Treehouse Almond Market Update – January 12, 2023

California handlers shipped 206.3 million lbs in December, up 9% from shipments of 188.8 million lbs a year ago. California sighs a bit of relief as this number is on the higher end of expectations and is the first modest step in the right direction seen this season. Season-to-date shipments have gained slightly from November, which were down 4.3%, and now pacing slightly better at 1.9% behind last year’s pace. 

Some callouts:

1. Domestic November shipments at 52.47 million lbs, down 18%. Domestic shipments are down 8.7% or 28.4 million lbs for the first 5 months of the season. With domestic season-to-date commitments at 330 million lbs (down 1.7% vs last season) the continued lag in shipments warrants concern and suggests larger inflationary pressures continue to impede low market pricing from being passed on to consumers.
2. India imported 33.28 million lbs for the month, up 37.5% from last December. This continues a positive trend in a critical market for California. Demand for Independence inshell remained strong as pricing remained 10-15 cent discount to Nonpareil inshell. Season-to-date imports now lag 9% vs 17% a month ago. Notably, inshell shipments are a likely mix of both old and new crop.
3. Western Europe shipments impressed with a 22.9% increase in December to 56.46 million lbs. Spain continued its coverage adding another 18.76 million lbs (up 21.8% for December) backfilling for the short Spanish crop supply. Helped by the continued strengthening of the Euro as well as a 1.5% duty reduction (3.5% – 2%) for the first 19 million lbs of imports encouraged European buying interest.
4. The Middle East, California’s diamond in the desert, increased imports 74.9% for December bringing season-to-date shipments to 121.96 million lbs up 38% for the season. Despite a 36.4% in the Lira against USD, Turkey is now up 25% season-to-date expanding its footprint as a reprocessor and trading hub for the Mediterranean. UAE, more sheltered from currency fluctuations, increased December shipments by 120.5% adding another 11.9 million lbs bringing season-to-date totals to 62.1 million lbs and nearly eclipsing China (63.9 million lbs season-to-date) as the 4^th largest California import market. A positive sign that low prices are working as they continue to add stocks ahead of Ramadan in March. 
5. Chinese imports remain disappointing adding only 1.7 million lbs with season-to-date shipments down 24%. A flurry of Chinese buying interest helped stall out recent market declines with the latest NPIS sales reported $1.42-$1.45. Sentiment for the Chinese market remains moderate and we will wait to see if supplemental coverage continues out of California in lieu of the Australian crop which enjoys a 0% duty but has been plagued with quality issues over the past year. 

December commitments of 719.7 million lbs calculate new December sales at a respectable 234.9 million lbs compared to past December sales (2019 at 166.2 million lbs, 2020 at 172.7 million lbs) but again fall short of 2021 by 4.8% (246.8 vs 234.9 million lbs). Domestic sales accounted for 72.6 million lbs and export 162.3 million lbs. Commitments a year ago stood at 811 million lbs. A decent sales report but lacks the volume to suggest California can start easing off the gas pedal.

Crop receipts continued their slowdown in December, adding only 226.2 million lbs vs 344.8 last December. Season-to-date crop receipts now sit at 2376.4 million lbs vs 2656.87 million lbs (280.5 million lbs less). Considerations of recent rains slowing down end-December hulling capabilities and continued storage constraints suggest the 2.6 billion lbs Objective Crop forecast is still a reasonable expectation. However, comparing crop receipts after December for the past 9 seasons, the 2021 crop season at 9.1% received after December is on the high end with the average over the past 9 seasons received January forward at 4.4%. This will likely increase speculation that 2.6 billion lbs may be on the high end.

Impressive winter rains continued to pour on California and as of today, the snow water equivalent for the state is now 227% of normal for this time of year and 104% of normal for the entire rain season (thru April 1^st). Replenishing California’s water reserves brings hope that orchards will receive necessary water deliveries over the summer months. Paired with ample chill hours, growing conditions are better than we have seen in recent years. Over the next few weeks, the focus will shift to bloom and we will wait to see if the wet weather patterns continue or make way for dry and warm bloom conditions. At this point, winter growing conditions continue to suggest a likely bounce back from the 1,900lb/acre 2022 yield levels.

Since our November report, pricing for December remained relatively stable with Standard 5%’s settling in at $1.50/lb FAS Port. However, following the holiday break, the continuance of impressive rain systems and the need to generate cash ahead of the 2023 growing season brought out sellers. Nonpareil took the brunt of the decline with NPIS 27/30 giving up 10-12 cents with sales reported $1.39 – $1.42 range. Standard 5%’s retreating 3-4 cents to $1.47/lb

Although a positive report in terms of slowed crop receipts, increased shipments, and decent sales, the overall outlook remains about the same. California remains in an undersold position and at its current pace still faces another potential 800 million lb carryout. With early estimates increasing bearing acreage for the 2023 crop by 30,000 acres to 1.34 million acres and the potential for an increased yield/acre (barring any freeze or bloom weather event) will keep sellers motivated to move product. Sales and shipments remain key to establishing confidence in a market that is more disproportionately sold than in years past. Today’s report is a step in the right direction to getting the industry in a comfortable sold & shipped position but there is more work to be done.

Position Report – December 2022