Almond Market Update - July 16, 2021

The USDA/NASS objective estimate was released on Monday.  For the 2021 crop there is an estimated 2.80 billion pounds now expected. This is counter to the subjective estimate in May that called out a possible 3.2 billion pound crop.  There was a gasp heard around the world, as this number represents the largest decrease in crop in the last 7 years.  The debate has begun on the methodology used by NASS, and with any polarizing news there are two sides, those embracing the number, and those that are refusing to accept the number.  The same people that happily accepted last year’s 3.0 estimate, some even called it higher and rightfully so, now are not buying into this one. 

So what is different this year? Well, California is struggling through a major drought, in fact all of the western states are being affected by this “Mega-Drought” as it is now being referred to.   We are having one of the hottest summers on record that forecasts show continuing through harvest.  This is taking its “toll” on the almond crop as well as many other crops.  

This is manifesting itself by orchards being abandoned (due to lack of water availability), other older orchards (that may have otherwise survived through a good water year) now being pulled to better manage water for younger trees with higher yields, etc.  All Federal and State allocations have been removed; the farmers are on their own to deal with the worsening conditions. 

The NASS report goes on to show the Nonpareil crop, which represents 38% of the entire crop, off 15% over last year.  We are also seeing in the report that this could have the smallest kernel sizes ever.   

Whether the objective estimate is accurate or not may really be beside the point.  California is in trouble.  If this crop is already having these issues, certainly next year’s crop may be even more in jeopardy without a great winter.   It is not all doom and gloom however, we will have a crop and we have a long way to go.   With grace, things can get better in the days to come.

Remaining Benchmark Dates:

Final shipping report for the 2020 crop year: August 12, 2021
 

Week 28 Update:

Bullish Trends:

1. An almost immediate result to this week’s objective estimate has been a market price correction, as we have seen Standards 5’s now trading at $2.30 for current crop and rising.
2. Demand continues as last Friday’s report shows a continuing pressure on the supply with record shipments now at 2.668 billion pounds on the books, 22% ahead of last year at this time.
3. Few offers are to be found adding to increased pressure as much is in doubt on this crop.  Specific to large size kernels will separate themselves from the pack.
    

Bearish Trends:

1. Even with a 2.8 billion pound crop, there is a + 600 million pound carry-out which will help support the differential from the 2020 crop to the 2021 crop to about 150 million pounds less this year.  Not as big of a decrease as one would think.
2. If growers hold off on offers, many opportunities may disappear as time is also a factor.  The delays in current crop shipping could be exasperated in August and September which might result in the industry falling behind in new crop shipments.
3. The shipping issues will remain a major factor and with freight costs to boot this may have profound effect in slowing down demand.

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