The South African macadamia industry
From humble beginnings when the first macadamia seeds were imported into South Africa by Reim’s nursery at Hillcrest, KwaZulu-Natal in 1935, the South African macadamia industry only really gathered momentum with the establishment of commercial orchards in Levubu and Tzaneen in Limpopo province, around Nelspruit and Burgershall in Mpumalanga and on the KwaZulu-Natal South coast in the late 1960s and early 1970s.
As Figure 2.1 illustrates, it was not until the middle 1990s that significant areas were planted, driven in the main by Mpumalanga farmers diversifying away from citrus, tobacco and other crops which had become less economically attractive than macadamias. In the 10 years from 1995 it is estimated that tree numbers in Mpumalanga grew by about 2 million, from around 300 000 trees in 1995 to 2,3 million trees by 2005, while tree numbers in Limpopo only grew from about 500 000 to 1.2 million over the same period. This rate of planting pales into insignificance when compared with the 11.6 million trees planted in the last 8 years from 2013 to 2021, with 4,8 million in Mpumalanga, 4.3 million in KZN, 2 million in Limpopo and 0.5 million in the Eastern and Western Cape and other provinces.
Figure 2.1 also clearly illustrates how the rate of new plantings is impacted by ruling macadamia nut prices. So, from 1999 to 2003, when macadamia prices were low, the rate of planting slowed. As prices improved to the peak in 2005, the rate of planting accelerated, but again slowed down after the last price crash of 2007, increasing again sharply with an estimated 13 million trees planted since 2008 as prices continued to rise to record high levels, taking the total macadamia tree population in South Africa to an estimated 18 million by the end of 2021.
Source: CompleteLee Nuts Consulting and SAMAC tree census data
Figure 2.1 is also used to highlight milestones in the development of the Southern African Macadamia Growers Association (SAMAC), formed in about 1971 and operated with a small Board of elected macadamia farmers with a voluntary levy of 5 cents/kg DIS nuts used primarily to conduct research for the first 27 years of its existence. The voluntary levy was then increased to 15 cents/kg DIS following a strategic planning meeting held in 1997, when the first staff were employed, and a permanent office established in Tzaneen. Annual scientific symposia were held starting in 1993 and the first international symposium held in Nelspruit in 1999, with the first SAMAC extension officer employed thereafter in 2000. The macadamia, avocado, mango, and litchi associations were merged under one umbrella – SUBTROP – in 2008, when the four grower bodies were consolidated under one central organization based in Tzaneen.
Following some years of unhappiness and disagreements among the macadamia industry participants, it was necessary to apply to government for the levy to be made statutory in 2014, when the levy was increased to 23 cents/kg DIS. More dissatisfaction and argument followed until it was decided to extract SAMAC from SUBTROP and the new Macadamias South Africa NPC was registered in late 2018 as a not-for-profit company, with the statutory levy again approved for the next 4 years and increased to 50 cents/kg DIS with provision for a 6 cents per annum increase, taking the levy to 68 cents/kg in 2022.
Despite the increased revenue collected and expenditure by SAMAC NPC, there is still a loss to the industry of some R300 million annually in the last two to three years from pest and disease damage. It is also concerning that nut yield has actually declined from a high of 3 143kg DIS/ha in 2018 to 3 013kg DIS/ha in 2019, 2 436kg DIS/ha in 2020 and 2 356kg DIS/ha in 2021 on average from all producing trees aged 6 years and older (illustrated in Figure 2.19 which also shows this disturbing downward trend in other macadamia producing countries). While some excellent research has been funded by SAMAC NPC in recent years, the results do not seem to be adequately communicated to the growers. Much of the recent research has been of academic interest, since there is little evidence that it has translated into any yield improvement in the orchards.
Figure 2.2 illustrates the rates of tree planting per province from 1971 to date (end of 2021). While Mpumalanga became the province with the most trees in 1999, it took another ten years to become the leading volume producer in 2009, when Mpumalanga began producing more macadamias than Limpopo (as shown in Figure 2.4). KZN became second largest in terms of tree numbers in 2016, taking over from Limpopo. Blessed with the best climate anywhere in the world in which to grow macadamias and a sugar industry that becomes more and more unsustainable by the day, KZN has shown the sharpest increase in tree numbers, going from 1.5 million trees in 2015 to 5,4 million trees by the end of 2021. About 600 000 macadamia trees have also been planted in more marginal areas by the end of 2021, mainly in the Eastern and Western Cape, from Port St. Johns to Mossel Bay and even as far west as Robertson.
In terms of cultivars, Figure 2.3 shows the number of trees planted per cultivar in South Africa in the last 8 years since 2013. Total number of trees planted over that period up to the end of 2021 is just short of 12 million, of which 50% are cultivar 695 (Beaumont), 20% cultivar A4 and 10% cultivar 816. Only three cultivars comprise 80% of the trees planted since 2013, with 20% comprising a mix of 814, Nelmak2, 788, 842, 849, A16 and the rest, probably including some 344, 246, 791 and others. Whether or not this heavy reliance on one cultivar, 695, at 50% of total plantings since 2013, will come to bite the SA industry in the future remains to be seen. It certainly flies in the face of the wisdom which recommends that macadamia growers should diversify their plantings to include at least 4 cultivars on each farm (about 25% of total area planted to each cultivar), so as not to have all our eggs in one basket and to benefit from the positive effect of cross pollination between cultivars, which improves both fruit set and fruit size, thereby contributing to both yield and quality (larger nuts have higher kernel recoveries).
Source: CompleteLee Nuts Consulting and SAMAC tree census data
Source: CompleteLee Nuts Consulting and SAMAC tree census data
The tree population data from Figures 2.1 and 2.2 have been used to good effect to predict total macadamia production in South Africa with an extremely high degree of accuracy, as shown in Figures 2.4 and 2.5. Figure 2.4 shows actual South African macadamia production increasing from 10 000 tons Dry-In-Shell (DIS) nuts in the year 2000 to 46 000 tons DIS by 2015 and then declining to a level of around 38 000 tons DIS in 2016 because of the drought conditions prevailing in most producing areas since the 2014/15 season but bouncing back to the record 59 050 tons DIS in 2019. Hot and dry conditions during flower and fruit set in the Spring of 2019, followed by heavy showers and increased humidity (which increased the amount of fungal infection, especially in older trees where canopies have become too dense) again had a negative impact on yield in 2020, with total production decreasing to only 48 925 tons DIS. The next year 2021 saw some improvement in total production with a small increase (about 9% better than 2020) to 53 320 tons DIS. While weather conditions were more favorable in the 2020/21 season, per hectare yields remained negatively impacted by dense canopies in many older trees and increased fungal infections hampering fruit set for the 2021 crop. More favourable weather conditions in 2021/22 have seen total production again bouncing back onto the projection line, with a record 70 139 tons DIS produced in 2022 (versus projection 69 931 tons DIS).
