June Almond Market Report

The June Position Report shows that California handlers shipped 186.7 million pounds in June. This was down -9.4% on net from a year ago. Domestic shipments were off -17.2% YoY in June and export shipments were off -6.1%. Through 11 months, total shipments lag -2.5% behind last year, with domestic shipments off -7.96% and export shipments off just -0.5%.

California handlers have just over 711 million pounds of almonds on hand. This inventory level is +3.95% above a year ago. The industry continues to target a carry forward in the 500-550 million pound range, which remains well within a balanced supply scenario as we enter the summer transition.

Total Commitments trail levels from a year ago by nearly -10%; however this figure does not account for future crop commitments which are off -58.9% YoY. Taken together, total contracted shipments currently on the book are off -31.5% versus last year at this time. In June, across current and future crops, handlers added just 142.5 million pounds of new contracts.

Objective Forecast

The USDA also released its annual Objective Forecast. This forecast involves significant physical sampling within orchards across the state to support a statistical model to forecast future yields. The report estimates a crop size of 3.0 billion pounds, which is +7% higher than the Subjective Forecast released in May and would result in a +10% increase in yield over the previous crop. The report explains that it is forecasting the increase in crop yield to be primarily driven by the number of nuts set per tree as acreage grew by just +0.7% and kernel weight across all varieties is projected to fall -0.6%.

Export Market Review

India imported +28.9% more almonds in June than it did a year ago continuing the accelerated pace of buying that has been present since March. At the end of February, India was down -16% on the crop year. In December they were off -21%. As of the end of June, India is behind its pace from a year ago by just -1%.

Western Europe was slightly ahead of its import pace in June from a year ago, but on the crop year EU imports remain flat YoY. Italy has experienced accelerated importing of almonds this spring. Since February, Italy has improved from a +4% pace on the crop year to +17%. The UK has also had a strong spring. In January, it was off -18% on the crop year and had been passed by France as the fifth largest importer for the year. In June, the UK now enjoys a +2% growth rate and has reclaimed its place ahead of France. Germany is another market where spring imports have outpaced volumes seen a year ago, but Germany remains off -12% on the crop year.

The UAE, Turkey, and Saudi Arabia all imported fewer pounds in June than a year ago by significant margins. The regional growth rate for the crop year fell from +12% in May to +7% in June after imports to the region dropped -35% in June. Escalating military tensions could certainly be a factor in the slowing pace of imports. Shipments to the UAE require traversing the Strait of Hormuz which has come under additional threat and shipping into Saudi Arabia isn’t without military risk either. However tensions and threats in the region aren’t entirely new and shipments may also be constrained by availability of preferred specifications as the industry heads into the transition.

Morocco has experienced a significant slow down this spring. In January, the North African country was enjoying a +18% growth rate on the crop year. As of June, that growth had fallen to decline and Morocco now paces -22% on the crop year. The slow down has been so pronounced that shipments on the crop year have now fallen below their levels from two years ago, erasing the gains seen last year.

Domestic Market

Domestic shipments are off nearly -8%. Volume shipped within the US will certainly end the year as the smallest volume seen in 7 years, if not longer. Domestic shipments have historically seen annual growth with the industry seeing just three instances where annual shipment volumes fell YoY since the 1997/98 crop year. The current -7.96% rate is certainly unusual from that perspective and would certainly be the latest annual decline in that time span.

As it stands, domestic buyers have purchased nearly -54 million pounds fewer almonds on the crop year than a year ago. This is on par with the combined volumes of the UK and France, or eliminating all shipments to Canada. In short, it's a meaningful decline.

The domestic market is undoubtedly facing headwinds. We outlined some of these in our May Market Report; but, we also noted the favorable position that almonds enjoy as an ingredient. While producers may be undertaking some rebalance of their offerings, almonds retain a strong value proposition to both consumers and producers alike and should remain an in demand ingredient.

Market Conditions

A 3.0 billion pound Objective Forecast and the expectations of an ‘on time’ harvest should bring some pressure to handlers to bring some product to market. Some supply side pressure will remain through the transition however with the Industry targeting a balanced 500-550 million pound carry forward. At this level handlers simply can’t ship much in excess of 200 million pounds within a month. But an expected on time harvest means handlers won’t have to be as fearful of over committing existing inventories for near-term shipment. This could help soften prices in the short term. Whether sustained price softening should be expected is a different matter altogether.

Commitment levels remain significantly below historical ranges for this time of year, particularly commitments for future crop. This has been a result of a bit of cat and mouse game between handlers and buyers with handlers electing to play it safe through the transition and while perhaps holding on to an expectation that the Objective Forecast would continue to add pressure on the supply side. A 3.0 billion pound forecast will certainly dispel concerns of a light crop and quiet some of the supply concerns. But any prolonged softening on prices will also be influenced by demand. The lack of commitments suggests that buyers still have a lot of volume to cover. Demand from export markets has remained strong in the face of rising prices and has helped easy some of the shipment weakness within the US domestic market. There is little reason to believe that demand in the export markets will not continue to remain strong and any rebound within the domestic market could quickly accelerate demand-side pressures.

It should also be noted that a forecast is still a predictive instrument and we will not truly understand what the upcoming crop has in store until it comes in from the field. For now though the forecast has brought some supply-side relief. How long this relief may last will depend on whether accelerated demand materializes and what harvest may yet bring.