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Hello and welcome to another episode of The Odd Lots podcast. I'm Jill Wisenthal and I'm Tracy Alloway. Tracy, you know I've never had nutello before.
I know that. I think we're talking about this the other day and I said, and I mean this one hundred percent, and I don't mean it to come off badly, but I genuinely feel really sorry for you for never having newtella. I feel like you are missing out on one of the best things in life.
And you know, I've never had the Dubai chocolate before either.
I know.
Again, my sympathy for you just continues to expand.
So as everyone knows, you know, I'm just like a real ahead of the curve guy in most things. I was really ahead of the curve. I'm having nut allergies because now like all kids basically have nut allergies. It seems like or like half the kids in any my kids class. But I was like, really early on in the nineteen.
You're having nut allergies before it was cool.
I was having nut allergies before it was cool. I'm aware that people love nutella. I'm aware that people love Dubai chocolate or some people do, or they at least like posting about it on Instagram and all things pistachios, et cetera. And yes, but I take it. It's all good stuff.
It's so good. Oh my god, it's I mean, there is nothing better than eating nutella out of a spoon, or sorry, eating nutella out of a jar with a spoon, preferably with a glass of milk. Like, it is so good, it looks good. Do you buy chocolate?
Have you had it?
I have, but I'm not that enamored with it.
Interesting. I remember, like it was probably like a year and a half ago, and I just started seeing like signs. It's like we have the du Bui chocolate.
Oh they're everywhere.
Yeah.
But the other day I went to my the local deli on my block and they had five just on the counter. They had five different versions, five different company selling it, five different products that you could buy, which I take is just some sort of you know, chocolate with some sort of creamy pistache shoe in the middle, and if you break it open, it looks good. On social media, that's pretty much it.
I do find it kind of funny that this like viral chocolate has come out of Dubai, of all places, which doesn't necessarily have a strong confectionery history, but it has certainly tapped into various luxury markets. So I think that's what's going on.
I was looking through the conference called transcripts on the Bloomberg a few weeks ago, and I was looking like, what companies have talked about this? And there's one big Swiss publicly traded chocolatier and they talked about it, and they talked about I guess it was a woman and Dubai just started making it. Then we called it the Dubai chocolate. Anyway, they were talking about how fast they
adapted to TikTok trends, et cetera. But I guess the business of nuts and how it works not something that we discussed much, maybe because of my own you know, I'm allergic to talk about these topics.
Well, there is one nut that.
You can eat, that's right, almends.
Almonds, and I still manage to poison you once with almonds. I feel really bad about it.
How did it happen?
I don't know. I so for listeners. I didn't do it on purpose. I bought him some of those Korean nuts that we've been talking about in the snack Food episode, and they were almonds, so we thought they were okay, but.
Like laced with something else omens. I guess I didn't die.
Yeah, so that's always a plus. I didn't kill my co.
Host anyway, despite my own Because I'm a journalist dedicated to learning about the truth about the world, I will get over my personal biases against nuts in pursuit of journalistic truth and learning more about how all these businesses work, in the chocolate business and all these work, how these work, just because I want to learn more about the world, even when I cannot partake of its goodness.
I think that is a very worthy cause. The one thing I would say is this is really interesting from just an investment and business perspective, because you have heard every once in a while people do get really excited about nuts as an investment. And the exact I'm thinking of is remember Michael Burry years ago. Yeah, his whole thing was invest in almonds because they're so water intensive. It's basically a play on water shortages. I don't think it worked out that.
Way, so I'm kind of curious. Uh Yeah, that was like at the end of the big short that very cryptic ending where they're like and after betting against the collapse of the US housing market, he's now shifted his attention to almonds.
They said, they didn't even say almonds would have.
Very strange anyway, Yes, what can we learn through the medium of nuts? Anyway, very excited to say that. We have a couple of guests today who have been doing a lot of work on nuts. Someone a couple of guests. I think we talked to them about five years ago during the pandemic.
Uh.
They're interested in frontier markets. They go all around the world looking for interesting opportunities that are off the beaten path. They've been doing some research on the hazel nut industry and they're based in Dubai. We're gonna be speaking with Burton Flynn and Ivan Neutronev. They are managing partners at Terra Nova Capital. They scour the world for interesting stories. They're based in Dubai. Burton and Ivan, thank you so much for coming back on odd Lots, and thank you so.
Much for having us.
Yeah, thanks for having us.