The projection based on tree numbers and estimated production per tree per age of tree predicts this growth with an accuracy of 95% (R² 0.95). In periods of more “normal” rainfall like in the years from about 2006 to 2013, the projection predicts actual production with an accuracy of 99%, but clearly the projection model cannot predict the impact of drought on total South African production. It is interesting to note that the only other years which saw a decline in SA macadamia production were 2004, which followed the severe drought of 2003/04 season during the previous dry cycle, and 2016 and 2017 and even 2020 in the recent dry cycle, which appears to have converted to a wet cycle in 2021 and 2022 and hopefully for the next few years.
Source: CompleteLee Nuts Consulting and SAMAC published production statistics
The projection (blue line) shows total production growing to about 135 000 tons DIS in 2027, while the fitted polynomial function (red line) suggests total production somewhat lower at around 80 000 tons DIS in 2027. Given “normal” rainfall going forward, it seems likely that total production will track closer to the projection line (blue line which projects 2023 production at 78 000 tons DIS) going forward, rather than the fitted polynomial function (red line), taking total production to around the 120 000 ton DIS level (about 40 000 tons kernel) in 2027.
The resilience of the macadamia tree is dramatically illustrated by the speed with which actual production has caught up again with projected production in 2018, even though most growing regions had not yet properly escaped the drought conditions prevailing since 2015. Even in 2019 the crop was negatively impacted by hot and dry conditions at critical times during the 2018/19 season, yet there was still a small increase in total production over the 2018 crop. Production in 2019 was, of course, also boosted by the 1.6 million young trees (aged between 6 and 10 years) coming into production, representing some 25% of the estimated 6.5 million trees in production in 2019. The resilience is again demonstrated by the record crop of 70 139 tons DIS taking total production back onto the projection line in 2022 following the two relatively good rainy seasons 2020/21 and 2021/22.
On the other hand, the decrease in production in 2020 also reflects the sensitivity of the macadamia tree to adverse climatic events aggravated by inappropriate canopy management, with average yield per tree dropping below 7kg (about 2,2 tons DIS/ha) of DIS. It is hoped that the many messages conveyed to growers by SAMAC and numerous technical advisers in the industry about the importance of canopy management are getting through to growers and that they are actively pruning/training their trees to limit fungal infection and improve fruit set.
Source: CompleteLee Nuts Consulting and SAMAC published production statistics
Figure 2.5 shows actual production per province from 2000 to 2021 and the projections through to 2026. The increased planting rate in Mpumalanga from 1995 resulted in this province overtaking Limpopo as leading producer in 2009. Accelerated plantings in KZN will see KZN catch up with Limpopo as second largest producer in the next few years and retain this position going forward. This accelerated planting in KwaZulu-Natal has been fuelled by the declining economic viability of the sugar industry coupled with the unprecedented increase in macadamia nut prices since 2007, not to mention the steady weakening of the Rand over the last 5 years. The impact of the drought was most severe in Limpopo, probably because there are less trees irrigated in that province than other areas. KZN saw the least impact from the drought, with only one low crop year 2016 before bouncing back to the trend line in 2017 and just exceeding the 10 000 ton DIS mark in 2019, displaying the smallest decrease to around 9 400 tons DIS in 2020. All provinces appear to have seen an average 9% increase in production in 2021 over 2020.
The impact of the change in global macadamia nut price and Rand/dollar exchange rate on the wholesale and farm gate Rand price of macadamias since 1996 is examined in Figure 2.6, which clearly highlights the dramatic rise in the US$ price of macadamia kernel from the low of $6.55/kg in 2007 to the estimated $18.80/kg in 2019, slipping to $17.70/kg in 2020 in the midst of the covid pandemic which put a hand break on global trade and transport logistics. This is the average price for premium grade kernel of all styles supplied by South African macadamia exporters in the standard 25lb (11.34kg) gas flushed vacuumed pouch in cardboard cartons, a price increase of 187% over the 12-year period to 2019, with the small decrease of 6% in 2020.
It is important to note that the world price of macadamias has never been as high as it is now (even though it slipped further to around $16.50/kg kernel on average in 2021) and has never before remained above US$10 for such a long period (the eleven years from 2011 to 2022).
In Rand terms, the average kernel (wholesale) price increased from R45.85/kg in 2007 to R288.50/kg in 2020, an increase of 529%!! The farm gate price (which is the wholesale price less the processing costs charged to the grower) has increased from R25.85/kg in 2007 to R243.51/kg kernel in 2020, an increase of 842%. So, a great deal of credit must go to all the processors for restricting their processing costs to the relatively modest increase of only 160% between 2007 and 2021, from R20/kg to R52/kg kernel, in the face of substantial increases in electricity, labour and transport costs over the period.
While the average dollar price of kernel increased from the estimated $16.75/kg in 2016 to $17.35/kg in 2017, the strengthening of the Rand saw the average exchange rate of R14 to the US$ in 2016 decrease to about R13.30 to the US$ in 2017, resulting in the decrease in Rand value of kernel from about R234.50/kg kernel in 2016 to the R231/kg kernel in 2017. Further strengthening of the kernel price in 2018 to around $17.90/kg and relative stability of the Rand in 2018 saw the Rand price of kernel return to about R240/kg in 2018. The dollar price increase to $18.80/kg kernel, combined with the weakening of the Rand to R14.45 during 2019, moved the wholesale Rand price to the record high of R272/kg kernel. Further weakening or the Rand to R16.30 to the US$ on average in 2020 pushed the Rand price to the new high of R288.50/kg kernel, despite the $1.10/kg decrease (6%) in the US$ price in 2020 taking it down to $17,70/kg kernel.
