January 2017 Almond Market Update

Over the past week most of the talk of expectations for January shipments clustered around an increase of 10% or so. So today’s report showing California shipments at 165.8 million lbs, or 28% up from last January’s 129.2 million lbs should impress. At the core of the sturdy number are continued robust domestic shipments (up 27.3% at 57.3 million lbs). Strong contributions also came from India (up 380% at 15.1 million), Western Europe (up 19% at 50.6 million), Japan (up 23% at 6.7 million) and South Korea (up 59% at 3.9 million). Some trader dominated markets, perhaps eyeing new crop prospects and fearful of weakening values, were less lively. The Middle East was flat, while China was down 44% at 3.9 million lbs.

With six months now under our belt, the midpoint season-to-date shipments now stand at 1,117 million lbs or 33.4% ahead of last season.

January receipts of 2016 crop added another 46.4 million lbs to bring the total thus far to 2108 million lbs. With wet weather in California motivating hullers to clean up stockpiles we do not think that there will be much left to be reported in the ensuing months. We can confidently pencil the final crop near 2125 million lbs (average yield 2360 lbs/acre on 900,000 bearing). In retrospect the industry was well served by both trade and official forecasts before the season started which eyed the crop near 2050 million lbs with reasonable accuracy.

Focus is now on new crop prospects. The wettest winter in decades in California has taken the drought card off the table. Snow pack is currently at over 180% of average while reservoirs are in flood control mode. Storms have had a welcome southerly component, with strong San Joaquin flows enabling Delta pumps to run, bringing water back south for ground storage recharge. All in all a very good winter for growers.

We are now seeing temperatures start to rise and bloom has begun in the south end of the valley (usually a few days ahead of central and northern growing regions). This morning early varieties had about 5% blossoms on mature blocks. With warmer days we anticipate that bloom will be well underway by mid to late next week. Weather forecasts show the storm door still open, with unsettled conditions anticipated tomorrow and then on Thursday next week. With now approximately 960,000 bearing acres waiting to be pollinated for the 2017 crop, the yield multiplier has a big influence.

Concerns for the potential 2017 crop have weighed on the market over the past month, with values dropping about 10 cents across the board. Despite talk of a “quiet” market, the commitment numbers suggest relatively active buying and selling, with new sales calculated at 159 million lbs. It appears, however, that buyers have had the upper hand, taking advantage of willing sellers as California enjoyed successive January storms. Standards dropped from $2.45 to the $2.30 to $2.35 per lb range. Premiums for larger Carmel types were unusually skinny, topping out at 10 cents or so, as Middle East buyers stayed away. Large nonpareils (23/25) were recently available near $3.10 per lb. Blanched Sliced and sliver traded in the $3.15 to $3.20 per lb range, while BWB sold between $2.70 and $2.80 per lb

Over the next few weeks the main influence will be bloom weather. Today’s report, however, reiterates that almonds are being sold and shipped at record volumes. The domestic shipment number underlines the pull from consumers as lower prices hit the shelves. For some varieties and sizes it is going to be a very tough transition to new crop.

It will be against this underpinning of strong demand that day to day weather conditions are considered. Currently the market is already factoring in significant jump in production. We warn that the California will need to produce over 2300 million lbs to allow for a moderate 5% to 7% growth in shipments. Although quite possible, a 2300 million lbs crop is not a fait accompli.

With California sitting at about 78% sold and shipped, selling pressure will be moderate over the balance of the season. Additionally we note tightening markets in other tree nut markets (walnuts, macadamias) and almonds relatively cheap versus all other tree nuts. While Europeans may have decent cover (shipments up 21% season to date), our sense that there is still significant buying to be done elsewhere and buyers for now are banking on a good bloom. It will be an interesting few weeks, but from our perspective the there is more upside than downside risk to this market.

Jonathan Meyer
CEO
Treehouse California Almonds, LLC.
Sales@treehousealmonds.com