October 2022 Almond Market Report
The October Position Report published by the Almond Board of California showed the Industry shipped over 214 million pounds of almonds in October. This was off a modest -1.1% over last October and an increase of +13.9% over September shipment numbers. Through the first three months of the crop year, the Industry is down -3.19% in total shipments. Export markets are off -1.69% on the crop year and domestic shipments have slipped -6.7%.
Total commitments are off -7.1% for the year, while new commitments booked in October effectively matched the rate from a year ago. Total supply remains buoyed by the large carry forward and exceeds last year by +3.98%
The Position Report shows receipts of 1,656,928,108. This is -7.65% below last year’s figure at this time. This equates to over 678 million pounds being processed in October, which is -6.7% less YoY. This also represents the smallest October receipt figure since at least the 2017/18 crop year. We’d go back further, but with the assumption that hulling capacity would have measurably increased since then, the point that receipts are significantly off for October should already be apparent. October should be full capacity for hullers with fields harvested and plenty of stock piles to work with. The reality that we’re so much below historical averages could be a sign of a shorter than expected crop.
That said we can run some simple projections to gauge possible yield scenarios. If the industry processes the same amount it did between now and the end of the year, crop size would top 2.78 billion. This doesn’t seem particularly likely, so instead, if the Industry was the same percentage received as it was last year, yield would fall just below 2.70 billion pounds.
Both of these hypotheticals are likely over statements at this point. With the North seeing unprecedented reductions in yield due to frost, many hullers and shellers in the region have wrapped up their seasons early and had never run at full capacity. This could in part count for October’s low receipt figure. While the North is a relatively small portion of the total supply, it is still significant. We ran a projection in last month’s Market Report based of regional assumptions and came to a 2.55 billion crop. This is within the ballpark of the 2.6 billion Objective Forecast. This author however, is taking the under on 2.6.
Long-term supply projections also need to be evaluated as we look forward into the mid-term health and trajectory of the market. We are absolutely in an oversupply scenario in the present. This perception is also fueled by a demand cycle that has seasonally shifted due to the past logistical realities of Covid. We’ve been talking about this frequently, but went into detail in our Last Report where we helped contextualize why the industry isn’t seeing, nor should it have expected, its historical demand peak in the fall. Pair that with the abundant carry forward and there are a lot of almonds on the market. But what lays ahead?
We believe we as an industry in California have hit peak production. This is a view contrary to the Almond Board which believes the Industry will see slowing growth, but grow overall capacity to 3.2 – 3.8 billion pound by 2030. To meet this supply growth additional acres will need to be put into production at a pace exceeding orchard removals. We don’t see this happening.
Growers are facing significant head winds. The least of which is higher production costs in the face of historically low commodity prices. But growers are also resilient and have experienced the cycles of boom and bust before. What is most likely to quell the rate of orchard plantings is simply water, or the lack thereof.
Drought cycles are not new either to California almond growers. It is true that we are in an excessively dry period and surface water supply has been stressed to unprecedented levels, but there is always the hope for a wet winter. However, it is also true that the region has grown drier over the past twenty years and the expectation is that this trend continues. Enter SGMA, the regulatory drought.
Simply put, SGMA has demanded that local water district develop plans for reduced water use and begun regulating the use of ground water. New wells have been effectively stopped and ground water availability is being impacted significantly across the state, but especially in the drier south. The reality we see is one where the locations where new orchards can even exist has become particularly constricted. And this says nothing about orchards already planted in areas where water availability is becoming harder and more expensive to come by. We will be seeing accelerated orchard removals and fallowing in the years to come as well. How we as an industry can continue to grow our supply, even in the short term, is a question we can’t reasonably answer.
India exceeded last October’s shipments by +11.4% YoY, but remains off -27% on the crop year. This is likely influenced by the early Diwali season. Stronger shipment numbers in October reflect our Sales Teams’ observation of significant demand coming from the market. With the depletion of float loads on the water that went ahead of Diwali, our expectation is that India will be an active participant in markets.
China continues to lose ground YoY moving from a -7% pace in September to -14% in October. The slowing has occurred exclusively in the inshell market however with kernel shipments up +9.1% on the year.
The Middle East has been active to start the crop year, but October saw some cooling of growth in this region. The UAE and Turkey, the two largest markets in the region, were both off YoY in October. That said, Saudi Arabia and Jordan, who round out the top 4 markets, did see growth. We continue to remain optimistic on the growth outlooks in these markets, but would expect more normalized growth patterns in the future.
Morocco imported over 3 million pounds in October. Through the first three months of the crop year, this market is up +416% having imported over 13.6 million pounds on the year. Growth here seems to be real, but questions regarding the sustainability of this growth remain.
Prices will remain suppressed as handlers work through the carry forward and buyers leverage the over-supply scenario. There are two potential levers we are watching that could lift prices. A short crop, one significantly under the forecast of 2.6 billion, would bring some pressure to the market. New commitments have been on pace so we know demand is present, but total commitments are down suggesting many buyers could still be bearish on the market and waiting to enter the market. With total supply not even +4% over last year at this time, supply constrictions could begin to materialize with a short crop, especially if a significant portion of buyers aren't covered.
The bloom in Feb/March is also going to be a key point for prices. If drought persists we could see accelerated orchard removals, or continued drought stress. Add in the potential of inclement bloom weather and prices could change on a dime. Of course a wet winter and great bloom could ease some of these pressures.
There are certainly headwinds on the demand side of the equation with global inflation and recession fears and ongoing conflict on the European continent. The shift in seasonal buying patters we’ve been tracking could also continue to shift and influence when peak demand materializes. This could work to imbalance supply and demand influencing prices accordingly. Nothing is certain however, and we’ll continue to track and help put our markets into perspective.