Unfortunately the uncertainty in global markets resulting from the covid pandemic continued to put pressure on the macadamia (and all tree nut prices) price, which decreased a further 7% ($1,20/kg kernel) to $16,50/kg kernel in 2021, with the strengthening of the Rand (average R14,95 to the US$ in 2021) resulting in the average wholesale price of South African kernel dropping to R246,68/kg kernel and the farm gate price declining to R198.68, a level last seen in 2017.
Source: CompleteLee Nuts Consulting and USDA Foreign Agriculture Service (FAS)
Continued pressure on global logistics resulting from covid and the negative impact on global economies resulting from the war in Ukraine have put further pressure on macadamia nut prices, with the average global price for the first seven months to July 2022 losing a further US$2/kg kernel decreasing to $14,50/kg. Recent Rand weakness has at least cushioned this a little for South African growers, the average Rand/$ rate to end July at R16,00 implying average wholesale Rand price of kernel for 2022 at R232,00/kg kernel and farm gate price at R180,00/kg kernel if the present average exchange rate persists through to December 2022. That is a farm gate price last seen in 2015, equating to about R54/kg DIS ($3,38/kg DIS) at 30% SKR.
From a relatively insignificant player in the South African horticulture landscape back in 1996, with only 1 million trees and production of 840 tons kernel with wholesale value of R32 million, our magnificent macadamia industry has certainly risen to prominence 26 years later, not only as a leader in the South African subtropical crop and horticulture sectors, but also as the leading supplier of quality macadamia nut products globally. With 18 million trees as at December 2021, of which only about 49% (8.8 million trees) were in production (6 years and older) in 2022 and production of 68 522 tons DIS in 2022 worth about R5 billion, the achievements of all role players who have contributed to this incredible success story are indeed worthy of praise.
At this point the answer to one of the most frequently asked questions: “With all the new trees being planted will there not be a price decline resulting from over supply?”, should be abundantly clear to the reader. From Figure 2.2 it can be seen that total RSA production increased from 24 000 tons DIS in 2008 to 59 050 tons DIS in 2019 (2.5 – fold increase in 11 years), while the global price of kernel went from $8/kg to $18.80/kg (2.4 – fold increase over the same period). So, an increase in South African (and global) macadamia production has not resulted in any decline in global price of the product. Indeed, the global macadamia nut price increased by two and a half times in 11 years despite the same order of increase in South African (and global) production over the same period. Few people seem to understand that the macadamia nut is “price inelastic”, a term in economics used to define products for which there is no inverse relationship between production volume and price.
The global price has rather been driven by increased demand for these delicious creamy nuts with their proven health benefits, especially in China, where consumers prefer to buy them in shell and crack the nuts themselves. The almost insatiable Chinese demand has been a big benefit to the SA macadamia industry, adding another string to the bow of our processors/marketers. The kernel equivalent of volumes of macadamias exported as Nut-In-Shell (NIS) relative to NIS processed to produce kernel in recent time is illustrated in Figure 2.7.
Figure 2.7 clearly shows the very small volume of local consumption of macadamia nuts at about 5% of total production in 2021, as well as the two major markets, North America (3 284 tons kernel or 21% of total production) and Europe (3 580 tons kernel or 22% of total production), together accounting for 43% of total production in 2021. Figure 2.7 also illustrates the extent of diversification into other new markets over the last ten years with about 10% of total production going to South East Asia/Hong Kong, Japan, the middle East and other markets as kernel exports and the balance of 42% of total production exported as NIS (6 750 tons kernel equivalent or 22 500 tons of NIS) to South East Asia/Hong Kong/China in 2021.
Source: CompleteLee Nuts Consulting, USDA Foreign Agriculture Service (FAS), Japan Nut Association (JNA) and SAMAC.
The attraction of the NIS export market is in the very good prices achieved, farm gate prices increasing from $3.32/kg NIS (about R37.40/kg at R11.25 to the US$) in 2014, to $5,30/kg NIS (about R76.60/kg at R14.45 to the US$) in 2019, a 60% increase in the US$ price over 5 years (105% increase in the Rand price). There was little change in the NIS export price to China in 2020 but the weakened Rand pushed the Rand price to about R85/kg NIS ($5,20/kg NIS). However, the combination of covid, trade wars and logistical problems resulted in a significant price decrease to an average of $4,40/kg NIS in 2021. At the average exchange rate of R14,95 to the US$, this was a 22% reduction in the wholesale Rand price to only about R66/kg NIS in 2021. Further pressure now being added by the war in Ukraine will see the NIS price decline even further during 2022, which will no doubt also exert downward pressure on the global kernel price going forward as well.
With kernel exports of 13 215 tons in 2019, South Africa cemented its position as the largest supplier of macadamia kernel to world markets. The 2019 season also saw a more favourable balance between kernel (75% of total) and NIS (25% of total) exports. The lower crop in 2020 resulted in only 8 900 tons of kernel exports (57% of total production) with 21223 tons of NIS being exported (43% of total production). The slightly better crop in 2021 saw this balance maintained, with some 9 223 tons kernel sales (58% of total production) and 22 500 tons of NIS (42% of total production) exported. Given the present difficulties in the Chinese market, it can be expected that a larger volume of the 2022 crop will need to be sold as kernel, with lower volumes exported as NIS. Going forward, the focus must be on QUALITY, whether in kernel or NIS markets. Given that increasing production of macadamias in China will see that country self-sufficient in terms of macadamia supply in the next 5 years and even exporting macadamias thereafter, the South African macadamia industry will need to focus on developing new markets for high quality macadamia kernel products. It is indeed opportune that the World Macadamia Organisation (WMO) became a reality in late 2021, ably directed by Ms. Jillian Laing and supported by most of the leading macadamia producing countries of the world, with the primary focus being the promotion of macadamia nut consumption globally.
