February 12, 2015
by Bill Morecraft
Blue Diamond Almonds
The January ABC Position Report confirms that west coast port congestion has taken center stage in the California almond industry. While the issues have been evident since November, they have escalated substantially since mid-December. The long lead time to deliver goods through west coast ports now creates a stark contrast for almond exports. Record January commitments for the industry of 256 million lbs are juxtaposed with monthly shipments dropping 28%. Short-term demand is at record levels, but execution has not been this hampered since 2002.
The January data confirms a 2014 crop of 1.85 billion. The total 2014 supply of 2.16 billion is now ~70% committed. Welcome bright spots recently include strong demand from China, India, Middle East, and the U.S. Shipments to Europe continue to be impacted by the rebound in 2014 Spanish supply and the embargo on exports to Russia. Overall, shipments lag the ~10% decline necessitated by the smaller crop. Port congestion is responsible for the decline in January.
Almond pricing in January from California origins was firm to rising, reflecting the exceptional demand for new commitments. However, the light export shipments threaten to create shortages of forward goods in the short term. While most markets have covered through early spring, delivery time for many export destinations is uncertain. Even after a resolution of the ongoing west coast labor negotiations, it will take 60-90 days to recover normal service levels.
January U.S, shipments were up 1.5% over the prior year, and remain flat on a YTD basis. Export shipments declined 42% from last January and are down 20% YTD. Underlying demand is best characterized by the record January commitments at current pricing that drove the industry to a 70% commitment level.
Bloom in California has begun and is expected to progress rapidly under excellent weather conditions for the next 7-10 days. Uncertain water availability and the long-term impact of drought makes crop projections more uncertain than in any previous years. The difficult conditions cloud the outlook on 2015 yield per acre.
Prices through late December and January have been firm to rising, reflecting strong demand. The future outlook is made more difficult by the difficulty in fulfilling export orders through west coast ports. The light January export shipments are far more reflective of port congestion than they are of underlying demand. Prices from origin are likely to remain stable through the bloom on somewhat lighter activity than experienced in January. Concern for 2015 crop supply will remain until harvest given the current water outlook.