The Almond Board released the May position report on Thursday, June 11th. Key highlights as below:
With just 550,000 lbs. received this month, year-to-date receipts stand at 2.533 billion lbs.
Given that USDA receipts stand at 2.543 billion lbs., we would estimate the final crop number to settle down around 2.545 billion lbs.
May shipments were a lackluster 154 million lbs., down 14% from the record 178 million lbs. shipped last May.
This low shipment number can be directly attributed to the ongoing COVID-19 pandemic, which has resulted in port closures and buyers delaying call offs.
With several markets now easing restrictions, June shipments are expected to be strong, but only time will tell if June and July can make up for the 25 million lb. deficit from May.
After 5 months of record shipments the domestic market finally showed signs of a slowdown, with just 57 million lbs. shipped in May.
While this is down nearly 14% from last May, year-to-date domestic shipments are still at a record 647 million lbs., up 4.26%.
Export shipments in May were 96 million lbs., down 14% from the 112 million lbs. shipped last May.
With the exception of the Middle East, all other regions were down this month.
Sales & Commitments
There were 110 million lbs. of new sales in May, which brought the committed inventory to 455 million lbs. – up 90 million lbs. compared to last May.
Lack of sales can be attributed to the following:
a) With the COVID-19 situation, end consumption has slowed down. As a result, existing coverage that buyers have is likely to extend longer than they had predicted.
b) With prices having corrected after a prominent trader released their crop estimate of 2.96 billion lbs., buyers are willing to delay purchase decisions in hopes of covering lower.
It is worth mentioning that even though sales in April were relatively lower, the industry remains in a well committed position as a result of business that was put on the books earlier in the season.
Given a higher commitment figure, the common deduction would be that we should see strong shipments in the coming two months. However, given the recent decline in prices and the supply chain issues around the globe, we will need to wait and see what percentage of these commitments actually ships out over the next two months.
The worst case scenario would be that shipments for the final 2 months of the season would be flat to last year, in which case the carryout would be 470 million lbs.
This report marks the start of handlers reporting new crop commitments. Commitments for the 2020 crop stand at 286 million lbs., which is significantly higher than the 133 million lbs. of new crop sales last year.
This additional 150 million lbs. of sales goes to show that given the anticipated increase in supply, handlers have been aggressively building a book and the industry is now at a significantly better sold percentage than it was a year back.
The increase in commitments is spread across both export and domestic markets. This shows that at current prices, buyers consider almonds a great value buy and are willing to take additional coverage.
In A Nutshell...
On a fundamental note, California handlers have sold 84% of the current crop. This is typical for this time of the year and we have started off with a much better sold position for the new crop.
Most handlers and traders seem to have arrived at some kind of resolution with their buyers on their existing contractual obligations and both sides are now in a position to move forward.
As a result, we have started to see increased activity from India and the Middle East. With prices being at the lowest this decade, almonds are at a great value. As one of the speakers at the INC Almond Webinar said “Once you hit rock bottom, you can’t shovel any lower.”
The initial reaction to the position report was one where traders tried to cite poor shipments in order to bid the market down 10 cents ($1.70 stds). California handlers have resisted to some extent and by Friday we did see bids inch back up to $1.73 levels and are expecting it to stabilize around $1.75 - $1.78 levels. All of the above would indicate that while we might see market come off a few cents from pre-report levels, overall we should see some stability in the market leading up to the release of the Objective estimate on July 7th.
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