                                                                                                                                                                                                             15,468                                                          15,468
tonnes, 15.7% less than in the previous        Chile                                                                     5,000                                                                                                                                                       48,000                                                          53,000
season. This fall was due to a quick
                                               South Africa                                                                                                                                                                                                                          51,000                                                          51,000
transition in the Chilean grape production,
moving into new seedless and more              Total                                                                   99,000                                                                    928,000                                                                            166,468                                             1,193,468
productive varieties.                          2017                                                              117,916                                                                         883,461                                                                            153,000                                             1,154,377
                                               % Difference                                                               -16%                                                                        5.00%                                                                            8.80%                                                         3.40%
“These new varieties have higher
                                               Source: International Seedless Dried Grape Producing Countries Conference
production costs and many small growers

www.ieg-vu.com                                                                                                                                                                                                                                            IEG Vu | Global Outlook 2019 / 15
last year, due to a better dam capacity                                                        20.3% less than in the previous year and
level. Thompsons accounted for 58.0%,                                                          the smallest crop of seedless raisins in
Goldens for 35.2%, sultanas for 3.4% and                                                       recent years. The Thompson variety
currants for 3.3%. Exports are expected to                                                     production totalled 190,741 tons,
account for 85% of the total crop.                                                             21.5% less. The 2018 crop is expected to
                                                                                               reach a similar figure, continuing the
The 2019 crop is expected to be slightly                                                       supply shortage.
lower than in 2018, although it expects
notable growth in 10 years due to the                                                          In addition, Chinese retaliatory tariffs have
intense vineyard renewal, exceeding                                                            caused a 37% increase in the base price to
90,000 tonnes.                                                                                 importers and consumers alike, making it
                                                                                               difficult to run any kind of trade or
“South African growers are                                                                     consumer promotion.

modernising their orchards                                                                     China, India and Iran
and we are optimistic”                                                                         The 2018 Chinese crop is expected to
                                                                                               reach 190,000 tonnes, of which 30,000
Ferdie Botha and Dappie Smit of the South                                                      tonnes will be exported. Meanwhile, India
African Dried Fruit Technical Services                                                         is expected to reach 140,000 tonnes and
explained: “South African growers are                                                          export 20,000 tonnes. Finally, Iran is
modernising their orchards and we are                                                          expected to reach 80,000 tonnes,
optimistic, although we have several                                                           exporting all its production.
challenges such as the land reform and
climate change.”                                 gradual recovery and the British pound’s      However, they have not managed to
                                                 weakening due to Brexit negotiations have     alleviate the Californian and Turkish
Turkey                                           made life difficult for exporters.            shortages, due to commercial sanctions
Turkey exported 280,000 tonnes of dried                                                        against Iran and MRLs and phytosanitary
vine fruit in 2018, a record and 3.7% more       The US                                        controls in the EU.
than in the previous season. However, the        The Californian industry has almost
2018/19 crop is expected to drop to              completed its removal vine programme,         Our forecast for 2019 season is a price
260,000 tonnes and exports to 235,000            totalling 150,186 hectares of raisin          increase of around 15-20%, based on the
tonnes, adding pressure to the global            plantings and has automated 50% of            continual global supply shortage and
supply shortage, especially in the UK, its       harvesting due to labour shortages and        expected Turkish crop fall. However, it
main importer. In addition, the sharp fall       rising minimum wage rates. The 2017 crop      would be necessary to analyse H1 2018
in the value of the lira last summer and its     totalled 218,236 packaged (short) tons,       data to project a more solid forecast.

 World Golden and Currant Supply 2018 (tonnes packed weight)
 Country           Estimated       Goldens Estimated          Total estimated    Estimated physical         Currants        Total estimated
                physical stock   Production 2018 crop       available product     stock 31/08/2018         Estimated      available product
                  31/08/2018                                    for marketing                             production          for marketing
                                                                                                           2018 crop
 Greece                                                                      0                                 16,000                16,000
 Iran                                           25,000                 25,000                                                             0
 Turkey                                              0                       0                                                            0
 USA                                            18,000                 18,000                                   1,500                 1,500
 Indıa                                               0                       0                                                            0
 Uzbekistan                                          0                       0                                                            0
 China                                               0                       0                                                            0
 Argentina                                           0                       0                                                            0
 Australia                   0                       0                       0               1,069              2,092                 1,841
 Chile                                           8,000                  8,000                                                             0
 South Africa             800                   17,000                 17,000                  800              2,000                 2,000
 Total                    800                   68,000                 68,000                1,869             21,592                21,341
 2017                    5,111                  64,718                 44,829                2,485             28,421                20,905
 % Difference            -84%                      5%                    52%                  -25%              -24%                    2%
 Source: International Seedless Dried Grape Producing Countries Conference

