California shipped 152.0 million lbs of almonds in April, down 9.3% from shipments of 167.6 million lbs in April a year ago. Nearly 12 million lbs of the shortfall can be attributed to lower inshell shipments to China (include Vietnam in here) and India. Another 6 million lbs of the gap is accounted for in the Middle East, primarily Turkey. Domestic shipments were just about even (50.8 million versus 51.0 million a year ago). Other major destinations pulled well.

Least one month dampens enthusiasm for what has been a remarkable year of consumption growth, we note that year-to-date shipments are still running well ahead (21.1%) of last year’s levels. Also we remind that last year shipments in April through June were unusually strong as pricing hit a bottom March and empty channels sucked in cheap almonds. Indeed we might even point to the lower inshell shipments are mostly due to lack of supply and not function of lower demand.

Commitments were reported at 410.0 million lbs. The change in commitments from last month suggest new sales of 121.9 million lbs. California is in a comfortable position – about 2% more sold and shipped compared to the end of April last year.

2016 crop receipts were only minimally higher – dribbling in 1.1 million lbs in April to total 2132.1 million lbs. We may be hard pressed to reach the NASS mentioned number of 2.14 billion, but we are not here to quibble about 5 million lbs or so. More importantly we note again yesterday’s NASS Subjective forecast of 2200 million lbs on 1 million bearing acres for the 2017 crop – coming in at the bottom end of expectations.

In the run-up to the Subjective forecast, the April 26th bearing acreage report (revised upwardly by 40,000 acres for 2016 then adding another 60,000 acres for 2017 to total 1 million acres) weighed on sentiment. We saw prices drift lower ahead of the acreage number and then bids drop another few cents as traders tried to encourage a few bites. Current crop standards, which had spent most of April a little above $2.30 per lb were seen closer to $2.25 over the past couple weeks. Premiums for Cals and Carmels were in a tight range, with business being done between $2.30 and $2.45 per lb. Nonpareils are an odd one. We are seeing traders dropping their interest levels with NP 23/25 bids at close to $3.10 per lb, while packers do not appear to be following and offers are in the $3.15 to $3.25 range. Current crop inshell appears to be tight supply, with current crop NPIS offered over the past two weeks in the $2.30 to $2.40 range and small premium for whatever Sonoras might be left. New crop levels are being bandied about at a 10 cents discount to current crop, but apparently with spotty support.

All in all it has been a wait and see few weeks as the potential for a larger Subjective number put buyers on the sidelines. The 2200 million lb forecast comes as a relief to sellers, but will still be viewed with some skepticism by buyers. For us it is a reasonable number to work with and the projection of slightly lower yields than last year reflects what we are seeing in our orchards.

Indeed if the 2200 million lbs is close to actual there is only room for shipment growth of 2.8% (with no change in carry-out/carry-in). This is not enough supply to support shipment momentum that will likely end the season at around 15% or more above last year’s levels. Almonds continue to be the value tree nut and are at historically cheap prices. Season-to-date shipments to important markets, including price sensitive destinations, are running well ahead of last year (USA 14%, China 21%, India 42%, Western Europe 11%). Essentially all of the 2016 crop has been sold at an average of today’s current levels (a simple average for standard 5 pricing for the entire 2016 sales campaign is just over $2.30 per lb).

While not out of the question, downside price risk is seen as limited. We anticipate that rational players on both sides will emerge to hedge their bets. While there is a risk that the crop could be bigger than 2200 million lbs, there is an almost certainty that a 2200 million lb 2017 crop will not suffice at current price levels.

Jonathan Meyer
CEO- Treehouse Almonds

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