July 2024 Almond Market Update

The July Position report marks the end of another crop year. Shipments for the month of July fell below 200 million pounds for the first time all year, totaling 179 million pounds. This ends the longest streak on record of shipments exceeding 200 million pounds. On the year, California handlers shipped nearly 2.7 billion pounds - a net YoY growth of +4.97%. The Domestic market grew +1.64% and export markets grew +6.26% YoY.

Handlers head into the transition just about 456 million pounds on hand after factoring in the full 4.23% serious damage rate the industry saw this year. This is -38% below last year. As a ratio of annual shipments, on hand inventory is 18.3%. Historically a 20% Stock-to-Use ratio has indicated balance between supply and demand. An 18.3% figure indicates modest supply side tightening.

July’s release of the Objective Forecast projects a harvest of 2.8 billion pounds. With the carry forward, California Handlers are expecting a total supply of 3.3 billion pounds. This is roughly +3.3% more than the total supply for the crop year just ending. This provides little, if any, room for shipment growth next year considering the Stock-to-Use ratio is already below 20%.

Harvest Has Begun

July brought very hot temperatures to most of California’s growing regions with many setting daily temperature records as well as records for consecutive days above 100 degrees Fahrenheit. Hot temperatures have helped hull split but have put added strain on trees. Orchards that had already been stressed or neglected due to years of returns below the cost have been hit especially hard this summer, but in many cases are still being prepped for harvest.

Growers, hullers/shellers and handlers have all been working diligently in preparation of harvest. Reports of early variety harvesting began coming in at the end of July with first loads arriving to hullers about a week earlier than last year. Growers looking ahead to mid season varieties are expecting a similar near-normal timing of harvest. As the harvest season kicks into full gear, we will keep an eye on kernel sizing and reports of damage and rejects.

Market Review

India ended the crop year having imported an astonishing +21% more than a year ago. Shipments to the subcontinent grew by +69 million pounds YoY, which by itself would rank inside the top 10 largest export markets for California almonds. India topped 400 million pounds for the year, ensuring its position as the largest single export market for California almonds.

July shipments were down YoY however. Several factors were likely conspiring to suppress shipments. First, large scale and wide spread shipping delays began in mid July at California ports. California handlers may also be facing supply constraints with a much smaller carryforward limiting what handlers could offer. Diwali falling on November 1st means that processors in India will be eager to replenish inventories as new crop hits handlers’ warehouses and India seems poised to once again be a primary growth market.

Western Europe ended the year growing at +3% YoY. The region’s top markets from a year ago lost ground however. The EU's largest to markets were off however. Spain was off -3% and Germany was off -7%. Particularly in Spain, but elsewhere in the EU as well, EU-based local almond production from Spain and Portugal is offsetting needs from California suppliers. So while shipment growth from California may seem stagnant or declining in some markets, consumption continues to rise.

The Netherlands saw significant growth this year, more than making up tonnage declines from Spain and Germany. Shipments grew by +23% fueled in large part by the country's robust processing capacity and ability to handle product with higher levels of serious damage - which were at elevated levels this year. Its growth propelled it past Germany becoming the second largest market in Western Europe.

Elsewhere in the EU, Italy also saw growth, adding an additional +4%. The UK grew by +24% to reclaim the 5th spot from France, which itself grew at a rate of +4%. The UK, no longer a member of the EU, doesn't benefit from EU production and has a free trade agreement with the US meaning its consumption needs are not likely to be offset by EU production like other countries in the region. On net, Western Europe imported over 601 million pounds and collectively represents the largest regional market for California almonds. It remains a robust and important market for California almonds.

China declined YoY by more than a quarter, losing -26% of its volume. Both kernels and inshell products saw dips, but inshell experienced the heaviest losses declining -34.3%. Vietnam grew +56%, and while it certainly functions as a value-added destination before getting re-exported, often to China, its growth cannot account for the full decline in shipments from California to China.

But declining shipments from California do not mean that China is consuming less almonds. While the local economy has sputtered as of late, we need to remember that time and time again we see food purchases remain resilient through economic turmoil. Food are the last purchases to be cut. The Chinese economy is not in such a poor spot where these types of cuts are impacting its consumers. More favorable trade conditions from other supply markets like Australia however, do mean that California handlers don't always have ample opportunities to be competitive shipping directly to China. As we move into September and October, other suppliers are likely to have limited stock making California a more attractive partner.