I just have like a really simple question. In Dubai, is it just called chocolate? Like or do they also specify that it's Dubai chocolate even when it's in Dubai.
Like you know, the original Dubai chocolate is called fix and so in Dubai there's fixed chocolate and then there's the knockoff you know, other kinds of chocolates and the fixed chocolate. I didn't know this when I received it as a gift once actually about six months ago, when the first time I had it, somebody brought it to my house. They brought me five bars and as a gift, and we ate them that week. And then later I found out that these bars go for like twenty five dollars apiece.
Oh that was a good guest, so I did.
Yeah, it was how much of that is the cocoa price versus the pistachio price, because we've seen both of those kind of go up recently.
Well, I mean this was before any of that went up, right, So this is all just margin based on marketing, I think branding.
So what do you tell us, generally speaking, besides the fact that you're in Dubai, actually tell us about the work that you do. We sort of covered it in when we talked to you in twenty twenty, but presumably we have a lot of listeners who haven't listened to that episode. What do both of you tell us, like how you approach your work discovering new thing interesting things around the world.
First of all, what we look for in our objective is to find stocks that can double in twelve months. And the way that we do that is we look for basically, you guys know, growth GARP investing right, growth at a reasonable price. We are not GARP investors. We
are growth at an unreasonable price investors. We go on and we look for or really huge earnings, growth that is being completely miss understood or completely overlooked, because, you know what, we believe that a good stock, you know, it has to be a good business plus something that's fundamentally misunderstood. So the way that we do this is we approach it from several different angles. One is that on a daily basis, we're looking at insider transactions basically
CEOs buying theirs of their own companies. We find that to be a really strong signal. We also look for companies that have very good leading indicators to their earnings and we try to monitor those and then also periodically we like to reach out to all of the companies we've met, and at this point we together Ivan and I have met over two thousand companies. We've conducted twenty six hundred meetings in the past six years with both
of us. In all of those meetings, most of those were with CEOs, and so we like to reach out periodically and just ask about top all situations that are happening. The most recent one was the Trump terraces. You know and understand how it's affecting your business. So we get kind of a global view based on a bottom up perspective.
So how did nuts actually get on your radar other than you know, a friend gave you twenty five bars of overpriced luxury chocolate.
Well, you know, it's an interesting story because we're based in Dubai, so just by definition, we are right in the center of this Dubai chocolate hysteria. Like you see du Bai chocolate bars everywhere in the grocery stores, then you see them when you order food online, you see them on the billboards, and you know, sometimes you hear from people that haven't been in touch for like ten years, and then they message you and all they want is
not actually even ask how are you doing. But they just want you to ship some Dubai chocolate to them by some express courier delivery, and you know, it's fun. A lot of media has written about the Dubai chocolate phenomenon, and I think there was also a claim that Dubai chocolate led to some severe shortages of pistachios and skyrocketing
prices of pistachios, which is debatable. But one day we were in office and we were just just jogging around and we were saying, look, you know, pistachios are such a kind of a hot niche commodity. Now, let's let's have a look at something else. What about hazel nuts, because you know, they're also used in chocolates and so on, even in some of the variations of the Dubai chocolate
and knokovlans. And we checked kind of the recent news about hazel nuts just to see what's going on with the hazel nuts, and what we found was actually quite you know, it was really really really interesting.
Well, before we actually get to the hazel nuts, I'm curious you mentioned there these metia reports of pistachie shortages or skyrocketing, skyrocketing prices and then you said, but that's debatable. What actually is happening? You know, I don't know, I don't know. I don't think we have like a pistachio index on the terminal, although I've never actually looked.
I think a lot of them come from Iran, which I also.
Coright, which right also, But like actually, what like how do you what is happening in the pistachio market. What has been the effect so far as you can tell, from the Dubai chocolate craze to the actual trade in pistachios.
Actually, quite a lot has to do simply with weather. It's not only it's not only the Dubui chocolate demand, but a lot of that has to do with the weather, and just the weather was not favorable enough and the crop was not good enough. So as simple as that. So because I remember there was one expert on pistachio supply chain and he was saying that basically there is now so much talk and a lot of media articles claiming that it's all about du Bui chocolate, but in reality,
the Bui chocolate doesn't use the row pistachios. You know, it's a paste, and a paste is very very diluted, so you don't really need like all the pistache in the world to produce the by chocolate. But you know, if the weather events affect the crop, then of course the price of the commodity will go up. And this is something that also happened to the hazel nuts this year.
