October 2017 Almond Market Update

Anticipation has been building over the past couple of weeks as handlers up and down the state informed of strong October shipments. While not a surprise, the market will be reassured by today’s report showing a record 246.5 million lbs of October shipments, up 4.6% from the previous monthly record set in October last year of 235.6 million lbs. Season to date shipments have now just about caught up with last season’s pace and stand at 605.6 million lbs versus 607.1 million lbs at the same time a year ago.

A look under the surface shows huge, but expected, shipments to India (29.6 million up from 16.7 million a year ago). Domestic shipments continue to perform well (63.9 million versus 60.1 million). Japan and South Korea pulled well as did UAE and the Middle East region. In Europe we see the Spanish shipments slightly down in October but more than offset by German gains (perhaps we include Russia here) to put total Europe ahead last October (58.2 million versus 56.1 million).

Meanwhile the critical growth market of China (and let’s include Vietnam here) is not yet showing a convincing picture. October shipments for these two countries are down over 10 million lbs (43.0 million versus 53.8 million), while season to date shipments are trailing by 14.6 million lbs. With Chinese New Year a little later this year (second half Feb) there is still time to make up ground with November shipments, but at this point the anticipated strong increase in this market is not a sure bet.

Commitment numbers were good, but not overwhelmingly so. Commitments dropped from 722 million lbs a month ago to 677 million lbs – suggesting 201 million lbs of fresh sales – good for October but not extraordinary. Handlers continue to be a little more sold than usual for this time of year with sold and shipped now accounting for 58.2% of the anticipated crop of 2250 million (less 2% losses). A year ago this number stood at 57.1%, while over the past 8 years this has ranged from 47% to 63%.

Crop receipts jumped by 685 million lbs in October and now stand at 1529 million lbs versus 1559 million lbs at the same time last year. This is the biggest month of hulling in the history of the industry (by about 55 million lbs), but only informs us of the hulling capacity not the crop size. Total crop size, will remain shyly hidden until at least December or more likely January. Many attempts are being made to lift the veil. At this stage we are certain that we are down in the south (Kern County), but hear that it improves to the north. Insect damage is higher than usual, reducing availability of better grades and slowing final processing. Most observers are still sticking with the 2250 million lbs objective forecast, up from 2136 million last season.

Over the past month, almond prices for the most part have drifted lower. Standard 5 pricing dropped from $2.45 per lb and has been trading at a little under $2.35 per lb for the past two weeks. Better quality grades have been more insulated, but nevertheless have seen about 5 to 7 cents of erosion. Cal SSR 27/30’s were most recently seen in the $2.45 to $2.50 range and Nonpareil Extra grades (already hard to find) we see near $3.30 to $3.35 per lb for 23/25. Manufactured almonds slipped to $3.15 per lb for slice and sliver about 2 weeks ago, but firmed back to $3.20 per lb over the past week on good demand and short-term supply constraints.

In summary this is a positive report. Demand in most regions appears to be on track to accommodate a slightly bigger crop than last year (about 5% shipment growth is needed to avoid an increase in the carry-out of 400 million lbs). As we look to November we anticipate another very good shipping month for California, particularly as India will again pull close to 30 million lbs while last year demonetization resulted in an anemic 6.8 million Indian November tally. Chinese shipments will be key and closely watched. The strong commitment number suggests that shipments will likely materialize. The commitment number, however, is a two edged sword. On the other side of handlers being sold, buyers have covered.

We anticipate that today’s report will likely result in firmer offers by sellers, many of whom are in comfortable positions. Time will tell if buyers follow wholeheartedly as both buyers and sellers contemplate prospects for a significantly larger crop in 2018.

Best regards,

Jonathan Meyer
CEO
Treehouse California Almonds, LLC.