Treehouse California Almonds, LLC.

We have seen almond prices firm over the past couple of weeks. Although impossible to apportion all the blame, we can point to the surprisingly low preliminary 2016 bearing acreage of 900,000 acres reported by NASS on April 27th as the primary catalyst. The number, which factored in 45,000 acres of removals, surprised most observers who had been anticipating bearing acres to increase by 20,000 to 30,000 rather than a very moderate 10,000 acres from last year. This figure is important in that it is the driver for the NASS Subjective and Objective Estimates. Consequently, we saw offers scaled back and sellers chasing business in anticipation of the Subjective Estimate released yesterday and then the April shipping numbers released this morning.

In short, reluctant sellers have been rewarded by both numbers.

The Subjective Estimate came in at 2.00 billion lbs –  at the low end of industry expectations. After calling around to growers representing 27% of the California acreage, NASS plugged in a forecasted yield number of 2220 lbs per acre, up only 4.7% from last year’s computed yield of 2120 lbs per acre.

The April shipment number was reported today up 10.9% at 167.5 million lbs – a surprisingly strong performance and suggesting that low almond prices are already having an effect. As expected, strength came from export markets, up 26.2% at 116.5 million lbs. Domestic shipments are as yet unresponsive to prices and posted another loss (13.2% down at 50.9 million). We note markets with elastic demand doing well — including China (adding 4.9 million lbs versus last April), India (3.1 million), Pakistan (2.9 million) and Turkey (6.6 million).

Commitment numbers confirmed brisk sales over the past month, increasing by just under 10 million lbs since last month to 432.5 million lbs, suggesting new sales of 176.9 million. Last year at this time commitments were at 365.9 million lbs, but this needs to be seen in context of the overall supply as uncommitted inventory is at 83.9 million lbs ahead of last year. One last note on this –still a niggling concern that some of the 432.5 million lb of reported commitments belong to contracts that will yet default and have to be resold.

At the time of writing prices are still in flux as the market figures out an appropriate reaction to the numbers. Prior to yesterday’s Subjective Estimate market levels had increased by about 25 cents per lb since last month’s report. Hard to find standards were being offered at $2.25 per lb, Nonpareil Sup 23/25 traded around $2.85 per lb, NP inshell at $2.00 per lb for both current and new crop, while manufactured almonds traded between $3.00 and $3.10 per lb for slice and sliver. Market levels after the Subjective number have been tough to pinpoint – we hear perhaps another 10 to 15 cents but too early to pinpoint any trades.

Stepping back from the excitement we note that even if shipments continue at 10% over last year over the remaining months of the 2015 season, handlers will still carry-out over 450 million lbs into next crop. We also remind that the Subjective Estimate has underestimated the crop 13 times in the last 20 attempts.

There are still almonds to be sold out there. An interesting, but unanswerable question is how much of the unsold is now in the hands of call pool sellers. Our opinion is that it is higher than usual. Although the 2.00 billion lb crop number will bolster confidence in the short-term, we do not expect that many sellers will be keen to hold excess inventory into the 2016 season. We anticipate that once prices have adjusted to the supportive news of the past days the market should find a more stable footing as sellers reemerge to finish off their campaigns.

Best regards,

Jonathan Meyer

CEO Treehouse California Almonds, LLC.

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