December 2019 Almond Market Update

California handlers managed another record in December, shipping out 205.3 million lbs versus 199.6 million lbs in December a year ago (up 3.2%). Season-to-date shipments now run 4.4% or 44.0 million lbs ahead of last year’s pace at a total of 1051.3 million lbs.

Encouragingly we see domestic shipments bucking a 2-month decline, posting a December increase of 7.7% or 4.1 million lbs to total 57.5 million lbs. Another month of shortfall and we might have been calling this a trend.

On the export side, we see a continuation of what was seen in the first few months of the season – tariff driven reductions in Chinese shipments (down 80% to trickle out at 2.6 million lbs in December) being compensated by strong demand in most other markets. Notably, we see another strong month in India (up 22% at 24.3 million lbs) and another remarkable month for Western Europe (up 13% at 59.3 million lbs). Indian season-to-date totals have now pulled slightly ahead of a year ago, while Western Europe is running 14% higher. In the Middle East Turkey continues to pull strongly (December up 95% at 8.0 million lbs) and the region is currently up 55% on season-to-date totals.

Handlers added another 302 million lbs of receipts in December to bring the 2019 season thus far to 2385 million lbs. While last month the receipt number signaled a larger crop than forecast, this exclaims the fact. Estimating the remaining huller stockpiles is still a dabble in uncertainty, but 302 million lbs tells us that many hullers were actively engaged for the whole month (December receipts a year ago were 215 million lbs) and not everyone is finished. Last season another 70 million lbs or so were added to the total after December. This season it is likely to be more. To pin a number on it so we can calculate sold percentages we suggest 90 million lbs, putting a crop number 2475 million lbs. This is on the upper end of expectations coalescing a month ago, and obviously well above the unhelpful Objective forecast of 2200 million lbs.

Nonpareil receipts have now passed the billion pound mark (1002 million lbs to be precise). While congratulations to California growers might be in order, this will be tempered by the reality of nonpareil pricing moving even closer to California values. As summarized succinctly by a European trader, “buyers need to buy standards and sellers need to sell nonpareil”.

Commitment numbers reveal a modest month of new sales at 166 million lbs (compared to 180 million lbs in December a year ago and 191 million lbs in November). Committed sales of 609 million lbs continue to run ahead of last season when 568 million lbs were committed, but the gap is narrowing. Interestingly we see domestic commitments increasing slightly, with export commitments falling about 100 million lbs in the past two months, confirming the sense that export buyers are not well covered.

Following the November position report last month showing strong receipts the market has shaved about 5 to 10 cents per lb off pricing. Standards were most recently trading near $2.85 per lb, while sized Californias are adding only a few cents to these levels. Nonpareils continue to drift lower for smaller sizes, but a scarcity of 23/25 AOL is keeping values for larger sizes supported. Nonpareil inshell saw good demand out of Indian buyers coming off the New Year holiday at $2.20 per lb sliding scale. Strong demand for manufactured is supporting blanched sliced and slivered at $3.70 per lb.

Today’s report will likely be perceived as neutral. While strong receipts are a concern, this has been anticipated over the past month and we have already seen selling pressure and price weakness (particularly in early January) as handlers adjusted to increased supply.

More supply, in fact, is exactly what is needed to make what is still looking to be a tight transition to a potentially larger 2020 crop. Strong worldwide demand continues as almonds enjoy ever-expanding versatility in product applications and expanding market penetration. Using a crop number of 2475 million lbs, shipments can only grow by about 3% to 4% in the current season (a little UNDER the current pace of shipment growth). Market pricing appears to have already adjusted to enable this to happen.

Furthermore, headwinds to California pricing caused by the 50% retaliatory Chinese tariffs cannot be discounted. Consumption continues to grow in China as they turn to higher-priced but zero duty Australian supply. Next week the market will hear the almond specific details of the Phase 1 agreement between the US and China that will be signed in Washington DC on January 15th. There is a good likelihood this brings good news for California almonds. Reducing the price for Chinese consumers will spur consumption growth in this key market going forward.

Regards,

Jonathan Meyer
CEO
Treehouse California Almonds, LLC.