Almond Review - September 2016

Today the Almond Board of California released the August 2016 position report.

August shipments were 170 million lbs. vs. 126 million lbs. in 2015 - UP 34.8%

DEMAND

August shipments were a shocker, beating the previous record by 22 million lbs. and 2015 by 44 million lbs.

U.S.A.  +9%

W. Europe +23%

Middle East +47%

India/Pakistan +148%

China / HK +7%

Japan -13%

THE 2016 CROP

Yields vary greatly by region.  The South is bouncing back the best with reports of 30%+ vs. LY.  The Center-East is showing a moderate bounce, though certain areas such as Chowchilla, Ripon, Oakdale had good crops in '15 and show similar yields.  The West side is more erratic with many orchards yielding less.  The North was very strong in '15 and should be down unless there is enough of an acreage bump.  It's premature with some late varieties still on the tree, but expectations are around 2.1

Inedibles of 1.41% are similar to LY.  Most of the crop is cleaner but certain orchards are getting hit severely with ant or navel orange worm damage.

OUTLOOK:

Pricing softened further in second half August due to weak sentiment and quiet conditions. This week activity perked up.  STD5 has traded in the $2.20/lb. range and NPX in the $2.80/lb. range.  

Bullish factors:  Cashews at $4.50/lb., hazelnuts over $5/lb., and the low starting prices of almonds.  The industry is 650 million lbs. sold or shipped - up 31%.  Health trends continue to help; we include below links to studies released about almonds and the Mediterranean diet.  

Bearish factors:  Strong USD, economic uncertainty, and decline in market sentiment (as many sellers believe we're in a "new cycle" due to increased acreage).  Some buyers continue to work through high priced contracts.

"The Pipelines" are varied as select markets seem to have good stocks, while others are showing up to buy for quick delivery.

Supply / Demand Scenarios below take into account a 2.05 Billion lb. crop as NASS forecast, or a 2.15 crop, which seems to be the range of expectations.

                               2016 (2.05)     2016 (2.15)       2015        2014        2013

CROP (Millions)      2050              2150                1894        1868        2009.7

Marketable                2009             2107                 1846.6      1838.6      1970

CARRY-IN                412                 412                376.6        350.6        317

SUPPLY                  2421                2519              2223.2      2189.2      2287.2

SHIPMENTS           ????                 ????               1811.2        1812.5      1937.4

Under these scenarios, supply is up 9 to 13%.

Assuming 2.1 billion lbs., the industry needs to ship 2.058 billion lbs., an increase of 13.6%, to have the same carry out.  The '17 crop outlook will come into play February onward.  The bigger the crop expectations, the less comfortable sellers would be with a large carry out and vice versa.  

Achieving strong shipments will be easier for fall months but as we get into 2017, the comparison will be against heavier months.  By then retail prices will have further declined, helping fuel continued strong shipments.

After last season's experience, handlers focused on continually feeding this market, which has brought the industry to the comfortable sold position of 30%.  As one grey haired trader told us, "you're going to sell a lot of almonds at 2.50/lb."  

New Almond Heart Health Study

  • "Almond intake was associated with significant reductions in levels of total cholesterol, LDL-cholesterol and triglycerides, with no significant effects on HDL-cholesterol levels."

New Diet Study shows heart disease is better treated with Mediterranean diet than cholesterol lowering drugs.

Water Supply Update

August 2016 Position Report

Next position report:  October 11, 2016

Best regards,

Paul Ewing      Dennis Soares