The first position report of the 2018 season surprises on a couple of fronts. Shipments were weak, but not where anticipated. New sales were lower than last year, but not by as much as might be surmised by the lackluster energy and general malaise of the market.
Total shipments by California handlers totaled 154.2 million lbs in August, down 8.5% or 14.4 million lbs from shipments of 168.6 million lbs in August a year ago. Surprisingly the weakness did not come from India and China as expected, but can be almost completely explained by a short fall of 32% or 15.0 million lbs in Western European shipments.
Indian and Chinese shipments were unexpectedly robust. An increase in Chinese tariffs implement in early July had been expected to throttle imports. Notwithstanding, August exports to China and Vietnam combined were up 34% at 7.3 million lbs. Indian shipments, which were expected to be well down from last year due to a later crop and supposedly slow interest, were up 8% at 22.2 million lbs.
Notably, Middle East August shipments were down 52% at 3.2 million lbs. Shipments to Turkey, where tariffs and a sharp currency devaluation have crippled importers, were slashed by 2.5 million lbs to total only 0.7 million lbs. Dubai importers have also struggled to maintain momentum as trade with Iran has slowed considerably.
Domestic shipments started the season a very strong 67.1 million lbs, about on par with last year which was an August record at the time.
Commitments by California handlers stood at 515.1 million lbs at the end of August, down 16% from commitments of 677.2 million lbs at the same time a year ago. New sales in August can be calculated at around 408 million lbs, compared to 440 million lbs last August. While 7% down, the new sales figure will likely surprise many in a market that has been generally described as very quiet.
August receipts by handlers of 189.5 million lbs reflect a later than usual crop and the slowest start to the hulling season since 2012. Last year handlers reported receipts of 215.6 million lbs in August, while a typical August over the past 5 years has been closer to 350 million lbs. Nonpareil, the first variety to be harvested, is now essentially in from the field and with consistent reports of yields at about 20% lower than last year. The NASS objective report had been calling for yields approximately 14% lower, but anticipates that additional acreage would lift the nonpareil total crop to a forecasted 910 million lbs, about 0.8% less last year's 918 million lbs total. At this point it does not appear likely that the nonpareil will reach the NASS figure.
So far, the market appears to be largely ignoring the disappointing crop news and is focusing more on anticipated demand slowdown in key nonpareil markets. The nonpareil premium which over the past several years has enjoyed a typical 50 to 70 cent premium over California varieties has been cut to 20 to 40 cents per lb, while the premium for inshell has pretty much evaporated over the past several weeks. Actual levels are more difficult than usual to determine, with traders trying to stir up business with low bids while a significant number of major sellers/handlers are reportedly off the market as they wait for low yields to be better reflected in prices. For now we would put nonpareil Extra 23/25 in a wide range of $2.90 to $3.10 per lb (down about 10 cents per lb since last month) while nonpareil inshell is currently seen near $2.10 per lb or a little below (down about 15 cents per lb).
California varieties, or pollinators, have been more stable and about unchanged since last month. 2018 crop standards are seen near $2.35 per lb for October forward, while sized Californias are in the $2.50 to $2.65 per lb range.
So what is the next move?
European shipping weakness can be attributed to a tight transition from old to new crop. Most of the carry-over has been nonpareil leaving a lack of pollinators for August and September shipments. A bearish trade environment has also contributed. Tariff disputes have cast a pall of uncertainty over major markets, while industry buyers have also had their confidence dinged by significant declines in prices of other nuts, particularly walnuts. Nevertheless, European consumer demand at these price levels is not seen as vulnerable and shipments will likely rebound as pollinators become available in late September and October.
Chinese shipments remind us of the durability of their channels and bode well for the next several months. Indian shipments are a major relief as Indian holiday demand now looks likely to be supplied without any disruption and associated lack of consumption.
Almond prices are at levels that have shown to work well for the consumer and today's report shows that new commitments/sales are continuing despite the â€œquiet marketâ€. While it may take more than one month of shipping numbers to settle concerns and restore near-term trade confidence, these shipping numbers are a good start.
Treehouse California Almonds, LLC