Walnut Market Analysis

Report
Walnut Market Analysis
Group member: Jessica, Tai, Zoe, Roson
To Be Discussed
 Background
 Market Power
 Price Factors
 Regression Model
 Case Studies
Background
Walnut Fruit
Walnut
Background
Walnut
Categories
Processes
Technology
Walnut Market
Background
Nutrition Value
Leading Producer
&Consumption
Leading Exporters &
Importers
Walnut Background
Walnut Fruit
Round
singleseeded stone
fruit is
enclosed in a
husk
Categories
•Two major varieties of walnuts are grown for their seeds:
English
Walnut
Persia
Black Walnut
Eastern North
America
Walnut
•In every category, walnut has two basic form:
In shell
• Meet the appearance
requirements
meet the appearance
shelled • Not
requirements
Climate requirement
 Warm weather
 Sunshine
 Average annual temperature
range: l0-14 ℃
Minimum temperature :16 ℃
Maximum temperature not
:38℃
1
Good
Growing
Weather
2
High
Quality
3
Important world
walnut
producing area
Processes
Farmer Process (Whole)
Farmer Process( Annual)
Trees produce full crops
Trees pruned, irrigated
and fertilized
( Year 4, first crops)
Year 2-6
Year 7-100
• Pruning continues
• Dormant Sprays
DecemberMarch
AprilAugust
November
SeptemberOctober
Year 2
Year 1
Trees planted,
irrigation
system installed
Seedling graft
• Fertilization
• irrigation
• Pest
management
• Late harvest completed
• orchard floors cleaned
• Early harvest
begins
Processors
Purchase
Walnut from
farmers
mechanically
dehydrated to
optimum
8% moisture
level
Walnuts are
transported
to a packing
plant
Processing
into different
walnut food
Technology
 Grafting
Grafting is used to increase nut production on
otherwise healthy trees and should be preformed
when the host tree is fairly young
Technology CON’T
 Insecticide
Depth
Good
Production
Width
Nutritional Value
•Elements
( per 100 gram)
Unsaturated fatty acids (g)
8g
Protein (g)
7g
14g
56g
15g
Carbohydrates(g)
Fiber(g)
Others(Zinc, V6,Iron, Calcium)
Nutritional Value
•Main Benefits
•Alpha- Linolenic Acid(the plant-
based omega-3 essential fatty acid)
•Antioxidants(slow down the process of
ageing)
Antioxidants Content mmol /serving
6
5.7
5
4
3
2
1
0
3.6
3.4
3.1
3
2.9
2.7
2.6
Walnut Market Background
Leading producer
Leading consumer
Metric Tons
800,000
700,000
800,000
China
600,000
500,000
700,000
600,000
U.S.
500,000
400,000
400,000
300,000
300,000
200,000
Ukraine
200,000
100,000
0
China
EU
U.S.
100,000
Turkey
Source: http://www.fas.usda.gov/psdonline/circulars/TreeNuts.pdf
0
Turkey
350,000
300,000
Leading Exporters
Leading Importers
Metric Tons
160,000
U.S.
EU
120,000
250,000
200,000
140,000
Ukraine
100,000
China
80,000
150,000
Chile
100,000
60,000
Turkey
40,000
Japan
50,000
China
0
Source: http://www.fas.usda.gov/psdonline/circulars/TreeNuts.pdf
20,000
0
World Market thickness
Year
Exports
Production
Thickness
2007/08
296,900
1,037,450
28.6%
2008/09
357,000
1,184,700
30.1%
2009/10
416,200
1,285,700
32.4%
2010/11
466,800
1,335,600
35.0%
2011/12
474,100
1,455,700
32.6%
Source: http://www.fas.usda.gov/psdonline/circulars/TreeNuts.pdf
Consumers
Producers
Country
2011/12
Country
2011/12
China
700,000
China
758,200
United States
418,200
EU
171,300
Ukraine
115,000
United States
142,200
Turkey
80,000
Turkey
117,300
Total
1,455,700
Total
1,407,600
CR4
90.2%
CR4
84.5%
Exporters
Importers
Country
2011/12
Country
2011/12
United States
275,400
EU
125,000
Ukraine
100,400
China
75,500
Chile
36,500
Turkey
51,500
China
17,300
Japan
29,500
Total
474,100
Total
434,900
CR4
90.6%
CR4
64.7%
Source: http://www.fas.usda.gov/psdonline/circulars/TreeNuts.pdf
Regulation and Policy Analysis
Walnut Marketing Board
The Board
• also known as California Walnuts Board
• supports the California walnut industry
Established
• according to the Code of Federal Regulation
• by the Secretary of Agriculture
By 10
numbers
• selected by the Secretary.
