June 2016 Almond Market Update

Almond participants at the INC in San Diego last week might be forgiven for their glazed stares as they endured yet another conversation about the upcoming crop size, but if they were paying attention their ears would have focused on the background sucking sound of shipments leaving California warehouses. If they were not attuned, then today’s report makes it pretty clear.

Handlers shipped 178.1 million lbs in May, up 27.6% versus 139.6 million lbs a year ago. Continuing the pattern we saw in April, shipments to price sensitive markets continued to perform well. May versus last May percentage increases give a flavor. China up 365%, India up 58%. Gateway destinations Vietnam and Pakistan with significant volumes up 1991% and 1672%, respectively. Strength was seen in Turkey (up 109%) and UAE (up 25%), while strong shipments to Spain (up 27%) helped European shipments to a 15% increase over last year. Capping the argument that low prices are doing their work, domestic shipments posted a 1.9% over last May. Domestic shipments were expected to continue to lag last year as domestic programs take time to reset. While not yet a trend, the early recovery portends a promising 2016 season for domestic consumption.

Prices last month jumped up about 25 cents per lb after the strong April shipment number was reported in early May. Current crop standards quickly stabilized near $2.50 per lb as a comfortable base for other grades and sizes. Cal SSR 27/30 traded between $2.60 and $2.65 per lb while Nonpareil traded between $3.10 and $3.25 per lb for most available sizes. Buyers are finding gaps in the offerings, with NPS 27/30 and smaller Californias being noticeably scarce. Strong demand for inshell pushed NPIS levels by about 35 cents per lb with current crop bids most recently circulating for the most part unfulfilled at $2.30 per lb. With the transition to new crop now sure not to be the cake-walk buyers expected few months back, current crop is trading a small premium to new crop levels. With the exception of prompt needs we do note buyer hesitancy to wholeheartedly commit as much of the focus remains on supply expectations.

Buyer reluctance is reflected in the commitment numbers, reported at 361.8 million lbs suggesting unremarkable sales of 107.3 million lbs. Uncommitted inventory stands at 372.8 million lbs versus 290.2 million lbs a year ago.

With May numbers under its belt, California is now looking at carry-over at well under 450 million lbs. Perhaps carry-out is closer to 430 million lbs (assuming a 10% shipment increase in June and July). This is a significantly different outlook compared to a few months ago when 500 million lbs plus was feared.

We will not know the 2016 crop number until December or January, but meanwhile it is clear that most are anticipating a final higher than the Subjective 2000 million lbs. For what it is worth we would pencil our forecast at 2100 million lbs, suggesting the need for shipments over the next season to increase by 10% or so – which appears well within reach at current price levels.

We expect that with today’s report that demand will again start receive the attention it deserves. The market went down on shipments and is recovering on shipments. If buyers were looking for the signal that current prices are justified, perhaps this report will be enough. Meanwhile, sellers will be reassured that prices are working and will likely keep offers firm as we approach the Objective Estimate on July 6th.

Best regards
Jonathan Meyer
Treehouse California Almonds, LLC