October Almond Market Report

Per the October Position Report, net shipments were up +0.6% over last October. This continued a trend of rather stable shipment figures for the fourth October in a row. Both domestic and export volumes were comparable to last year with domestic shipments off -0.6% and export shipments up +0.8%. Through the first quarter of the crop year shipment volumes on net are up +11.42%, with domestic shipments off -5.49% and exports up +16.81%.

Crop receipts (which we’ll touch on more in a subsequent section) neared 1.9 billion pounds and are up +11.68% YoY. This puts receipts roughly 200 million pounds ahead of last year at this time, but represents a modest decline from the 223 million pound advantage in received weight reported in September indicating that less volume was processed this year than last. 

Handler’s added just under 248 million pounds of new business to their books in October. Total Committed Inventory is off -6.29% YoY, but monthly purchasing has consistently been in line with recent historical figures indicating that purchasing velocity is well within expectations.

Projecting Crop Yield

Weather in October was generally mild and allowed field operations to continue without significant weather related disruptions. This is reflected in the over 680 million pounds increase in receipts reported in the Position Report from September to October. This figure was about -3% behind last year - a variance that would be within expectations for a normal operating year. November’s pace however could provide additional clues as to how big a crop we actually have, and we’ll be watching those figures closely when they arrive.

What we're left with is an aged Subjective Forecast and Industry sentiment to set expectations around eventual yield. In our September Market Report we included a simple poll. We asked readers whether they believed the crop yield would fall above or below 2.6 billion pounds. The results are in:

This mirrors what we’re hearing elsewhere with estimates generally falling in the 2.55 - 2.60 billion pound range, though we’re hearing more estimates at, or even below, 2.5 billion pounds than we were a month ago reflecting observations of poor yields from late arriving pollinator varieties.

While admittedly quite unacademic, our poll also supports the idea that the industry has already priced in an expectation of a crop that falls below the Subjective Forecast of 2.7 billion pounds. We have been reporting general consensus around a 2.6 billion pound expectation for several months. Now the question is whether the markets are pricing in a yield below 2.6 billion pounds, and of course, how closely reality reflects those expectations. November could well offer some significant clues.

Global Markets

India has been on an unprecedented buying spree. Through the first quarter of the crop year India’s imports have surged +124% YoY. While October’s shipment volume did not match September’s record setting 66 million pounds, importers still received over 52 million pounds - an increase of more than +85% from a year ago. On net, India has imported nearly 163 million pounds thus far for the crop year compared to almost 73 million pounds a year ago. That’s an increase of +90 million pounds in just three month's time. That 90 million pound increase alone is larger than the annual import volume from a year ago of all but seven (7) of the largest global export markets, ahead of Morocco (87 million pounds) and Japan (85 million pounds). Shipment volumes will assuredly slow with such a large volume arriving in a relatively short time period and with Diwali approaching without time for new shipments to arrive ahead of the festivities. 

Direct shipments to China are up +50% on net through the first three months of the crop year. This is driven entirely by inshell shipments which are up nearly +550%. The trouble is, we’re working from small baselines so we’re only adding about +3.5 million pounds. And the increase in inshell shipments had been expected with China having fewer options to supply this need. We see this reality playing out across Southeast Asian value-add markets as well with cumulative inshell shipments up +30%. 

Kernels tell a different regional story however. Imports direct to China are relatively flat, but across SE Asian markets, volumes are down -21.5%. Taken together, volumes across all varieties to China and SE Asia are down a more modest -10.4% for the crop year suggesting there may be some unmet need in the region.

Western European markets slowed in October compared to a year ago. Import volumes for October were -27.3% below last year’s figures. For the crop year, Western Europe’s markets have imported -12% less on net YoY. Some of this can be explained by local almond harvests offering an attractive alternative with transit delays and elevated costs associated with the logistics of importing from California. The price advantage to EU sourced almonds is at or near all time highs. There is also growing concern of consumption slowing as consumers face inflationary pressures. Traders have reported slow load turnover lately and continued aggressive offers from local producers might suggest waning interest on the wholesale market as well, but this may be better attributed to full supply chains than disinterest. Either way, while volume is available locally, we’re expecting volumes from California into Europe to be moderated.

The Middle East continues to be a dynamic market. Large swings in shipment volumes persist in the UAE (-29%), Turkey (+13%) and Saudi Arabia (+72%) as war in the Strait of Hormuz continues to reshape supply lines. We’re also watching impacts in Pakistan as volumes handled through trading hubs in the region are now heading direct with volumes up +360% on the crop year. While regionally the Middle East is off -8% YoY, when factoring in volumes to Pakistan the Greater-Middle Eastern region is up +15.0%

Market in Review

With shipments up +11.42% on the crop year, shipment volumes are going to have to begin to slow with yield expectations signaling supply levels below those of a year ago. California simply can’t support that level of volume growth. Considering contracted volume is comparable to a year ago, handlers have even more incentive to be patient in the short term. 

Patient sellers could be a recipe for rising prices, but buyers are largely in a position to be patient as well. India has been on a torrid buying pace and should have plenty of inventory to last past the Diwali season. The EU also appears covered with local suppliers continuing to hold inventory at discount to California. Chinese value-add and the Greater-Middle Eastern markets are also relatively covered with perhaps some pent up kernel demand lingering in SE Asia. We’re also seeing evidence of traders looking to sell volume rather than purchase in profit taking moves. 

Taken together, this could create an environment where handlers with call-pool and those needing cashflow find tepid interest forcing temporary price reduction. We’re seeing the impacts of such market conditions already this month with prices pulling back slightly ahead of the Position Report. As long as prompt demand falls below the volume needs for those seeking cashflow prices will continue to take a breather.

But pressures for continued price elevation are not far removed. Should shipment volumes continue to remain elevated and should receipts suggest any further tightening of the overall supply, we’d only expect further price increases. We’ll keep an eye on developing conditions and will provide more context after the November Position Report.