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Agcom, LLC Market Update

 9/26/2016                          Almond Market Update        
 
In general, the market flipped like a light switch the past week.
  • The market went from a feeling of slightly oversupplied and sellers needing to sell a little more to feel content, to an oversupply of buyers fighting for their place at the table, then on to a quieter market.
  • Now many sellers have drawn back away from the market, as their sold positions have advanced to a point that is comfortable, or more than comfortable. 
  • Over the past few days offers have been fewer and seller’s confidence has increased.  
  • The California crop is not looking like the mammoth crop it was once thought to be, as well, the Spanish crop looks to be shorter than last year.
The view point from both sides on the general market conditions:  
 
Seller’s Perspective  
  • Shipments for June, July and August have been quite large.
  • Prices must go up to curb huge demand that has become evident.
  • Our sold position is very comfortable. We will sit back and see how much prices will go up.
  • The Spanish crop is shorter that last year. The California crop is getting shorter every day.  Reports from the north are showing a shorter crop that what many expected.
Buyer’s Perspective  
  • Prices going up will kill the momentum in the market.
  • Buyers don’t have the resources to pay high prices again. The market crash of last year has limited our resources. We need to be able to build our bank accounts up and reestablish our credit lines, which have been slashed.
  • The low prices are the goose that laid the golden eggs. That will allow the entire crop to be sold.  Don’t kill the goose.
  • Regardless of the exact size of the current crop, there are many almonds to sell! Higher prices will not get you there. 
The U. S. Domestic market has led the way in buying. 
  • Large roaster/rebaggers, as well as the large retailers have been busy filling their books with purchases for the Christmas season, as well as long-term buying that stretches well into 2017. 
  • Unaffected by currency differences and motivated by lower prices, many U.S. companies have already scheduled promotions that include almonds. 
The view point from both sides on the demand from the U.S. Domestic market:   Seller’s Perspective  
  • The domestic market will not be affected by the credit issues of the international markets. 
  • The domestic market will not be affected by currency fluctuations.
  • The cheaper prices will allow almond consumption to grow in the US.
  • The shorter Spanish crop will force buyers to come to California sellers to purchase almonds.  This will further reduce supply.  
Buyer’s Perspective  
  • The domestic market has taken a large amount of product.  They are covered for several months.
  • The domestic demand of late has taken up so much demand that the market will not be busy enough to satisfy sellers in the coming weeks and hold prices.
  • The domestic market can’t make up for 300 million to 500 million pounds additional supply in this crop year.                                                                
Europe was slow to come in to buy the 2016 crop because of the massive amount of product that was taken in during the months of June and July. 
  • Many European buyers took advantage of the full book of purchases to take extended holidays well in to mid-August, if not late August. 
  • This removed the temptation to buy more. 
  • The lower prices that took place in the spring and early summer will no doubt prime the consumers for the consumption of more reasonably priced product being shipped August through December for Q4 and Q1 consumption.  More buying is anticipated to take place during Q4 and Q1 for the Easter consumption.
Seller’s perspective:  
  • Cheaper almonds will give the demand we need.
  • Europe still has to buy more.  This will hold the market prices up.
  • You’ve always said that Standard sheller Run below $2.50 is a workable price.  
Buyer’s Perspective:  
  • We have purchase a great deal of our needs. 
  • These prices are too high.
  • The prices went up to much, too fast recently.
  • We can’t move the almonds you want us to move with prices moving up this quickly.
China played the waiting game this year. 
  • Many in that region felt the crop was too large to hold the prices that were in the market and waited for the softening of prices that never happened. 
  • China underestimated the liquidity of almonds world-wide, especially the large amount of business that was obviously being done with India over the spring and summer months.  
  • China stayed out of the market until very recently, in general.  
  • Now the Chinese buyers are much more flexible in their thoughts about pricing; willing to take most prices that are offered at, or close to market levels. 
  • Now, the Chinese are faced with a shortage of supply since the offers have diminished and prices have increased. 
  • They have been looking more and more at filling their needs out of large, newly harvested, but more expensive pistachio crop. 
  • With the window closing on the timeframe for Chinese New year shipments, Chinese buyers are now forced to come in one wave of buying, undoubtedly affecting market pricing and draining an already dwindling supply of Nonpareil Inshell.
The view point from both sides on the demand from the China Market:   Seller’s Perspective:  
  • We are getting to a comfortable sold position.  If you want offers, you need to pay our price.
  • Supplies of the items you want most are going down, quickly.
  • The crop is not as large as you thought.  We may get to the estimated crop volume and we may not.
  • If you don’t buy soon, we will not be able to ship in time for Chinese New Year.
Buyer’s Perspective:  
  • The crop is large.  The prices must go down!
  • We can’t capture market share and make money at these levels.
  • We need shipments prior to the end first week of December.
India is probably the biggest surprise in the almond world today. 
  • Few expected that market to have the availability of offers / supply to buy, as well as the financial resources to buy it after the issues that occurred there just a few months ago. 
  • India has come back in a way that has not been seen previously. 
  • An early Diwali (October 30) gave buyers a glimmer of hope that risking early purchases of the remaining 2015 crop and the earliest shipments of 2016 crop would hopefully turn a tidy profit upon arrival. 
  • This market will need estimated 1,200 - 1,300 containers just for the consumption during festival season.
  • The heavy demand of 2016 crop Nonpareil Inshell during this Diwali season may be the catalyst for a future problem.  Looking forward into 2017, we see that Diwali falls even earlier than it did this year.  An October 19 start date to the festival will make early shipment out of the 2017 crop even more difficult to arrive in a timely manner than this year.  It is estimated that 80% of the almonds needed for the festival; about 1,000 +- containers will be needed from the old crop (shipments in July and first half of August 2017).  
  • How will this void be filled with such high demand for Nonpareil inshell now?  Will there be enough almonds for India during the transition period next year?
The view point from both sides on the demand from the Indian Market:   Seller’s Perspective:  
  • If you don’t pay for your contracts, this will be the last time!
  • We’ll just make more kernels for other markets, if you can’t take the inshell.
  • Where are the almonds going to come from for 2017 demand?
Buyer’s Perspective:
  • We can still buy large volumes of almonds.
  • We need to have confidence that California won’t drag the market down after we buy.
  • You need to stick with the regular buyers, because the GST leveling will bring in every Tom, Dick and Harry to buy almonds!
The almond market has proven to once again be very resilient.  As we have seen in the past, low prices will move mountains of almonds.   Sooner or later the mountain of almonds will become a smaller hill and a balancing point will have to be achieved.  Based on the behavior of the market today, we have not reached that balancing point yet.
 
Agcom, LLC| Phone: (209) 250-1515 | Cell: (209) 605-1363 |Email: [email protected]