Almond Market Update – August 2020
The Almond Board of California released the July 2020 position report
Shipments: 180.1 million lbs. vs. 154.2 million in 2019 – UP 16.8% (+4.8% YTD)
U.S. +8.4% (+4.5% YTD)
Exports +22.6% (+4.95% YTD)
Western Europe +3% (+5% YTD)
China/HK/Vietnam -27% (-39% YTD)
India +51% (+11% YTD)
Middle East / Africa +84% (+38% YTD)
Japan -12% (+5% YTD)
South Korea +69% (-1% YTD)
Canada Flat (-2% YTD)
Central / Eastern Europe +75% (+20% YTD)
Harvest is underway for the some early blocks of Independence and Nonpareil. The early fields we are seeing from the west side are showing smaller sizes and yields off 15% or more from last year. Kernel sizing and yields usually improve as harvest gets further along. We are also anticipating a much better crop vs. last year from the center/east and North, so it’s too early to get too concerned about the crop.
July Shipments were surprisingly high. This was the best shipping month (vs. LY) of the entire crop year.
July Sales of 2019 crop of 74 million lbs. were more than double last year’s 35. Low prices, larger inventory and motivated sellers all helped boost sales.
Committed (Unshipped) is 265 million lbs., up 61% from a year ago
Uncommitted Inventory is 182 million lbs., up 17% from a year ago
New crop sales of 695 million lbs. is nearly double last year’s 352 million lbs. (Bullish news)
The low prices will gradually reach consumers but they are so low they are already starting to spur demand growth. The below charts demonstrate how good of value almonds are today, and keep in mind these retail prices should continue to drop world-wide for the coming 3-6 months.
Currencies have generally moved in seller’s favor recently with the EURO back up to to 1.17 to the USD.
After 7+ months of bearish sentiment, today’s report may help lift the mood. Sellers have been very aggressive to reach a level of approximately 23% sold on new crop. Any firmness we see or don’t also depends on how longs sellers continue to want to keep the pedal down (so hard)
FOR 2021 CROP, TREES LIKELY TO REST Looking back at when we hit bumper yields like 2008, 2011, 2013, the following year yields per acre fell by 18%, 9%, and 9% respectively. If 2020 really is 3 billion lbs. and 2380 lbs./acre, we could see a yield more like 2165 in 2021 crop, based of a 9% rest. This along with more moderate acreage growth due to higher orchard removals could put a 2021 crop around 2.8 billion lbs. (potentially). If 2019 turns out to be 2.9 billion as some in the industry expect, a 2021 crop decrease of 9 to 12% would give us a 2021 crop around the 2.55 – 2.65 range. So long-term, these things tend to balance out. And the best cure for low prices is low prices. COVID-19 brings a wild card no doubt, but we still anticipate very impressive demand growth this season. The USDA’s initial purchase of $40 million of almonds for food nutrition assistance programs (such as food banks) gives hope of a potential larger buy later in the season, which presents another wild card.
We put together some possible supply/demand scenarios for this season. Last year we tended to see the crop as larger than NASS’ estimate and this year we are skeptical of the 3 billion lb, estimate. We presented two scenarios with 3 billion lbs. and two scenarios with 2.85 billion lbs.
|2019 Actuals||2020 Scenario A||2020 Scenario B||2020 Scenario C||2020 Scenario D|
Scenario A seems unlikely to us, but the fear of this possibility is likely what has kept the market so weak. The carry-out possibilities by itself would point to scenario D as being the only possible real bullish scenario of these four, however, given 2021 crop’s likely lower potential, a higher carry out may be needed, especially if these prices stay around long and spur a freight train of demand growth that should continue into the next crop year.
Hopefully by next month we should have more yield data to share.
Best wishes for a smooth new season.
Paul Ewing Dennis Soares
Further Info: July 2020 Position Report
August Position Report – September 11, 2020