Treehouse Almond Market Update – March 9th, 2023

California handlers shipped a record 245.7 million lbs in February, up 23% from shipments of 199.2 million lbs in February a year ago.   While strong shipments were anticipated after extremely robust new sales in January (350 million lbs), this number comes in at the higher end of expectations.

Unsurprisingly, February export shipments of 188.3 million lbs account for most of the strength, sharply up from February exports of 145.8 million lbs last year. Domestic shipments were decent at 57.5 million lbs, up from 53.4 million lbs a year ago.

Main call-outs echo a common theme; in markets where lower prices are being mostly passed on to consumers we are seeing strong growth.   In more mature markets where more almonds are being incorporated into consumer packaged products and higher prices of other inputs have discouraged price drops on the shelf, the growth in consumption less pronounced.

• Chinese February shipments totaled 21.9 million lbs, sharply up from 4.0 million lbs a year ago.   Chinese buyers came in strongly in January as they saw consumer demand in run-up to lunar New Year celebrations surprisingly strong.   Looking forward, China will now turn to duty advantaged Australian supply for spring and summer.   A very good Australian crop is expected at about 375 million lbs, up from 315 million lbs last season.
• Indian February shipments were at 34.2 million lbs versus 20.3 million lbs a year ago.  India will also start looking to Australian supply starting in March, but we anticipate that California will get their share.  Season-to-date shipments to India are now up 5%.
• The Middle East continues to perform very well as they pull strongly ahead of Ramadan starting in late March.   February shipments were up 16.7 million lbs at 31.8 million lbs.   Almost all countries in the region executed, with heavyweights UAE (14.5 million lbs) and Turkey (8.8 million lbs) shouldering most of the tonnage.  Shipments to the Middle East are now up 54% season-to-date.
• After pulling strongly in January, Western European shipments took a breather in February, totaling 50.5 million lbs.   This is down 12.5 million lbs versus last February and leaves season-to-date totals at a modest but respectable 4% ahead.

After slow start to the shipping season, the past 3 months have now lifted California season-to-date shipments for all regions to 6% ahead of a year ago.

End February commitments of 784 million lbs reveal February new sales at 190 million lbs.   This is well off the remarkable January pace of 350 million lbs of new sales and more in line of what we typically see in February.   The slowdown in sales was par for the course in a month when uncertain weather conditions discouraged sellers, while buyers were likely still digesting what they had bitten off earlier.   With commitments down 8% versus end February commitments of 857 million lbs a year ago the market will need continued new sales if California is going to match shipments over the second half of the season when loosened logistical constraints helped California ship strongly.

February 2022 crop receipts of 47.9 million lbs brought total receipts for the season to 2,523 million lbs.   This confirms that the 2022 crop is not going to reach the 2,600 million lbs Objective Estimate and will likely final around 2,550 million lbs or a little below.   Nevertheless, kudos to the Objective Estimate for getting it close, after a controversial lowering from the Subjective of 2,800 million lbs last summer.

With the market focused on unusually wet and cold weather in California during bloom, prices have moved up rationally.   Standards for 2022 crop have added about 15 cents per lb, while Nonpareils have enjoyed a bigger bump.   Price conscious brownskin buyers have been enjoying affordable 27/30 and smaller levels and these offers are now drying up and values have increased 25 to 30 cents per lb.  We do note, with caution, that higher levels have not been wholeheartedly followed by buyers.   The market has been relatively quiet over the past weeks as the consequence of inclement weather is contemplated.

Over the past three months of position reports we have seen supply and demand inch closer towards a better balance.  With California 2022 supply now 50 million lbs off expectations a few months ago and shipments strengthening, carry-over expectations into the crucial 2023 season have been pared from 800 million lbs or more, to a manageable 650 million lbs or so.

This sets the stage for the all-important, but as yet unanswerable question of the 2023 crop.   Even old-timers cannot remember this much rain and snow during bloom.   On the one hand, the drought card is off the table, but the effect of weather on pollination has yet to be determined.   Nutlet development over the next few weeks will be closely watched as will potential for freeze, which can be a factor until the first week or two of April.    With scarce offers and much uncertainty, the market is justifiably approximating a 10 to 15 cents premium on new crop.  Although pricing is now off lows seen last month, they remain at historically attractive levels for buyers and below the cost of production for most growers.  Prudent risk management on both the sell and buy side is advised.

Position Report – February 2023