So it's a supply story more than a demand story for pistachios, at least.
It could be both, could be both, but without the supply shortage there would not be such a severe price appreciation.
How did Turkey get into the hazelnut business because they seem to have made a conscious decision to actually, you know, nurse this particular type of agriculture.
Yeah, it's a long story which goes back thousands of years, and the situation is that Turkish Black Sea region is naturally the best region in the world to grow hazel nuts because hazel nuts need a cool winter, they also need sunny, warm spring and also need a rainy summer, and this is exactly what the Turkish Black Sea region gives them. And they've been cultivated in Turkey for thousands
of years. So today there are six hundred thousand farmers that grow hazel nuts in Turkey, and there are over five million people in Turkey who are in some way involved in the hazelnut farming or trading business. So it's a very, very long history. It just came naturally. It's just where the hazelnuts grow. In a given year, Turkey produces about seventy percent of all the hazel nuts in the world, so the concentration in this industry is huge.
It's like seventy percent of all hazelnuts. So if something happens to the Turkish hazelnut crop, you know, the consequences to the supply can be severe.
What is the market structure of the Turkish hate nut industry? How fragmented are those six hundred thousand farmers? Is a huge agribusinesses that dominate the trade. And then what is the exchange process? Like I don't know, I assume there's not hazel nut futures, but talk to us about like that process by which the nuts get to the processors and then into a finished product.
So there's six hundred thousand farmers, they are quite fragmented. It's basically some artisan mamonopop farmer shops, and then there are some wholesalers who buy hazel nuts from the farmers when the harvest time comes around, which is actually next week, and then as wholesalers, they might sell their hazel nuts to the exporters and then the exporters sell them abroad, or some of these wholesalers they also act as exporters.
So basically, if you compare the hazel nut industry in Turkey to the one in Chile, then the Turkish one is much more old school. It's very small orchards, it's famine businesses, it's some standalone farms, whereas for example, in Chile it's kind of industrial scale, and then once a year this all gets consolidated. The farmers sell their hazel nuts to wholesalers and then the entire kind of chain starts.
It's quite fragmented, and you know, the quality of the entire hazel nut production in Turkey is lower than in some other parts of the world because also it's not only the history, it's also kind of the terrain. It's a bit hilly. It's much harder to have these huge fields of hazelnut plantations. It's a long standing tradition and it's very very hard to bring any innovation into the Turkish hazelnut farming.
Okay, so you have a traditional business that's resistant to innovation in an emerging market that is very, very fragmented and also pretty untransparent because it's not like you can look up a single benchmark for hazelnut prices. How do you deal with I guess the opaqueness of a niche commodity like this when you're evaluating an investment.
Well, this is this is exactly the kind of situation we love, actually is opaqueness because it means that it's difficult for others to kind of access you know, access
the information. And so the way we approach it is we try to find primary sources, right and so in this in this case, we have had the opportunity to talk to the world's largest hazelnut processing company and basically understand the market situation from them, you know, and then kind of collaborate this with other sources that we find and you know, continue to ask them questions to understand
the market situation. But you know, it's possible that we might be the you know, some of the world's best experts on hazel that's even though we didn't know anything about them two months ago.
So what do you look at in terms of just pricing.
There is pricing. It's not something you can pull up on Bloomberg. So basically, when we are talking to the CEO of this hazel nut operating operator, he said that, you know, it's it's basically a price that it's called on the phone. I mean, it's this is like old school trading practices.
There are no hazel nut futures. It's nearly impossible to trade hazel nuts, you know, through any agricultural exchanges, and it makes this market so inaccessible that it's it's very hard. It's very hard for a regular investor to play it. I mean, I think the only way to play the hazelnut market is probably through this only listed public like the only publicly listed hazel nut processing company in the world, and it's listed in Turkey, which also is not so
easy to access. But when it comes to hazel nuts themselves, it looks like you just need to find the party that can sell this hazel nuts and you just buy the bags the tones of hazel nuts, but you also need to find a transportation, you need to find the storage and then and then you need to find a buyer. When you want to sell. So it's it's a very very difficult one to accident.
