‘Painful’ almond prices, at their lowest in more than a decade, are “likely to rise”, producer Select Harvests said, viewing a rash of forced sales by US producers to raise cash as fuelling the market slump.
Paul Thompson, managing director at the Australian-based group, said that the market “cannot continue to sustain these prices” which, for benchmark third grade California SSR (select sheller run) almonds stand at just under $1.70 per kilogramme according to US trader Derco Foods.
That compares with a 2015 high of some $4.70 per kilogramme, and is the lowest price since 2010.
‘Dampened snacking demand’
The extent of the weakness in prices reflected in part the extent of US inventories left over from the country’s bumper harvest last year, with the carry-in to 2022-23 soaring by 38% to 837m pounds, and leading to a further season of strong US supplies, above 3.4bn pounds.
“The almond market is entirely focused on the carryover,” Mr Thompson told investors.
Meanwhile, demand had been undermined by rising living costs and the knock-on effects of the Ukraine war.
“Low consumer confidence caused by geopolitical tensions in Europe and inflationary pressure has dampened global snacking demand.”
‘Painful for all’
However, the supply of growers willing to sell at current levels, to fund their cashflow, was limited.
“Many US growers are selling below their cash cost. This is unsustainable,” Mr Thompson said, adding that the liquidation has been “painful for all.
“Growers have had to absorb significant cash cost increases, pollination, agrichem, fertilizer and energy.
“All they want is cash and are prepared to forgo profit.”
The market focus would eventually turn to results of a US harvest which was said to be falling short of expectations.
With the US harvest, which is responsible for some 80% of world output, “nearly complete, indications are that volumes may be lower with smaller sizing and variable quality,” he said.
“This, combined with severe ongoing Californian drought conditions, rising production costs and removal of bearing acres, may lead to an increase in the global almond price.”
He added that the “likely triggers” of a price rebound included the potential for a poor blossoming period in drought-hit California in February, and the extent of tree removals the state is seeing because of the lack of water.
“Anecdotally, we know that there are significant orchards being removed,” in California, “particularly on the west side because… they have zero access to water,” Mr Thompson said.
Many of the comments tally with those from Derco Foods, which in its latest market report said that “demand from the US domestic market and Europe continues to be subdued and limited to first quarter 2023 forward shipments”.
Derco also noted that the availability of storage bins, “warehouse space and cashflow needs – which differ from seller to seller – are heavily influencing current [grower] sales strategies in California”.
Mr Thompson was speaking after Select Harvests unveiled a 68% slump to Aus$4.8m in earnings for the year to the end of September, reflecting higher fertilizer and energy costs and a plant fire, as well as the depressed almond price.
Brokers shrugged off the data, with Wilsons retaining an “overweight” rating on Select Harvests shares, and Bell Potter and UBS restating “buy” recommendations.
“We remain positive on the outlook for [almond] prices over the next 2-3 years, but acknowledge stronger shipments out of California are needed to rectify the current oversupply, before prices rise,” UBS said.
Nonetheless, Select Harvests shares have lost 7.9% in Sydney since the results were released on Tuesday.