16 / Global Outlook 2019 | IEG Vu                                                                                           www.ieg-vu.com
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Pepper prices still falling
despite restructuring
The global pepper industry closed 2017 with a 50% price fall
compared with 2015 and dreaming of a price hiccup in 2018 or,
at least, stabilisation after having dropped from around USD3,000-
3,100 per tonne fob in December. However, the oversupply from
Vietnam and Brazil was a stubborn background.

By Jose Gutierrez

The global pepper crop reached 488,000                                                       due to favourable weather and a larger
tonnes in 2017, 13.9% more than in 2016,                                                     yield of the younger vines, according to
and exports totalled 389,000 tonnes,                                                         Nedspice. The Brazilian production was
20.9% more, both exceeding all previous                                                      expected to increase by 26.1% to 82,000
estimates, according to the International                                                    tonnes. The only origin which expected a
Pepper Community (IPC).                                                                      fall was China, dropping 35,000 tonnes,
                                                                                             8.5% less. As a result, average prices
Despite the price fall, Vietnam and Brazil                                                   ranged from USD2.60/kg fob to USD3.0/kg
increased their 2017 export values due to                                                    fob between March and May.
their volume growth. Vietnamese exports
increased in value by 21% to USD1.2 billion                                                  An updated estimate steepened the price
while those of Brazil gained 12% to USD277                                                   fall in summer. The 2018 Indian production
million. Vietnam exported 222,000 tonnes,                                                    was expected to reach 92,000 tonnes.
24% more than in 2016, and Brazil 62,000                                                     Indonesian was expected to reach 45,000
tonnes, 92% more, according to the Dutch                                                     tonnes. Nedspice quoted Indonesian
trader Nedspice.                                                                             Lampung fair, average quality (faq) 550 g/l
                                                                                             black pepper at USD2,720/tonne fob;
Cambodia underwent major changes in its                                                      Vietnamese faq black pepper of 550/g at
position in the world market, its crop                                                       USD2,650/tonne fob; and Brazilian faq 550
reaching 20,054 tonnes in 2017, up from                                                      g/l at USD2,425/tonne fob in July.
1,450 tonnes in 2011. Most Cambodian
production is organic, bought by Vietnamese                                                  Heavy rains due to monsoons impacted
importers to mix it with domestic product                                                    pepper harvesting in the Indian states of
and reduce its pesticide levels in order to   Vietnamese black pepper average prices fell    Kerala and Karnataka, which account for
meet European and US requirements.            from VND71,000-72,000 per kilo (USD3.11-       around 90% of the total domestic crop.
                                              3.16 /kg) in December 2017 to VND70,000/       The Indian Institute of Spices Research
Indian growers suffered a crop fall due to    kg in January 2018.                            (ISSR) estimated that cropscould drop to
severe droughts and they convinced their                                                     45,000-50,000 tonnes, very far from the
government to use pesticide on imported       The initial 2018 production estimate was       previous forecast of 90,000 tonnes. The
pepper and, finally, a minimum price of       released in spring. Again, a crop increase     combination of crop declines in China and
INR500/kg (USD6.95/kg) on imported            was set to fuel price falls. The 2018 global   India might temper the price fall but not
pepper in December, after claiming cheap      pepper crop was expected to reach              reverse it due to the Brazilian and
Vietnamese product was re-exported            575,000 tonnes, 17.8% more, and the            Vietnamese production forecasts.
throughout Sri Lanka. This pushed down        carry-over stock to 399,000 tonnes,
the local production price taking             according to the European Spice                Brazilian prices enjoyed a brief fillip in the
advantage of the South Asia Free Trade        Association (ESA). This crop was set to        second fortnight of October due to
Agreement (SAFTA), signed by India,           exceed consumption by 120,000 tonnes.          uncertainty about results and the
Bangladesh, Sri Lanka, Bhutan, Pakistan                                                      consequences of Bolsonaro’s victory at
and Maldives.                                 Vietnam’s crop was expected to reach           presidential elections. Brazilian product
                                              218,000 tonnes, up 8,000 tonnes from           reached USD2,500/tonne for Asta graded 1
Vietnam led global price trends.              2017 despite a 19% fall in its growing area,   ranged and USD2,400/tonne, following

