The United States Department of Agriculture (USDA) has revised its 2021/22 almond production estimate for California to 2.8 billion lbs. In its Objective Measurement Report released on 12th July, the agency lowered the forecast by 400 million lbs, from May’s subjective forecast of 3.2 billion lbs, citing adverse dry weather in California. At 2.8 billion lbs, the 2021/22 Californian almond output is set to fall by 10% year-on-year (y-o-y), from a record harvest of 3.12 billion lbs in 2020/21.
The downward revision of 400 million lbs (-12.5%) is the most significant adjustment made by the USDA in the objective measurement report, while the projected output of 2.8 billion lbs is at the low end of industry expectations.
A UK-based nut trader commented on the latest USDA forecast – ‘The objective report is not in line with industry expectations. In my estimation, the new crop will come at around 3 billion lbs.’
Another European importer added – ‘If the USDA says 2.8 billion lbs, it is most likely going to be more.’
A US seller commented – ‘While it is definitely lower than we were expecting it isn’t unreasonable given the issues with water availability. Personally, I was expecting a figure of around 2.95 so this did come slightly out of left field. How accurate the estimate actually is won’t be known until the position reports at the end of the year, so we just have to trade off what is known until then.’
Prior to the subjective forecast published in May, market participants surveyed by Mintec predicted a crop size of between 2.9 and 2.95 billion lbs.
After last year’s record crop, the almond industry has been bracing itself for a decline in yields, and the May forecast of 3.2 billion lbs came as a surprise to many. The tree productivity is expected to fall, further exacerbated by severe drought conditions and heat waves that California has been experiencing lately, hindering nut development. Whereas in May, the USDA projected the average production yield at 2,410 lbs per acre (-3% y-o-y), this has now been revised down to 2,110 lbs per acre.
The water scarcity in California is a growing concern. As of 6th July, 33% of the state was in exceptional drought and almost 95% of the state experienced severe drought conditions, according to the National Oceanic and Atmospheric Administration. The drought and intense heat, with cities across the US West experiencing all-time high temperatures in recent weeks, is increasing risk of severe wildfires. Reservoirs in California are currently at about half of their historical capacity.
The Mintec Benchmark Prices (MBP) for standard 5% almonds were assessed at $1.94/lb on a FAS US basis on 8th July, up 1% w-o-w and 5% m-o-m. Since the report was released, prices have jumped with trades on current crop standard 5% reported at $2.20/lb and offers from California ranging from $2.20-2.25/lb. New crop pricing has also jumped upwards with offers at a 10 cent premium to the current crop at $2.30-2.35/lb.
One broker commented – ‘We saw some hesitation directly after the release but over the past couple of days we’ve seen industrial buyers willing to pay these higher prices to secure supply both on current and new crop.’
Market participants expect the downward revision in USDA’s forecast to provide the almond market with more upside impetus, especially given the record volume of shipments from California.
Some traders, however, do not expect a strong rally in the market.
A European almond importer said - ‘The latest crop estimate will undoubtedly push prices higher in the short term. However, there is no demand in Europe at the moment. No one is interested in the new crop. Packers need to clear warehouses before new crop comes in and everyone has lots of stock to carry them through to Christmas’.
Jara Zicha and Aidan Wright