Something I'm interested in, you know, this idea of there not having been much productivity gains in the actual farming of hazel nuts. And I'm sort of fascinated by the degree to which different commodities inherently lend themselves to varying
levels of mechanization in production. Right, And so you know, you could have competitively priced wheat in that's grown in America, competitively priced wheat that's grown in Russia, competitively priced wheat or corn that's grown in Brazil, all because there's very little labor involved. You have like one one combine out there on a giant field, and then you have other commodities that are inherently labor intensative because it's not so
easy to automate. What have you seen, you know, as you've gone around the world to frontier various frontier markets, the sort of range by which some commodities lend themselves to productivity gains and some don't.
You know, for example, in this hazel nut industry, right, we can look at turkey, which we discussed it's artisanal, and then we can look at something like Chili. So by nature, Chili is not necessarily the best place for growing hazel nuts because it doesn't have enough moisture. However, if you manage to provide enough irrigation, then you solve that issue. So in Chile, for example, you can grow hazel nuts with a much much higher yield than in Turkey.
You can have huge plantations of hazel nuts, you provide irrigation, and then you can get probably five six times more
hazel nuts per hector of land than in Turkey. And this is all this is something that started happening in the last several years, and the projection is that Chili will become the number two producer of hazel nuts in the world in about seven to ten years, with a production capacity of two hundred thousand tones a year, which still compared to the Turkish supply capacity of eight hundred thousand tones a year, is quite small, you know, and this just kind of underlines the sheer importance of the
Turkish market for hazel nut business.
Do you have any idea why Chili decided to go in on hazel nuts. I'm just very curious about how they make these decisions, because you know, it's not necessarily a completely natural crop. As you pointed out, ChIL doesn't have you know, that much rainfall, and so they have to do something in order to foster this industry. Why did they decide on hazel nuts in particular?
The initiative comes from the bottom up. So for example, the largest hazelnut processor that's based in Turkey, they decided to expand in Chile. Right, So it wasn't the kind of Chilean government initiative. It was the corporate initiative because they looked at many different countries. They looked at New Zealand where it's more hilly, which would be more difficult. They looked at Latin America, and in Chile, there is
this great culture of basic of growing agricultural commodities. Right, it's industrialized, it's possible to make it large scale, and they just needed to add irrigation and that would.
Be the Other thing is that it provides a very nice diversification for them, right because as we're talking about, there was a huge weather event that disrupted the supply in Turkey. Turkey is the vast, vast majority of the production. So for them to have you know, the crop in an entire different hemisphere with different conditions pro know provide some sort of diversification.
What do you tell us about that weather event specifically, since this seems to be central to your interest, How big of a deal is it? Is it a one off? And second of all, like give us the overall sort of supplied demand imbalance that you analyze right now for the hazel net market.
Every about ten years there's a big frost that happens in Turkey. So the previous ones happened in two thousand and four and twenty fourteen, and this year there was a very very major frost in April which destroyed one third of all Turkish hazel nuts. Basically, in a few days, one third of the entire crop was destroyed. And frost like this, as I said, they happened in once every
ten years. They are quite one off. But the thing is that this year Turkey had a very very warm spring, so the hazel nut trees started deloping much earlier, and then when the frost happened, they were exposed to this huge risk and they got damaged really badly. Now this is one thing, so the frost destroyed one third of
the Turkish hazelnut crop. The second thing is there's another small little creature named the marmorated brown, the brown marmorated stink bug, which only settled in Turkey in twenty seventeen, but it has become so widespread that in a given year it can destroy from ten to twenty percent of the entire hazelnut crop in Turkey. So we read some academic research about it. It was fascinating. So on top of the frost, you also have the stink bug. But
then that's not the entire story. Then there's also the heat. And in the western Black Sea region in Turkey this year the summer was the worst summer in the last sixty five years, the hottest, the driest summer. And what does it mean. It means that the hazel nuts that did survive the frost, that did survive the stink bag, they will not develop as well as they should have because they need moisture. The nuts, the kernels, they need
the moisture. But without the moisture, without the water, with this huge like dry, hot weather, they will be damaged. They will be underdeveloped, some of them won't develop at
at at all. So, just to give you some numbers, the expectation for this year's crop was seven hundred and sixty eight thousand tones of inshell hazel nuts in Turkey now after the frost, after the stink bag impact, and after the heat, the Ministry of Agriculture in Turkey now estimates this year's crop to be at around four hundred fifty four hundred sixty thousand tones, which is about forty percent lower supply than expected. This is for the inshell hazel nuts now kind of going back to this heat.
