November 2024 Almond Market Update

Per the November Position Report, California almond handlers shipped over 271 million pounds in November. This is up +13.9% YoY and was the largest monthly volume since March 2022. On net, shipments are roughly even through the first four months of the crop year off just -0.4%. November shipment growth was fueled by export markets which saw a YoY increase of +21.9% in November. Export shipments through the first four months of the crop year are also effectively flat compared to a year ago off -0.28%. Domestic shipments were down YoY in November by -9.8% but are off just -0.75% on the crop year.

California handlers have now received over 2.3 billion pounds of almonds. This is a +25.44% increase from a year ago, but less than the +38.3% pace we saw in October. Total computed inventory stands at nearly 1.9 billion pounds which is ahead of a year ago by +10.01%. A month ago this figure was ahead YoY by +16.77%. This is in line with a pattern of early harvest we had previously noted.

New commitments in November topped 209 million pounds. This volume was in line with historical average for November, though commitment levels are now -5.5% behind where they were a year ago. Uncommitted inventory levels are now +19.42% ahead of last year, though down from +32.36% a month ago.

Market Recap

China continues to import less almonds from California handlers than it did a year ago. On net, China is down -42% on the crop year. Declines have been seen in both inshell and kernel varieties. The incoming administration in the US is unlikely to usher in a political environment conducive to more positive trade relations, and China has been looking to other means to acquire its almonds. Strategies have included procuring almonds from growing sources like Australia and relying more on value-add intermediaries in SE Asian. Vietnam has been the primary beneficiary up +63% on the year having imported more than 23 million pounds so far on the crop year, but others in the region, including Thailand, Indonesia and Malaysia are all seeing significant growth on the year.

Through the first four months of the crop year, India has imported -23% less almonds than it did a year ago. This amounts to a decline of nearly -37.5 million pounds. To put that in perspective, 37.5 million pounds is more in volume than all but four countries have imported so far this year. If these pounds were to have been imported, net export shipments would have grown +3.7% through the first four months of the crop year instead of the -0.4% rate currently seen. All that is to say, that the volume that India is off is quite significant. However, all indicators from the ground suggest that consumption itself hasn’t slowed. As we had noted last month, Australia has benefited from advantageous trade scenarios and has been a favorable source for Indian buyers. Volume from Australia is limited however and we continue to hear from our team that buyers are returning to California suppliers.

As we highlighted in last month’s report, neighbors to India continue to see growth. Kazakhstan has now imported 2.4 million pounds, up from just 200 million a year ago. Pakistan is also up +1.9 million pounds on the crop year. These markets could be a sign of a growing regional market demand and could be a source of ongoing growth; but, it's unclear if the recent growth is sustainable.

In October, shipments to Western Europe as a region were off -27% on the crop year. One month later, the region has made up significant ground importing nearly 79.5 million pounds in November. By the end of November, the EU was off just -3% on net. The Netherlands led EU importers with over 23.8 million pounds in November. This was more than double the volume it had imported in the first three months of the crop year combined. The Netherlands now boasts a +38% growth rate on the crop year. Spain also topped 20 million pounds of imports in November exceeding figures from a year ago by almost +4 million pounds. Spain is now off -15% on the crop year. Germany was another market that significantly reversed recent trends importing 11.7 million pounds in November, almost double the volume from a year ago. It remains off -27% on the crop year however.

Middle East markets have buoyed export volume by providing a robust growth region for California handlers. On net, the Middle East is up +38% on the crop year and has imported +31 million pounds more than a year ago. Turkey has accounted for +20 million of added shipments topping 52 million pounds on the year and growing at a +63% rate. The UAE has also seen significant growth and is up +21% on the year as the region’s largest importer.

In October, Morocco was down -40% on the crop year. In November, the North African country more than doubled its volume from a year ago and is now up +6% on the crop year. This was a market that saw significant growth a year ago and there were some concerns about how sustainable that growth would be. Morocco may still have some volatile shipment periods ahead, but it was encouraging to see the country have a robust shipment month.

Weather

The rainy season has only just begun in California. In November, a major atmospheric river event hit the northern region where the state's largest reservoirs reside. This provided a welcome boost to water levels in these key reservoirs to start the rainy season. With much of the season left to come, we will continue to monitor and provide updates to the state’s water reality as the season progresses.

Don't Play Tug of War With a Bull

Over the past five years, crop receipts through November have accounted for an average of 79.7% of the year’s total volume. By this math, California almond receipts are on pace to exceed the 2.8 billion pound harvest estimated by the Objective Forecast. Total supply, with the carry forward, would exceed 3.4 billion pounds, roughly, +6% ahead of last year. But this is not an average harvest.

With an early start to the season, hulling and shelling operations have been well ahead of where they were a year ago. Late maturing varieties also came in lighter than initially expected. Between these two factors, many hulling operations have been signaling that they will be done before the Christmas holiday. To assume receipts at the end of November will account for 79.7% of eventual receipts would be overestimating the eventual supply. An 85-90% received rate is much more reflective of reality. That would suggest a final yield that would struggle to top the 2.8 billion pound Objective Forecast. In fact, many handlers have expressed the belief that yields might actually fall below 2.7 billion pounds.

Accounting for an average exempt and loss rate of -2% at a 2.8 billion pound yield, and assuming flat shipment figures, our hypothetical scenario would leave handlers with about 550 million pounds of available inventory by the end of the year. This puts the industry in the ballpark of a 20.5% stock-to-use ratio. Falling under 2.8 billion pounds could easily put us closer to 18.5% without any shipment growth. Historically, the industry has viewed a 20% stock-to-use ratio as a target carry forward, indicating there is little, if any room, to sustain shipment growth.

India almond consumption continues to grow. While shipments from California have been lagging this year, the slow start is not for a lack of demand. Buyers have been looking to secondary sources like Australia where favorable trade conditions exist. Local markets and intermediaries have also been taking advantage of price increases and stepping in to take profits when buyers have been skeptical of price increases from California. Growth in regional markets like Kazakhstan and Pakistan is further proof that regional demand is strong. But these inventories are becoming depleted and buyers will need to return to California to supply their almond needs.

The EU has been in a similar situation and offset shipments from California with growth in local production. Supply chains had also enjoyed plentiful on-hand inventories. Many buyers had been waiting out California’s harvest hoping an oversupply scenario would materialize. While harvest has been solid, EU buyers have had to return to California handlers and helped fuel one of the largest shipment figures on record in November.

Where the EU and India had pulled back to start the crop year, the Middle East took up the slack and has demonstrated the region’s ability to drive demand growth for California almonds. In terms of our forecast model where little room exists for YoY shipment growth, growth in these markets have put added pressure on established markets who had hoped for a reprieve on the supply side.

The market reality is this: EU and India buyers are only now reentering the California almond market in earnest and are doing so under the reality that demand growth in developing markets has been robust enough to maintain overall shipment volumes seen a year ago. The reality that supply is not going to be sufficient to sustain demand growth has continued to come into focus. Buyers who took advantage of a lull in contract interest while many awaiting the late position report are going to be rewarded. As the title of this section suggested, don’t play tug of war with the bulls. Conditions for a continued bull market persist.