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Prices Rise as Shipping Problems Dampen Business with China

December 16, 2020

Prices strengthened for the third consecutive week in the U.S. FAS market during the week ending December 15, partly on continued demand for inshell almonds from India.

“The inshell market is hot,” a packer said. “It’s firming, and it’s spreading to the rest of the industry.”

Prices jumped for nearly all assessed items, with BP SSR 27/30 and BP SSR 30/32 increasing 14 cents/lb on the week and NPX 27/30 climbing 13 cents/lb. Expectations of a bullish position report helped lift prices as sellers gradually raised offers and buyers followed. (See the article in Analysis and News section for more on the latest position report).

The robust demand from India surprised some market participants. In recent months, shipments from California to India have run high, convincing some participants that the country’s buying spree would soon subsidize. December also marks the start of a quiet period for almond buying from India.

Market participants attributed the continued demand in India to recent shipping delays, which could be having the unintended consequence of regulating the arrival of containers to India and therefore preventing the market from becoming oversupplied, which would dampen demand.

Instead, a supply glut hasn’t occurred, and demand from India for California almonds persists. Also, shipment delays to India mean that containers purchased months ago at U.S. FAS price levels lower than current levels are just arriving in the country now, enabling importers to sell into the local wholesale market at historically low prices. Those low wholesale prices have kept retail demand in India alive, which incentivizes importers to continue buying from California to keep the market sufficiently supplied.

NPIS prices climbed throughout the week, ending 5 cents higher. In addition to NPIS, importers continued to show interest in Monterey Inshell. A broker in India said buying interest for IIS was waning because of competitive NPIS prices and apparent smaller-than-normal kernels from Independence. As a result, the spread between bids and offers for IIS is increasing as sellers raised offers but buyers showing little desire to chase them.  

Europe buying for Easter holiday

In addition to India, Europe emerged as an active buyer during the week ending December 15. The euro’s recent strength relative to the U.S. dollar has made now a good time for European importers to buy U.S. almonds. The approaching holidays and purchasing for Easter also helped fuel buying from Europe.   

Market participants said most of Europe’s interest came from its manufacturing and confectionary sectors, with Germany emerging as the top buying country within the region.

STDS, which are sold primarily to Europe, started the week bid at $1.83/lb FAS and lingered there for most of the period. Trades were verified at $1.84/lb FAS for prompt shipment before increasing at the end of the period.

Buying from Europe also bolstered prices for BP SSR 27/30 and 30/32. Market participants note that candy companies have built manufacturing equipment around Butte Padre specifications, which has creative captive demand with Butte Padre production in California declining.   

 

“Buyers really need to have Butte Padre but people have stopped planting it,” a packer said.

Selling to China becomes problematic at a critical time

Shipping problems during the period made selling to China difficult with the Chinese New Year approaching. In recent years, demand from the country has ramped up ahead of the Chinese New Year before slowing.    

One packer said multiple shipping companies said they are no longer accepting shipments to China until after the festival, which falls on February 12, 2021. Another packer who frequently sells to China said buyers there are asking for guarantees that almonds they purchase now will be shipped within two weeks – a request that packers said is difficult if not impossible to fulfill given the current constraints.

Some packers said shipping problems are resulting in price premiums for almonds shipping prompt versus almond shipping further forward.

However, if some items were commanding higher prices for prompt shipment, STDS were not among them. Instead, buyers during the week ending December 15 appeared willing to pay more for STDS shipping later in 2021 compared with prompt. A bid for STDS shipping in Q3 2021 was heard at $1.88/lb FAS, and another bid for STDS shipping in Q4 2021 was heard at $1.96/lb FAS.

Demand from Japan appeared to be decent last week, with multiple trades verified for Japan-spec items. Even though shipments from California to Japan have been down this crop year compared with previous years, a packer who sells to the country said inventory levels in Japan could be on the verge of reaching lower-than-usual levels after running high most of the year.

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