Almond Market Update - October 2020

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DEMAND

U.S.  +17% (+11% YTD) 

Exports  +39%   (+43% YTD)

Western Europe +23% (+17% YTD)

India +139%  (+167% YTD)

Middle East / Africa +25% (+19% YTD) 

China / Hong Kong/ Vietnam  -6% (+2% YTD)

Japan  +2% (-3% YTD)

South Korea +53%  (+56% YTD)

Canada -6% (-5% YTD)

Central / Eastern Europe +49% (+39% YTD)

2020 CROP 

Harvest nears completion though large deliveries of late varieties (Monterey, Fritz, etc.) continue.

The crop is highly varied by region, benefiting from growing acreage state-wide, and we gauge the crop at around 2.9 billion lbs.  We see most of the increase coming from Nonpareil and Independence, with a bit from Monterey/Wood Colony.   

If you are interesting in digging in deeper, Click here for our Detailed Crop Analysis

REVIEW

September Shipments were expected to be strong and came in on the top end of expectations.

September Sales were 298 million lbs. vs. 299 last season – also on the high side of expectations (given how sold the industry already was, and the unusual sales patterns during the month, some anticipated moderate sales in the mid 200’s)

Committed (Unshipped)  stood at 1.093 Billion lbs. – up 64% from last year’s 665 million lbs.

Sold / Shipped Combined reached 1.55 billion lbs. vs.  1.01 Billion, up 53%.  

The Industry Sold Position reached 46% of total supply vs. 36% a year ago.  On the sellable crop, based off a 3 billion estimate, this is 53% vs. 40% a year ago.

Currencies have generally remained steady in seller’s favor recently with the EURO today at 1.18 to the USD (same as a month ago)

Carry-Overs Another strong report continues to demonstrate the need for larger carry-ins.

CAPACITY & SPACE:  We mentioned last month that production capacity was a double edged sword.  As sellers pulled away following the report, buyers chased for purchases and production capacity.  About a week after the report buyers backed away as more sellers came to the market, and sellers pushed for sales partly to fill production capacity.  Whether it’s 2.8 or 3 billion lbs., space is an issue and contributed to the good deals available over the past few weeks.  Grower and handler cash flow also play a role in pushes to sell, though most handler pools are well sold so it would likely be grower cash flows bringing volume available in the coming months.  Given current prices, some growers plan to sell a portion and hold back a portion to sell in 2021.

COVID-19 continues to help and hurt the market, with more talks of impacts on various economies recently.  COVID-19 has also accelerated movements toward healthy eating, plant based, online grocery shopping, etc. which favor almond consumption.  It presents a wild card that combined with the very cheap prices, actually could benefit consumption considerably, we just don’t know yet.

OUTLOOK

Historically demand grows by 16-18% in years like this with a big increase in supply and big decrease in pricing.   Over 1.5 billion lbs. of 2020 crop year supply has been shipped or sold, mostly at quite low prices.  We estimate over 1 billion lbs. of 2019/2020 crops was sold at the bottom of the market that was roughly May to August, reminding us of the old adage, the best cure for low prices is low prices.  It seems the best cure for weak seller confidence is strong shipments and strong sales, and the question becomes, how many months of this are needed for seller confidence to support an increase in pricing that lasts, unlike the last bump.  If warehouse space and the seller’s need to continue selling remains an important factor, low prices could remain in the short term, which likely would only stimulate continued strong sales and shipments and present a stronger finish to the season.  On the flip side, if demand were to pick up considerably short term (i.e. buyers wanting to cover after this positive position report), seller capacity would fill up quickly and the market would be more bullish short-term.

Longer-term, a potential 17% growth rate and a 2.9 Billion lb. crop would mean a roughly 500 million lb. carry-out going into what’s likely a smaller 2021 crop.  Such figures together would present a very bullish scenario at current price levels, though all three of these data points are viewed very differently throughout the industry.  There is a tendency to underestimate demand growth in years like this.

Best Regards,

Paul Ewing    Dennis Soares


10/25/2020

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