18 / Global Outlook 2019 | IEG Vu                                                                                          www.ieg-vu.com
firmer prices in Vietnam. Brazil’s average                                                                                                                                                Malaysian exporters to keep stocks to wait                                                                                                                                   demand of 474,000 tonnes, 2.1% more,
price reached USD3,000/tonne for ASTA                                                                                                                                                     good offers, the price being over USD3,600/                                                                                                                                  according to Nedspice. The 2019 global
grade 1 in June, fell to USD2,600-2,700 in                                                                                                                                                tonne cif,” Kai Jantzen of Hamburg trader                                                                                                                                    stocks may total 517,000 tonnes.
July and enjoyed an increase in the end of                                                                                                                                                Jantzen & Deeke told IEG Vu.
August, at around USD2,400/tonne,                                                                                                                                                                                                                                                                                                                                      “The over-production will cause global
according to Juliano Camara, director of                                                                                                                                                  The global 2019 pepper crop was                                                                                                                                              stocks to increase further and it will likely
the Brazilian broker Coreimex.                                                                                                                                                            upgraded again at the China Spice                                                                                                                                            take some time before supply lines up
                                                                                                                                                                                          Conference, held in Wuanxi (China) from                                                                                                                                      with demand again, resulting in
However, Brazilian prices started to fall in                                                                                                                                              October 31 to November 2.                                                                                                                                                    continuous downward price pressure,”
November, as did most origins. The only                                                                                                                                                                                                                                                                                                                                Nedspice explained.
exception was the Malaysian Sarawak black                                                                                                                                                 The 2019 global stocks may total 517,000
label pepper, much appreciated in Far Eastern                                                                                                                                             tonnes. The 2019 pepper production is                                                                                                                                        “Prices are already close to or below
markets. “It did not suffer as deep a fall as                                                                                                                                             expected to reach 612,000 tonnes, 11%                                                                                                                                        production costs in many countries, so the
other origins and its scarcity encouraged                                                                                                                                                 more than in 2018, against an international                                                                                                                                  struggle for farmers who concentrate on
Black Pepper Prices Weekly, cif nw Europe (USD/tonne)                                                                                                                                                                                                                                                                                                                  pepper may harden.”
Black pepper prices weekly, cif nw Europe (USD/tonne)
8K
                                                                                                                                                                                                                                                                                                                                                                       “The over-production will
7.5K
7K
                                                                                                                                                                                                                                                                                                                                                                       cause global stocks to
6.5K                                                                                                                                                                                                                                                                                                                                                                   increase further and it
6K                                                                                                                                                                                                                                                                                                                                                                     will likely take some time
5.5K
                                                                                                                                                                                                                                                                                                                                                                       before supply lines up
5K
4.5K
                                                                                                                                                                                                                                                                                                                                                                       with demand again”
4K
                                                                                                                                                                                                                                                                                                                                                                       As a result, this optimistic pepper crop
3.5K
                                                                                                                                                                                                                                                                                                                                                                       estimate led to short positions and lower
3K
                                                                                                                                                                                                                                                                                                                                                                       prices. Nedspice explained that Brazil has
2.5K                                                                                                                                                                                                                                                                                                                                                                   become the cheapest origin due to its weak
2K                                                                                                                                                                                                                                                                                                                                                                     currency and selling pressure before the end
                                                                                                                                                                                                                                                                                                                                                          10/12/2018
                                                                                                                                                                                                                                                                                                                                            26/11/2018
                                                                                                                                                                                                                                                                                                                              12/11/2018
                                                                                                                                                                                                                                                                                                                 29/10/2018
                                                                                                                                                                                                                                                                                                    15/10/2018
                                                                                                                                                                                                                                                                                       01/10/2018
                                                                                                                                                                                                                                                                          17/09/2018
                                                                                                                                                                                                                                                             03/09/2018
                                                                                                                                                                                                                                                20/08/2018
                                                                                                                                                                                                                                  06/08/2018
                                                                                                                                                                                                                    23/07/2018
                                                                                                                                                                                                      09/07/2018
                                                                                                                                                                                        25/06/2018
                                                                                                                                                                         11/06/2018
                                                                                                                                                          28/05/2018
                                                                                                                                           14/05/2018
                                                                                                                           30/04/2018
                                                                                                           16/04/2018
                                                                                           02/04/2018
                                                                          19/03/2018
                                                             05/03/2018
                                                19/02/2018
                                   05/02/2018
                     22/01/2018
        08/01/2018

