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The Almond Board of California released the May position report on Thursday, June 10th. Here are some key highlights and observations below:

Shipments

With 219 million pounds shipped in May, California set a record once again representing nine out of the last 10 months of record shipments, albeit driven by export demand. May shipments are a 42% increase over last May, bringing the total shipments for the season to 2.448 billion pounds which represents a growth of 21.4% in global demand year on year and exceeds total shipments from the 19/20 crop year.  Year-to-date May receipts now stand at 3.1 billion lbs. growing total supply by 24% year on year, which is only slightly higher than the growth in demand. With more markets slowly opening, it is only a matter of time until the pace of demand growth exceeds supply.

After two months of relatively lower shipments, the domestic market seems to be coming back to life. Domestic shipments were a solid 69.89 million lbs., up 22% over last May. Year-to-date domestic shipments now stand at 671.94 million lbs. which is nearly 4% higher than last year. With more states opening, people starting to travel and return to normal activities, and channels such as food service coming back to life, the outlook for domestic demand appears positive.

Exports from California were a whopping 149.511 million lbs., up 54.56% over last May.

As can be seen in the table below, all the major regions had a role to play in the growth story:

Interestingly, while shipments into India have slowed down, imports into China continue to grow. This can be attributed to the fact that more Chinese processors are able to get duty waivers under the import for re-export model.  We have seen historically in other regions as well, when one market is off, another always seems to make up for it.

Sales & Commitments

Export markets continue to book additional volumes resulting in an extremely strong committed position. Clearly buyers see almonds as a value, not just while comparing with other competing tree nuts, but in absolute values as well.

New sales in the month of May were 102 million lbs., down 7% over last year, but this was solely due to the lack of buying interest in the US domestic market.

Domestic buyers have struggled with being able to forecast demand but if anything, this report should give them the confidence to start layering on additional coverage.

May is the first month where new crop commitments are reported.

New crop commitments stand at 231 million lbs., down 19% over last year, but this comes as no surprise as handlers were off the market following the large subjective estimate released last month that the industry did not buy in to.

When we compare the new crop commitments as a percentage of the projected crop, the position seems reasonable with about 7% of the crop already being spoken for versus 9% last year and 5% the year before.  This of course may change depending on the objective estimate numbers and how the California drought impacts the actual harvest.  

In A Nutshell...

Overall, this report goes to show that global demand for almonds continues to grow and despite shipping woes, the industry has been able to get product shipped.

Given the commitments on the books and shipment trajectory it would be safe to say that we should continue to see record shipments in the last two months of the season, which should help bring this carryout closer to a 610 million lb. level.

Focus will now shift to the 2021 crop. With higher temperatures in the valley, the impact of drought both in terms of water costs as well as yields is the topic of every conversation.

The subjective estimate at 3.2 billion lbs. has not found much support in California. What the actual crop ends up being may be immaterial now as the overwhelming sentiment is that given cost of production, prices need to be at levels that are far more sustainable.  And while California might be sitting at a less sold position currently, the flip side is that buyers don’t have coverage either. This is specifically true in the case of the domestic market where current crop commitments are flat to last year while new crop coverage is 23% down. It is only a matter of time until domestic buyers jump in and try to lock in volume before prices rise further.

New crop has been trading at about a 5 - 7 cent premium to current crop and since the release of the position report we have seen the overall market firm up by about 5 cents. It might be a few days before the market settles but it does appear that we could see increased trading activity in the coming weeks.


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