2.2 Global production
World macadamia production is dominated by South Africa, Australia, China and Kenya, and in 2021 these countries accounted for 79% of total kernel output (South Africa 27%; Australia 25%; China 15% and Kenya 12%). In 2020 China already surpassed Kenya as third largest kernel producer. Other major producers, in order of production, are Hawaii, Guatemala, Malawi, Vietnam, Zimbabwe and Brazil. African production in 2021 contributed 44% of world production, up from 21% in 2001. This significant growth in production saw Africa overtake Australia as the leading supplier of macadamia nuts to the world in 2010, as shown in Figure 2.8, which also projects the increasing dominance by Africa of global macadamia supplies through to 2026.
The African macadamia success story is unprecedented in macadamia producing areas around the world. Production has grown from 2 240 tons edible kernel valued at US$21 million in 1996, to 29 2 00 tons valued at US$482 million in 2021 – a 13 times increase in production and a twenty-three-fold increase in value over 26 years. Despite the recent entry of China as a macadamia producer, whose five-year plan has seen 2012 estimated macadamia tree numbers of 6 million grow to 84 million trees by the end of 2021, Africa will remain the dominant supplier of macadamias through to 2026, as Figure 2.8 shows.
South Africa has been the driving force behind this growth, accounting for 60% of total African production in 2021. It has an active and statutory levy funded macadamia grower association, the Southern African Macadamia Growers Association (SAMAC), now (from January 2019) known as Macadamias South Africa NPC, with total membership of 1 170 in 2021. SAMAC conducts agronomic research and has generic promotion campaigns promoting consumption of macadamia nuts. SAMAC has shared the information gleaned from agronomic research with Malawi, Zimbabwe, and Mozambique since the mid 1990’s, and would undoubtedly be a valuable source of information for any new macadamia venture anywhere in Africa. SAMAC also plays an active role in the World Macadamia Association (WMO), therefore also making a significant contribution to their global promotional and data collection activities and SAMAC has also supported the International Nut Council (INC) research projects addressing the nutritional benefits of macadamia nuts in a healthy diet.
The projection of Chinese production in Figure 2.8 assumes that half of the 84 million trees planted there to date will not survive. It further assumes that the 42 million trees that do survive will never produce more than 10kg DIS nuts per tree. Even given this very conservative projection, China will certainly be the largest macadamia producing country in the world by about 2026.
Source: CompleteLee Nuts Consulting and the International Nut and Dried Fruit Council (INC)
Australian production has been hamstrung by inclement weather in the last several years, including serious flooding and drought, and declined from a peak of 14 000 tons kernel in 2006 to the low of only 8 400 tons kernel in 2011, but improving to a record level of 16 000 tons (48 600 tons DIS) in 2016. Production has remained at levels of 14 500 to 15 800 tons through to 2019, increasing to the previous high and reaching 16 200 tons kernel in 2021. New tree plantings in that country continue and production is expected to grow to 20 000 tons kernel per annum by 2026.
The Hawaii macadamia industry came to prominence in the 1960’s and is presently characterized by old orchards, with very few new trees planted since 2000, so production is expected to stabilize at around 3 500 tons kernel per annum in future. There are macadamia plantings in several Central and South American countries, including Guatemala, Mexico, Costa Rica, Colombia, Bolivia, Ecuador, Brazil and Paraguay, where combined production will continue to grow and has exceeded Hawaii production in 2020 and 2021.
Historic and projected world production by country is shown in Figure 2.9. Although world production previously doubled every 10 years, from 5 000 tons kernel in 1980 to 20 000 tons kernel by 2000, disappointing crops from Australia and Hawaii in the next decade saw global production add only 10 000 tons kernel to reach 30 000 tons kernel by 2010.
Source: CompleteLee Nuts Consulting, INC and AMS.
The African share of total production presently at 44% (South Africa 27% of total) is expected to stabilise at that level, with a slight decrease to 43% by 2026 as Chinese production takes them to an expected 32% of total in that year. Growth in African production, together with the entry of China as a producer, has indeed resulted in another doubling of global kernel production, from 30 000 tons kernel in 2010 to 60 000 tons kernel in 2020, and accelerated growth thereafter is likely to take global production over 120 000 tons by 2026 (doubling in just 5 years).
These estimates are based on best guesses of the number of macadamia trees planted around the world in 2021, shown in Table 2.1. Of the present tree population of 134.82 million, 84 million (62.3%) are in China, 29,1 million (21,6%) in Africa, 11,2 million (8,3%) in Australia, 6.46 million (4,8%) in Central/South America and about 4 million (3%) in Hawaii and the rest of the world.
2.3 Global markets, consumption and prices
Based on import statistics from various sources, Table 2.2 provides an estimate of global macadamia consumption. Demand in China has strengthened significantly in recent years, both for Nut-In-Shell (NIS) and kernel and it is certainly now the largest and most important market for macadamia nuts. China imported an estimated 45 000 tons of Nut-In-Shell (NIS) in 2021 (15 000 tons kernel equivalent at 33% SKR), most of which came from South Africa (22 500 tons) and Australia (15 000 tons), but also from the USA (Hawaii), Guatemala, Brazil, Zimbabwe, Malawi and Mozambique, as well as 4 500 tons of kernel, mostly from Australia (3 500 tons). Then add 8 000 tons of kernel (average 25% Sound Kernel Recovery) from the estimated Chinese production of 32 000 tons of NIS to get the estimate of total consumption of 30 000 tons kernel in China in 2021. This is very much a best guess as there is a paucity of reliable information on the volume of macadamia nuts consumed in China. The only reliable numbers are imported volumes from South Africa and Australia and the actual production of NIS in China.
North America remains the second largest market for macadamia nuts, with an estimated consumption of around 14 300 tons kernel in the USA (imports of 8 600 tons plus Hawaii production of 4 400 tons) and another estimated 1 300 tons in Canada in 2021.
The European Union is an attractive market for the higher priced whole kernel styles and has shown steady growth from around 1 000 tons in 1999 to 5 400 tons by 2009, declining to below 4 000 tons in 2012 as a result of the economic downturn in the EU, but showing steady growth again in recent years to reach an estimated 8 000 tons kernel in 2021.
Consumption in Australia has been boosted by the “Nuts for Life” promotion funded by the Australian tree nut industry since 2003. This has seen macadamia consumption increase from 2 000 tons kernel in 2004 to 3 500 tons in 2021, making Australia the highest per capita consumers of macadamias at
about 135 grams per person per annum. Japan is another important market for whole kernel styles, as most of the macadamias consumed there are chocolate coated. Consumption of 2 620 tons kernel in Japan in 2021 showed no growth over the 2 600 tons consumed in 2020.