                                                                                                                                                                                                                                                                                                                                                                       of the year, showing a discount of USD500-
                                                                                                                                                                                                                                                                                                                                                                       600 per tonne against Vietnamese prices.
                                                                                                                                                                                                                                                                                                                                                                       “Many Vietnamese exporters were buying
                                                                                                                                                                                                                                                                                                                                                                       Brazilian product to cover orders. However,
                                                                          Vietnamese min 550g/l                                                                                       Malaysian Sarawak black label                                                                                                                                                    traffic congestion in Brazilian ports is leading
                                                                                                                                                                                                                                                                                                                                                                       these exporters to buy domestic product
             Indonesian, Lam Pong min 550g/l, mach. Cleaned                                                                                                                                                    Indian MG 1 grade                                                              Brazilian grade 1
                                                                                                                                                                                                                                                                                                                                                                       again,” Nedspice explained.

Whitepepper
White Pepperprices
            Pricescif
Source: IEG Vu     cifnw
                       NWEurope
                          Europe(USD/tonne)
                                 (USD/tonne)                                                                                                                                                                                                                                                                                                                           Nedspice quoted the following November
                                                                                                                                                                                                                                                                                                                                                                       fob prices.
 7K
                                                                                                                                                                                                                                                                                                                                                                       • V
                                                                                                                                                                                                                                                                                                                                                                          ietnam: USD2,850/tonne for black faq
 6.5K                                                                                                                                                                                                                                                                                                                                                                    550gl; and USD4,200/tonne for white dw

 6K                                                                                                                                                                                                                                                                                                                                                                    • Brazil: USD2,125/tonne for black faq 550gl,

 5.5K
                                                                                                                                                                                                                                                                                                                                                                       • India USD5,493/tonne for black faq 550gl
 5K
                                                                                                                                                                                                                                                                                                                                                                       • I ndonesia: USD2,820 for black Lampung
 4.5K                                                                                                                                                                                                                                                                                                                                                                     faq 550gl and USD3,920/tonne for white
                                                                                                                                                                                                                                                                                                                                                                          Muntok, faq,
 4K
                                                                                                                                                                                                                                                                                                                                                                       • China: USD5,000/fob for white faq.
 3.5K
                                                                                                                                                                                                                                                                                                                                                         10/12/2018
                                                                                                                                                                                                                                                                                                                                           26/11/2018
                                                                                                                                                                                                                                                                                                                              12/11/2018
                                                                                                                                                                                                                                                                                                                 29/10/2018
                                                                                                                                                                                                                                                                                                    15/10/2018
                                                                                                                                                                                                                                                                                       01/10/2018
                                                                                                                                                                                                                                                                          17/09/2018
                                                                                                                                                                                                                                                             03/09/2018
                                                                                                                                                                                                                                                20/08/2018
                                                                                                                                                                                                                                   06/08/2018
                                                                                                                                                                                                                     23/07/2018
                                                                                                                                                                                                       09/07/2018
                                                                                                                                                                                         25/06/2018
                                                                                                                                                                           11/06/2018
                                                                                                                                                            28/05/2018
                                                                                                                                             14/05/2018
                                                                                                                              30/04/2018
                                                                                                              16/04/2018
                                                                                              02/04/2018
                                                                              19/03/2018
                                                                 05/03/2018
                                                    19/02/2018
                                       05/02/2018
                          22/01/2018
             08/01/2018

                                                                                                                                                                                                                                                                                                                                                                       IEG Vu expects a price fall up to the
                                                                                                                                                                                                                                                                                                                                                                       second half of 2019, when downgraded
                                                                                                                                                                                                                                                                                                                                                                       crop estimates will stabilise price levels.
                                                                                                                                                                                                                                                                                                                                                                       However, we do not want to quantify the
                                  Vietnamese min 550g/l                                                                           Indonesian Sarawak faq                                                                                  Indonesian Muntok White faq                                                                                                  percentage because it will be based
                                                                                                                                                                                                                                                                                                                                                                       largely on Vietnamese and Brazilian
 Source: IEG Vu                                                                                                                                                                                                                                                                                                                                                        exchange rates.

www.ieg-vu.com                                                                                                                                                                                                                                                                                                                                                                     IEG Vu | Global Outlook 2019 / 19
Orange juice slowly falls
                                    out of global favour
                                    Demand is slowly but surely falling but then so is production.