If you look at the kernels, then the kernels will be impacted even more so. Last year, for example, they yield, which is measured as the proportion of the weight of the kernel to the to the weight of the entire hazel nut, was forty eight percent. This year it will be much lower. So the actual hazelnut kernels, which is what's important, will probably be in shortage by about forty
five up to fifty percent this year. So now the entire Turkish crop might suffer by forty five fifty percent this year, which means the entire global crop of hazel nuts might suffer by thirty five percent. And the demand. The demand for Turkish hazel nuts is three hundred and twenty thousand tones for the export and seventy thousand tones for the domestic use, so three hundred and ninety thousand
tones of kernels. This is kernels, and the production of kernels this year in Turkey will probably be half that, So we're looking basically at a supply which will be half of the demand.
You know. I have to say that I am unfortunately very familiar with marmorated brown stink bugs because they've made their way to New England too. Oh really, yeah, they're invasive there too, and in the winter they really like to crawl into old houses.
And can they really smell? Huh?
They if you scare them, they smell, okay, or if you kill them and they just sort of fly around
and make a lot of noise anyway, Okay. The thing I don't quite get about this particular investment, I guess I understand there's a shortage, a potential shortage of hazel nuts, and that could translate into higher wholesale prices, But how does that actually feed into higher prices or profits for the hazel nut processor, who I assume you know, has to pay the higher prices on the wholesale end, and then maybe they can charge higher prices for it at
the retail end, but you know it's not guaranteed that margin's.
Going to go up. Well, first of all, they have some inventory which they have built over the past season. And the thing is the processor applies mathematical models and weather weather pattern prediction models to manage their inventories. So this year, when there was a very very warm winter and early spring, they knew that if some kind of frost happens, it doesn't have to be a severe frost because the hazel nuts already developed quite a bit, so
if something happens, then the damage will be severe. So they managed to increase their inventory. Right, this is one thing. The price in the market, of course, will go up a lot. We looked at the previous frosts in thousand and four and twenty fourteen, so the prices for hazel nuts went up about three and a half four x from just before the frost to about one year later. Right. So if you have inventory and if you hold on to it and then you kind of sell it later,
you make some profits. But also even when you buy from the farmers and when there's this shortage of hazel nuts in in the world, you can kind of command higher margin and the buyers will have to pay it, you know, because they have no other option.
The inventory reported on their Key one financial report was one hundred and sixty four million dollars, which is I think something like a third of their market cap. And that's you know, that's before the increase in prices.
What is the structural demand story for hazel nuts? So again we're telling you know, with the pistachio question, we know that whether whether it's the demand that's driving the price of the supply, we know that demand has been booming. Maybe the Dubai chocolate trend will fizzle out at some point, but from we don't know. But for hazel nuts, what does the long term structural demand outlook look like?
Because we already have hazel nuts chocolate, which is already night.
And it's already been huge, and utella has been a staple of the Internet and people talking about it the culture for a long time. Is it rapidly growing? Still has it plied to what's happening there?
It's not growing rapidly, but it's still growing. For example, from twenty fourteen until now, the demand for hazel nuts went up more than thirty percent overall. So I would say it's probably like a two three percent a year growth, which is still there. So it's it's slow, but it's
going up. And you mentioned Ntella just wanted to mention very interesting fact, so Ferrero Ferrero buys a quarter of the entire global hazel nuts supply every year, so so it sounds really fascinating, you know that one single kind of entity just buys the quarter of the entire supply.
So one of the really interesting things I think that's been happening in the world, certainly since twenty twenty is this idea of overlapping emergencies. That's Isabella Weber's term, but this idea that you know, something dramatic always seems to be going on, and it always seems to be sparking some sort of shortage. And we've certainly seen that in
the world of commodities. And I can rattle off a bunch of you know, pretty like niche ones that have had some sort of supply squeeze, so coco obviously, orange juice, wheat during Ukraine Russia, hazel nuts now, maybe pistachios earlier. Would you expect as more of these happen for those markets to become maybe more financialized or maybe more easy for investors such as yourselves to invest in.
Well, I don't know about making it easier to invest in, but I think that these kinds of events create huge opportunities. You know that you mentioned Coco. Coco is really interesting because this is actually something that we studied last year.
