December 2023 Almond Market Report
December’s Position Report shows strong shipment figures with net shipment exceeding 229 million pounds up +11.2% YoY for the month of December. Both Domestic and Export markets exceeded their marks from a year ago, with Domestic shipments seeing growth of +8.0%, and Exports up +12.2%. Total shipments through 5 months of the crop year are up +9.9%.
Newly contracted shipments in December effectively held pace with actual shipments with handlers reporting just over 219 million pounds of new commitments. Committed shipments stand at 637 million pounds, -11.4% below this time last year. With the accelerated shipping rate however, uncommitted inventory is currently -14.4% below last year.
Handlers processed almost 361 million pounds of crop receipts in December. This is up +59.5% compared to the 226 million pounds the industry added in December 2022 and reflects the lingering effects of a late start to harvest. The Industry has now harvested 2.2 billion pounds on the crop year.
As a percentage of the eventual harvest, this time last year handlers had processed 92.4% of their crop. If we assume the same this year, yield would total 2.4 billion pounds. This is nearly -8% below the July Objective Forecast of 2.6 billion pounds. One could certainly speculate whether the industry would actually hit a 2.4 pound harvest. Field reports suggest stockpiles that remain are fewer and smaller than a year ago with the majority of processors completing their yearly work. 2.35 seems more realistic, but perhaps we're splitting hairs at this point. One thing that is clear however is that the industry has experienced significant impacts from pest and weather damage and rejects are running twice their historical pace of 2% and currently top 4% overall. Nonpareil is even worse at a reject rate of 4.7%. This will further reduce available supplies regardless of where the eventual crop yield falls.
Let’s assume then a 2.4 billion pound harvest with 4% loss. That yields 2.3 billion in available inventory. Add in the 800 million pound carry forward, the industry would be looking at roughly 3.1 billion pounds in marketable supply by the end of the year. This compares to a 3.35 billion pound figure a year ago, representing a -7.5% YoY decline in total inventory.
Taking this a step further, if we project forward a shipment pace where the summer carry forward fell to 600 million pounds, which would be a signal of a particularly healthy supply and demand balance, we would then assume that the industry would need to ship 2.5 billion pounds this year (3.1 billion marketable - .6 billion carry forward). The Industry has already shipped over 1.1 billion pounds, meaning in the next 7 months, handlers would be looking to move less than 1.4 billion pounds. That’s an average of 200 million pounds a month.
So what have historical shipment figures looked like Jan - July? Each of the past three years shipment figures have exceeded 1.5 billion pounds in total through this time period averaging 1.57 billion pounds. We have been highlighting shipment trends suggesting a return to historical demand trends, so a comparison better aligned with those trends may be the 19/20 crop year. That year the industry topped 1.32 billion pounds.
All of this is to highlight the reality that supply and demand are coming back into balance in a significant way. If the growth in demand that we are currently experiencing continues, the likelihood of an imbalance reverse of what the industry has seen the past few years increases.
So, Where do we See Demand?
India continues to lead growth markets topping 38.5 million pounds in imports in December. This is +15.8% YoY. India has now imported +43.3 million pounds (+28%) more almonds through the first five months of the crop year than it did a year ago. This is despite a slow start to the year with importers having to wait due to the late harvest.
Chinese buyers imported 4.5 times more almonds in December than it did a year ago. While the pace was half that from November, China imported more than 9.3 million pounds in December and moved into positive territory for the crop year as it has now imported +8% more almonds than a year ago at this time. Inshell shipments are off about -5%, while kernel shipments are up +8.1%
Vietnam continues to experience a resurgence with the country importing nearly 3.7 million pounds in December versus just 900 million pounds a year ago. Vietnam is currently up +120% on the crop year.
Western Europe continues to surpass its recent trend of import growth with December figures +6.4% YoY. The region is +12% ahead of where it was a year ago through the first 5 months of the crop year. The region’s largest market, Spain, saw modest growth YoY in December and is now essentially flat on the crop year at -1%. Germany continues as the 2nd largest market in the region and boasts a +6% growth rate on the crop year, but the Netherlands is up +28% on the crop year and is less than -1.5 million pounds behind Germany for the #2 position. Italy with 36 million pounds imported on the crop year is enjoying a +22% growth rate on the year. The UK, with a +38% growth rate has reasserted itself as the 5th largest market, reclaiming the position from France that itself is growing at a rate of +16%.
As a region, the Middle East has experienced a modest growth rate of +7% through the first five months of the crop year. Its top three markets of the UAE (+12%), Turkey (+20%), and Saudi Arabia (+4%) each have seen growth this year. Jordan, which had imported over 10 million pounds at this time last year, hasn’t topped 4 million pounds and is off -61%.
In Africa, Morocco has rebounded after a slow start to the season. After a year of stellar growth, there had been some concern regarding the sustainability of their import rate, but after importing 5.7 million pounds in December, which was +2 million more than a year ago, Morocco is again pacing growth for the year at +3%. Elsewhere in the region, Algeria continues to grow and, while Libya imported less in December than it did a year ago, it has become the region’s second largest market.
Winter Means Water For California
The rainy season for California continues to be drier than it was a year ago. Considering how historic last season was, this isn’t necessarily a bad thing. It has however left much of California, including most areas within California’s almond growing regions, below average for this time of year. Precipitation has however found its way to the state and additional storms are in the forecast. While below average, no one is sounding alarms as of yet, but we should certainly keep an eye on how the rest of the season plays out.
California snowpack, which feeds its reservoirs, and is the primary water source for the state, currently stands at 42% of normal as of Jan 11th 2024. The Northern region (48%) is looking better than the South (31%). Reservoirs however continue to remain well stocked as most are at or above their historical averages for this time of year enjoying a residual boost from last year’s record precipitation and snowfall totals. Even if California experiences a below average rainfall year, its reservoirs are likely to remain in relatively good standing. That said, water regulators are going to be quick to remember the years of historic drought and may yet implement reduced water allocations if the water year doesn’t return to a wetter pattern.
To align with pre-Covid era buying cycles, shipments would need to soften a bit but remain close to the 200 million pound mark. This was at least the case in 19/20 before buying trends diverged with the impacts of Covid. This would be below last year's record shipment figures, but are much more plausible for the current market situation.
Demand has been strong out of export markets with India, China and the EU all showing growth for the year. Sentiment from our buying team suggests that despite the strong shipment figures so far this year, most markets have less inventory on hand than they did a year ago forcing buyers to source from California handlers rather than work through on-hand inventory for prompt shipments and replenishing supply lines.
Domestic markets have shown some fluctuations but have averaged flat through the first 5 months of the crop year. This is encouraging considering the softening we had seen in this market over the past two years. stability in demand is a positive sign for handlers, particularly considering the growth we’re seeing in export markets.
Buying is likely to continue on a hand to mouth basis. Handlers will be cautious of overextending with supply concerns regarding rejects and yield below the forecast. This will likely continue to nudge prices upward in general with large movements occurring where quality concerns and shortages begin to come into focus. The bloom in February is just over a month away and many on both the buying and selling side will be watching to see how the event shapes up. A stellar or lackluster event could swing the supply and demand narrative one way or another.