Australian Nut Conference 2019 Impacts of trade policy in China on Edible Nuts · 2019-04-16 ·...
Transcript of Australian Nut Conference 2019 Impacts of trade policy in China on Edible Nuts · 2019-04-16 ·...
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Australian Nut Conference 2019
Impacts of trade policy in China on Edible Nuts
Damien Houlahan
27 4056 - 63
2011 2016 2022
8.2% 3.4% 1.7%
Edible Nuts Global GDP Agriculturaldemand
US$40bn industry, growing at ~8% CAGR (2.4x global GDP growth rate & 4.8x agri-demand growth rate)
Source: International Nuts and Dried Fruits 2016/2017 Statistical Yearbook (Year shown represents season start year) and internal company data.(1) Represents real GDP growth.
Edible Nuts: Market size (2016)
Edible Nuts: Demand CAGR Edible Nuts has outpaced real global GDP as well as overall agri-demand growth
11.35.8 5.3 5.3 5.0 4.2 1.6 1.4
Almonds Pistachios Hazelnuts Walnuts Peanuts Cashews Pecans Other nuts
1.2 0.8 0.4 0.9 4.0 0.8 0.1 0.1Volume in m MT
Market value by nut type ($B)
Global market value ($B)
~2.4x ~4.8x
Growth benchmarks
Edible Nuts growth multiple:
Increasing research on and awareness of nut benefits leading to higher consumption
Source: International Nut and Dried Fruit (June 2017). Note: consumption excluding peanuts
Number of scientific studies on nuts have increased Increasing awareness on the health benefits of nuts
International Congress on Nutrition
International Symposium on Diabetes & Nutrition
World Congress of Public Health Nutrition
World Forum for Nutrition Research Conference0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0
10
20
30
40
50
60
70
1998 2000 2002 2004 2006 2008 2010 2012 2014
Scientific studies Consumption, MT millions
Scientific studies
Consumption
Global media
Online sources – Blogs and interactive videos
Global research conferences
Rising affluence and higher GDP per capita in emerging economies
4
Consumption: USA in Top 5 acrossall nuts;China only in certain types; fragmented consumption otherwise
China Domestic Tree Nut Production
6
0
1,000
2,000
3,000
4,000
5,000
2014 2015 2016 2017 2018
MT
Pistachio
- 5,000
10,000 15,000 20,000 25,000
2014 2015 2016 2017 2018
MT
Macadamia
-
200,000
400,000
600,000
800,000
1,000,000
2014 2015 2016 2017 2018
MT
Walnut
0
2,000
4,000
6,000
8,000
10,000
2014 2015 2016 2017 2018
MT
Hazelnut
Current Duty Structure excl. Australia
7
10%
25%
5%
12%7%
10%
25%
40%
20%
27%22%
25%
50%
65%
45%
52%47%
50%
10%
25%
5%
12%7%
10%
0%
10%
20%
30%
40%
50%
60%
70%
Almonds Walnuts Pistachio Macadamia Pecan Hazelnuts
USA Before 2nd April 2018 USA 2nd April - 6th July 2018USA 6th July 2018 onwards WTO Countries - 2019
China Import Duty for Australian Origin 2015 –2019
8
19.2%
14.4%
9.6%
4.8%
8%
6%
4%
2%
19.2%
14.4%
9.6%
4.8%
19.2%
14.4%
9.6%
4.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2015 2016 2017 2018 2019
Australia
Almonds In Shell Almonds Shelled Macadamia In Shell Macadamia Shelled
0%
The “Grey” Trade
9
US Tree Nut Exports to China from 2015
10
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Pistachio (.95is) Almond ke Walnut (.85is) Hazelnut (.85is) Pecans (is)
2015 (MT) 2016 (MT) 2017 (MT) 2018 (MT)
Australian Nut Exports to China from 2014
11
- 2,000 4,000 6,000 8,000
10,000 12,000 14,000 16,000
2014 (MT) 2015 (MT) 2016 (MT) 2017 (MT) 2018 (MT)
Australian Volumes by Nut by Year
Almonds Tonnes Macadamia Tonnes (.95is)
$-
$50,000
$100,000
$150,000
$200,000
2014(MT)
2015(MT)
2016(MT)
2017(MT)
2018(MT)
Australian Value by Nut by Year ('000)
Almonds Macadamia
Australian Almond Exports to China are Increasing
12
Australian vs. US Almond Exports to China
13
578
58,468
11,414
58,493
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
AUS USA
MT
2017 (March - December) 2018 (March - December)
19.3%
10.67%11.4%
% of total exports
1.1%
14
-47%
-54%
-74%
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
July August September October November December January February
LBS
US Almond Exports China, Hong Kong & Vietnam
2017/18
2018/19
% Change MoM
15
2017/18 2018/19 Inc/ Dec
Feb YTD 82,084,726 89,895,440
54,348,648 61,811,896
3,894,511 7,654,811
Total 140,327,885 159,362,147 14%
Feb FTM
2017/18 2018/19
China 2,737,300 1,862,147
Hong Kong 2,609,683 2,149,000
Vietnam 747,000 233,950
Total 6,093,983 4,245,097 -30%
Jan FTM
2017/18 2018/19
China 995,783 6,872,034
Hong Kong 2,046,720 437,991
Vietnam 710,901 2,141,119
Total 3,753,404 9,451,144 152%
US Pistachio exports to China 2019 (lbs)
** Short crop in Iran
China Nut Imports – Current Economics for Almonds
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Legal Trade Border Trade
Australia - China main port
US - China main port (50% tariff)
US - China main port (10% tariff)
AUS/US - HK/VN - China
USD/LB USD/LB USD/LB
NPIS (CIF China) 2.28 2.28 2.28 2.28
Duty 1.14 0.23 0.41
VAT 0.23 0.34 0.25
Landed China Cost
2.51 3.76 2.76 2.69
% difference 50 10 7
** Current domestic market in China for NPIS is only reflecting a USD$2.34/LB price level
Conclusions
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• Trade “disruption” ultimately leads to overall market fundamental “disruption”. Negative sum game. Price implications will result across the nut sector – short term positives for Australia – particularly in almonds – but longer term implications on demand growth for all nuts.