We came across a stock which is one of the only stocks that you can sort of play Coco, and it's listed in Malaysia and it's you know, it doesn't have massive liquidity, but it has it has sufficient liquidity, and we had noticed last year, of course, there was a weather event that caused the coco Coco supply to drop by about fourteen percent. You know this is because in West Africa they produce seventy percent of the global coco supply. You know, we started looking at potential plays
on Coco. By the time we found this stock that we looked at, it had already played out. But what we did was we created a case study to understand kind of how this timing worked out. What we found is actually that the cocoa prices increased several months before the stock price had increased. So again it's it's another case of kind of an obscure company that people weren't really watching, even though there's there's sort of an obvious play.
The other really interesting thing that we noticed about this company is we looked at the insider buying disclosures and the CEO and the management. We're buying like crazy the stock leading up to or you know, kind of as as the weather event and the the coco supply situation was was developing. So I'm not sure about you know, providing better access, but I think that these sorts of global events, you know, can provide really huge opportunities if you, you know, if you kind of do the work right.
But for Coco, I mean, you could just go out and buy a future right or I think there's even a Coco ETF. Now why not just do that? Is that because your expertise is sort of in single stock businesses, or you don't want to become a commodity player.
We're not top down investors. We're very much bottom up investors. And so, you know, so when something like this is happening, of course you can play the trend of the you know, the cocoa price itself, but that you know, that's obviously going to also depend on kind of the market dynamics. What we find is that there's bigger opportunities in in sort of a second order, which is, you know, a coco company that's going to benefit, you know, from these prices.
They're they're earnings, but the earnings bag you know, a quarter, two quarters, and the stock really gets rewarded when you know, when they start producing the earnings, at least in these sorts of markets. You know. That's why we see this as as a more interesting way to play it than just writing the you know, the trend of the futures prices.
Can you tell you know, you mentioned finding a random cocoa company in Malaysia and the due diligence work you have to do reaching out to management. Can you talk about the state of essentially IR in frontier markets?
Right?
We go to a website like an American big company, like a Pepsi or something, and they have this incredibly full IR page that has you know, their presentations and the number of the you know, the main person, and all their earnings, et cetera. How varied is the quality of IR in the markets that you look at.
Hugely varied and so so in the case, you know, in the case of this Hazel Nott process, or they only have investor relations materials basically in Turkish, which is you know, of course you can, you know, if you do the work, you can you can translate to this stuff easily these days. But but you know, what we found over the years is that some companies have very
good investor relations practices and some don't. And we've selectively taken opportunity to basically teach companies how to improve their investor relations practices. Basically we give them free consulting, you know, after they've become portfolio companies on basically best practices on investor relations. What we've seen is that some companies have been highly willing to engage with us to improve their their investor relations practices. Other companies have have kind of
shied away from it. And you know, we we actually looked at the results of companies that we engaged with, and we found that the companies that were willing to engage with us, we're three times as likely to see their stock prices double in the twelve months following our engagement then other stocks that we had bought in our portfolio. So it could be on the one hand that these recommendations are very valuable. That companies now you know, are going out to the market and sharing how great there
their businesses and investors are learning about that. Another you know, another explanation could be that it's a feedback loop and that you know, companies that have really great things to tell are the companies that you know are are happy to go out and talk to the market. Whereas you know, if they really don't have great things coming down the pipeline, they don't really want to go out and make a lot of noise.
Yeah, Tracy, I had a friend of mine, this is like twenty years ago, et cetera, but he was engaged in some forms of like frontier market investing, and he thought there was like a pretty big alpha opportunity and
essentially doing exactly what Burton just described. I think he wanted told me about I don't know, a change some company that owned a lot of gas stations and laos or something like that, and the opportunities that it's like, can I just like help you build out your IR page because your financials are really compelling and was nobody nobody even knows about them or could figure it out even if they wanted to. Did it work, I don't know, but it seems like an interesting idea.
Okay, So if we look at the past twenty fourteen frost, the past precedent, how long did that actually have an impact on prices or how long did it take for hazelnut prices to normalize?
So what happened in twenty fourteen. The price started going up in March twenty fourteen, right after the frost, when the degree of destruction became clear, and then it reached its peak at the end of April early May twenty fifteen, so the following year, and then by that time usually it's quite clear if the new crop of the new year will be substantial or not. So in that case, was quite a good crop, and the price started going
down quite quickly. So the price went up over three and a half x from March twenty fourteen to May twenty fifteen, and then it dropped I would say about fifty percent in just one one and a half months.
So I still have time or to buy nutella before the big price spike.