Markets for which detailed statistics are available include the USA, Japan, and the European Union. The USA market imported most of the macadamias consumed there in 2021 from Africa. As Figure 2.10 shows, the African share of the USA market has grown significantly in the past two decades, from a level of 27% in 2000, to 85% in 2021. Previously dominated by supply from Australia, the Australian share of US imports has declined from 53% in 2000 to 4% in 2021. Crop shortages over this period, the increased home consumption of macadamias in Australia, increased exports of NIS to China and the switch by their marketers to the more lucrative and accessible Japanese and Pacific rim markets, are the major reasons for this change.
Source: USDA FAS
Figure 2.10 also highlights the largest ever volume of 12 688 tons kernel imported by the USA in 2019, declining by 34% to only 8 340 tons kernel in 2020, mainly as a result of the slowdown in the USA economy because of the covid pandemic and the disruption caused to transport logistics. South Africa supplied 3 134 tons of kernel to the USA during 2021, which was 49% down on the record high of 6 113 tons exported to the USA in 2019. Total imports into the USA amounted to 8 642 tons kernel in 2021, only slightly higher than 2020 imports.
The USA is also the only market for which reliable price statistics are published (on the USDA website). Even though the macadamias imported by the USA are predominantly (80% of total imports) of the lower priced half and pieces styles (Styles 4, 5 and 6), the price information published by the USDA provides a good indication of the general macadamia nut price trends in global markets, as shown in Figure 2.11.
Figure 2.11 shows these imported macadamia nut prices fluctuated between $6 and $12 per kilogram kernel from 1987 to 2011, remaining above $12/kg kernel for the last nine years since 2012. The average price over the 34-year period is $10.69/kg kernel. There have been many reasons given to explain historical price movements, as highlighted in Figure 2.11, but suffice it to say that prices have improved from the 2007 low of about $6.50/kg, to the high of $18.35/kg in 2019 on the back of the strong demand from China. The negative impact of the covid pandemic on global logistics and demand resulted in a decline in price to $17.05/kg kernel in 2020 and a further decline to $15,01/kg kernel in 2021, yet this is the first time in the history of the macadamia industry that price has remained above US$12 for nine years. Figure 2.11 also clearly demonstrates the close correlation in the trend between the US$ kernel import price, as the main indicator of the global kernel price, and the price paid to the Australian farmer for macadamia Nut-In-Shell (Au$/kg NIS).
What is somewhat anomalous is that the price paid to the Hawaii farmer for NIS does not follow the trend of the US$ kernel price. Difficult to explain this but one reason could be that a large proportion of the Hawaii crop is sold in Hawaii as value added products (suitcase exports purchased by tourists to the islands), so the processors and marketers of these products treat kernel as their raw material which they seem to be able to keep at a relatively stable price. The price paid to growers in Hawaii only rose above US$2/kg NIS in 2017, reaching $2.65/kg NIS in 2020 compared with the $5.20/kg NIS farm gate price achieved by South African growers for NIS exports to China in 2019??!!
Source: USDA FAS, AMS, CompleteLee Nuts Consulting analysis
Once dominated by Kenya (44% of total) and Australia (51% of total) back in 1995, the Japan market remains the preserve of Australia which supplied 62% of Japanese imports in 2021, while South Africa (23% of total 2021), Kenya (7% of total in 2021) and Malawi (6% of total 2021) supply most of the rest of the macadamias consumed in Japan. Shown in Figure 2.12, the significant change that took place in this market from year 2000 was that Malawi and South Africa became alternative suppliers to Kenya, and Japan stopped buying macadamias from Kenya between 2008 and 2010. This can only be ascribed to the very stringent quality requirements of Japanese importers, who came to realize that the lack of uniformity of Kenyan nuts was because most of the macadamia nuts in Kenya are produced from seedling trees (as opposed to the grafted varieties in South Africa and Malawi).
One can only assume that this was a serious wake-up call and the factories in Kenya improved their quality resulting in some 61 tons kernel being imported from Kenya again in 2013, increasing to 193 tons kernel in 2021, but still nowhere near the record 804 tons kernel exported by Kenya to Japan in 2001.
Source: Japan Nut Association (JNA)
Total macadamia nut imports by Japan grew rapidly from 1 300 tons kernel in 1995 to just below 4 000 tons in 2002, stabilizing to levels of 2 200 to 2 600 tons kernel in recent years, with a growth spurt from 2017 to reach 3 161 tons in 2019, slipping back to 2 571 tons in 2020 and increasing slightly to 2 617 tons in 2021. The peak imports of 4 000 tons in 2002 was ascribed to over purchasing by importers at a time of relatively low prices. Much of this volume was then re-exported in 2003 at higher prices. The promotion work by the Australian industry in the Japan market did appear to be paying off, with a record volume of 2 179 tons kernel supplied to Japan from Australia in 2019, but unfortunately dropping to 1 606 tons kernel in 2020 amidst the covid pandemic and only 1 553 tons kernel in 2021.
By contrast to these more mature markets (USA and Japan), the European Union has grown steadily from about 1 000 tons kernel in 1999 to 5 700 tons by 2011, dominated by supplies from South Africa and Australia. Since then, the economic downturn saw imports decline to a low of only 3 700 tons kernel in 2012, with a steady improvement to 7 531 tons in 2019, as illustrated in Figure 2.13, a very encouraging doubling of consumption over the 7 years. Since 2012 supply to the EU has been increasingly dominated by African sources, with 68% of total EU imports coming from Africa (South Africa, Kenya and Malawi) in 2021. The record volume of 7 531 tons of kernel imported by the EU in 2019 arose mainly from the record supply of 3 600 tons of kernel by South Africa. Also impacted by the covid pandemic, total EU imports declined by 10% from 7 531 tons kernel in 2019 to 6 800 tons in 2020, bouncing back nicely to about 8 000 tons in 2021 on the back of the 3 580 tons kernel supplied from South Africa (similar to the record South African supply volume in 2019).
