The Past, Present and Future of the Australian Macadamia Industry
An overview of the past, present and future of the macadamia nut industry in Australia.
I will give a brief overview to set the scene for today of where I see the past, the present and the future of the macadamia industry. The past starts many years ago, where I can only get some literature about it.
The first trees were planted in Australia in the 1880s. In the 1890s the first trees were established in Hawaii. In 1910 to 1920 there were five small commercial orchards started up in northern NSW, and there were also some first orchards planted in Hawaii towards the end of WWI.
In 1930 the annual production in Australia came to 30 tonnes. Just to give you some perspective, today the figure is 100 times that. So, in seventy years it has basically increased by 100 times.
In the 1940s to 1950s, the servicemen in Hawaii during WWII were basically responsible for developing awareness of macadamia nuts, and Australia's production increased to about 40 tonnes, about one tonne per year.
In 1950 another ten tonne increase. It was really 1960 when the modern industry was introduced into Australia. The CSR, those days, but some very large plantings in over the next ten years in southern Queensland.
In the early 1970s there were some very large commercial plantings in northern NSW. That was really the major start in NSW, the industry kicked off. Those were mainly made by professional people. Because of the time lag in return on your investment, it meant you needed a substantial amount of money behind you to set it up. There were some very good short term tax advantages in doing it, as well.
In 1972, production was only 70 tonnes, so it was barely increasing.
In the early 1980s plantings expanded to the Gympie region, just north of Brisbane. They were forced to expand in that area because of prices of land. In the Lismore region, in the early ’70s was around $1000 per acre. Nowadays, you are talking around $10,000 per acre. So when it got up to $7000 or $8000 per acre, people started looking elsewhere for cheaper land. At the same time there were further plantings in northern NSW. With all the plantings in the 1970s, tonnage began to jump up to around 4400 tonnes.
In 1990 there was what we considered to be a major crash in the industry. This was brought on by multiple effects, one of which was that farms produced double what had been anticipated. There was a general world recession at the time, and there was the Falklands war, and there were other factors that just affected trade in macadamias. To give you an indication, prices dropped from $3.95 per kg with the payment spread over 30 days, to $1.65 paid over twelve months. The best way I can explain that to growers is that 40 tonne of product in the silo, in the old days, was worth $160,000, and you were getting that payment within 30 days of sending them to the factory, compared with getting about $60,000 for that same silo spread over 12 months. It was a major crash for the industry. It really sorted out the people who were serious about the industry. People who were only there for short term gain got out, they weren't serious about it. It made the rest of us more serious about our costs and quality. The industry introduced some good quality initiatives in those days. Probably about 80% of the crop was hand-harvested in those days. Nowadays it is probably the reverse: about 80% is harvested mechanically.
Also, in the early '90s, once again as prices of land in the Gympie region crept up, the industry moved further north to Bundaberg. They took over large plantings of sugar cane, perfectly flat country, unlike the hilly land around Lismore and Gympie. When we realised we had to do a lot more mechanical harvesting, etc., there was the need to find flat country so we could operate in a totally different area. The current prices in the Bundaberg area are still around the $4000-$60000 per acre. Production started to increase dramatically to 17,500 tonnes. It was only 20 years earlier that it was about 20 tonnes, so it has jumped quite a lot.
In the late '90s, there were some very large plantings going in in the Bundaberg area, plantings of 100,000 trees, people buying a 1000 acres and just massive plantings going in.
The current state of play is that Australia is now the largest producer in the world. Up until several years ago, Hawaii was the largest producer. We account for 40% of the world's production. In 1999, our crop was 34,500 tonnes, which was the biggest crop that has been recorded in Australia to date.
Some of the mature orchards in the Lismore area are starting to get some seasonal effects where while you are in the growth phase of trees up to about 15 years of age, there is always going to be a natural increase in production. Once you get over that 15 to 18 years of age, they will level out, but there will be seasonal fluctuations that will come in. In 2000, the crop was down to 30,000 tonnes. The estimate for this year is back up to about 34,000 to 35,000 tonnes.
There are basically no new plantings going in in Hawaii; the industry is reasonably stagnant. Equally so, there are some very large plantings going in in South Africa.
The farm gate value of our product, depending on what price you use, is around $80 million, with the wholesale value about $120 million.
Seventy-five percent of our product is exported: the States probably receive about 40%, followed by Europe and then Japan. We have commercial plantings as far north as the Atherton Tablelands just west of Cairns, in the hills. The Glasshouse Mountains area is about an hour north of Brisbane, some reasonably large plantings around there. Lismore, as far south as Coff's Harbour, which is about three and a half hours south of the Qld/NSW border. So the industry covers much of the east coast of Australia, and it is kicking off here in WA, as well.
