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Rally fades as demand hesitates

July 20, 2022

A price rally lost momentum in the global container market the week ending Tuesday as buyers continued to grapple with oversupplied local markets and a strengthening U.S. dollar.

After jumping 8 cents the previous week on bullish fundamentals, the Stratamarkets Almond Index returned 4 cents to settle at $2.12/lb FAS. Leading the decline were NPX 30/32 and NPX 23/25, losing 13 cents and 7 cents, respectively.

Market participants attributed the drop to unsteady global demand caused by a supply glut in most markets and purchasing power diminished by inflation and a U.S. dollar that continues to rise against other currencies.

“You can’t move it up if no one is actively trying to buy,” said a California packer on Tuesday.

Prices fell on thin trade, with most reported transactions for a small number of containers. New crop trade remained light, with buyers and sellers largely far apart on bids and offers.

In other developments:

  • NPIS lost 7 cents on the week as the market in India contends with a large volume of supply heading to the region and a weakening rupee against the dollar.
  • Australian inshell shipments fell by 33% from March to May, according to new data from the Australian Bureau of Statistics.
  • SSA Marine shut the largest terminal at the Port of Oakland on Tuesday due to a lack of workers at the terminal, a port spokeswoman said.

STD5 and SSR

STD5 current crop prices showed volatility during the week, with trades reported from $1.70/lb-$1.80/lb FAS for prompt shipment and prices declining as the period progressed.

Packers raised their offers following the USDA’s objective measurement forecast and the Almond Board of California’s June shipment report. After climbing following the reports, STD5 and SSR-grade prices began to fall on Monday. STD5 was offered at $1.72/lb at the close of the assessment period with bids at $1.68/lb FAS.

“We’ve seen an elastic movement in the STD5 price,” said a Spain-based trader. “Packers tried to move up the price, but when buyers realized there is plenty of product in ports such as Amsterdam, Rotterdam, and Valencia, it came down again.”

Traders said the item is available in considerable volumes on local spot markets at competitive prices, with one trader citing 10 loads offered at $4.18/kg DDP Spain. Another source said he knew a trader with 60 unsold containers of mostly STD5 and SSR-grade kernel in Valencia.

Market sources in Europe said that with high local spot availability of almonds and the peak summer holiday season approaching, buyers have little incentive to purchase forward. Covering for Q4 2022 is primarily finished, they said.

Participants said that afloat shipments continue to arrive, topping up already high inventories at storage facilities.

“Buyers are in a summer lull now and not really in a rush,” 

a U.K.-based trader said. “They’re concerned about what happened last year,” he added, referring to last summer when STD5 prices climbed to $2.49/lb FAS following the USDA’s objective measurement forecast before sliding.

The Spain-based trader said most European buyers were cautious about filling their warehouses due to uncertainty over the euro’s depreciation against the U.S. dollar, rising inflation, and a likely recession in the region.

He said that during a period of economic crisis, almond buyers prefer to “keep money in the company” rather than amass stocks of food items with a limited shelf life that could lose value.

“End-users and industrial buyers don’t want to move forward in taking positions,” he said. “What positions that have been taken up to now are mostly by processors and traders.”

The upshot was that few containers traded between California and Europe. “It’s just amazing the lack of volume going through,” a market participant said on Monday.

Inshell

NPIS lost 7 cents on the week as buyers in India essentially stepped back from the market with large volumes of supply in transit to the country.

Traders in India said prices in the domestic market have been choppy recently. On Tuesday, the rupee fell to an all-time low of over INR 80 against the greenback.

In the local market, unsized NPIS was offered lower at INR 16,800-17,200/40 kg on an EXW basis immediately after the position report, equivalent to $1.79-1.84/lb CIF, as traders noted the high amount of container shipments to India in June.

But by Tuesday, NPIS on an EXW basis was being offered at INR 17,300-17,800/kg ($1.85-1.90/lb CIF).

“Markets are on the firm side as good festival demand is coming,” a trader in India said on Tuesday. “I think there is more upwards room looking at the current trend.”

Some market participants believe that improved freight logistics mean shipments to India for the Diwali Festival are possible up to September. Others said containers will need to ship in the next two to three weeks to make it.

Though some buyers in India said they’re sufficiently covered for the festival, India remains the world’s largest importer of almonds from California and generates demand year-round.

“I’m hearing India isn’t as well covered for after Diwali,” said a Kern County packer.

In addition to demand from India and China, reduced inshell shipments from Australia could help support inshell prices.

Australian inshell shipments from March to May were down 33% from the same period last year, from 24 million lbs to 14 million lbs, according to the latest export data from the Australian Bureau of Statistics. Wet, humid weather before and during harvest in Australia damaged its crop.

India and China are Australia’s main inshell markets. India has felt the decline in Australia’s inshell shipments more than China, receiving 5.8 million lbs of inshell from Australia from March to May this year, compared with 9.6 million lbs the previous period.

Australia’s crop year starts in March.

Shipping

On Tuesday, one almond exporter in Madera County said trucks hauling his containers were turned away from the Port of Oakland as concerns heightened that shipping almonds from the port could slow after showing signs of improvement.

It was unclear how long the Oakland International Container Terminal, the largest terminal at the port, would remain shut following its closure on Tuesday. SSA Marine shut the terminal due to an insufficient number of workers at the terminal, said Marilyn Sandifur, a port spokeswoman.

The lack of workers at the terminal coincided with a protest by truck drivers of a state law that impacts independent contractors. The protest began Monday as trucks clogged traffic around the port. The protest is expected to continue on Wednesday.

Truck activity at the remaining three terminals at the port was reduced on Tuesday, though ship operations continued at those terminals, Sandifur said. The port is an exit point for about 85% of California’s almond exports.

New Crop Trade

New crop activity was thin during the week as buyers and sellers largely remained far apart on bids and offers.

According to one U.K.-based trading source, some European clients were inquiring to secure new crop consignments due to concerns that the euro could depreciate further against the dollar.

Last week, the surging U.S. dollar reached parity with the eurozone’s common currency for the first time in 20 years, reducing European buyers’ purchasing power amid rising inflation in the region.

“They are concerned about the weakening exchange rate and say they want to get some new crop on the books, and they’re not too bothered about when it arrives,” the trader said. “It’s kind of a forward hedge.”

However, a German marzipan producer said he would not be locking in forward purchases solely on currency concerns:

“There are always people who think things will get worse, but I don’t believe it will,” he said. “I expect the euro to pick up again soon.”

With the USDA’s objective measurement estimating less Nonpareil production from California compared with last year and small changes to kernel weight, some packers have refrained from selling large-size new crop Nonpareil kernel.

“From our standpoint, there isn’t a lot of reason to sell our big NPX until we know what we have,” a California packer said.

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