The position of macadamias relative to the larger global tree nut basket is given some perspective in Figures 2.14 and 2.15. Figure 2.14 shows the total global production of tree nuts over the last 14 years, dominated by the “big 5”, being almonds, cashews, walnuts, pistachios (shown as in shell as most pistachios are sold as in shell products, whereas all the other tree nuts are shown as kernel) and hazels,
which together comprise 94% of the global tree nut basket in 2021. The “small 4”, pecans, macadamias, brazils, and pine nuts, comprise the other 6% of total tree nut production, with macadamias being only 1.2% of the total tree nut volume of 5 371 877 tons kernel in 2021. Add global production of around 50 746 000 tons of peanuts in 2021, then it is evident that tree nuts comprise only about 10% of global nut production, and macadamias then only 0.12% of all nuts.
The good news for future macadamia and all tree nut consumption is demonstrated in Figure 2.15, which shows that while tree nut production volume has increased by 145% over the last 19 years, the average price of all tree nuts has nearly doubled over the same period, from US$4.07/kg kernel in 2003 to US$7.23/kg kernel in 2021, while total production value increased by 334%, from $8.9 billion in 2003 to $38,8 billion in 2020. While production volume of all tree nuts did increase in 2020, this was accompanied by a price decrease of 7% from the record high of $8.43/kg kernel in 2019 to $7.85/kg kernel in 2020, with total production value decreasing by 5% from $37.5 billion in 2019 to $35.64 billion in 2020, no doubt also a result of the covid pandemic.
This did not happen by chance, but rather as a result of the publication of volumes of medical and dietary research findings by the International Nut Council Foundation (INC) and many of the world’s tree nut industry associations, that clearly show the consumption of one handful of tree nuts per day is beneficial to human health, increasing longevity, reducing the risk of heart disease and having a neutral to beneficial impact on blood cholesterol levels. The promotion of these health benefits will continue and probably even accelerate, to continue the trend of increasing both consumption and value of tree nuts globally, within which the macadamia nut has commanded the highest price most of the time.
2.4 A final word on China
The number of trees planted in China is shown in Figure 2.16, with tree plantings in South Africa and Australia included for comparison. Going back to the year 2000, Australia had 4.1 million trees, South Africa 2.3 million trees and China 0.2 million trees. Fast forward to 2010, both Australia and South Africa had about 5.3 million trees and China 2.2 million trees. It was at about that time that the Chinese government implemented the first five-year plan for their macadamia industry, which was to plant 20 million trees by 2015, at a rate of roughly 4 million trees per year starting in 2011. As illustrated in Figure 2.16, this target was achieved and so by 2015 the Chinese had 22.5 million trees, South Africa 8 million and Australia 6.3 million.
The next Chinese 5 – year plan was to plant another 60 million trees by 2020 at a rate of about 12 million trees per year starting in 2016. By all accounts this has now been achieved and they now have about 84 million macadamia trees in the ground, while South Africa has 18 million and Australia about 11,2 million as at end 2021. As Figure 2.16 shows, China became the country with the largest area of macadamias in 2013 already, when their macadamia tree population went past 10 million.
While these numbers are very difficult to comprehend, China has indeed been the major contributor in taking the global macadamia tree population from 20 million in 2010 to about 135 million by the end of 2021. The big question is: what impact this will have on the global macadamia industry in the medium to long term? More importantly, what do we need to do in the next few years to ensure that the South African macadamia industry remains competitive in the face of the anticipated accelerated production growth driven by China?
As already indicated, China presently has 84 million trees planted by the end of 2021, and in 2022 there were about 34 million trees that were 6 years old and older. The Yunnan Macadamia Society has indicated that actual macadamia nut production was 10 000 tons DIS in 2017, 20 000 tons DIS in 2018, 28 000 tons DIS in 2019, 30 400 tons in 2020, 32 000 tons in 2021 and 50 000 tons in 2022, as illustrated in Figure 2.17.
Production of 50 000 tons DIS in 2022 therefore implies average production of 1.5 kg DIS per tree from the trees that were 6 years old and older in 2022. The “low road” projection calculated on the assumption that only half the trees planted will survive, indicates production of 53 375 tons DIS in 2022, while the “high road” projection (all trees planted survive and produce nuts) puts 2022 production at 136 050 tons DIS. So actual production to date seems to be tracking below the “low road” red line and well below the “high road” blue line in Figure 2.17.
By comparison, South Africa had about 7,6 million trees aged 6 and more in 2021 and produced 53 320 tons DIS in 2021 – an average yield of 7 kg DIS per tree. Not really a fair comparison, as South Africa has a lot more older trees (20 years plus) in production than China.
Given that few, if any, of the macadamias planted in China are irrigated, it is highly likely that the total Chinese production will display an alternate bearing pattern, as seen from other producing countries where most orchards are dryland, like Malawi and Kenya.
The important take home message from these data is that as long as the South African macadamia farmer continues to be the most efficient producer, achieving the highest possible yields at the lowest possible cost, then we will always be competitive in the global macadamia and tree nut industries, irrespective of what impact the increasing Chinese production will have in the market. Nevertheless, it is critical for all existing and potential macadamia growers, processors and marketers, to understand that China will be the largest macadamia producing country in three to five years from now.
Although most Chinese production will come from smallholders which may not be of the highest quality, the present market for NIS which the South African industry has been exploiting for the last few years will become smaller going forward and possibly dry up completely. There may be a small market for top quality (large sizes with high Sound Kernel Recovery percentages) NIS products from South Africa in China in the medium term, but again it must be stressed that the South African macadamia industry needs to focus on the development and maintenance of markets for top quality macadamia kernel products going forward.
2.5 Longer term projection of South African macadamia production
Using the South African macadamia tree statistics shown in Figures 2.1 and 2.2, an extended projection of South African macadamia production through to 2030 is illustrated in Figure 2.18. Actual production from 2000 to 2022 is shown as the solid red line with the projection based on tree numbers and estimated mass of DIS produced per tree per age of tree (yield per tree) represented by the blue line in Figure 2.18. As already discussed, the projection based on yield per tree using the tree numbers planted each year published by SAMAC, is an extremely accurate predictor of actual production over time. This projection estimates total production at 186 000 tons DIS nuts by 2030 (about 56 000 tons kernel).
