Gerard Klijn lays out the requirements for success.
Part 2: The cashew, pecan and macadamia tree nut markets are of huge and growing importance so we continued to download a market view from Gerard Klijn, founder and CEO of Trade & Development Holding bv. and renowned market specialists discusses the outlook for this hugely important crop. (2 of 2)
Not only have volumes increased, but so have prices. This is partly due to the significant increase in demand in large markets, such as China and India. For example, in 2004, there were 400-600 million pounds of almonds sold in a price range of of $1,00-3,25/lb; today, there are over 2 billion pounds sold in a range of 3,50-5,00$/lb. This is largely to an active nut marketing effort, which has resulted in an active demand for a variety of tree nuts.
What are key elements of success for tree nut trading companies such as TDH?
Improving routes to market
One thing we have done since the inception of our company, TDH, is to try and connect farmers to markets. This includes improving the link between farmers, processors, roasting companies, and final buyers (e.g. supermarkets). We also think long term (>10-year horizon), even if general planning is done on a 5-year timeframe.
Improving transparency in tree nut value chain
When TDH started in 1993, there were a multitude of trading houses operating with a notable lack of transparency. For example, it was not uncommon for nut parcels to move through seven companies before they were roasted! Leading companies now focus on ‘direct sourcing’, where the supermarket (or other buyer) is connected to the farmer and many players are removed from the chain (or work as supply chain co-ordinators) and final buyers work for example with subcontractors for roasting, salting, packing, etc
Improved market stability for tree nuts
The increase in transparency has connected farmers to end markets, resulting in improved farmer prices, food safety and reducing long-term price volatility. Nevertheless, direct sourcing (shorter supply chains) can create short-term volatility when there are sudden spikes in consumption with too little product in the SPOT market or supply line.
With the improved transparency, buyers are in a position to encourage improvements across the value chain. For example, the fluctuation of cashew yields varies massively between different farmers. By encouraging consistent management approaches, farmer income can increase by over 1000%. Traders can also create synergies between different value chains. This could include engaging the same buyer with different crops (e.g. mangos and tree nuts) or partnering when separate buyers are working with the same farmer (e.g. shea nuts and cashew).