Bearish Outlook for Almond Market Despite Recent Jump in Prices

Spend Matters welcomes this guest post from Jara Zicha, market analyst at Mintec.

A lot has been written about this year’s bumper almond crop in California, as well as on tariffs major global importers have stamped on the U.S. product. But despite all of the talk of prices heading down, we have actually seen prices rising lately, by 5% since mid-July. Will this trend last? Let’s look at the current market dynamics.

In the recent weeks, the almond market has been driven by supply tightness. Year-to-date shipments since the season started last year in August have increased by 7% and, at 2.25 billion pounds, have caused ending stocks from the last year’s harvest to be relatively tight. This has led to prices jumping slightly higher.

In the longer term, however, we are looking at an unbalanced market and can expect some corrections before the year’s end. This has not changed. As the supply is expected to increase once again, following this year’s record crop, farmers will be looking for an adequate increase in global demand, which is not an easy task in the current market environment.

As we all know, China and Turkey, both major importers of Californian almonds, have increased import duties from 10% to 50% and from 15% to 50%, respectively. It is highly likely that demand for almonds will be subdued from these countries heading into the new season.

In India, the biggest importer of U.S. almonds, the government has increased duties on shelled almonds by INR 20 per kg (30 U.S. cents). Almonds in shell will attract import duty at INR 42 per kg, up from INR 35 per kg. But considering almonds currently sell at around $5.70 per kg, an increase of 30 cents per kg does not sound like a big deal.

What might play on minds of importers in India, China and Turkey, in addition to tariffs, is the devaluation of their respective currencies, which will further add to their purchasing costs. The Turkish lira has lost almost half of its values against the U.S. dollar over the course of a year, while Indian rupee has fallen 8% y-o-y and the Chinese Yuan has slid almost 10%.

The uncertainty surrounding the market outlook has so far translated into new crop sales, which are currently down 36% y-o-y.  Moreover, shipments of the last season’s crop were down 7% y-o-y in July.

Shipments generally peak shortly after the harvest in October, and by this time we should be able to say with more certainty how the season will develop. But already now, even without a crystal ball, it is not difficult to see an outcome, and it is not the one growers in California have been wishing for.