Conclusions
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• Trade “disruption” ultimately leads to overall market fundamental “disruption”. Negative sum game.
• Short term we have seen a spike in Australian almond imports into China which has no doubt been lucrative but we have not seen a similar response in Macadamias ( superior South African quality / increase in domestic supply ). In reality it must be noted that in the case of Almonds, Australia does not have near the overall supply ( and grade requirements ) to replace US imports entirely.
Conclusions
19
• Trade “disruption” ultimately leads to overall market fundamental “disruption”. Negative sum game.
• Short term we have seen a spike in Australian almond imports into China which has no doubt been lucrative but we have not seen a similar response in Macadamias ( superior South African quality / increase in domestic supply ). In reality it must be noted that in the case of Almonds, Australia does not have near the overall supply ( and grade requirements ) to replace US imports entirely.
• With an uncertain and spasmodic “Grey Channel” still operating in some form this has continued to limit gains for Australian pricing against legal channels and the 50% duty spread on offer.
Conclusions
20
• Trade “disruption” ultimately leads to overall market fundamental “disruption”. Negative sum game.
• Short term we have seen a spike in Australian almond imports into China which has no doubt been lucrative but we have not seen a similar response in Macadamias ( superior South African quality / increase in domestic supply ). In reality it must be noted that in the case of Almonds, Australia does not have near the overall supply ( and grade requirements ) to replace US imports entirely.
• With an uncertain and spasmodic “Grey Channel” still operating in some form this has continued to limit gains for Australian pricing against legal channels and the 50% duty spread on offer.
• Unfamiliarity and quality inconsistency are also dragging on pricing premiums for Australian product.
Conclusions
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• Trade “disruption” ultimately leads to overall market fundamental “disruption”. Negative sum game.
• Short term we have seen a spike in Australian almond imports into China which has no doubt been lucrative but we have not seen a similar response in Macadamias ( superior South African quality / increase in domestic supply ). In reality it must be noted that in the case of Almonds Australia does not have near the overall supply ( and grade requirements ) to replace US imports entirely.
• With an uncertain and spasmodic “Grey Channel” still operating in some form this has continued to limit gains for Australian pricing against legal channels and the 50% duty spread on offer.
• Unfamiliarity and quality inconsistency are also reducing pricing premiums. • Interestingly but unsurprisingly the China domestic market – at least for
almonds – has yet not adjusted for higher import prices - clearly we are seeing Chinese domestic consumption resistance – hence market fundamentals (price in this case) could play out and we see a reduction in demand overall for edible nuts in China for the medium term. For Australia to really capitalize on the duty spread we need Chinese demand to hold. The trend in the first quarter of 2019 is not encouraging. Trade policy uncertainty is also influencing buying patterns of Chinese importers.
Conclusions
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• Trade “disruption” ultimately leads to overall market fundamental “disruption”. Negative sum game.
• Short term we have seen a spike in Australian almond imports into China which has no doubt been lucrative but we have not seen a similar response in Macadamias ( superior South African quality / increase in domestic supply ). In reality it must be noted that in the case of Almonds Australia does not have near the overall supply ( and grade requirements ) to replace US imports entirely.
• With an uncertain and spasmodic “Grey Channel” still operating in some form this has continued to limit gains for Australian pricing against legal channels and the 50% duty spread on offer.
• Unfamiliarity and quality inconsistency are also reducing pricing premiums. • Interestingly but unsurprisingly the China domestic market – at least for almonds – has not
adjusted for higher import prices beyond 20% - clearly we are seeing Chinese domestic consumption resistance – hence market fundamentals (price in this case) could play out and we see a reduction in demand overall for edible nuts in China for the medium term. The trend in the first quarter of 2019 is not encouraging.
• China nut demand in the long term will have major implications for Australian almonds and macadamias in particular. With major supply growth on the horizon for both these nuts China has great potential to absorb this increase. Not withstanding this short term opportunity of a significant duty advantage against the US - the Australian Nut Industry in the long term would like to see disruptive impacts of trade policy removed and let the robust fundamentals in the sector play out.
Thank You
Presentation Title 23
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-40.19%
-63.4% -84.89%
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
July August September October November December January February
LBS
US Almond Exports China & Hong Kong
2017/18
2018/19
% Change MoM
-47%
-54%-74%
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
July August September October November December January February
LBS
US Almond Exports China, Hong Kong & Vietnam
2017/18
2018/19
% Change MoM