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Statement on Salmonella and Food Safety
5/24/04 Billion
Pound Crop Estimate 7/1/03
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- Shipments reported for May 2006 were 79.88 million lbs. - This is approximately 18.63% above the May 2005 figures. Prices have continued to increase for both current and the 2006 crop, and the disparity has widened further. Approximate market levels prior to the shipping figures were: 2005 crop NPS 25/27 AOL – USD 3.25/lb. - 715/220 FAS California Carmel SSR 25/27 AOL – 3.05/lb. – 671/220 Cal SSR 27/30 AOL – 3.00/lb. – 660/220 STD5 – 2.95/lb. – 649/220 2006 crop NPS 25/27 AOL – 2.60/lb. – 572/220 FAS California Carmel SSR 25/27 AOL – 2.35/lb. – 517/220 Cal SSR 27/30 AOL – 2.30/lb. – 506/220 STD5 – 2.25/lb. – 495/220 2006 CROP DEVELOPMENT: Overall the weather conditions for crop development in California have been favorable in the past 6 weeks. Hail storms (most notably the storm on the Westside of the valley April 21) and the more recent Leaf-footed plant bug have damaged some orchards significantly, but the damage appears to be localized to select growers and not having affected the total crop size significantly. Early signs in the orchards are that harvest will be 10-15 days late this fall. The subjective estimate of 1.02 billion lbs. was inline with our expectations but the acreage estimate of 580,000 acres was a surprise, we expected a slightly higher number. FACTORS THAT COULD INCREASE THE CROP SIZE FROM THE ESTIMATE: BEARING ACREAGE – If it were actually for example 600,000 acres – Add 35.2 Million lbs. to the crop size. Note, this is our own estimate and NASS’s figure is 580,000 bearing acres. THIRD LEAF ACREAGE (not considered bearing acreage as crop production is only in the range of 500 lbs. per acre) – If we have 32,785 third leaf acres compared with 15,524 third leaf acres with the 2005 crop – Add 8.6 million lbs. to the crop size. FACTORS THAT COULD DECREASE THE CROP SIZE FROM THE ESTIMATE: KERNEL SIZE – The late spring delayed kernel size development. Smaller kernel sizing could easily decrease the crop size by 30 to 50 million lbs. HAIL DAMAGE – If an estimated 15,000 acres were affected at about 650 lbs. per acre loss – we estimate about 9.75 million lbs. were lost. LEAFFOOTED PLANT BUG – Too early to estimate but doesn’t appear significant. FROST DAMAGE – Was spotty and should have already been factored into the subjective estimate. CALIFORNIA’S ACREAGE DEVELOPMENT & PRODUCTION 1994-2006: SUPPLY & DEMAND ANALYSIS: 2003 Crop Carry-In..............162.04 Million lbs. Receipts (Net)........1011.14 (1032.94 Gross) Total Supply..........1173.18 Shipments.............1024.28 Carryout..............148.9 2004 Crop Carry-In..............148.9 Receipts (Net)........958.116 (998.038 Gross) Total Supply..........1106.8 Shipments.............984 Carryout..............137.68 2005 Crop –Estimated Final Figures Carry-In..............137.68 Receipts (Net)........883.44 (910.758 Gross)* Total Supply..........1021.12 Shipments.............915.75 ** Carryout..............105.37 ** 2006 Crop – Preliminary Estimates Carry-In..............105.37 ** Receipts (Net)........989.4 (1020 Gross)** Total Supply..........1094.77** Shipments............. Carryout.............. * We are now using an estimated Loss & Exempt of 3% as the Almond Board will be using this figure instead of 4% as its much more in line with the actual L&E we have experienced in the past several crop years. ** Estimate only. Assumes shipments improve by 10% in June & July versus the previous crop year. If they remain the same, shipments will be 902.83 million lbs. If they improve by 20%, shipments would reach 928.68 million lbs. SUPPLY & CARRY-OUT: With the upward price trend the “grower reserve” has come back in place, with many growers holding onto product for both 2005 and 2006 crops, leaving handlers with much less to offer and making supply seem even tighter than it really is. We expect the carry-in for the 2006 crop to be less than what we carried into the 2005 crop. We find it very interesting that the figure has been declining every year since the 2003 crop. These tight supplies in the later part of the crop year put pressure on pricing and make it difficult for some end-users to cover their requirements. It is understandable that a carryout of 105 million lbs. does not seem like a tight supply to some. This is approximately 47,000 MT and probably more than the entire Spanish crop was last fall. Though, we point out a few factors to keep in mind: 1. The carry-in is calculated by as of July 31 every year and in a year like this with an expected late harvest; we still need the carry-in to cover about 4 weeks of Nonpareil shipments and 6-8 weeks of Cal/Mission type requirements. 2. We now have many more handlers in our industry. With over 100 handlers, the supply is very widely dispersed which can make it difficult to come up with full-loads of a buyer’s specific requirements. 3. There are now much more call pool growers (those which make the decisions of which time to sell their crop) and during times of tight supply and rising markets, they often postpone selling, which restricts the short-term supply further. A larger carryout in the future will help bring more stability to the market. SPANISH CROP: Most recent estimates have been in the range of 130 to 155 million lbs. There is not an official estimate done by government organizations, but the general expectation is for a larger crop than last year’s estimated 100 million lbs. The trees received more water this year and there weren’t significant frost events either. DEMAND : California’s monthly shipment figures have been better than the same months with the 2004 crop for the past three months– please find below chart:  While the upward price trend for much of the past few months has brought in some short-term demand, giving more incentive to importers and distributors to buy now for their distribution in 30 to 90 days, there have also been many signs of an actual increase in consumption from the lows caused by last fall’s record high prices. Demand started to recover at the consumer level in many markets including the US, though consumption by no means has recovered to anywhere near where it was 2 years ago. Demand in the Middle East and India for summer shipments and very early new crop shipments should put more pressure on the transition as Diwalli and Rammadan are both early this year, and India appears to have a very empty pipeline. The Spanish manufacturers have come in to buy a lot more for their manufacturing needs and there has been an overall demand for STD5, which seems to have greatly exceeded the offering of it. The disproportionate demand for STD5 has helped squeeze the premiums between grades and varieties to where there is a much smaller gap between the price of STD5 and Carmels, between Carmels and Nonpareils, etc. As is expected in down-markets and up-markets, the manufactured almond pricing has not kept pace with the increase in the STD5 and overall brown-skin market. Most grades of manufactured almonds are currently in the 3.30 to 3.50/lb. FAS range. CONCLUSION: The .65 to .70/lb. spread between current crop and new crop should continue to encourage buyers to buy only what is needed between now and new crop and encourage sellers to sell all their crop before the 2006 crop arrives. As of May 31 we had a computed inventory of 2% less than the time last year, an uncommitted inventory of 5.5% less, and about 25-30% lower prices. These factors should encourage a very firm market at least up until the next crop estimate, despite the price gap of .65 to .70/lb. If the tight supply of current crop brings 2006 crop prices up too high, the market could set itself up for another correction during the 2006 crop year. The expected crop and carry-in quantities will allow us room to potentially improve shipments by about 8% from this crop year. Its very possible this could be done with higher price levels than those the 2006 crop have been trading at, and we expect a short-term increase in pricing in the next 20 days. OBJECTIVE ESTIMATE: Expected to be released by NASS June 29! (update 6/14/06: Next estimate will be delayed until July 6th). Best Regards, Paul Ewing Director of Sales Hilltop Ranch, Inc. For more information, contact Paul Ewing directly. Previous Market Reports: ©2006 Hilltop Ranch, Inc. |
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