• All members represent processors and
farmers
The role of the Board
Each processor and farmer shall pay the Board
pro rata share of the expenses
The Board may provide for the establishment of
production research, marketing research and
development projects
Policy Analysis: Volume Regulation
Estimation of
production
Recommendation
of free, reserve,
and export
percentages
Revision of
percentages
Free walnuts: for domestic market
Reserve walnuts: each processor and famer has
Reserve obligation
Export walnuts: all from reserve percentage
Policy Analysis: Grade and size
Regulations
Minimum standard for
inshell and shelled
walnuts
• no individuals can handle
substandard walnuts
Minimum requirements
for reserve
• the Board may specify
the minimum
requirements for any lot
of reserve walnuts
Substandard walnuts
• only for manufacture into
oil, livestock feed
Policy Analysis: Control over
Substandard walnuts
Substandard
walnuts
Only for manufacture into oil, livestock
feed
Other uses as the Board determines to be
non-competitive with existing markets
Handlers should report their production
and holdings disposition to other person
Dose Regulation Work?
  −  
 
The US is earning high profit from
walnut export constantly.
Price Factors
Factors affect price
walnuts US export pice /Tonne
3500
3000
2500
2000
walnuts US export pice
/Tonne
1500
1000
500
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
0
Factors affect price
Price
factors
Demand
Healthy
information
Exchange
rate
Supply
Substitution
goods
Policy
Factors affect price
Factors affect price
Supply Parts
Factors affect price: Policy
 The Rules and Regulations (Effective Data: Jan 1,2011)
Original Regulation
1. All shelled walnuts are inspected
and certified by DFA of California.
Shelled
walnuts
Ending
product
2. By-products are inspected and certified
Walnut meat: pieces smaller than 3.175 millimeters.
Walnut
meal
Byproduct
Factors affect price: Policy
 New Regulation
 1.Ending product are
 Inspected and certified
 2.By-product are inspected
 and certified
Shelled
walnuts
Ending
product
Walnut
meal
Byproduct
Factors affect price: Policy
Impact: improve the manufacturing process by
Eliminating the need for
multiple inspection for
the same product
(walnut meal).
Improve processor
efficiencies by eliminating
duplicative inventory
tracking.
The price of
walnut meal
will decreased.
Factors affect price: Policy
 Market Access Program(MAP)
Assist U.S. organization
Address sanitary, phytosanitary and
technical barriers that prohibit the
export of U.S special crop
Develop a Walnut Pest Management
Factors affect price: Policy
MAP---Colifornia Walnuts commission
5000000
4000000
3000000
2000000
1000000
0
2006
2007
Source :http://www.fas.usda.gov/info/factsheets/mapfact.asp
2008
2009
2010
Factors affect price: Policy
 Impact:
1
• MAP encouraged U.S. farms to adopt new pest
management techniques.
• U.S. Walnut production was increased
2
3
• U.S. walnut price was more competitive.
• The export volume was rise up.
4
(In-
shell Walnut exports to South Korea already are much
increased form previous levels)
Factors affect price: Policy
U.S. Total Export Volume
500000
450000
400000
350000
300000
250000
Total
200000
150000
100000
50000
0
2006
Source: USDA ERS
2007
2008
2009
2010
Factors affect price
Factors affect price
Demand part
Factors affect price: Healthy information
 New Function of Walnut
Impact: increase consumers incentive to buy walnut.
Indian Case
1
• Walnut is a remedy for knee
pain.
2
• Demand is more than 25%
compared to previous year.
3
• Wholesale price of walnut in
shell has surged 17-20%.
