October 2024 Almond Market Update

October’s Position Report shows that California almond handlers shipped over 258 million pounds in October. This was the largest October shipment figure since the 20/21 crop year. Domestic shipments grew +18.2% YoY and was the largest single month in nearly three years. Through the first three months of the crop year, domestic markets are up +2.27%. Export shipments in October were effectively even YoY, up just +0.3%, and export markets are off -8.25% on the crop year. Net shipments across all markets are off -5.43% for the crop year.

Contracted commitments remain on par with figures from a year ago and are off just -0.56% on the crop year. During the month of October, California handlers added nearly 265 million pounds to their books, which is right in line with historical figures for this time of year.

The Position Report also shows that California handlers have received over 1.8 billion pounds of almonds from this year’s harvest. This is +38.3% more received volume than this time last year having been accelerated by an earlier harvest. But on-hand supply is up just 9.64% due to a significantly smaller carry-forward.

Harvest

Handlers received nearly 831 million pounds in October from huller/sheller operations, the most in any October. The additional volume is likely being driven by added capacity coming online over recent years paired with an early and favorable harvest. Whatever the case, harvest and processing continue to run ahead of last year with many operations planning an earlier end to the year as they work through their remaining stockpiles.

Deliveries to handlers have so far shown improved serious damage conditions from a year ago, with some areas reporting their lowest levels in years. Yields have fluctuated from region to region, but generally kernel sizes are running a size or two smaller than a year ago. A final volume matching the 2.8 billion pounds forecast in the Objective Forecast is not out of the question, but markets have moved in a way that suggests there is less optimism that supply could exceed that figure in any meaningful way.

Hulling and shelling operations will continue into the fall with November another significant month for inventory arriving at the handler. With receipts through November traditionally reaching about 80% of the final harvest, markets will have additional insight into the eventual supply.

Markets

The UAE has continued to grow and is currently the second largest export market on the crop year having imported over 51 million pounds. The UAE is growing at a pace of +33% and has imported +12.6 million pounds more than a year ago.

Elsewhere in the Middle East, Turkey has climbed to the number three spot globally behind the UAE. Turkey has imported +14.6 million pounds more than a year ago and boasts a +60% growth rate on the year. Saudi Arabia, while a smaller market, has also enjoyed significant growth on the year, more than doubling imports from a year ago. Collectively the Middle East is up +41% on the year and has proven to be a resilient growth market for California almonds.

While India is off -16% through October, consumption trends continue to show strength in the market. Ahead of Diwali, indications on the ground suggested that local inventories were at comfortable levels. As prices for California almonds rose, local markets and suppliers enjoying a trade advantage from Australia became more favorable. But these sources can not supply India with the volume it demands, and buyers on the ground are reporting that demand post-Diwali is stronger than it has been in the past. Our sales team agrees and reports that buyers from the subcontinent have come back to California and are looking for additional volume and they expect robust demand through the fall and winter months.

It is also worth noting that elsewhere in the region, Bangladesh, Kazakhstan and Pakistan have all seen triple digit growth on the year. Between the three countries, +2.5 million pounds were added over a year ago in the month of October alone. While that growth does not supplant the volume that India is short, the shift in volume headed to these secondary regional markets is noteworthy. Whether this is due to changes in regional consumption, regional trade influences, or something else is not something we will speculate on, but should such growth trends continue, they would be worth monitoring.

In Western Europe, Germany and Spain highlight a long list of markets seeing large declines thus far through the crop year. Spain remains the EU’s largest market, but is off -31%. Germany, once the region’s second largest market, is off -52% and now sits in the number four slot. The Netherlands holds on to the third position while being off -15%, and Italy leapfrogs into second as the only major EU market seeing growth on the year (+2%). Collectively, Western Europe is off -38.5 million pounds (-27%) through October; but, fundamentally consumption patterns remain strong. Production increases locally in Portugal and Spain offer an attractive alternative to California almonds. While capacity is growing, local production can not supply the region's full needs. As local supply is depleted, EU buyers will return to California.

China is off -15.3 million pounds (-38%) on the crop year. These declines are evenly split between kernels and inshell. With a political regime change on the horizon in the US, political circumstances are not likely to shift in support of more favorable trade conditions, at least not directly with the US. This has already given an advantage to Australian growers who enjoy a trade advantage over US. Supply chains into China are evolving in other ways as well as China has looked for other means to acquire its needs through value-add markets in Southeast Asia. Vietnam has long been one of these markets and has seen a resurgence of its almond markets having imported +56% more thus far than a year ago. But other countries in the region, such as Malaysia and Singapore, are also fulfilling value-add niches and are seeing robust growth on the year. And the growth is not exclusive to kernel products with inshell also increasing into the region with Vietnam, Malaysia and Thailand helping the region grow from less than a million pounds of inshell a year ago to 4 million pounds this year.

Market Summary

A year ago, the top five export markets for California almonds through the first three months of the crop year were, in order, India, Spain, China, UAE and Germany. All but one of these markets has seen double digit declines on the crop year. India is off -18.7 million pounds (-16%), Spain -12.8 million pounds (-31%), China -15.3 million (-38%), and Germany -15.3 million pounds (-52%). Collectively, these four markets are off -62.1 million pounds on the crop year.

Simply focusing on these numbers, one might conclude that demand has weakened, but this would not be an accurate picture. Total net exports are not off nearly as much as the declines in those large markets. Net export shipments are off a more modest -40.9 million pounds (-8.25% on the crop year), and much of that decline can be attributed to smaller on-hand inventories through the transition where net export shipments fell -29.5% in August.

As to the larger markets, a shift in sourcing can best explain the declines in shipments sourced from California. Australia had a bumper crop and enjoys trade advantages to key markets like China and India, while EU production also offset needs there. These large markets are still consuming large volumes of almonds, they have simply been taking the financial incentive found elsewhere.

A shift in sourcing could still have spelled trouble for California handlers if other markets were not buying. With net export shipments rebounding in September and October, the reality is that while shipments have softened in some of the largest markets, others have picked up the slack.

And how important has the strength of global demand outside of the largest markets been? If continued firming prices is any indicator, it has been quite significant. While buyers in the larger markets may have been willing to seek other sources, or let their supply chains feed their demand, California handlers found other markets willing to purchase, even as prices moved upward. This effectively dispelled the myth that higher prices would not support sustained demand. Now these historically larger markets are without sufficient on-hand inventories and dwindling options to source elsewhere.

The final piece of this puzzle is the supply and expectations have long held that yields would not produce the black swan that would return the bear market. Handlers now find themselves in a situation where they are not faced with excessive inventories and global demand has remained strong even as some of the largest markets sought supply elsewhere. As a result, buyers are being forced to the table with handlers having called their bluff. No longer are handlers willing to accept prices below their cost of production, and the return of the bull market we reported on all the way back in our May Report is set to continue.