China remains an important market from a global perspective and their overall consumption will still impact worldwide supplies. In scenarios where California supplies may be tightening, they could end up being a large influencer in global almond markets.

The Middle East added more than 50+ million pounds in shipments during the crop year growing at a rate of +19%. This comes on the heels of an annual growth rate of +9% that the region saw the previous crop year. The UAE grew +31%, importing more than 158 million pounds as the third largest single export market behind India (400 million) and Spain (188 million). Turkey also surpassed 100 million pounds on the year and grew 29% YoY.

North Africa saw +16% growth on the year with Morocco, Libya and Algeria all posting respectable growth figures. Morocco lead the way growing +23% after importing nearly 78 million pounds. It also enjoys a free trade agreement with the us importing kernel almonds making California an attractive supplier. Algeria imported 17 million pounds growing +7% YoY, and Libya grew +15% after importing 12 million pounds. The North Africa region grew +56% a year ago and raised questions about the sustainability of such significant growth. Now there is optimism that the region can continue to grow and build off of its success.

Of the 11 export markets that exceeded 50 million pounds of imports, seven saw YoY growth, while 4 saw YoY declines. On net, these 11 markets grew at an annual rate of +3%. However, if you exclude India, the remaining markets would have actually declined -2% on net. This, combined with the stagnation of the domestic markets, highlights a mixed outlook for consumption growth within the established markets for California almonds. This isn’t necessarily new, and handlers have long been working to cultivate emerging markets. They will need to continue to do so to sustain future growth. And with its population and growing economy, India remains poised to lead the way as a growth market. Globally, we’re projecting modest growth pressures to continue into the new crop year.

Domestic buyers secured 728 million pounds of almonds on the crop year. This is a +1.63% growth YoY, but remains below the peak set in 20/21 where shipments topped 808 million pounds. Last year aside, this was the smallest shipment figure since the 2016/17 crop. The domestic market however remains the largest destination for California almonds accounting for 27% of all shipments.

The Big Picture

As is usually the case, the industry will be looking for signs of what the eventual yield will be as harvest continues. With a tighter transition and total supply forecasted just +3% above last year, any indicator that yield is coming in lower than expected would have a strong influence on the market. Even a year without shipment growth would put enough pressure on supply to buoy prices.

Stronger yields would help ease concerns of an over-tight supply scenario, but with growth conditions existing in global markets, a particularly large swing in yields would be warranted to dampen prices. In the short term, India will be looking for immediate volume to cover Diwali. This will keep handlers busy and limit capacity for additional prompt shipments. This may not immediately impact prices in a significant manner but certainly puts a lot of risk on buyers looking for shipments beyond fall, especially if harvest comes in under expectations.

On the demand side, California is facing a few wild cards. A shipping delay began about July 20th, with bookings getting rolled and vessel departures delayed. Logistical bottlenecks reduce shipment capacity in the short term. The industry widely expected a shipment figure over 200 million pounds in July and attribute falling short of this figure to issues shipping product. That isn't always how global markets see it, but a continued bottleneck doesn't help anyone.

India has also done a good job buying ahead of the transition and local markets are relatively flush at the moment. Having purchased at lower prices, the local market remains an attractive source for prompt shipments through transition. This has suppressed the premium generally observed in inshell markets by as much as $0.10 on a kernel meat basis as opportunistic buyers take the advantage locally. This has eased the demand pressure for prompt shipments from California, at least for the short term. Diwali will demand that India markets resupply in short order as local supplies are not so ample as to carry its industry through the whole of the festive season. This may ease pressure on the most immediate shipments, but early season demand as we move into the fall is likely to rebound in a significant way.

Globally almonds continue to retain their attractive position as a nutrient rich food. Even as prices has come off of recent bottoms, almonds remain not just historically cheap, but cheap compared to possible alternatives including cashews, walnuts and pistachios. This keeps almonds especially well positioned as an attractive ingredient, even should commodity prices rise. And for the grower to remain viable and long term health of the industry, they will need to. The right supply and demand balance may finally be conspiring to ease some of that pressure.

As a final note, La Nina has been forecast to develop in the Pacific this fall. This phenomenon is characterized by cooler surface ocean temperatures which reduces humidity and generally results in drier conditions for much of California. While reservoirs are still in good shape after two above average rainfall years, water regulators have continued to take a cautious approach and should even a mild drought year materialize, California growers are likely to face increased costs if not outright shortages. This is yet a long ways off and however the markets may change, we’ll try and keep you informed.