Cracking the profit barrier

Challenge set for macadamia nut industry to maintain profitability for farmers

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Commercial farming of macadamia nuts is not cheap. With ongoing plantings and continued increase in supply, the onus is on the industry to ensure that key players collaborate and market responsibly to maintain profitability and sustainability for farmers.

South Africa, reputed for top quality, is the second largest producer of macadamias in the world, after Australia. Domestic plantings continue to expand by 1 500 hectares a year and a bumper crop expected in 2018. Primary growing regions include Mpumalanga, Limpopo, coastal regions of Kwazulu Natal, as well as Zimbabwe and Mozambique where many South African farmers have decided to diversify their land portfolio and set up operations.

It’s no secret that macadamia farmers have been on a lucrative wicket for some years now: the popularity of the nut is on the up and currently demand outstrips supply: and therein lies the opportunity for the industry to grow. However, getting into the game requires sizable capital investment, tight cash flow management and waiting approximately seven years before breaking even. For a cash crop farmer, this may seem an eon.

Trees take four to five years to bear their first crop and will set you back around R45 to R50 a tree. And the cost of bare land (as does the cost of macadamia farms) varies extensively from around R45 000 per hectare to R90 000, depending. Other costs to consider are land preparation, soil correction, spraying and infrastructure like boreholes and dams. De-husking and drying bins to store product before transporting to be processed is also needed.

The International Nut Council (INC) at their annual conference hosted in Chennai, India last month announced an 8.4% increase of in-shell crop up by 14 956 mt from 17 506 mt in 2016 to 193 462 mt for 2017. China is set to become a major producer and claims to have planted 185 000 hectares with 330 000 planned by 2030.

Because of this, the time is now for the industry to act responsibly to ensure that huge macadamia volumes in coming years are absorbed into the market, and current profitable prices maintained. Investment into processing facilities, new market and product development are paramount. Currently accounting for only 1% of tree nut volume there is no doubt plenty of room to grow in the future if the marketing is handled professionally.

South Africa’s crop is exposed with more than 50% going to China and a more balanced marketing approach to spread risk is imperative. The 200 000 Euro jointly funded research project undertaken at this year’s INC by a number of macadamia industry bodies is laudable to developing a unique health stand-point for the nut.

Macadamias are 80% consumed as a snack and 20% used as an ingredient. With other nuts, like almonds, it’s the opposite—80% are used as an ingredient and 20% consumed as a snack. Symptomatic of an immature industry, flipping this ratio is needed to provide security for the industry into the future, while adhering to increasingly stringent food safety standards.

We have everything to play for: a head start in the game, one of the most suitable climates in the world, and businesses, with invaluable insight, through the value chain that have been in the industry for years: to make sure this remains one of South Africa’s leading agri-exports.

Alex Whyte, general manager, Green Farms Nut Company

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