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  • Humble brazil nuts reveal an existential problem for the planet

.By Tony Ayre, Paragon Commodities Ltd                                                                                                                               Feb 2020

Due to their unusual botany, brazil nuts will only grow in the primary Amazon r ainforest.

The flowers can only be pollinated by a few types of robust bees which in turn rely on particular wild orchids for their life cycle.

There are no viable orchards or commercial plantations of this nut, unlike most other agricultural products. This product is collected from the floor of the primary jungle.

Brazil nuts achieve the largest amount of cash generated from any one item in the remaining standing forest in Brazil, Bolivia, Peru and Ecuador and this money is integral to the preservation of‘The Lungs of the Planet’

Without the funds generated from the sale of brazil nuts, the Amazon ecosystem would be under even more pressure as the indigenous people who live under the canopy will be forced to find other means of income, almost certainly destructive:For example the production of palm hearts which requires clearing the jungle.

The importance of preserving the delicate balance in these precious areas cannot be overstated.

We need the Amazon basin pristine, now and for the long term. Nobody is denying this, yet the system itself, that mankind has created, is complicit in the potential break down of the cycle and this can be shown by recent events within the story of this noble and health-giving foodstuff and it is an ongoing and worsening problem:

From 2016 – 2017 there was a climate event in the Amazon, unique in living memory and also in recorded history. The rains failed. There was a drought and the brazil nut harvest failed. The trees did not have enough water to develop the pollinated nutlets and so the fruit did not develop properly.Additionally, dampness is needed to help to rot the stem holding the nut pods to the trees so that they fall to the ground for collection. (Harvesting direct from the trees is impossible,this is the tallest plant in the canopy growing up to 200ft)

The crop was 50 percent down. In some areas 80 percent down. With prices skyrocketing to more than double that of any previous historical highs, a further spanner was was thrown at the problem when a revered Korean nutritionist urged his country folk to start eating this superfruit for its selenium and other health giving properties .Being new to the market, Korean importers paid silly money for this already extended priced product as the whole country went mad for Peruvian Brazils.

Some producers and importers made a lot of money, others lost. The ordinary people who do the hard and dangerous work collecting the nuts from the Jungle interior were left no better off as the higher prices only offset the lower volume available for them to sell.

Meanwhile in traditional markets in the developed world, companies started to aggressively de-list brazils from their ingredients for mixed nuts, confectionery, snack packs, nut bars and cereals, seriously curtailing demand.

By mid 2018, with the precipitation back to average and a normal size crop now collected, producers were in need of traditional buyers, prices had started plummeting and would continue to fall for 6 months until pre-drought prices were once again prevalent and the spike was over.

In the meantime, the panic Korean buying had been a craze. Importers there are still desperately trying to sell their overpriced and aging stock.

There was an inevitable dead cat bounce at the beginning of 2019 as hard pressed holders of raw material used their collective bargaining power to push prices back up a little. However on the demand side, buyers shrugged, very little trade was done at the higher levels, businesses that were considering starting to buy again delayed their decision. Those that decided to permanently de-list brazils congratulated themselves on their prescience and we now find ourselves in an extremely sickly and  weak situation in concern to price. There are still some parcels of  2019 to sell and 2020 crop is ready for shipment. This is a disaster for the producers who are losing money on every kilo they shell.

Historically, when prices have fallen to very low levels, the people of the jungle are not enthused to go out and collect. At subdued levels for brazils, the very jungle itself is devalued, paving the way for destructive industries like the timber trade to help make up the shortfall in the indigenous peoples pockets. If they are not getting the cash for brazils, what else can they do to make a living?

So now we can see the whole cycle of destruction: Climate change creates an unnatural shortage of the Jungles biggest green export, the financial system pushes prices to the point of extreme destruction of demand, the subsequent slump pushes many participants in this industry away or bust and the ruinouseconomic forces are let in to do their worst to the Rainforest, the preserve for all mankind.

Brazil nuts may not be the most popular of the edible nuts, but this product holds a unique place in the pantheon of natural products and deserves more support than the current structure is able to provide.This system is based entirely on market forces and is hostage to the whims and winds of financial boom and bust. We cannot afford to let this go on much longer in the same way. The story deserves to be heard by all people of the planet and we should all be supporting this tiny yet vital industry. Urgent action needs to be taken in order to help preserve the Amazon rainforest in a truly fair and sustainable way.

Politicians should be more supportive of all non-invasive Amazonian industry.

Food production companies who claim to have green credentials should commit to backing the brazil nut industry by pledging to keep on buying a steady quantity for their output irrespective of market fluctuations.

Consumers worldwide should be encouraged to eat this healthy food.

