Almond Market Update - May 26, 2022

California had some scorching hot weather this week with 103 degrees reached in the central valley.  It appears we made it through the hottest days however and are heading to low 80’s just in time for Memorial Day!   The snowpack is disappearing quickly as we are down to 10% to normal for this time of the year.  Interestingly, the state had asked for its citizens to volunteer to use -25% less water, and yet water consumption has increased 35%. This speaks to water mandates coming with forced water restrictions, penalties and fines most likely.  We will continue to watch the reservoirs that are much better managed than our populous manages their use. We are averaging 70% to normal over the 17 major reservoirs, which is slightly better than last year at this time. Nevertheless, the drought in the West will continue to be of major concern not just for California but for most of the 14 western states.

This is a great time of the year for the almond industry. The trees are fully developed with almonds and branches are hanging low, irrigation is at full strength as there are less than two months left before harvest begins in many parts of the state. Key information needed for decision making is also available, as we now have a consensus of the crop size, with the USDA releasing the subjective estimate of 2.8 billion pounds. In support of that is bearing acreage of 1.34 million acres for the ‘22/23 crop. A factor of 2,090 lbs. per acre yield supports the estimate and is what the industry will use as their basis going forward this year. 

As we saw with the April shipping report, the industry has managed to ship 245 million pounds for back-to-back months now. We sit with 1.93 billion pounds shipped year to date.  If the last two shipping reports can be duplicated or something similar, a lower carry-out of less than 900 million pounds (which was expected just two months ago) will be a reality. In fact, industry leaders are sensing an even better shipping report for May. This would add a very positive outlook to the new crop year as supply begins to match up closer to global demand and logistics issues begin to get ironed out even sooner than expected.

 Upcoming Milestones:

·        Position Report: June 10, 2022

·        Objective Estimate: July 6, 2022

Week 22 Update

Bullish Trends:

1.      With a clearer forward view of crop size coming and back-to-back strong shipping months, we have seen the market respond positively. Overall, the market is very stable.

2.      Expectations would be for a lower carry-in than previously anticipated which may put less pressure on the fourth quarter as well as storage space for the industry.

3.      While logistics issues persist, there is light at the end of the tunnel as the industry adjusts and adapts to the changing world we find ourselves in.  

Bearish Trends:

1.      The objective estimate is yet to be released and will no doubt have a say in what transpires prior to harvest, as there may be some drama associated with that report.

2.      While March and April have been good shipping months for the industry, it may be too little too late to have the sizable impacted needed for the carry-out.

3.      Overall market pressures on rising overhead costs are impacting the industry, while the ability to capture increased revenues remains difficult as supply remains out of balance with demand.

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