The dotted red line is the best fitting polynomial function to the actual production line, which predicts actual production with a 95% level of accuracy and estimates total production at about 90 000 tons DIS nuts by 2030 (about 28 000 tons kernel). However, this is a purely arithmetic forecast based solely on actual production to date and does not take into account any of the new trees that will come into production in the next ten years (9 million trees planted in the five years from 2017 to 2021).
It is therefore realistic to expect that given the very large numbers of trees planted over the last five years, actual production in 2030 will be in the region of 160 000 to 190 000 tons DIS (48 000 to 57 000 tons kernel).
The yield per tree assumptions used to generate the long-term projections for South African production are as illustrated in Table 2.3. This estimate reflects the average yield for all trees planted in South Africa to date, which has predicted total actual annual South African macadamia nut production with an accuracy of 95% since 1979.
For those seeking information on what macadamia trees have actually produced over time, Figure 2.19 illustrates the average yields from four countries since 2002, expressed as NIS (kg/ha). Since the data used for these graphs is ballpark yield calculated from published total production in each country and published number of trees in production, the purpose is only to make macro-comparisons using these data.
So back in the early 2000’s, Australia was achieving yields between 3 and 3.5 tons NIS/ha. Then followed a slow decline in yield to the low of 2 tons NIS/ha in 2011, as the Australian industry was plagued by extreme weather conditions from cyclones to drought. The Australian Macadamia Society (AMS) has since spent a lot of research money on developing an integrated management system for macadamia orchards driven by the need for sustainability going forward. General adoption of these new systems pushed Australian yields back to over 3 tons NIS/ha in 2016, after which the dry cycle (also experienced in the whole of Southern Africa for the last 5 years), pulled yields down to 2.5 tons NIS/ha in 2020, which is where average yield ended up in all three of the main producing countries where intensive horticultural management systems are practiced.
In South Africa, yields started at 1.7 to 2.4 tons NIS/ha from 2002 to 2006 and then increased consistently to a peak of over 3.5 tons NIS/ha in 2014 and 2015. This significant yield increase was driven by the fact that there were many young trees (mainly the precocious cultivar Beaumont) planted at relatively high density (standard in SA is 8m by 4m giving 312 trees/ha), mainly irrigated and optimally managed in terms of nutrition, pest, disease and weed control, which came into production over that decade. The yield decline from 2015 to the 2.5 tons NIS/ha in 2020 can be explained by the dry cycle (below average rainfall for the last 5 years), coupled with high temperatures (more days than usual with maximum temperature above 33 degrees centigrade, causing flowers to shrivel and not set any fruit) during flower and fruit set and aggravated by dense canopies (conditions more favourable for fungal growth and development and infection) because of a lack of pruning or inadequate/inappropriate canopy management.
In Hawaii, a much more tropical climate in which to grow macadamias, orchards are mostly 40 years old and older, and they have been able to maintain their yields at 2.5 to 3 tons NIS/ha for the last 20 odd years, but also declining to below 2 tons NIS/ha in 2021.
By contrast, Malawi yields have hovered around the 1.3 to 1.5 tons NIS/ha up until 2015 and then showed a distinct decline to just below one ton NIS/ha in 2017 and again in 2020, showing some improvement to 1,15 tons NIS/ha in 2021, possibly influenced by some new, younger, irrigated orchards coming into production. The Malawi industry is characterized by wide spacing (200 trees/ha and less) of a fruit salad of cultivars with no irrigation and in many cases poor tree nutrition and weed control, although their pest and disease control is of a good standard. This more extensive management system explains the poor average yields achieved there to date.
Figure 2.19 clearly shows a disturbing downward trend in average yields per hectare in all four of these producing countries in the last 5 to 7 years, with South Africa at 2,36 tons DIS/ha, Hawaii at 1,97 tons DIS/ha, Australia at 2,29 tons DIS/ha and Malawi at 1,15 tons DIS/ha in 2021. In Hawaii and Australia these are the lowest yields produced since 2002 and 2011 respectively and for South Africa the lowest since 2007. There was some improvement in Hawaii, increasing to 2,48 tons DIS/ha, South Africa increasing to 2,8 tons DIS/ha and Malawi increasing to 1,2 tons DIS/ha in 2022, but further reduction in Australia to 2,2 tons DIS/ha in 2022. There must be a host of reasons for these downward trends – something for grower organizations to seriously ponder. Can we identify the main causes of this disturbing trend? Is it driven by climate change or are there other factors that farmers may be able to control? If so, can we put in place appropriate farming practices to remedy the decline?
It is also pertinent to note a much higher frequency of alternate bearing experienced in the three countries where most of the of macadamia orchards are not irrigated (Hawaii, Australia and Malawi), than in South Africa, where it is estimated that at least 70% of macadamia orchards are irrigated.
2.6 Conclusion – what lies ahead?
Challenging times. As with all previous macadamia price declines, the present price decrease has not been caused by any oversupply in the market, but rather another global economic catastrophe. In this case precipitated by the covid pandemic and now aggravated by the war in Ukraine. As shown in Figure 2.20, the monthly price of all macadamia kernel imports into the USA has dropped from the high of $18,93/kg kernel in January 2019, to end at $14,45/kg kernel in December 2021. This is a $4,48/kg kernel (24%) decrease. There has been a further decline to $13,92/kg kernel by June 2022. Remember that this is not a reflection of the global macadamia nut price, only the average prices of all kernel imports into the USA, mainly (80%) of the lower priced styles 4 and smaller, as published by the USDA Foreign Agriculture Service (FAS), the only reliable source of macadamia nut prices and as such used as an indicator of macadamia nut price trends over time. This is not as spectacular as some of the previous price “crashes”, probably because the almost insatiable demand from China has helped to cushion the blows dished out by the covid crisis up until now. Yet even that market appears to be fading in the face of the present economic challenges and consumer debt in China.
The impact of the global economic slowdown of the last few years has not only had a negative effect on macadamia prices but also the volumes imported into the USA, illustrated in Figure 2.21.
Volumes imported into the USA in January and February 2022 have been the lowest since 2019, even though it must be remembered that 2019 saw the largest volume of 12 688 tons kernel imported. Imports decreased to 8 340 tons kernel in 2020 with small improvement to 8 640 tons kernel in 2021. There is some light at the end of the tunnel as import volumes have certainly picked up in the second quarter of 2022, with both May and June 2022 showing the highest monthly volumes since 2019. It is reasonable to speculate that this improved demand will continue through the second half of 2022 driven by the present lower prices.
