Almond Market Update 13.09.24

The harvest is well underway, and the August Position Report shows that it started earlier this year compared to last year, with crop receipts up 313% year-on-year. Due to last year's late start, the 290 million pounds received in August is more comparable to totals from the 2020-21 and 2021-22 crop years, which saw 312 million pounds and 264 million pounds, respectively.

The final adjusted carryforward reached 502 million pounds, down 37.19% from last year. Despite the earlier harvest, the total supply is currently 9.44% lower year-over-year, and the total Computed  Inventory has dropped 5.84%. Based on the Objective Forecast of a 2.8 billion-pound crop, the total annual supply is projected to approach 3.25 billion pounds, accounting for a 2% loss and exempt rate. This would be just 1.5% higher than the supply available a year ago.

August shipments declined by 20.63% year-over-year. Domestic shipments rose 1%, but export shipments dropped by 29.5%. Total commitments also fell 2.30% year-over-year, with new commitments in August down 14.8% from last year. Uncommitted inventory stands at only 11 million pounds, a 68.44% decrease, but with the harvest just beginning, much more is expected to come in.

Harvest Conditions

Weather conditions have been nearly ideal during the early stages of harvest. Temperatures across much of the growing region have been at or above normal, accompanied by generally low humidity. This has supported the continued maturation of almonds and provided optimal conditions for drying. In California, weather typically remains dry throughout the harvest season, with any precipitation being light and short-lived. With the earlier start to harvest this year, weather is expected to have less impact moving forward.

Initial feedback from hullers indicates that kernel sizes are slightly below average. Concerns about widespread insect damage and other significant issues are easing, though with most of the harvest still ahead, there remains some worry that pest damage could still pose a problem.

Market Overview

Importers in India remained active in August as preparations for Diwali ramped up. Shipments to India increased by 24% year-over-year, nearing 28 million pounds. This uptick was anticipated following July's drop, which was caused by logistical challenges and limited supplies. While local markets are generally well-stocked, there is less urgency to buy ahead of Diwali compared to previous years. However, current inventories are not expected to meet festival demand, meaning buyers will still need to remain active in the market.

In contrast, every market in Western Europe saw lower imports in August compared to the previous year. The region's volume was down 39%, with major markets like Spain and Germany seeing declines of 44% and 56%, respectively. The Netherlands was a relatively bright spot, with imports down only 4%. While these numbers are notable, they may not be as concerning in isolation. It appears that Western Europe had sufficient inventory in supply chains to meet immediate needs. Additionally, uncertainty over crop size and a tighter transition may have led sellers to be less active, causing EU buyers to take a cautious, wait-and-see approach. September's market engagement in the region will be closely monitored.

In Northeast Asia, China, Japan, and South Korea all saw a year-over-year decline in imports. China’s imports dropped 73%, with just 1.7 million pounds compared to 6.2 million pounds a year ago. Japan and South Korea also saw declines of 22%. These reductions may be tied to the availability of preferred specifications, with shipments to Japan and South Korea often fluctuating based on the carryforward inventory. California handlers may not have processed enough of the new crop to meet these markets' needs yet, given the reduced carryforward. A modest rebound is expected in September.

Vietnam emerged as a bright spot, continuing its growth as a value-added market. Imports surged by 71%, reaching 3.8 million pounds in August.

In the Middle East, shipments were down 41%, with the UAE seeing a sharp 59% drop. This decline may be due to limited availability of preferred specifications, as well as buyer caution as the harvest begins. Historically, the region has shown strong demand, so a recovery in shipments is anticipated in September.

Adding Context

The lighter shipment numbers in July and August might have some predicting a return of bearish trends. However, smaller shipment figures shouldn’t be overemphasized, as they only reflect one side of the supply-demand equation.

With a 500 million-pound carryforward and nearly 2.7 billion pounds in shipments last year, the stock-to-use ratio stands at 18.5%. Recent oversupply has made it easy to overlook what a balanced market looks like when the carryforward is below 20%. In this scenario, handlers don’t have the same flexibility to meet customers' preferred specifications. Many may be cautious about accepting prompt orders, especially with harvest still in progress. Keep in mind that received tonnage doesn’t mean it's ready to ship—it needs to be processed and accumulated in sufficient volumes first. Currently, there isn’t enough available inventory to expect much higher shipment figures.

It’s also important to note that the final crop size remains uncertain, with some concerns that yields may be lighter than expected. Combined with lower inventory levels, sellers are taking a more conservative approach to their offerings, as seen in the modest commitment numbers added in August. As harvest progresses and inventories are replenished, handlers will have more flexibility and capacity to meet demand fully.

Some markets have been able to afford patience due to ample inventories in their supply chains, while others may have been waiting for early harvest reports before making moves. However, markets are far from saturated, and initial reports haven’t significantly altered yield expectations. Despite the recent oversupply, steady consumption growth continues, and handlers are adjusting to a new reality where they are more selective in their business, focusing on quality over sheer volume. With prices firming up, there is little doubt that demand remains strong.

via Select Harvest USA