Almond Market Update – September 2020
The Almond Board of California released the August 2020 position report
Shipments: 193 million lbs. vs. 147.7 million in 2019 – UP 31%
Western Europe +29%
Middle East / Africa +46%
China / Hong Kong/ Vietnam +70%
South Korea +47%
Central / Eastern Europe +63%
We are more than halfway through harvest. The early varieties Nonpareil, Independence, and Shasta are harvested. Wood Colony, Price, Aldrich and others continue coming in as growers harvest their Butte/Padre and much of the Monterey & Fritz remain on the trees.
Yields improved considerably as harvest moved beyond the first couple weeks. On our 10 million lbs. of completed 6th leaf and older blocks, we are up 2% vs. last year. Nonpareil are flat, Independence are down 9%, Aldrich are down 2%, Price & Wood Colony are up 13%. These figures include both the west side which was very strong last year and similar this year, and some of Eastern Madera County that was mediocre and bouncing back.
NASS is forecasting an 18% increase in supply to reach the 3.0 Billion lbs. The East sides of these counties will help boost the crop: Madera/Merced/Stanislaus, San Joaquin along with the Sacramento Valley (“The North”). Generally, the west and south appear flat on Nonpareil yields with some growth from young and new acreage. It’s still early to say where this crop ends up.
Inedibles are up slightly with Nonpareil averaging 1.8% vs. 1.5% a year ago, and Independence averaging 2.2% vs. 1.7% a year ago. Navel orange worm pressure in the orchards in increasing recently. It seems the late harvest pressure is becoming more the norm.
Kernel Sizing is smaller with Nonpareil sizing heavily concentrated around 27/30. This is creating price spreads between sizes of Nonpareil that we have not seen for many years, as much as 10 to 20 cents per size.
Last month we touched on how yields in 2021 are likely to rest due to the alternate bearing nature of almond trees.
Crop potential is also impacted by recent growing conditions. Minor late spring rains caused an increase in rust. Then high humidity and extreme heat lead to further pressure with increased issues like hull rot, mites, rust, nuts sticking on the tree, etc. Some trees did not get enough water during the extreme heat, so some of these trees have partly prematurely defoliated and the subsequent re-leafing takes away energy from the next crop’s development. While not everywhere, the problems are much more prevalent than a year ago.
August Shipments were expected to be strong and were.
August Sales were 288 vs. 193 million last August, up 49%
Committed (Unshipped) reached 1.055 Billion lbs. – up 88% from last year’s 561 million lbs. (This is a big deal)
Sold / Shipped Combined reached 1.249 billion lbs. vs. 709 million, up 76%.
The Industry Sold Position reached 37% of total supply vs. 25% a year ago. On the sellable crop, based off a 3 billion estimate, this is 42% vs. 28% a year ago.
Currencies have generally remained in seller’s favor recently with the EURO today at 1.18 to the USD
Carry-Overs have been the big talk in recent months. The 450 million lb. carryover was a very good amount to help boost August/September shipments which suffered from low carry-outs in recent years. Looking back, it seems a nearly ideal carry-over, as Nonpareil were essentially all gone as new crop Nonpareil came in, and more recently pollinators have become hard to find just as the new crop pollinators are becoming available.
During the summer months, when our industry typically sees very low sales, sellers felt the pressure more than usual this year because of the large potential crop size. Looking back, it seems buyers seized on the opportunity and took advantage of the extremely cheap offers. This massive volume of cheap sales was the “heavy lifting”, or “leg work” as some call it, that helps give this season an incredibly strong kick start. Sellers were so worried about the crop size they likely underestimated the large growth we should see from emerging markets in particular (India, China, the Middle East, Eastern Europe, Latin America, etc.) along with food trends that favor almonds.
Healthy eating is growing in popularity and COVID-19 has given this trend a boost. Consumers are increasingly seeing the link between their health and what they eat. With almonds priced so low, they are positioned very well with these trends. Almond industry traditional research focused on heart health, diabetes/pre-diabetes, then weight/satiety, more recently skin health and energy, and there’s more coming.
Obviously, consumption is not set to grow 88% (as much as commitments are up), but the increase in sales is not just extra forward buying either. The make-up of additional coverage (early buying vs. increased consumption) has been a topic of debate, much like the anticipated carry-overs. We should see very strong September shipments and come October we may test California’s capacity to process almonds (we shipped 265 million in Oct ’19). The double edged sword of production capacity was a bearish factor during the summer as sellers sold cheap to ensure they would clear product out the way (i.e. where would we put all these almonds if we didn’t). Now, production capacity is a bullish factor as buyers come in and sometimes find sellers without capacity to sell for nearby.
Pricing fell 42% from the highs and looking back it seems this was too large of a correction. Pricing is currently about 33% down from 10 months ago.
India took a massive amount in August and is expected to for September, so now could step back as other parts of the world continue buying.
While the industry is very well sold, sales are thought to be more skewed toward season pools, as many growers resisted locking in big volumes at prices below most growers’ cost of production. Going forward, the call pool growers are more in control of their destiny as season pool sellers may not want to get too far ahead in a rising market.
The short-term outlooks seems bullish.
Paul Ewing Dennis Soares
Further Info: August 2020 Position Report
September Position Report – October 9, 2020