Sellers withdraw on concerns about the quality of California’s next crop

March 30, 2022

Talk of potential damage from last month’s freeze in California resurfaced in the global almond market the week ending Tuesday, prompting offers to retreat and bolstering prices for STD5 and inshell.

“Growers are saying there could be a little more damage than they initially thought,” said a California-based broker on Tuesday, explaining why offers were become harder to find. “There’s still concern about frost damage.”

Though prices for STD5 increased 3 cents on the week, prices for all assessed Select Sheller Run and Carmel Type Supreme items fell. NPIS showed the biggest gain, rising 6 cents on the week. NPX kernel prices were mixed.

A buyer in Germany said the STD5 market is in a “standoff,” with buyers largely refraining from chasing offers and sellers withdrawing until more information about the 2022 crop becomes available amid uncertainty about potential freeze and drought effects.

Still, STD5 demand from Europe firmed during the week, with increasing demand for shipments partly linked to a large German supermarket tendering to local rebaggers for a large volume of blanched, sliced, slivered, and meal almonds.

Traders said this demand had filtered back to European food processors: One large Spanish processor launched a bid for 200 metric tons of STD5, which one U.K.-based trader described as unusual.

Bids for prompt STD5 increased to $1.78/lb FAS. A paucity of offers meant isolated buyers with short positions decided to pay a few extra cents to eliminate their risk rather than wait for new data about the upcoming crop.

That new data is expected to arrive in April with a forecast from an industry participant and an acreage report from the USDA. Market participants will be paying close attention to the reports to glean insight into the extent of damage from the recent freeze, which hit parts of California’s Central Valley beginning on February 24.

New crop

Prices for new crop STD5 inched up with business for October and November shipments at $1.85/lb FAS on Friday, following offers as low as $1.81/lb FAS the previous week.

“In my opinion, new crop prices should not be higher than those of current crop,” said the Germany-based buyer referred to earlier, adding that due to delays in shipping, new crop cargoes would not arrive in Europe in time for the crucial Christmas peak consumption period.

“When I use it in January, I have no benefit, so why should I pay a few cents more for new crop when I can get current crop at a lower price for the same purpose?” he said.

A U.K.-based trader said that despite concerns that the 2022 crop could be large, he believed some buyers were locking in new crop volumes due to several factors.

“Production costs are similar to current levels, so there’s limited downside risk, inflation is rising, food prices, in general, are soaring,” the trader said. “If you can get a good freight deal, you should probably jump on current new crop prices.”

Still, new crop trade remained more subdued than usual for late March. A call-pool packer in Stanislaus County said growers have little interest in selling.

“This is the first time I’m zero sold on new crop this time of year,” the packer said.

Indian inshell demand

The inshell market continued to push higher, with sources saying the low prices are attractive for Indian importers keen to get ahead of shipping constraints and cover Diwali demand.

Prompt business for NPIS was done from $1.82/lb-$1.85/lb FAS, although traders in India said that buying interest fizzled as offers increased. One importer said the market was still beset by shipping delays, creating an artificial shortage of stock locally.

“People are still waiting for inventory they bought long ago, and they’re not sure at what level they can sell it,” the importer said.

The NPISEM premium to NPX 27/30, typically positive and seen as an incentive for packers to ship inshell rather than crack out kernels, rose to 37 cents on Tuesday. The spread has averaged 17 cents this crop year.

Prices for most NPX kernel items were rangebound amid an apparent tight availability of midsize, U.S. Extra No. 1-grade kernels and a lack of offers from packers.

A U.K.-based trader said there were already concerns last August during the harvest that larger-size NPX kernels would struggle to meet demand, citing a rise in NPX 23/25 prices to over $3/lb as an example.

“With all the [Nonpareil] inshell that’s gone out, the tightness is coming back to haunt us,” the trader said.

Logistics issues

Although container shortages continue to delay shipments from Oakland, some market participants said they had seen signs that booking freight was becoming less challenging and hoped that the next position report from the Almond Board of California would reveal healthier shipping numbers for the month.

However, one European trader was skeptical that March shipments would approach the 266.6 million lbs shipped in March 2021. He said that overall shipments for the remaining five months of the crop year are unlikely to alleviate the potential for a large carry-out, given that February uncommitted inventory was 1.16 billion lbs, up 30% on the year.

“If I were a seller, that would scare me,” he said.

The Stratamarkets Almond Index ended the week at $2.14/lb FAS, down 1.1% from the prior week and up 2.5% on the year.

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