                                    By Neil Murray

                                    Pity the poor orange juice sellers. Still the                              changing breakfast habits in the west
                                    lynchpin of the juice industry,                                            have meant that a glass of orange juice is
                                    consumption is stagnating in Europe and                                    now a rare sight in the morning and the
                                    has been in decline in the US for the                                      hope, often expressed at the start of the
                                    better part of a decade.                                                   century, that China would be the saviour
                                                                                                               of the industry has not happened.
                                    Orange juice has been at the sharp end of
                                    the sugar-in-fruit-juice backlash (mainly                                  “If every Chinese consumer drank just
                                    because it’s the most visible target),                                     one small glass of orange juice a week…”

                                    Brazilian orange
                                    Brazilian orange juice
                                                     juice processing yields by
                                                           processing yields by box
                                                                                box
                                                       350                                                                                                    6.5

                                                       300                                                                                                   5.57

                                                       250                                                                                                   4.64

                                                       200                                                                                                   3.71
                                    Boxes/FCOJ tonne

                                                                                                                                                                    Lbs solids/box

                                                       150                                                                                                   2.79

                                                       100                                                                                                   1.86

                                                       50                                                                                                    0.93

                                                       0                                                                                                       0
                                                             1

                                                                  2

                                                                       3

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                                                                                                                    20

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                                                                                          Boxes/FCOJ tonne          Lbs solids/box

                                     Source: CitrusBR

20 / Global Outlook 2019 | IEG Vu                                                                                                                    www.ieg-vu.com
MORE THAN
PRUNES
started the industry prayer. Well, they           The pack from fruit was hugely reduced.          Orange juice buyers are sourcing from
didn’t, they aren’t and they probably                                                              countries that, hitherto, they would only
won’t. Not for a while, anyway.                   The inventory for NFC juice, on the other        buy from in an emergency. It is worth
                                                  hand, had shrunk from 27.3 weeks’                mentioning that the smaller producers are
Production is still endangered due to             supply to just 20.5 weeks. The pack from         providing, collectively, some reasonable
disease and unpredictable weather.                fruit was down by well over one-third to         volumes and Europe and the Middle East
Greening is still rampaging through               just over 200 mln lbs (320.6 mln lbs) and        have not (yet) been affected by the citrus
Brazil’s citrus groves, and Hurricane Irma        imports nearly doubled to 99.3 mln lbs           diseases that have ravaged the Americas.
slashed Florida’s orange production to            (55.0 mln lbs).
below 50 million boxes. There has been a                                                           Globally, the availability of fruit for
USD25 million support package for
                                                  It looks as if NFC juice has                     processing is expected to fall, with FCOJ
affected growers in the state, but this                                                            production forecast down nearly 25%,
smacks more of a temporary sticking               become the core product                          according to a recent USDA report on the
plaster to tide growers over rather than a        for Brazilian processors                         industry. Fresh fruit exports are relatively
scheme that will actually allow them to                                                            unchanged.
invest in growth.                                 The clue to the market situation is in the
                                                  word ‘imports’. It looks as if NFC juice has     US production is estimated to decline
For all this, it looks as though FCOJ             become the core product for Brazilian            24% to 3.5 million tonnes as unfavourable
consumption has been declining faster             processors, because (in the major markets        weather and citrus greening continue to
than production, because in October,              of the US and Europe, anyway) exports are        cause fruit drop in Florida.
Florida’s FCOJ inventory was the                  holding up reasonably well. To a degree,
equivalent of nearly 44 weeks’ worth,             US bottlers (the big brands) have managed        Brazil’s production is forecast to fall 23%
compared with just under 25 weeks’                to disguise price increases by ‘shrinkflation’   to 16.0 mln tonnes as poor weather
worth at this point in the previous year.         – reducing the size of their larger packs.       resulted in poor bloom and fruit set. Fresh
                                                                                                   orange consumption is up 173,000
                                                                                                   tonnes while oranges for processing are
 Forecast Brazilian orange production and juice exports (tonnes, FCOJ equivalent)
                                                                                                   down 5.0 mln tonnes to 11.1 mln tonnes.
                             Orange production                         OJ exports                  FCOJ juice production is forecast to fall to
 Year                        Forecast        Upper limit          Forecast          Upper limit    1.0 mln tonnes.

