EU customs duty reduction and low prices lift European almond demand

Recent price declines in the global almond market are driving increased buying from European traders, but demand is also being helped by a 1.5% reduction in European Union customs duty on imported U.S. almonds from the start of the New Year.

Another factor supporting U.S. almond prices is their current price advantage over Spanish almonds, which some European end-users are happy to use as a substitute if they can be procured cheaper.

STD5 prices for prompt shipment fell to $1.82/lb FAS on Tuesday, its lowest since June 2021. However, traders said the low prices are attracting bids from buyers taking advantage of the customs duty reduction.

EU import tariffs for shelled almonds from all origins are set at 3.5% but a lower tariff of 2% applies for the first 85,958 metric tons (189.5 million lbs) of U.S. almonds imported each year.

A buyer in Germany said he believed that along with the historically low prices, steady inquiries for STD5 were partly incentivized by the lower tariff, which came into force on January 1. He dismissed the idea that buying was being driven by processors replenishing stocks.

“I guess a lot of people are buying right now to put them into the 2% duty, but I doubt very much if there is higher demand for almonds on repacking,” he said, adding that German imports per year would typically swing between 58,000 mt and 64,000 mt depending on whether it was a low- or high-price environment.

A Spanish broker said the 85,958 mt import quota is usually cleared by the end of March or beginning of April but with current logistics issues impacting container freight transport, “maybe this year with all the delays we could reach mid-April or even the end of April.”

A U.K.-based trader said many industrial users of STD5 “filled their boots last year at the cheap prices” around $1.75-$1.80/lb FAS, covering into Q1, Q2 and even beyond.

“And so those that haven’t covered are looking at shipment delays– you can’t even get a booking for three weeks and transit is 45-50 days – and they’re accepting the prices in the low $1.80s,” he added.

Spanish substitution

Trading sources said that the fall in California FAS prices means U.S. STD5 prices have a price advantage over Spanish Unselected Valencias, which some end-users can switch to if containers bought on a DDP Europe basis fall below the combined price for U.S. almonds including freight costs and customs duties.

Last week, two trucks (48 mt, or 105,821 lbs) of Unselected Valencias for prompt delivery traded at Eur3.97/kg, ($2.03/lb) on a DDP Spain basis although traders said the price had now firmed to above Eur4.05/kg.

The buyer in Germany said at current prices in the $1.83-1.85/lb FAS range, STD5 from California could be secured at an equivalent DDP price of around Eur3.85-3.87/kg, although he added that buyers also had to factor in the likelihood of transport delays given current logistics problems.

The delivered price for STD5 priced at $1.85/lb FAS with $0.08/lb for U.S. West Coast to Europe container freight and a 2% customs duty equals $1.97/lb (Eur3.84/kg), according to Stratamarkets’ analysis.

While the Spanish market normally reacts quickly to a correction in California FAS prices and offers a 5-10 cent discount on a delivered basis, Spain was receiving a lot of demand from Western and Central Europe due to logistics delays.

“Many customers are suffering delayed loads that they need and are supposed to be arriving now, so they are switching into Spanish varieties in sized selected products,” said the broker based in Spain. “So Spanish prices are holding right now and we could see this premium grow slightly bigger, but eventually the delayed loads [of U.S. almonds] will arrive and probably the amount of availability is going to be huge so we could see prices fall later on.”

EU demand

Western European imports were up 21% last crop year when compared with the 2019-2020 crop year, driven by low pricing. Between February 2021 and June 2021, STD5 prices averaged $1.84/lb FAS, according to Stratamarkets price data.

Europe took advantage, and exports to Western Europe from March 2021 to July 2021 totaled 332 million lbs, up 41% compared with the same period in 2020.

But from August 2021 and December 2021, exports to Western Europe were down 24% compared with August to December 2020.

That roughly 15% difference roughly matches historical demand, implying that inventory levels should be coming into balance. The ongoing shipping delays, however, could accelerate inventory depletion.

“They have to be eating into inventory,” said a Madera County packer. “Maybe they bought too much last year, but the shipment delays this year are starting to dig into supply.”

The STD5 market has been markedly active in recent days, with multiple trades reported between $1.82-$1.87/lb FAS for nearby shipment.

STD5 trades reported to Stratamarkets this month through Tuesday total 69 compared with 25 in December.

A second California packer said it wasn’t clear if Europe’s inventory levels  were falling, speculating that much of the recent trading activity has been price-driven.

“Europe is a weird one right now,” said a Kern County packer. “They bought so much last year, so they’ve been able to flip that stuff for a lot more money, and now prices are down at those levels again, so I can see them flipping again rather than using them.”

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Launched in 2021, Stratamarkets is the leading provider of independent price benchmarks and market intelligence for the global almond market. Companies in 11 countries and five continents rely on Stratamarkets to track prices in a fast-moving market, negotiate and settle contracts, benchmark performance and much more.

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