July 2021 Almond Market Update

With summer heat upon them and new crop nipping at their heels California shippers did what they do best and cleared out another 220.5 million lbs of almonds in June, up an impressive 25.7% over shipment of 175.4 million lbs in June a year ago. Season-to-date shipments are 21.7% ahead of last season.

While strong shipments are not a surprise given heavy commitments still on the books as the current crop season winds down, 220.5 million lbs is on the upper end of expectations. Domestic shipments were on track (up 11.5% at 65.3 million lbs — bringing domestic season to date up 4.3% up). Exports again surprised, though we should be getting used to it (32.8% up at 155.2 million lbs — with season to date exports a whopping 30.0% up).

It was anticipated that export inshell shipments would suffer in June as available inventories dwindled (inshell shipments down 32.7% at 18.3 million lbs). India understandably lagged versus last June (down 33% at 15.5 million lbs), while Chinese importers were hampered (up only 10% at 6.15 million lbs).

It was not fully anticipated the extent to which export kernel shipments would take up the slack (June kernel shipment up 59.2% at 125.6 million lbs). Strong June kernel shipments were widespread across the globe and at the risk of hurting anyone’s feelings we would call out:
* Japan (up 102% at 9.4 million lbs) — too late for Olympics, likely finally pulling commitments made early in the season
* Western Europe (up 45% at 64.9 million lbs) as all major countries pulled strongly, particularly the manufacturing destinations of Spain, Germany, Netherlands and Italy
* Eastern Europe (up 112% at 6.4 million lbs) was helped by continued strength in the Estonian gateway to Russia
* Middle East (up 67% at 18.1 million lbs) with pronounced strength in Turkish and UAE shipments

New commitments were not as stellar, but also perhaps to be anticipated as sellers have kept a tight grip on offers ahead of the July 12th (Monday) Objective forecast. Current crop sales, which at this stage would reflect prompt demand were decent at 108 million lbs (compared to 90 million, 86 million and 104 million lbs in the past three seasons). New crop sales in June of 95 million lbs were on the lower end of recent performance. This compares poorly to 172 million lbs in June when low prices and willing sellers spurred new business, but in line with previous three seasons when new June sales ranged between 76 and 98 million lbs.

As anticipated last month, we have seen an increase in media attention given to the developing drought in California, bolstering seller confidence and worrying new crop buyers. Prices over the past month have added about 10 cents per lb for both current and new crop. Standard 5% for current crop are currently seen a little over $1.90 per lb FAS, while new crop standards are trading over $2.00 per lb with few offers beyond the 4th quarter. Inshell demand continues, with current crop now about cleared out with the last loads of NPIS enjoying $2.10 per lb. An attractive premium versus kernel continues for new crop inshell which is seen near $1.90 for September and perhaps another nickel or more for August.

Nothing out of this report to overly concern sellers… yet. Not much more could be asked of shipments. Indeed, the tag-team approach of inshell and kernel has worked to clear out last year’s bumper crop, with the carryout now expected at a very manageable 600 million lbs. However, we would caution that the slower sales approach to the season is a double-edged sword. While the sold position of the industry of 10.4% (lets calculate as percentage of anticipated crop here) is not extreme, it is at the lower end of recent ranges (2017 — 13.0%, 2018 — 7.0%, 2019 — 9.3%, 2020 — 15.1%) and there are almonds to be sold. We also caution that strong current crop commitments (still strongly up at 495 million lbs versus 370 million lbs at the end of last June) might spill over into new crop shipments, curbing buyer appetites for the 4th quarter.

Sellers are betting that they can sell the crop later this season at higher prices. While sharply higher pricing is likely not on the cards as much of the consumption gains last season were on the backs of price sensitive importing countries, sellers might be further modestly rewarded if the crop does not surprise on the upside. Most observers feel that following bumper yields last season and the current drought pressures, the 3.2 billion lbs suggested by the Subjective forecast is on the top end of expectations.

No matter the Objective outcome on Monday (July 12th), we will likely see sellers come out to play again after digesting the number as harvest is fast approaching.