Yeah, you know, when we looked at it, so first there is like a thirty percent spike from the time of the frost till August when the harvest starts, and then from August to late April there is kind of the most of the price increase happens in that timeframe.
I just have one.
Last question, and as inspired by a tweet I saw yesterday from the Chinese embassy in the US, and they're talking about the d desertification that they're doing in China, essentially turning desert into arable land. And I'm curious what you're seeing if that's something that you're thinking about. I mean, we're so used to talk about disruption coming from China from a manufactured standpoint, but in terms of its own I mean, it has a lot of land, much of
it historically has not been arable. They're trying to reverse that, which you can obviously do if you have sufficient access to irrigation technology and electricity, et cetera. When you look out in the long term hazel nut supply story you mentioned Chile growing, is this going to be a big story in more? Is this a story that you're thinking about in agg markets, whether hazel nut or general China turning itself into a sort of a man made bread basket.
Everything as possible, but it's a very very long term top down trend. So our job is we are emergent markets investors traveling the world in search of hidden gems through bottom up opportunities. So I mean it's possible, but again it's a very long term, top down sort of trend. And as I mentioned Chile, it produce double the number
of hazel nuts they do today in ten years. But then who knows what's going to happen to the weather patterns in Turkey in ten years, because it looks like, you know, the winters are becoming warmer and the summer sometimes are becoming drier and hotter, and I think the predictability is getting worse.
Bertand Ivan, thank you so much for coming back on odd lots. I've learned a lot about hazel nuts, which I didn't know about, and I hear they are good, but I still don't know. But now I can't taste them, but at least I know something about them.
Now to us, hazelnuts taste much better than to buy chocolate. At least it's much healthier.
Well, yeah, thank you, Tracy. I think your invocation of overlapping emergencies is really app like we're going to be doing a lot of these episodes in the future lot all kinds of niche commodities.
Over the years.
It does feel like that. Yeah, and there are some technological solutions I guess can help at the margins. But even in that conversation, Burton and Ivan were talking about, you know, this Turkish processor. They have weather technology, so they had an early sign that the hazel nuts had grown you know, big early, which made them susceptible to a potential frost and so they started building up their inventory and then lo and behold the frost hit and
they're in a relatively good position. That's good for them, but it doesn't expand the absolute supply of hazel nuts, right.
Yeah, I feel like ag tech is like a really interesting story.
You know.
We did that episode with the Lental King of Saskatchewan several months ago, and I feel like there are sort of two different things, because farmers in any country, as he noted, are always going to be among the politically most protected class. Politicians feel some sort of obligation to protect farmers almost always. On the other hand, like any other good you know, there's going to at least in theory, be opportunities for genuine productivity gains. And if Chile is
stronger at irrigation, et cetera. It'll be interesting to watch the sort of like interplay between like technology that gets applied to growing anything, cultivating anything, including in Chile and maybe in the future in China, versus the political desire and sort of legacy producers to you know, protect the small artisan farmer on the hillside.
Yeah, that's right. There is that tension, and it becomes more prominent the more overlapping emergencies that we see.
I think the problem for a hazel nuts is that they're brown, and they could it's just never going to go viral the same way because it just does not that green. If the pistachio, whether in chocolate or now you know, you see them a lot more like on top of a croissant, shredded up, et cetera. Like that's just made for twenty twenty five in a way that a hazel nut isn't.
Also, sorry, but hazel nut chocolate is already a classic.
No, yeah, it's sorry, it's mature.
Maybe someone can come up with green hazel nuts.
Yeah.
Genetic engineering, Yeah, yeah.
That's the next frontier of viral chocolate, making genetically engineered nuts.
Better looking produce that I mean, that really is going to be the key right on. Ironically, any piece of produce that photographs well, et cetera is going to be big. I mean, this is why people drink Macha.
Glitter infused hazel nuts.
Beat okay, happen.
Shall we leave it there?
Let's leave it there.
This has been another episode of the Authoughts podcast. I'm Tracy Alloway. You can follow me at Tracy.
Alloway and I'm Jill Wisenthal. You can follow me at the Stalwart. Follow our producers Carmen Rodriguez at Carmen Arman, Dashel Bennett at Dashbot, and Kale Brooks and Kale Brooks. For more odd Laws content, go to Bloomberg dot com Flash odd Lots with the daily newsletter and all of our episodes, and you can chat about all of these topics twenty four to seven in our discord Discord dot gg slash od Lots.
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