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Select Harvest Almond Market Update June 2020

Busy, Busy, Busy

July is a busy time for the California Almond Industry. The USDA-NASS Objective Forecast came out on the 7th and today, the Almond Board published the June shipment numbers in their latest Position Report. All of this happening as our orchards and facilities are gearing up for the pending harvest amidst a pandemic. Deep Breath! Let’s explore.

Supply Driven

The Objective Forecast held steady the 3.0 billion pound expectation for the 2020 harvest. This is a significant supply increase over 2019 and the anticipation of ample supply has fueled price suppression since the Subjective Forecast was published in the spring. The market has now largely factored in the expected increase in supply and the Objective Forecast confirming the 3.0 billion number will likely bring some stability to the equation.

Staying on the topic of supply, the latest shipment numbers help us gain a clearer picture on expected carryover. We’re expecting a strong July with YoY growth above the YTD average. Using that as our high end and a flat July as the other, we can narrow our expected range to 440 – 474 million. In any case, these numbers signal what is usually seen as a healthy balance to sustain the industry through the transition into the new crop year. However, the looming supply increase means this is still a buyer’s market.

Demand Isn’t Going Away

The June numbers showed signs of acceleration after a dip in May. While we did not set any shipment records for June, both domestic and export shipments saw growth YoY with the export markets posting an eye popping +20.7% over May. Total commitments is also quite encouraging up +30.8% from this time last year buoyed in large part by export markets reengaging. Collectively the committed numbers suggest long term confidence in almonds and those who paused while prices adjusted no longer seem to be passive.

Consumer behavior will continue to be influenced by Covid-19. It would be natural to assume a fair amount of uncertainty regarding how this may impact almond consumption. It’s true that here in the US we’ve seen products that relay on impulse purchases struggle as consumers shift to purchasing more online and shift in-store buying habits to larger, less frequent outings. But clear winners are snacking and health/nutrition driven products. Both of these trends were well entrenched, particularly in the US consumer market, pre-Covid and are now being accelerated by the realities of the Covid consumer landscape: Heightened awareness around healthfulness and eating more at home with better ability to control healthy consumption. None of this is going away any time soon as Covid-19 continues to threaten and almonds play across these trends in many consumer products. The narrative we’ve emphasized before, suggesting that demand for almonds historically remains strong through turmoil, seems especially true in this unique set of circumstances.

Market Bright Spots

India moved an extraordinary volume of almonds in June. With the crop year almost finished, they moved from a 4% YTD growth in May to 7% in June. To do this, India moved over 10 million more pounds in June than in May, a +77% increase MoM – this occurring in spite of Covid related restrictions. India’s strength in the current environment highlights not just how responsive this market is to price-driven opportunities, but how health driven consumption habits are surging demand here. With any semblance of stability in price at these suppressed levels, assuming logistics concerns from Covid remain mitigated, the sub-continent could be poised for phenomenal future growth.

Elsewhere in the world, we see broad signs of market rebound. Most Western European markets are up over May, including Germany, Italy, Spain and the UK. China, like India, also saw a major increase over May shipments up +89.6% in June. In fact, the broader export market, including many minor and developing markets, show remarkable resiliency considering the upheaval the pandemic has caused. One may have expected collapse in some of under-developed market, yet in many cases we see continued growth. In all, export markets look to be taking advantage of the historically low prices and will continue to fuel future demand.

Thanks

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