Looking at the Asian market, incorporating China, Vietnam and Hong Kong, which has now become the largest market for macadamia nuts, mostly imported as Nut-In-Shell (NIS), the SAMAC statistical report, 2022, recently released in August 2022 provides interesting insights. Figure 2.22 shows the volume of NIS imported into Asia over the last 4 and a half years. The SAMAC statistical report 2022 is the first time that such data has been made available, with some of the numbers in the report quite startling and difficult to interpret. Clearly, there has been quite good growth in volumes imported by Asia as a whole, although there is no data available for imports by Vietnam for 2018.
Then we have to also make some assumptions about where the macadamia NIS imported by the three different regions was actually consumed. How much of the Vietnam and Hong Kong import volume was consumed in either of these places and how much was in fact consumed in China? Whatever the case, 55 000 to 60 000 tons of NIS is a significant chunk (about 25%) of global macadamia production (about 240 000 tons NIS in 2021). What is most alarming is the sudden decrease in imports of macadamia NIS by all three regions in 2022. Unless imports by these three regions increase dramatically in the second half of 2022, it seems that total volume of NIS imports by Asia for 2022 will only be about half of the 28 000 tons imported in 2018?! Main reasons touted for this dramatic decrease in NIS imports is the lockdowns caused by covid 19 and resulting major disruption of world trade and transport logistics.
It is nevertheless heartening that the prices paid for these Asian NIS imports have hardly changed at all, according to the SAMAC statistical report 2022, as illustrated in Figure 2.23. Imports to China started 2018 at $4,64/kg NIS, went to a high of $5,37/kg in 2020 and finished June 2022 at $4,61/kg. Similarly, imports to Hong Kong started at $5,66/kg in 2018, decreased slightly to $5,08/kg in 2020 and finished June 2022 at $4,97/kg NIS. Why the prices of NIS imported by Vietnam should be so much lower, starting 2019 at only $2,94/kg and ending June 2022 at just $2,07/kg is not known and no explanation is provided in the SAMAC statistical report. Can it be that there is such aa large price differential for possibly much lower quality NIS imported by Vietnam?
It would appear from these few statistics from the two most important macadamia markets – Asia and USA, that certainly in the case of Asia and mainly China, the demand is still very much there judging by the very good prices maintained right through to June 2022 and can be expected to remain strong once covid 19 restrictions and transport logistics problems are out of the way. Even the USA market is starting to show signs of improved demand judging from the recent increased volumes imported in second quarter 2022. It is therefore likely that the second half of 2022 will see increased buying by USA, and probably also European customers in the lead up to the peak demand Christmas period, especially since prices are now lower than they have been since 2017.
In the longer term it is unlikely that macadamia nut prices will decline any further into 2023. Given the steady continued increase in global production at a rate of about 5% per annum and even if the new tree plantings in China and South Africa push this growth rate to 7 to 8% per annum, there is no reason that macadamia nut prices will not maintain their present levels of around $15/kg kernel (and $4,80/kg NIS) and even regain the 25 to 30% decrease in prices since 2020.
So, what to do now? It is indeed opportune that we have the WMO actively promoting macadamia nut consumption in key consumer markets. It will be wise to extend these promotional activities to other new and emerging markets, particularly in Southeast Asian countries like Thailand, Taiwan, South Korea and others, not to forget the Middle East. The Europeans can still consume a lot more macadamias if they are swamped with the good news about their health benefits, not to mention their unique taste and crunch. I recall the dynamic presentation made at an INC Congress some 20 years ago by the guy who was head hunted by the Californian Almond Growers Association from “Nike”, who explained how you sell another pair of sneakers to people who already have ten pairs in their closet?! The almond growers saw large volumes coming from the new millions of trees they had planted and needed to inject some new demand pull into the already large almond market at that time. The gist of the message was: saturate the minds of the potential consumer using every single available media (newspapers, television, social media, billboards, radio, celebrity messages, sport star endorsements and whatever) all the time. In the years after the “Nike” guy was employed, almond prices improved and stabilized despite increasing production volumes.
Finally, to address the disturbing downward trend in macadamia yields, the following suggestions from my observations and experience in macadamia orchards over the last 30 something years:
- A paradigm shift in the way we establish and manage macadamia orchards.
- The large increases in yields required to make macadamias more profitable can only come from plant breeding – the development and release of improved cultivars capable of taking average yields to 4 tons NIS/ha or more, from the present 2 to 3 tons NIS/ha, or more appropriately to 2 tons kernel per hectare or more from the present 0,7 to 1 ton kernel per hectare. Yield improvement that may be possible from optimizing all the other management inputs like irrigation, tree nutrition, pest, disease and weed control and even canopy management can only be expected to provide 15 to 20% increments, rather than the 50 to 100% yield increments that the industry needs.
- New orchards need to be planted to precocious cultivars capable of sustainably producing high yields of kernel (high NIS yields combined with thin shells/high kernel recovery rates), yet with dwarfing characteristics to allow high density planting to enable more nuts to be produced from smaller trees (optimised yield of nuts per cubic metre of canopy volume).
- Development of new cultivars through plant breeding programmes should therefore enjoy the bulk of research expenditure globally. Most sensibly this breeding work should be done in Australia, where the largest genetic diversity exists in the wild trees identified and preserved by the macadamia conservation trust, providing the best chance of unlocking the desirable traits. It also makes sense to fund this breeding work in Australia collectively, as it makes little sense for each producing country to engage in their own breeding programmes, spending smaller amounts and using only the limited genetic diversity offered by the existing macadamia plant material in each country.
- In the meantime, macadamia farmers around the world should embrace the principles mentioned here and strive for higher density planting, keeping trees smaller, more productive (optimizing nuts per cubic metre canopy volume) thereby making pest and disease management easier.
2.7 Additional resources
- SAMAC website: www.samac.org.za
- AMS website: www.macadamias.org
- USDA FAS website: https://apps.fas.usda.gov/gats/default.aspx (click on standard query top left
of web page)