There are approximately 3.8 million trees in the ground, covering an area of 12,500 hectares. Probably the key point here is that I classify a tree of 16 or more years of age as being mature. There is only a quarter of the industry in that state. Approximately only half of the industry is seriously producing nuts. The production levels are going to increase dramatically over the next 5 years or so, even with no further plantings. On top of that there are approximately 200,000 new trees going into the ground each year. These are mainly in the Bundaberg region.
There are 5 major processors. The top two are shareholder based companies, one in NSW and one in Queensland. The other 3 are all in NSW, privately-owned processing companies. On top of that, we have numerous small processors, including one in WA. Most of those processors, especially the major ones, have ISO 9002 accreditation.
To give you an indication of how the yield has increased (slide). The current price, last year, was about $2 to $2.10, which most people would agree is marginally low. This year, the offers are around $2.30 to $2.40 per kilo. In most cases that is an acceptable price. Most farmers who are doing their job properly should be able to survive quite well at $2.40 per kilo.
I think the long term future of the price will always fluctuate, but as far as the betterment of the industry, it is better to stay on a level playing field, around $2.20 to $2.60. It it has major increases and decreases, it certainly affects the industry.
There is hope, so don't get too disillusioned. Total production of macadamias accounted for one percent of the world trade in tree nuts. Some people could argue about that figure, whether it is half a percent or two percent. Either way, it is still a very, very small total production of macadamias. Even if we triple or quadruple that number, we still have a huge area for expansion.
South Africa certainly should not be seen as a threat. We need to work with these people. It is a global world, so we certainly do not need to see them as a competitor. We need to share our information and work with them. We need to identify and promote our strengths. One of Australia's strengths, without a doubt, is our quality. All the marketers who travel overseas say they have an edge on other countries including South Africa and Hawaii because of the quality of the Australia product. We need to maintain that quality.
One of our weaknesses, without a doubt, is our cost of labour which carries over to our cost of production. On a lot of our farms, the labour component is at least 50% to 60% of our total cost. That is half the reason why these bust. Some of these farms are moving further north into flat country where they can use more machine-orientated practices.
We need to be more aggressive in farming macadamias. Everybody, perhaps, comes into the industry thinking it is a long-term tree crop, to be there the next 20, 30, 60, perhaps 100 years. There are trees in Hawaii that have been there for 60 years and are still producing. There are some old varieties. Perhaps we need to be changing our strategy, going away from the long-term of the crop and looking at more of a medium-term. Whether that means planting newer varieties, reworking our orchards on a more regular occasion, whatever it may be.
We need to be smarter and more efficient at what we do. It is like most industries nowadays, I think. I believe our industry has come of age. In the 1990s when we had the crash, it certainly sorted out the industry. The industry is seriously only aged about 25 to 30 years of age, so we are still relatively young compared to other industries. I believe we have turned the corner now and we are getting more professional about it, instead of just doing so-called hobby farming.
Australia has been very cautions about not throwing too much money at the promotion of the product. We have a levy in place that we use to promote our product, internationally as well as domestically. We haven't found a lot of money at this stage. It is starting to increase considerably now compared to 2 or 3 years ago. I think there is a huge area for expansion there. There are scenarios I could quote where marketers have gone overseas to sell their product to some of the big players, and the big players say, "don't bother coming to talk to me unless you can guarantee this volume at this quality for the next 5 years or 10 years." Some of the big processors have only just got into that situation in the last 12 months; they have snapped up a couple of good deals like that. I believe the prices of $3.95, $3.50 will never return, and they shouldn't return. As long as we can sustain the $2.20, $2.40, $2.50 mark, I believe the markets will develop themselves overseas.
I am certainly not a marketer; I am more on the research side of the industry.
The marketers say that the problems with some of the African countries is that the quality is often not good. The kernel is often discoloured, not creamy white. They do have reduced shelf life problems. I think the crops over there are done on a more subsistence level, small-holdings that deliver to marketer-processors, and they just haven't got the quality control at farm level that will produce quality that will have the shelf life, the colour. Insect pests are a major problem for African countries. One of the farms in South Africa was spraying 15 times a year. On the east coast of Australia we spray 4 or 5 times a year. In WA, I don't think we spray at all.
The consumer is generally ignorant about the taste. We talk about subtle differences of taste between Australian varieties, but when you get it out to the consumer, it is more the crunch and texture. As long as the nuts aren't rancid, the consumers enjoy them.