Yesterday's AFR had a sobering story on nut growing in...

Yesterday's AFR had a sobering story on nut growing in Australia.

Hazelnut orchards not so sweet for Ferrero

Italian chocolate maker Ferrero Group has abandoned a decade-long project to develop a major hazelnut orchard in the NSW Riverina after putting its 2665.71-hectare Dellapool aggregation near Narrandera on the market for more than $80 million.

Up to 1 million hazelnut trees, worth about $70 million, will be removed from the property, which will be offered as a blank slate.The world’s second-biggest confectionary group behind Mars, Ferrero Group is best known for its Ferrero Rocher hazelnut chocolates, Nutella chocolate spread and Kinder Surprise chocolate eggs.

The family-owned company, which reported annual revenues of €14 billion ($23.5 billion) in 2022, acquired two large riverside potato farms, Dellapool and Arrambee, from former Rich Listers the Menegazzo family (owners of beef and cattle giant Stanbroke) in 2013.The acquisition was part of a $70 million investment that included planting 1 million hazelnut trees by 2018.

Ferrero hoped to harvest about 5000 tonnes of hazelnuts from its NSW operations by 2022, reducing its reliance on external growers for nuts for its confectionary. Hazelnut trees produce their first crop after about three years, but can take 10 to 15 years to reach full maturity.

Ferrero Group has remained tight-lipped about why it is not proceeding with its NSW project after investing tens of millions of dollars into it since 2013. One well-placed source said finding a local species that thrived in the Riverina had been a problem. Hazelnut trees are not a native Australian plant and can be difficult to grow successfully.

Financial accounts lodged by Ferrero’s Australian subsidiary, Agri Australias, for the year to August 31, 2002, show the company generated revenues of just $96,000 and made a loss after tax of $5 million, matching a similar loss made in the previous year. The accounts also show that Ferrero Group provided a $143.5 million loan to fund the development of the NSW hazelnut project. The net value of hazelnut trees as of August 2022 was $69 million.The abandonment of its NSW Riverina project comes amid a global shortage of hazelnuts due to low rainfall and insect problems in Turkey, which supplies about three-quarters of the world’s hazelnuts.

The Dellapool aggregation – owned by Ferrero-affiliated Waratah Land – is being marketed by CBRE’s John Harrison, James Auty and Matt Childs.A key ingredient of the offering is 11,361 megaltires of groundwater and surface water entitlements.There is also a large on-farm water storage dam of about 500 megalitres, plus extensive structural developments including offices, residential accommodation and multipurpose agricultural sheds.Mr Harrison said the aggregation would appeal to corporate and institutional investors seeking large-scale development assets with extensive river frontage and significant water entitlements.‘‘The Dellapool aggregation has been extensively developed with state-of-the-art irrigation infrastructure, enabling flexibility in the potential production of various permanent horticulture plantings.’’

Ferrero Group’s decision to not proceed with its NSW project is a big blow to the establishment of a commercial-scale hazelnut growing industry in Australia.The establishment of a 5000-tonne operation would have supercharged a sector that produced only 350 tonnes of in-shell hazelnuts, valued at $3.7 million, in 2020, according to industry body Hazelnut Growers of Australia. Highlighting the lack of momentum in the sector, the HGA’s September 2022 Tri-Nut Conference in Moama was cancelled due to low registrations.
________________________

Ash here.

Ouch. Here is a sobering reminder of just how tough the nut business is - despite Ferrero's certain demand, quality agri skills and deep pockets, they couldn't make it work.

This is an absolute vindication of SHV's prudent, conservative approach to building the almond business: no grand company-making gestures via giant plantings or M&A.

A few years ago, after several good harvests, the SHV BoD was muttering about diversifying into other nuts, likely macadamias.

Be careful out there!

Ash

ps. I am out of SHV, but will be back.