 2018                            16.92                 -              2.294              2.550
                                                                                                   EU orange production is estimated down
 2019                          17.043             19.428              2.289              2.578     5% to 6.4 mln tonnes on lower area and
 2020                          17.167              20.54             2.355               2.702     drought conditions. Imports (which are
                                                                                                   more than triple exports) are up 10% while
 2021                            17.29            21.421             2.387               2.771
                                                                                                   oranges for processing and fresh
 2022                          17.414             22.184             2.436               2.859     consumption are both down.
 2023                          17.537              22.87             2.477               2.933
                                                                                                   Egypt’s production is estimated at a
 2024                          17.661             23.503             2.521               3.010
                                                                                                   record 3.2 mln tonnes, up 6% from last
 2025                          17.784             24.094             2.564               3.082     year on higher area. Exports are up 5%
 2026                          17.908             24.653             2.608               3.154     to a record 1.6 mln tonnes on greater
 2027                          18.031             25.186             2.651               3.224
                                                                                                   exportable supplies. Egypt accounts for
                                                                                                   one-third of global orange exports.
 2028                          18.155             25.697             2.694               3.293
 Source: Brazilian Ministry of Agriculture                                                         Egypt is emerging as an interesting force.
                                                                                                   Its leading processors are properly
                                                                                                   certified and this summer (its season ends
 EU28 orange juice production (65 brix equivalent, tonnes)
                                                                                                   in June/July) it sold out of FCOJ and its
                                2014/15           2015/16          2016/17            2017/18      orange oil was priced around USD8.50 per
 Fruit to processors          1,251,000          1,286,000        1,490,000          1,385,000     kilo. Egyptian product is duty-free into
                                                                                                   Europe with the EUR1 certificate.
 Opening stocks                   15,000           15,000            15,000             15,000
 Production                       97,000           99,693           115,508            107,638     South Africa’s production is expected to
 Imports                        890,000           777,989           689,209            675,000     rise 8% to 1.5 mln tonnes. Exports are
                                                                                                   forecast at a record 1.2 mln tonnes and
 Total supply                 1,002,000           892,682           819,717            797,368
                                                                                                   account for 25% of global trade. The
 Exports                          50,000           52,065            63,493             65,000     USDA estimates that the 2017 exports of
 Ending stocks                    15,000           15,000            15,000             15,000     orange juice will increase by 3% to 28,500
 Total distribution           1,002,000           892,682           819,717            797,368     tonnes from 27,742 tonnes in 2016, based
                                                                                                   on the available supply, increase in
 Source: USDA
                                                                                                   production and the year-to-date exports

22 / Global Outlook 2019 | IEG Vu                                                                                               www.ieg-vu.com
We
We sell
     sell only
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                top quality
                    quality raw
                            raw materials
                                materials
to
to the
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                           In France
         In France fruit juice        LEVY
                               means fruit juiceGROUP    INTERNATIONAL
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                                                              Member
                                                              MemberofofUnijus
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                                                                                       QUALITY
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Levy Group
       LevyInternational
            Group International   - 31du
                         - 92 avenue   bis,Général
                                            rue desLeclerc,      92100
                                                             92100
                                                     longs prés,   Boulogne Billancourt
                                                                       Boulogne - FRANCE- FRANCE
                                    Tel: +33.
                                         +33. (0)1.46.03.82.44
                                               (0)1.46.03.82.44
                                    Fax:   +33. (0)1.46.03.84.00
                                    Fax:+33.    (0)1.46.03.84.00
                                      Email:: juices@djpl.fr
                                     Email     juices@djpl.fr
                                            www.djpl.fr
up to April 2018. Its estimate of 2017         Mexico’s production is projected down         ago, has staged a remarkably recovery.
orange juice exports were revised upwards      slightly, which is expected to lower fruit    Prodalim, the Israeli company that is
to 27,742 tonnes.                              used for processing and consumption.          pursuing a global aggressive acquisition
                                                                                             policy, has signed a joint venture with
Production in Turkey is forecast at a record   Mexico, whose orange juice industry was       Jugosa, a Mexican supplier of organic
1.9 mln tonnes due to favourable weather.      being written off by pundits a decade or so   juices, and this will focus on producing a
                                                                                             wide range of organic NFC juices: orange,
                                                                                             lemon, lime, grapefruit and tangerine, with
 Florida processing orange production, utilisation (‘000 boxes)                              apple in the near future. The products will
                              FCOJ             Chilled           Others              Total   be destined mainly for the North American
 1980/81                   144,322             19,867             6,353           170,542
                                                                                             and the European markets.

