With the harvesting season well underway, the Australian Macadamia Society expects to start hitting industry averages following last year's challenging season that was fraught with extreme weather. At www.freshfruitportal.com, we speak with multiple industry professionals about changing dynamics for the crop, international market trends and the industry’s strategic plans to meet the growing demand. 

While  Cyclone Oswald caused significant damages to Australian macadamia farmers in January last year, 2014 has been kinder to the industry.

"We have a crop forecast around 40,000 (metric) tons of in-shell. Last season the crop came out to be 35,500MT. This year we're expecting a reasonably significant 15% increase," says the society's CEO Jolyon Burnett.

As a world leader in production of the native nut, Burnett says Australia needs to continue on its competitive course.

"The Australian macadamia industry is competitive, where we've never had any tariff or quarantine protection of our domestic market. There’s nothing preventing Kenyans or South Africans from importing kernel into Australia, but our product is competitive and is of good quality," he says.

"As other origins lift their productivity, we have to strive to stay competitive."

Macadamias Direct general manager Jon Perrin shares Burnett's views that it is Australia's higher-quality product that seperates it from other growers.

"Our [Australian] kernel is still perceived as a high-premium product and is held in pretty high regard in terms of its taste and flavor," he says.

"Essentially, people taste with their eyes first, but I think once they put our product in their mouth, they’ll certainly taste the difference."

The Chinese Market

Burnett says macadamias were largely unknown in the Chinese market five years ago, but knowledge about the nut has improved since then.

"Principally it's about the better understanding of the health benefits of macadamias and its flexibility as a food product. Most Asian markets like to have foods they can attribute specific health benefits to," he says.

"Five years ago, macadamias were not well known in the consumer market in China at all and that’s changed dramatically. What’s happened in the last few years is that China has become a market in its own right."

Although China is the primary market for Australian in-shell product, Burnett says the market is undergoing a shift.

"We’re beginning to see a change from the in-shell market, to a kernel market. The top-end Chinese market is beginning to consume macadamias like other western countries - as a kernel snack.

"The ability of the Chinese wholesalers to buy in-shell product from Australia is driven by the fact that they sell it in-shell and charge a higher price.  That price differential has allowed the Chinese to be quite competitive when they’re purchasing raw product from Australia, Kenya and South Africa."

This shift to a more westernized diet has helped drive demand for the Australian macadamias to be used in a range of other products as well.

"As per-capita incomes in China or elsewhere grow, then diets tend to shift from largely fish or vegetable diets to more meat-based diets, or in this instance, the more processed diets," says Burnett.

"We’ve seen it with Chinese demand for wine – as the per capita income grows, then the consumption of western-style wines is increasing, as well as breakfast cereals.

"That trend is not specific to nuts, but drives the increase in consumption of nuts both as a kernel snack, and also incorporated into ice cream, bakery products, cookies, muffins, breakfast cereals, nut bars."

Making strides across Asia

Macadamia Marketing International's international marketing manager, George Hagios, says Australian macadamias have always had a lion’s share of the Japanese market, where the nut is often used in chocolate.

"In Japan, it's predominately a confectionary product. At least 80% would go into things like chocolate and the rest would be either ice cream or snacking," he says.

"It depends on what the country has launched. Japan was originally launched as confectionary. Snacking is improving but is still a small amount.

He says some countries lend themselves to easier macadamia market development due to their nut-based diets.

"In Korea and Taiwan, nuts are used in cooking, so it was quite easy to make that switch," he says.

Burnett believes the recent free trade agreement (FTA) between the Australia and South Korea will help "increase the Korean market substantially".

"The Australian Government has just signed a free trade agreement with Korea and that will reduce the tariff on Australian macadamias to zero over five years, from its current 30%."

The breaking down of trade barriers in South East Asia has also contributed to demand growth for the fruit.

"The Government has done a good job in Indonesia and Malaysia where, as the trade barriers come down, people get more interested in the product," adds Hagios.

"We’re getting better trading terms between those two countries."

Hagios mentions Australia may be missing out on countries such as Turkey and India, due to high levels of trade protection.

"There's protection and tariffs in a lot of countries....unfortunately there is 45% duty on macadamias to protect the local [Indian] hazelnut industry. Macadamias shouldn't be competitive to hazelnuts, but the government deems that it is.

"We literally send nothing into India, and the reason for that is the mid-forties tariff.

"It makes it uneconomical and unfeasible to have product go into these countries. At the duty clearance it gets to a point where it gets too expensive."

Increasing Yields

Darren Burton, the general manager of New South Wales-based Agrimac Macadamias and Hawaii-based MacFarms, says the industry is working hard to increase its yields and offset high labor costs by maximizing mechanization.

"The main thing we have to do is mechanise as much as possible. Our biggest challenge is production of older orchards. As the trees get older, their production starts to drop and that’s affecting the growth. From my perspective, the major issue is management of older orchards," says Burton.

Over the last ten years the primary focus of the Australian Macadamias Society’s breeding program has been to increase yields and kernel productivity.

"To date, we’ve been breeding simply on yield. They’ll have similar characteristics in terms of their taste and appearance, but they’re higher yielding varieties," says Burnett.

"In the next three to five years, we’ll be releasing new varieties. If they live up to their potential, we will see a 30% improvement in our productivity as soon as those varieties become adopted.

Part of the plan to increase productivity involves the industry's peak body pushing for a shift in levy allocation, to increase the percentage of funding contributed to R&D.

"We want to shift the allocation of the levy from two thirds marketing and one third R&D, to two-thirds for R&D and one-third marketing," he says.

The current 35% levy allocation to R&D is matched by the Australian Government and totals AUD$1.8 million (US$1.63 million) per year. Burnett says with this change, the industry hopes to see double the amount invested into research and development.

The expenditure of this money is based on a new 2014-2019 strategic plan, which shifted in focus from developing new markets to building consumption and increasing productivity.

"The aim is to use these increased funds to lift the average kernel production from 0.MT per hectare to 1.2MT.

"What we perceived to be the main challenge in the 2009-2014 strategic plan, is satisfying the growing demand. The priority in this new plan is all about lifting productivity."

Burnett highlights the importance of educating growers in better management of soil, including minimizing erosion and keeping their soils biologically active and highly productive.

"We want to invest this money in making sure that the average growers understand how to keep their soils productive, or unfortunately for most of them, what they can do to return their soil to productive soils, by adding composts or mulch and not burning their prunings and spreading them back out over the orchard floor."

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