Industry shipments for March reported by the Almond Board of California totaled 161.1 million pounds. This compares favorably with historic shipments for the month and reflects steady demand for California’s production. While 15.3% less than the amount shipped in March 2015, one must remember that the resolution of labor issues at West Coast ports in early 2015 allowed backed up shipments to flow freely during March, producing a whopping 25.6% increase over the prior year’s performance. Taken in that light, March 2016 shipments reflect solid performance for the month and should help to bolster confidence.
March shipments included product contracted last fall at higher prices, as well as more recent sales at lower price levels. It is evident that many markets purchased hand-to-mouth over the winter months as prices declined and still require additional tonnage before the supplies become available from the 2016 harvest. Over the last six weeks market volatility has subsided significantly. This is beneficial for an industry that is looking for stability and confidence.
Contract issues still exist in a few markets where buyer defaults have created a degree of turmoil, however these problems are being solved as the industry moves forward. While year-to-date industry shipments of 1,153 billion pounds trail the prior year by 7.65%, specific markets are showing continued good demand. China is only 7% behind in year-to-date shipments versus the prior year. The EU market, which is up 6%, has also enjoyed healthy shipments, riding on the shoulders of Spain, which is up 23%. India is 12% behind last year. The UAE is down a significant 49% while a number of other Middle East markets have seen an increase in shipments. On the domestic side of the equation, the North American market is down 8.9% year-to-date. This is a reflection of higher prices contracted last summer and fall, and consumer resistance to prices on store shelves today.
As the market adjusts to the existing conditions and aligns with expected supply, pricing is reigniting significant demand in all markets. China, India and the Middle East will react more quickly due to the way almonds are traded there and can quickly be introduced into the market place. North America, Japan and EU customers may not be able to move as quickly due to more established long-term commitments. The combination of the current price levels that are attractive to customers worldwide, combined with the excellent health and nutritional value of almonds, will continue to propel strong consumer preference for California’s production.
Market Perspective
Looking forward, the USDA National Ag Statistics Service Subjective Crop Estimate will be published on May 10. This number will dictate market direction until the Objective Estimate in June. The 2016 crop has enjoyed a strong bloom and relatively good post pollination weather. Although El Nino has brought relief to California by way of above normal rain which has helped to raise reservoir levels in the northern part of the state, the central and southern parts of the San Joaquin Valley still remain firmly in the grip of drought conditions. On April 1st, the U.S. Bureau of Reclamation announced a full 100% allocation to growers north of the delta which is good news for the Sacramento Valley. However, by stark contrast, a mere 5% allocation will be available for Central Valley Project for irrigation districts south of the Delta, meaning that west side almond growers will still have to rely on limited, poor quality, groundwater to get through another season. Those growers on the east side of the South San Joaquin served by the Friant canal system will fair only slightly better at 40% of their water allocation, still certainly not enough to make the full irrigation requirement to produce an almond crop. Even as future water concerns temper enthusiasm for the 2016 crop, buyers will gain confidence assuming future estimates mirror early impressions. At that point the market can better gauge what type of crop is on the trees, and we expect to see more stability and predictability, which benefits all involved in our industry.