 1981/82                   105,150             16,518             4,473           126,141
                                                                                             Morocco’s production is forecast only
 1982/83                   114,627             18,254             2,665           135,546    slightly lower at 1.0 mln tonnes on
 1983/84                    94,547             16,981             2,909           114,437    favourable weather following early
                                                                                             season drought.
 1984/85                    86,112             14,903             1,907           102,922
 1985/86                    96,061             17,267             1,361           114,689    More oranges will also be sent for
 1986/87                    96,182             19,661               948           116,791    processing. The original forecast was
 1987/88                   110,206             23,325               904           134,435
                                                                                             for 35,000 tonnes crushed for juice, but
                                                                                             that has been revised to 50,000 tonnes:
 1988/89                   113,732             29,902             1,141           144,775
                                                                                             the same volume as in the previous
 1989/90                    73,640             33,836               659           108,135    season. This equates to around 4,100
 1990/91                   104,136             38,387               568           143,091    tonnes of orange juice (FCOJ 65 brix
                                                                                             equivalent, though Morocco mostly
 1991/92                    93,932             37,324               456           131,712
                                                                                             produces NFC juice).
 1992/93                   132,154             47,441               355           179,950
 1993/94                   116,248             52,912               225           169,385    China’s production is projected up
                                                                                             300,000 tonnes to 7.3 mln tonnes as a
 1994/95                   144,678             54,843               289           199,810
                                                                                             result of good weather and yields.
 1995/96                   132,907             64,543               224           197,674    Consumption is up on higher domestic
 1996/97                   153,842             65,676               842           220,360    supplies and robust import demand for
 1997/98                   160,865             74,767               989           236,621
                                                                                             high quality and counter-seasonal fruit.

 1998/99                    97,247             80,112               756           178,115
                                                                                             US production is expected
 1999/2000                 134,204             90,085             2,387           226,676
                                                                                             down 98,000 tonnes to
 2000/01                   124,072             89,564             2,246           215,882
 2001/02                   135,975             85,869             1,385           223,229
                                                                                             205,000 tonnes. Imports
 2002/03                   102,073             92,506             1,445           196,024
                                                                                             are forecast up 37% to
 2003/04                   139,727             93,393               500           233,620
                                                                                             410,000 tonnes
 2004/05                    54,322             88,514             1,059           143,895
                                                                                             Global orange juice production for 2017/18
 2005/06                    51,873             88,662             1,195           141,730    is forecast down 24% to 1.6 mln tonnes as
 2006/07                    47,996             74,523               907           123,426    Brazil and US production plunges on fewer
 2007/08                    80,817             84,710                 0           165,527
                                                                                             oranges for processing. Consumption,
                                                                                             exports and stocks are expected to fall as
 2008/09                    72,543             82,561             1,115           156,219
                                                                                             Brazilian and US supplies, combined, fall to
 2009/10                    52,745             75,149               431           128,325    near 2015/16 levels.
 2010/11                    51,739             82,674               835           135,248
                                                                                             US production is expected down 98,000
 2011/12                    63,355             75,518             2,455           141,328
                                                                                             tonnes to 205,000 tonnes. Imports are
 2012/13                    47,968             79,247              411            127,626    forecast up 37% to 410,000 tonnes with
 2013/14                    22,723             76,035              442             99,200    Brazil and Mexico expected to supply over
                                                                                             90% of imports.
 2014/15                    19,224             71,891              865             91,980
 2015/16                    15,844             61,768              158             77,770    Brazil’s production is expected to drop
 2016/17                    12,648             53,237              162             66,047    nearly 30% to 1.0 million tonnes. Both
 2017/18                     7,664             34,378              146             42,188    exports and stocks are forecast down.

