Almond Market Update 13.08.24

The July position report signifies the conclusion of another crop year. For the first time this year, shipments in July fell below 200 million pounds, totalling 179 million pounds. This marks the end of the longest streak on record of monthly shipments exceeding 200 million pounds. Over the year, California handlers shipped nearly 2.7 billion pounds, achieving a year-over-year growth of 4.97%. The domestic market expanded by 1.64%, while export markets saw a 6.26% year-over-year increase.

As the industry transitions, handlers are carrying just over 456 million pounds after accounting for a 4.23% serious damage rate experienced this year, which is 38% less than last year. The inventory-to-annual shipments ratio stands at 18.3%. Historically, a 20% stock-to-use ratio indicates a balance between supply and demand, so the current 18.3% ratio suggests a modest tightening on the supply side.

The Objective Forecast released in July projects a harvest of 2.8 billion pounds. Including the carryforward, California handlers anticipate a total supply of 3.3 billion pounds, which is about 3.3% more than the total supply for the current crop year. With the stock-to-use ratio already below 20%, this provides little, if any, room for shipment growth next year.

Harvest Has Begun

In July, most of California's growing regions experienced extremely hot temperatures, with many areas setting daily temperature records and recording consecutive days above 100°F. While these high temperatures have facilitated hull splitting, they have also put additional stress on trees. Orchards already stressed or neglected due to several years of returns below cost have been particularly affected this summer, although many are still being prepared for harvest.

Growers, hullers, shellers, and handlers have been working diligently to prepare for the harvest. Reports of early variety harvesting began coming in at the end of July, with loads arriving at hullers about a week earlier than last year. Growers anticipating the harvest of mid-season varieties expect a similar near-normal timing. As the harvest season ramps up, we will monitor kernel sizing and reports of damage and rejects closely.

Market Review

India ended the crop year with an impressive 21% increase in imports compared to the previous year. Shipments to the subcontinent grew by 69 million pounds year-over-year, a figure that alone would rank among the top 10 largest export markets for California almonds. With imports exceeding 400 million pounds for the year, India secured its position as the largest single export market for California almonds.

However, July shipments were down compared to last year. Several factors likely contributed to this decline. First, there were large-scale and widespread shipping delays at California ports beginning in mid-July. Additionally, California handlers may be facing supply constraints due to a smaller carryforward, limiting what they can offer. With Diwali falling on November 1st, processors in India will be eager to replenish inventories as the new crop arrives at handlers’ warehouses, positioning India as a primary growth market once again.

Western Europe finished the year with a 3% year-over-year growth. Despite this growth, the region’s top markets from the previous year lost ground. Shipments to Spain decreased by 3%, and shipments to Germany declined by 7%. In Spain and other parts of the EU, local almond production from Spain and Portugal is offsetting the need for California supplies. While shipment growth from California may seem stagnant or declining in some markets, overall consumption continues to rise.

The Netherlands experienced significant growth this year, compensating for tonnage declines from Spain and Germany. Shipments increased by 23%, largely due to the country's robust processing capacity and its ability to handle products with higher levels of serious damage, which were elevated this year. This growth propelled the Netherlands past Germany to become the second-largest market in Western Europe.

Elsewhere in the EU, Italy saw a 4% growth, while the UK grew by 24%, reclaiming the fifth spot from France, which grew at a rate of 4%. The UK, no longer a member of the EU, doesn't benefit from EU production and has a free trade agreement with the US, meaning its consumption needs are not likely to be offset by EU production as they are in other countries in the region. Western Europe, as a whole, imported over 601 million pounds and collectively represents the largest regional market for California almonds, remaining a robust and important market.

China experienced a more than 25% year-over-year decline, losing 26% of its volume. Both kernels and inshell products saw decreases, with inshell products experiencing the largest drop at 34.3%. Vietnam grew by 56%, serving as a value-added destination before re-exporting, often to China. However, its growth does not fully account for the decline in shipments from California to China.

The decline in shipments from California does not necessarily indicate a decrease in almond consumption in China. Although the local economy has faced challenges recently, food purchases have historically remained resilient during economic downturns. More favourable trade conditions with other suppliers, such as Australia, have impacted California's competitiveness in directly shipping to China. However, as we move into September and October, other suppliers may have limited stock, making California a more attractive partner.

From a global perspective, China remains an important market, and its overall consumption will continue to impact worldwide supplies. If California supplies tighten, China could become a major influencer in global almond markets.

The Middle East saw shipments increase by more than 50 million pounds during the crop year, growing at a rate of 19%. This follows an annual growth rate of 9% in the previous crop year. The UAE grew by 31%, importing more than 158 million pounds, making it the third-largest single export market behind India (400 million pounds) and Spain (188 million pounds). Turkey also surpassed 100 million pounds for the year, with a 29% year-over-year growth.

North Africa experienced 16% growth for the year, with Morocco, Libya, and Algeria all posting respectable growth figures. Morocco led the way with a 23% increase after importing nearly 78 million pounds. With a free trade agreement with the US, Morocco is an attractive market for California almonds. Algeria imported 17 million pounds, growing by 7% year-over-year, while Libya saw a 15% increase after importing 12 million pounds. Although the region grew by 56% a year ago, raising questions about the sustainability of such significant growth, there is now optimism that the region can continue to build on its success.

Among the 11 export markets that exceeded 50 million pounds of imports, seven saw year-over-year growth, while four saw declines. On net, these 11 markets grew at an annual rate of 3%. However, excluding India, the remaining markets declined by 2% overall. Combined with the stagnation of domestic markets, this highlights a mixed outlook for consumption growth in established markets for California almonds. To sustain future growth, handlers need to continue cultivating emerging markets. With its large population and growing economy, India is poised to lead as a growth market. Globally, we project modest growth pressures to continue into the new crop year.

Domestic buyers secured 728 million pounds of almonds for the crop year, representing a 1.63% year-over-year growth but remaining below the peak set in the 2020/21 crop year when shipments topped 808 million pounds. Apart from last year, this was the smallest shipment figure since the 2016/17 crop year. Despite this, the domestic market remains the largest destination for California almonds, accounting for 27% of all shipments.

via Select Harvest USA