Hilltop Ranch, Inc. - News - Market Report, October 13th 2004

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Statement on Salmonella and Food Safety 5/24/04

Ewing Appointed Head of Sales 3/29/04

FDA Approves Qualified Health Claim 7/16/03

Billion Pound Crop Estimate 7/1/03

Letter to the trade 1/10/03

New Processing Facility 9/13/02

Market Report - October 13th 2004

The almond market remains firm – up approximately $0.70/lb. since harvest began about 11 weeks ago. Harvest continues with crop coming in shorter than expected and a few weeks remaining until it’s all in. Most in the industry are expecting a crop somewhere between 1 billion lbs. and last year’s 1.03 billion lbs. – about 70 to 100 million lbs. shy of CASS’s original estimate. Assuming a final gross crop right in the middle of this range, we’ll have a 974.4 million lb. marketable crop (1.015 billion gross lbs.) plus the carry in of 130 million lbs. Using this estimate and shipment figures based off historical growth, we’ve come up with the following Supply/Demand chart for US almonds:

Supply vs. Demand

Looking just at the US industry figures, if demand (measured by shipments) continues at the same pace, we would have no carry-over for next season. This has never happened in our industry and is impossible because approximately 80 million lbs. is essentially zero carry-over. With about 80 million lbs. it is very rare that the inquiries match up to inventories and the origin inventory is spread out among varieties, grades, and sizes in partial loads. The fact that the Mediterranean region crops combined are down an approximate 100 million lbs., demand has already surpassed world supply for this crop year. If shipments continued at this same pace we would run out of almonds sometime next summer 1-2 months before the new crop arrives.

We need these high prices to slow down consumption, but it’s certainly too early to know if prices have been over-adjusted. Today’s prices in the range of 2.90/lb. certainly haven’t hit the consumer yet. Because it’s not just a “snack item” anymore, and has so many versatile uses and known health benefits, demand has become much more inelastic. This was reflected in the September shipment figure, showing shipments up approximately 15% over last year’s September, despite much higher prices. When today’s high prices finally do reach the consumer, it will still be a few months before any discouraging of demand filters back to shipment figures.

During two months when most handlers have often been off the market – we had 256 million lbs. of new commitments in August and 162 million lbs. in September. At the end of last month, according to SEPT shipment figures, the industry had shipped or committed over 500 million lbs. – over half of this year’s expected salable crop.

The crop’s quality overall is better than last year, but the California and Mission types aren’t coming in as clean as the Nonpareils did. Sizing is very small, particularly for the Mission types which are averaging around 34/36. Availability of 27/30 AOL is limited.

With such high commitment figures and a decent percent of the crop sold at much lower prices than current origin spot prices, we don’t expect prices to come down significantly anytime soon. For now we’ll be watching upcoming shipment reports and hoping for a good bloom next spring.

Best Regards,

Paul Ewing
Director of Sales
Hilltop Ranch, Inc.

For more information, contact Paul Ewing directly.