 Source: USDA
                                                                                             EU production is projected down 8% to

24 / Global Outlook 2019 | IEG Vu                                                                                        www.ieg-vu.com
Although overall fruit juice and nectars         6%. Zansler and the FDOC also predict that
                                            consumption fell in 2017, the chilled and        per capita consumption should be
                                            NFC sectors are holding up well. Almost          unchanged at 2.5 gallons.
                                            all EU markets recorded increases, with
                                            chilled juice seeing an overall gain of          Once again, IEG Vu is taking a slightly
                                            3.6%, taking its share to nearly a quarter       more pessimistic view. The first report of
                                            of EU fruit juice volumes. NFC juice             the new season has actually posted
                                            registered a similar growth level, and now       steeper decline figures than the final
                                            represents over one-third of EU fruit juice      reports for the 2017/18 season reported.
                                            consumption in 2017.
                                                                                             Although overall fruit juice
                                            Nectars suffered a steeper drop than fruit
                                            juices, affected not only by the backlash        and nectars consumption
                                            against sugar, but competition from              fell in 2017, the chilled
                                            flavoured water (which is perceived to be        and NFC sectors are
                                            healthier) and, in the chilled segment,
                                            from chilled juice. Orange remains the           holding up well
                                            most popular flavour, but blended juices/
                                            flavours are expected to increase as are,        This may just be a one-off, and
                                            particularly, fruit/vegetable blends.            consumption may improve over the year,
107,000 tonnes. Consumption continues                                                        but we still think that the problems in the
to slide as imports are also down.          What will US consumption be, then, in the        orange juice market are too deep-rooted
                                            season that ends in October 2019? Marisa         for that. The slight recovery in Florida’s
Per capita consumption of fruit juice and   Zansler, chief economist at the Florida          production will not stimulate
nectars in the EU stood at 17.9 litres in   Department of Citrus (FDOC), has predicted       consumption: it will merely reduce the
2017, compared with 18.2 litres in 2016,    total retail sales of 386 million gallons. The   amount of juice that the US has to import
according to the newly published AIJN       previous season’s sales were 411 mln             from Brazil. We think US retail sales will
Liquid Fruit Report.                        gallons, so this forecast represents a fall of   be 380 mln gallons.

                      THE ART
                      OF FRUITS

                                                                                                               www.trisun.co.il

www.ieg-vu.com                                                                                         IEG Vu | Global Outlook 2019 / 25
Apple juice 2018:
                                    China sidelined and
                                    Poland triumphant
                                    The market has been upset by a complete reversal of fortunes.

                                    By Neil Murray

China simply underpriced            One major apple producing country suffers      months of the start of the season) and
                                    a devastating late spring frost which          Moldova blended with Polish juice, so
Poland (and every other             devastates its apple orchards (and badly       overall Poland sold less than 100,000
competitor) right through           damages other fruits), while another           tonnes of its own production: a far cry
the 2017 season and then            important origin enjoys a huge harvest.        from the 2014/15 season when it exported
                                                                                   well over 313,000 tonnes.
in 2018, the two countries          This scenario has been played out in two
changed places                      successive years. In early 2017, it was        China simply underpriced Poland (and
                                    Poland that suffered the frost, which cut      every other competitor) right through the
                                    its harvest to about 2.8 million tonnes,       season. There was no way Poland could
                                    while China had a record harvest of some       compete: its average AJC price, fob, over
                                    44 million tonnes.                             the season was around USD1,860 per
                                                                                   tonne. China averaged USD1,020/tonne
                                    In April 2018, China had the frost and saw     until March, after which it realised that it
                                    12 million tonnes wiped off its production     could charge pretty much what it liked.
                                    and Poland had the biggest harvest in its
                                    history: close to 5.0 million tonnes.          IEG Vu had seen this coming and in
                                                                                   August 2017, predicted that China would
                                    China exported about 708,000 tonnes of         introduce a two-tier pricing structure. A
                                    AJC in the 2017/18 season, while Poland        lower price for the US and higher for
                                    struggled to export anything at all. Total     Europe. Even given the 30% duty
                                    Polish exports were 172,850 tonnes, but        disadvantage, China could still be
                                    this included 76,000 tonnes of product         competitive. “IEG Vu still believes that
                                    imported from China, Ukraine (which had        China has enough leeway in the European
                                    filled all its EU import quotas within a few   market to price its AJC at USD1,150/tonne

26 / Global Outlook 2019 | IEG Vu                                                                               www.ieg-vu.com
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