In the rapidly evolving landscape of macadamia trade, the presence of sudden supply surges looms large, presenting both challenges and opportunities for stakeholders across the value chain.
Cobus Kok, MD of Macadamia Sales Market (MSM), underscores the critical importance of proactive and strategic planning in the face of uncertainty.
The sudden surge in macadamia supply will require the industry to stimulate demand for kernel, especially in the case of low demand for NIS or low pricing for NIS. How can we do this on short notice when a given scenario demands it? This is a question that warrants a deeper exploration by addressing these potential scenarios. According to him, the answer is clear-cut.
“The rapid expansion of recent plantings can result in an exponential increase in crop size. Or, dependence on a single market like China can lead to price shocks where price levels fail to exceed local production costs, leaving processors and farmers with the dilemma of finding new markets or facing losses. But simultaneous capacity expansions by various players might also require finding new kernel markets swiftly to accommodate increased volumes.
He also stresses that we must be watchful of the repercussions if such a scenario catch the industry unprepared.
“The nature of product and market development would not allow for sudden surges in demand. Typically, healthy growth occurs gradually under stable conditions. In our case, though, the patterns are disrupted by the dominance of, and relatively effortless adjustments towards NIS trade. He further continued that the industry players may respond with a sudden surge in kernel supply that could likely trigger speculative price drops, exacerbating market volatility and risk. But also, farmers may be tempted to leave the crop on the orchard floor. Or they may figure it best to supply the product at below production cost to recover some of the production input cost, but then determine if the venture is worth continuing with.”
Lastly, he also places focus on the question: Would a collaborative approach or a competitive approach within the industry best equip it to deal with these challenges?
Cobus states that in a purely competitive environment, enterprises tend to guard market information closely, hindering broad access to market insights and hindering swift strategy development. “Conversely, a collaborative approach, with greater transparency and real-time information sharing, enables stakeholders to foresee and collectively address crises, promoting sustainability and growth across trade cycles.”
Cobus says the key lies in transparency, allowing participants to assess risks and avoid panic reactions, fostering sustainable rather than destructive responses to market fluctuations. Participation in a Trade Platform facilitates the proactive management of such situations.
Advanced knowledge of increased kernel trading allows buyers and processors to prepare, mitigating sudden market shocks and promoting sustainable market growth.
Similarly, if you reflect your capacity to deliver NIS in advance and the market signals in advance that it is not prepared to meet your price conditions, you can commit more NIS to processing and notify the kernel market in advance to prepare for product coming their way, and at the same time diminish the downward pressure on NIS market price because less is going towards supplying it.
The MSM platform provides the means and mechanisms for industry collaboration and the discovery of fundamental conditions necessary to implement a common strategy and realise a common goal: prosperous growth for the greater good.
For more information visit: macsm.org
