Treehouse Almond Market Update – February 9th, 2023

Before we get into the report, we would like to take a moment to reflect on the recent tragedy impacting the countries of Turkey & Syria. To our friends, family and colleagues impacted, you are in our thoughts and prayers.

Treehouse Almond Market Update February 9^th, 2023

While expectations were high leading into today’s shipment report, it’s safe to say the numbers came in as a surprise to even the most optimistic of predictions. California handlers shipped an impressive 229.7 million lbs in January, up 29.6% (177.2 million lbs vs 229.7 million lbs) from previous January and notably the largest January shipments ever recorded. Season-to-date shipments, while trailing 1.9% in December are now 2.6% ahead of last year’s pace.

Although shipments were impressive, new sales take center stage. California managed to add 350.1 million lbs new sales, a 68.6% increase from previous January and exceeding the highest monthly sales ever recorded (Sept 2019) by 50 million lbs. Historically low prices and favorable exchange rates encouraged buyers to take cover. Export sales totaled 265 million lbs, up 90.75% for the month. Domestic added 85 million lbs of new sales, up 24% from previous January.  As a percent of total supply sold & shipped (using the 2.6 billion lbs Objective Forecast), California is now at 62.4% vs 59.9% last January, 2.5% ahead of last year’s pace. This number may likely be understated as YTD crop receipts of 2.475 billion lbs show a sharp slow-down in January receipts (only 99 million lbs vs 171 million lbs in January a year ago) and suggest the crop will likely fall short of the 2.6 billion forecast. Even if February forward crop receipts maintain same pace as last year, which would be on the high side of possibility, the final 2022 crop number would land at 2.569 billion lbs.

A few callouts:

1. Domestic season-to-date shipments continue to lag, down 7.25% from previous year. However, adding another 85 million lbs of sales in January, Domestic commitments of 348.85 million lbs, are now 3.1% ahead and a positive sign that we may see Domestic shipments starting to take a turn for the positive in upcoming months. Reports of heavy sales into rebagging & distribution channels brings hope that low prices are starting to be reflected on retail shelves.
2. European demand continues to impress, shipping another 58.8 million lbs, up 58.67% for the month and now up 10% for year-to-date. January shipments were heavy into manufacturing markets (Germany up 73%, Italy up 45%, Spain up 78%) as buyers make up for the shortfall in Spanish crop and continue to add coverage from California. Worth noting EURO strengthening over past 4 months continues to support buying interest out of California.
3. Middle East continued its campaign ahead of Ramadan and loading up for summer months, adding another 25.5 million lbs, up 88% for January. Season-to-date shipments now up 45%, a positive sign that market prices are working, and product continues to move through the manufacturing and trading channels at an impressive rate.
4.  Shipments to India increased 52% for the month, adding another 34.8 million lbs as buyers continued to cover March/April needs. With Nonpareil receipts down 11%, buying focus remained on Independence with recent pricing $1.32/lb. sliding scale vs 1.48/lb Nonpareil inshell sliding scale. Season-to-date shipments to India remain 2% down compared to last year. Buyer interest will likely begin to shift to upcoming Australian crop, which enjoys a favorable tariff rate.
5. Shipments to China were 5.84 million lbs, up 89.7% for the month. With season-to-date shipments still down 20%, the increase in January shipments and strong sales activity over recent weeks is a positive sign that market levels are working in this historically price sensitive market. With lockdowns beginning to ease, the outlook remains positive for China over the coming months.

All-in-all, this is an impressive showing for California. Strong winter rains changing the near-term water outlook for California and a likelihood of an increased 2023 crop size, early estimates ranging 2.8-2.98 billion, brought willing sellers to the market who were welcomed with open arms by buyers as sales of 350 million lbs blew past the previous 299.5 million lb record. New sales set the stage for a positive February shipment report and potentially another record shipment. With year-to-date commitments about on par (down 0.16%) with last year, the activity over the past month is a positive step forward for California which needs the momentum to continue ahead of the likely increased 2023 supply scenario.  New crop buying interest began to poke its head up with recent sales garnering a ~$0.15 premium over current levels as buyers remained encouraged by historically attractive price levels and started their 2023 crop coverage.

Although there are many positive takeaways from today’s report, it does come with a touch of cautious optimism. Looking ahead, California still has a heavy lift, needing to ship an average of 232 million lbs/month just to keep a carry-in close to 700 million with the 2023 total supply still likely to increase. It’s clear California will need to keep its foot on the gas pedal to keep clearing out product to set itself up for a more manageable supply scenario for the 2023 crop season.

Position Report – January 2023