Any individual or organisation that is interested in Green Issues, should be sharing this information for the good of all.

Cooks, chefs and Product Development departments should find new, exciting and tasty ways to present this delicacy.

 With the emphasis on ‘delicate'.


July / Aug 2018 Report following visit to Bolivian brazilnut factories

A normal crop, Western demand still recovering, trajectory downward but with potential upside shocks at any time.

Following a very interesting visit to Bolivia we will share out thoughts with you.

Before our trip we thought that the downward trajectory in prices may accelerate as unsold stock builds up at origin due to a continuing drought of buying interest. This may yet be the case but we should warn our esteemed clients that there are risks involved in trying to finesse a bottom to this market as we shall attempt to explain.

Raw material

Prices of inshell at the factory gate were very high as the collection season started (early) in Nov 2017. Levels were expected to fall rapidly as the high prices reigning at the time had destroyed demand in the main markets for brazils in Europe and the US. But the Koreans threw a massive curve ball into the market:

A national TV network repeatedly advised the nation the following kind of information about the superfood brazil nuts and nutrition: https://draxe.com/brazil-nuts/

The result was orders for 350 containers, or more than 5000 m.t. in a market that was already by far the shortest in history.

The Korean importers were new to the scene, knew nothing of price history and paid the ongoing highs for this material, making the shippers who actually had material for sale very happy for a change.

To put the above number into perspective, please consider that the largest crop ever exported was in 2016 with a total of 1916 containers of 16 M.T. coming from Bolivia, Brazil and Peru combined.

In 2017 the number was 1112 So the Koreans took more than 30% of a short crop, from a standing start and with no price discrimination at all!

Encouraged, the shelling factories continued to pay very high prices…. until the Asian buying recently curtailed.

They are now complaining that their shelling stock is costing them dearly if they sell at current prices and below.

Processing

Most of our suppliers are in full swing at the moment, producing beautiful product in pristine factories, using Good Manufacturing Practices. All have internationally recognised quality certification. Most have at least some automatic shelling capacity and the product is universally good looking and fresh. Some producers intend to close soon and await new market developments: Either lower inshell prices or higher kernels.

Demand

The high prices reigning over the past year have undoubtedly destroyed a large amount of demand in the West, however at the much more reasonable levels we are now seeing, interest is starting to slowly return. In a market such as this, where prices have been continually falling for a while, buyers tend to delay their buying decision looking for a bottom to the market. This may not be too far away. We urge our buyers to consider that:

The fuse lit in Korea could spread across other parts of Asia / The globe as the nutraceutical message sinks in.

The Brazil nut crop is relatively small compared to the population of the world and would not go very far if they were in universal demand.

Look at the numbers: 2000 containers x 16000 kilos = 32,000,000 kilos. average 330 nuts per kilo = 10,560,000,000 nuts per annual crop in a very good year.

Now lets consider the advice to take 1 per day so we divide the above figure by 365.25

That is 28,911,704.

Round it up to 30 million and we learn that there are only enough brazils to feed 30m people 1 nut per day (Conservatively)

Compare to the world population of 7,000,000,000 and that is 1 in 233 of the global population.

With the nutrition message going viral, shocks to the upside on this product may very well occur again in the future.

lso we should report that there are some unscrupulous players in this market who have sold short to their manufacturing and supermarket clients, something which Paragon will not entertain doing as it damages companies at origin and undermines the livelihood of the very people who are struggling to make an honest living . These shorts will need to buy their positions back in before long and at a time when demand in general is picking up, potentially adding fuel to the fire if the market is then rising.

In a nutshell:

Creeping lower, but with huge upside potential at any time. We advise taking some cover at the very least.

Other considerations

There are simmering / warming political tensions between Bolivia and Chile, from where Brazils are shipped.

This is causing ongoing problems with getting brazils shipped as Chilean product will always take precedent over

Bolivian at Chilean ports. This has caused long delays as containers hang around on the export quay looking for space on a vessel.

However there is now a new route from Bolivia, shipping through the Brazilian Amazon port of Manaus. The freight is slightly more expensive but we are proud to now be able to offer you this alternative, quicker route.

Spot

The amount of unsold material on the spot market for immediate delivery is still at very low historical levels as importers seek to avoid holding stock that is reducing in value. We currently have very limited amounts of wholes for sale, however we would be very happy to quote for container loads or less on a forward basis, arrival Aug/Sep onwards from our approved Suppliers.

Finally

Thanks for taking the time to read this report. If it has raised any questions or queries in your mind, or you would like to discuss the market in furtherdetail, please do not hesitate to call Tony on 07710 315837.

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