Treehouse Almond Market Update – November 11th, 2022

Not too many surprises in this position report.

There was a wide range of expectations for the shipment number as some handlers were well short of last October numbers, while others were flat to positive.    At 214.6 million lbs, total October shipments came in slightly lower (1.1%) versus October a year ago.  Last October, however, was not a strong showing.  Cumulative shipments for the first three months of the season are now down 3.2% versus last season.

Domestic shipments of 65.6 million lbs are slightly ahead (0.6%) of last October, the first time we have seen a positive month-on-month since March.  Domestic shipments for the first 3 months of the season are now running 6.7% behind.   This is not just short-term weakness, shipments for the first 10 months of the calendar year (Jan – Oct) are running 7.4% behind the comparable 10 months a year ago, reflecting lower consumption in the domestic market.

Export shipments at 149.6 million lbs are slightly lower (1.9%) than October a year ago.   Struggling against a strong dollar, season-to-date export shipments are down 1.7%.  Some callouts:

• India — 32.5 million lbs (up 11%).  Close to expectations for October.  Season-to-date down 27%.
• China — 25.5 million lbs (down 21%).  Disappointing for a critical shipment month to supply New Year demand, but not unexpected given continued lock-downs and uncertainty.   Season-to-date shipments to China down 14%.
• Japan and South Korea – both down again in October and season-to-date numbers are miserable in these key quality driven markets, with Japan down 24% and South Korea down 45% for the first three months of the season.
• Western Europe – strong imports to manufacturing hubs Spain and German, but overall a small decline (down 1%) versus last October.   The Spanish crop is forecast to be sharply lower (down 27%) at 150 million lbs, encouraging Spanish buying from California.   Western Europe is up slightly (1%) season-to-date.
• Middle East – October shipments relatively steady (down 3%) after strong gains in August and September.   Buying for Ramadan is healthy.  Currency issues are negated in the UAE where the dirham is pegged to the dollar.   However, even Turkish imports have been strong, where the lira has been devastated compared to a year ago.   Season-to-date shipments to the Middle East are up 34%.

Commitments at the end of October were reported at total of 694.8 million lbs, off 7.1% versus commitments of 747.9 million lbs at the same time a year ago.   New sales for the month can be calculated at 243.5 million lbs (57.1 million lbs domestic and 186.4 million lbs export).   This is decent performance, but not quite what handlers might have hoped given the unsold position.  As a percentage of total supply (which today we would pencil at close to 3,400 million lbs, with a crop of 2,600 million lbs) the industry is now sitting at 39% sold and shipped.   Over the past 7 years this number has ranged between 39% and 51%.   The last time we saw 39% sold and shipped was back in October 2015.   How the industry arrived there was a different set of circumstances (drought, crop concerns, high and rising prices and reluctance to sell), but we remember well the selling pressure in the second half of that infamous season.   This time around we are on the other end of the pendulum swing; low prices, lack of demand and oversupply.  Nevertheless, the unsold position is similar, and we can expect the market to continue to struggle under the seller’s weight.

End October crop receipts from hullers were reported at 1,657 million lbs, down 7.7% compared to receipts of 1,794 million lbs last season.   Running the numbers, puts the October receipt total at 678 million lbs.   This is perhaps a little clue to the crop as we have seen October run consistently higher the past three seasons (725 million, 758 million and 751 million, respectively), but there is not enough here to hang a hat on at this stage.   We continue to pencil the crop in at 2,600 million lbs, in line with the Objective forecast.

Since our last comment a month ago after the September position report we have seen the market struggle for the most part.   New crop standards which were a little above $1.60 per lb FAS California a month ago, eroded after the disappointing September report with prices at the end of October trading closer to $1.50 per lb.    A dip in the dollar in late October and extended over the past week sparked export buyer interest, with standards recovering to about $1.53 to $1.55 per lb most recently.   Better grade kernels and nonpareil followed suit.   Nonpareil inshell, which got severely beaten up for most October, with prices falling to around $1.40 per lb FAS, enjoyed a better bounce as Indian buyers looking for stabilization were encouraged by signs of seller resistance and came in to buy modestly.

Both buyers and sellers are looking for signs of confidence.   Buyers that have not booked want to be sure that further drops are not around the corner.   Sellers are painfully aware that current levels will not sustain almond growing in California and are reluctant to put too much volume on the books at these levels.

Shipments are needed to pull California out of the current oversupply.  Demand has stumbled at an inopportune time for the California almond industry as they grapple with large back to back crops in 2020 and 2021.

As we look for clues in this report as to whether we can expect from shipments over the next few months we are neither inspired nor disappointed.   October shipments were okay, but not strong enough given the supply.  New sales were decent, but the committed number is not signaling strong increased shipments soon.  Talk that significant shipments over the past months were unsold lingers (a discounted spot market in Europe lends support).   Difficult to quantify, but unsold and unshipped old crop also reduces confidence.  Until the market sees a sign that stronger shipments are on the horizon, buyers are likely to continue patient.

Position Report – October 2022