Factors affect price: Substitution goods
Acorns
Chestnuts
Peanuts
Almond
Factors affect price: Substitution effect
2
Correlation
rate: 0.783542
1.8
1.6
1.4
1.2
walnuts US
export pice
/Pound
1
Almond US
export pice
/Pound
0.8
0.6
0.4
0.2
1980
1984
1988
1992
1996
2000
2004
2008
0
Source: FAO STAT
PRICE OF
ALMOND
DEMAND
OF
WALNUT
PRICE OF
WALNUT
Factors affect price: Exchange rate
 Exchange rate(RMB/$)
9
8
7
6
Exchange
rate
(dollar&
RMB)
5
4
3
U.S price
of walnut
2
1
0
1995 1997 1999 2001 2003 2005 2007 2009
http://www.oanda.com/lang/cns/currency/historical-rates/
U.S Dollar
depreciate
U.S goods
becomes
cheaper
Global
Demand
U.S price
Econometrical Analysis
Econometrical Analysis Data Selection
Data Collection
http://faostat.fao.org
http://data.worldbank.org
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1377
Econometrical Analysis: LOG
Regression
log(Pw) = β0 + β1log(e1) + β2log(e2) + β3export% + β4GovtF + u0
Most important factor is the export percentage that the board
imposed can affect price change, which support our conclusion.
Econometrical Analysis: Linear
Regression
Pw = β0 + β1e1 + β2e2+ β3exportQty +β4Pwg + β5Pa
+ v0
Most important factors for price level are exchange rates.
But export quantity dose not affect price level a lot.
Case Study: The Walnut Story
The Walnut Story in EU
EU Walnut Market Overview
200,000
180,000
160,000
140,000
120,000
Production
Consumption
Export
Import
100,000
80,000
60,000
40,000
20,000
0
2005
2006
2007
2008
Source: http://www.fas.usda.gov/psdonline/circulars/TreeNuts.pdf
2009
2010
2011
2012
Stable and High Demand in EU
Purchasing
decisions
variety
Convenience
Nutrition
Usage
Snack
Cooking
ingredient
By-products for
further
processing
Price
Health
Timing
Ingredients in
bakery and
pastry industry
Main purchase
Winter time
Holiday
Increasing
purchase over
the year
Stable Supply in EU
 Domestic Production:
 France : Net exporter, 85% export to EU
 Italy
 Spain
 Import: 69% walnut supply from the US
Walnut Market in EU
 Promotions: Non price promotion
 Trade Shows
 Education Guide
The Walnut Story in China
China Walnut Market Overview
900,000
800,000
700,000
600,000
Production
Consumption
Export
Import
500,000
400,000
300,000
200,000
100,000
0
2005
2006
2007
2008
Source: http://www.fas.usda.gov/psdonline/circulars/TreeNuts.pdf
2009
2010
2011
2012
Rising Demand in China
 Popularity of walnuts increases
 Awareness: increasing knowledge of nutritional values of walnuts
 Perception: American walnuts perceived of better quality
 Taste: American walnuts taste less bitter
 Income increases over the years, more disposable income
 Demand from middle class and young adults increases tremendously, drives up
the price
Result : Import from California doubled from 2008 to 2009
Price doubled over 3 years period between 2008 to 2011
Demand VS. Supply in China
 Consumption VS. Production
 Increasing consumption and production
 consumption demand exceeds production
 Increasing imports, shrinking exports
 Used to be a net exporter, became a net importer since 2008
 Weak US dollars VS. strengthening RMB
 Changing direction from export driven to consumption drive
economy in China
China Walnuts Import & Export
100,000
90,000
80,000
70,000
60,000
Export
Import
50,000
40,000
30,000
20,000
10,000
0
2005
2006
2007
2008
Source: http://www.fas.usda.gov/psdonline/circulars/TreeNuts.pdf
2009
2010
2011
2012
Production Challenges in China
 Cultural, Climatic, Geographical Challenges
 High investment, low return in the first few years
Preventing the production to meet internal demand
Production Improvement in China
 Production is expected to increase dramatically in 5 - 10 years
(esp. in Yunnan Province)
 Poverty Alleviation Program
 Forestation Program
 Cropland conversion Program
 Production increases is expected by improving Technology
motivated by government support
 Walnut Drying technology
 Traditional wood or coal fire oven VS. modern technology (improve taste)
 Making walnut milk and walnut oil
Market Outlook in China
Opportunities in Walnut Market
 EU Market
 Mature
 Room to expand
 China Market
 Growing
 Lots of room to expand

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