January 2024 Almond Market Update
January’s Position Report published Feb 9th shows that California almond handlers had another strong month of almond shipments. Net shipments set a January record with nearly 236 million pounds shipped during the month. This was a +2.7% increase over the previous record set last year.
Export markets again lead the way seeing a +6.1% increase YoY for January setting a record for January shipments with 173 million pounds. This is however a slower growth rate than we’ve seen over the past fourth months where YoY growth rates ranged between +12%-28%. Through the first half of the crop year, Export markets are up +12.2% on net.
Domestic markets saw a -5.4% contraction from the previous January, receiving almost 63 million pounds of almonds. The domestic market has seen variations in YoY growth rates through the first six months of the crop year, but has balanced itself with an effectively flat growth rate on net for the year of -0.57%.
Crop receipts have come ever so close to topping 2.4 billion pounds with reported weight less than 9 million pounds under this figure. It seems all but certain that those taking the over figure are going to win their office pools for a year of bragging rights; but, it’s not official just yet. Either way, receipts that do continue to trickle in are not going to move the needle in any significant way to impact the market. The 2.4 billion pound figure that the industry had been targeting has very much come to fruition.
As we have mentioned in previous reports, losses from insect damage have been the highest in recent memory and more than double historical averages. Rejects have topped 4%, which represents a -100 million pound reduction in available inventory. This should be considered when assessing the status of market supply as it will continue to suppress inventory and will impact the availability of certain specifications, especially high quality ones.
India has been an extraordinary bright spot. The largest export destination for California almonds has paced +25% growth through the first half of the crop year. India has now imported over +47.6 million more pounds than it had this time last year. In January, shipments were up +12.3% YoY, continuing strong growth for the subcontinent. Inquiries for additional shipments have continued to come in and we are forecasting continued strong growth figures for India as long as supplies are available.
China slowed in January compared to a year ago, but remains up on the crop year with a +6% growth rate on net. Kernel shipments have fueled this growth with a +25% growth rate on the year. Inshell, on the other hand, has seen a slight contraction, off -9.5% on the year. That said, inshell products had an especially slow start to the year and shipments over the past several months have actually been ahead of the previous year. This trend has continued in January and it is likely that Chinese importers will continue to close the gap with accelerated inshell shipments in the short term.
Elsewhere in Asia, Japan and South Korea have both posted solid growth figures thus far through the crop year. Japan is up +12% and South Korea is up +31. As the 9th and 11th largest export markets respectively, growth in these markets is meaningful and welcomed. Not to be overlooked in Asia, Vietnam has nearly doubled its importation of almonds from 10 million pounds a year ago to almost 20 million pounds this year.
As a region, Western Europe has seen +10% growth in the first half of the crop year increasing shipments to the region by +28.6 million pounds. The Netherlands has been a primary driver of growth with a +31% growth rate and has imported 55.4 million pounds of almonds to currently lay claim as the second largest market in the region. Germany has imported 55.2 million pounds and is itself growing at a rate of +4%. Spain still claims the top spot in the region topping 94 million pounds, but is off -3% on the crop year. Rounding out other top markets in the region, Italy is up +15%, the UK is up +43% and France is also up, growing at a pace of +22%.
Major markets in the Middle East have also seen growth this year. The UAE is up +20% and has imported almost 86 million pounds thus far. Turkey is up +10% and is closing in on 42 million pounds. As a region, the Middle East is up +7% from a year ago.
Morocco is effectively flat on the year with a -1% growth rate. Libya has seen significant growth to start the crop year, but shipments have slowed. Libya currently paces +112% on the crop year having imported over 10 million pounds, but it imported less than half of what it did in January than a year ago.
Do You Want to Build a Snowman?
California has experienced a generally active weather pattern mid-January thru early February with multiple atmospheric river events. These events brought significant rain to much of California’s primary almond growing regions and watersheds that feed reservoirs that supply summer irrigation. Weather stations within valley growing regions are consistently at or above 100% of normal for this time of year. However precipitation through early February represents about 60-75% of most of these location’s annual rainfall, illustrating that a significant portion of California’s rainy season has yet to come.
Snowpack in the Sierra Nevada, which supplies reservoirs with spring and summer run off, saw a boost with the latest rounds of wet weather in the state. Early season systems were characterized by warmer temperatures resulting in less accumulation of snow. Snowpack was just 50% just a month ago. After cooler and stronger systems, statewide averages have improved to 75% of normal. Northern mountains have fared best at 82% of normal, while the South lags at 69% as of February 8th.
California’s two largest reservoirs, Shasta and Oroville, both have lake levels significantly ahead of historical averages. Shasta is 125% of normal, while Oroville is 130%. With few exceptions, major reservoirs in California are at or ahead of their historical averages. This is a positive sign regarding summer water allocations. While final allotments have yet to be announced, there is little concern at this point about impactful water restrictions this summer.
Bloom and General Orchard Conditions
With high levels of insect infestation observed in the recently harvested crop, there has been renewed attention to orchard sanitation practices that have been proven to be successful in suppressing pests like Naval Orange Worm by eliminating their overwinter food and habitat. However prolonged below average return years have resulted in growers continuing to look for cost saving measures. The question we have been trying to answer is whether the additional 2% loss we’ve observed in crop receipts this year is a large enough reduction in potential revenue that it influence’s growers' calculus when assessing whether to undertake sufficient winter sanitation to reduce widespread risk of infestations.
What we have been observing is a mixed bag. Growers did appear to be jumping on sanitation practices directly following harvest. However, field reports have suggested that a full return to sufficient sanitation practices hasn't entirely materialized. While it appears by and large some work has been done, many orchards could still benefit from additional treatment. The vexing problem presented to those who began, but perhaps hasn’t finished sanitation, is whether any additional applications would actually be beneficial. Mature insects can travel significant distances and impact your field even when your field has been optimally cleaned. Abandoned orchards and those whose operations don’t have sufficient cash flows to support sanitation are likely widespread enough where additional work within marginal orchards wouldn't have a benefit. This means the industry is likely to face another tough pest year and could see additional impacts upon next year’s harvest.
Bloom is knocking on the door. Growers have already reported the first flew blooms on their early blooming varieties. California should see a calmer weather pattern to finish off the first half of February and the additional sunshine should help the blossoms continue to develop. Additional rain is likely during the mid part of the month, but days are lengthening and are going to gradually warm.
Hives have been staged throughout the winter months and are beginning to be put into place. The ample rain and relatively warm weather has helped develop cover crops where they were planted and are already providing forage to strengthen hives. During the next month bees will become active and undergo the largest pollination event of the year before being moved out of the state. We will be eagerly monitoring bloom progress and the weather, hopeful for a strong start of the growing season.
Where are we Headed?
Supply and demand have been coming back into balance and prices have generally been on an upward trajectory. We had put forth a hypothetical model in our last report to highlight this reality and to illustrate the very achievable demand scenarios the Industry would need to see to target a balanced carry forward by the end of the year. With another strong shipment period in January, market pressures are going to continue to apply upward pressures on prices.
Bloom will be critical in determining future market movement. The oversupply scenario the Industry has been dealing with for the past few cycles is still fresh in everyone’s mind and buyers have been buying hand to mouth with that in mind. We’ve seen significant swings in weather and growers know all too well the fickle, and unforgiving Mother Nature can be in California. What happens between now and bud-set will be something we will all watch with a critical eye to the future. Should expectations develop of large swings in future supply one way or another, we will likely see markets following accordingly.