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Quality at Mt. Satake,
Jan. 2007 Statement on Salmonella and Food Safety
5/24/04 Billion
Pound Crop Estimate 7/1/03
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Market
Report – June 7th,
2007 Shipments reported for May 2007 were 76.7 million lbs.
SHIPMENTS/DEMAND: For current crop, several things seem to have been contributing to slow demand recently, but primarily the recent downward price trend, as well as buyer’s efforts to minimize their carry-in to a lower-priced new crop and seller’s efforts to minimize their carryout. There could be pent up demand on current crop, but with only 10-12 weeks remaining, any potential jump in pricing would not likely last too long. Additional demand could surface to ship to the E.U. before the new Aflatoxin regulations begin Sept 1. RECEIPTS & COMMITMENTS: Receipts as of May 31st were 1.113 billion lbs. The industry supply (including carry-in) is approximately 87% committed or shipped at this time, vs. 89% at this time last year. THE 2007 CROP: The NASS estimate of 1.310 billion lbs. was fairly inline with industry expectations but just high enough to bring 2007 crop pricing down slightly. There are a few things that we think could contribute to this number underestimating the crop: - Young trees – as many have commented already, the young trees have the strongest crop seen in many years and they will contribute some additional tonnage. The 3rd leaf trees are not counted in NASS’ 615,000 bearing acreage estimate. - Kernel sizing. Growing conditions have been excellent to help improve kernel sizing from what could have been much worse. We hope for maybe 1 size smaller than the ’06 crop for Nonpareils and other varieties may be 1-3 sizes smaller. We’ll know more about expected kernel sizing once we see the next NASS report on June 29. THE GROWER PERSPECTIVE (IN GENERAL): Price levels being traded for ’07 crop bring grower returns to roughly half the average levels returned with the ’05 crop. Farming costs have increased significantly in the past few years – perhaps 30%. Nevertheless, many growers, with some exceptions, acknowledge that the ’07 crop prices are generally profitable levels – especially given the excellent yields expected. Cash flow duress should not dictate growers’ marketing decisions like they did in some cases 5-6 years ago. There is a great diversity of opinion about when to sell, but most growers (like most buyers) are not unwilling to deal at the new crop prices, they just need more confidence in the market before they participate too extensively. Exceptions include growers facing exceptionally high costs (such as those with water difficulties or those who bought their land at peak levels) and some growers that simply do not want to support such low market levels by participating. LONG-TERM CONCERNS: Bees remain a concern, with initial quotes for hives for the ’08 crop pollination at record levels (USD 175 per hive), but water is by far the chief concern. Almond trees require about 4 acre-feet of water to produce and about 2.5 to 3 acre-feet to survive. On “the west side” (of the San Joaquin Valley) water is being auctioned off and was sold as high as 510 USD per acre-foot. In the case of these growers, new crop levels are certainly not profitable. They could face the prospect of running out of water by early fall. Depending on rainfall levels in the fall and winter, growers in this region (which makes up roughly 1/4 to 1/3 of the state’s acreage) may not have ample water for the ’08 crop. Growers of low value crops like cotton are selling their water to neighboring growers of almonds and other high value crops or transferring it within their operations to high value crops. The situation in Spain is also unfortunate. Most Spanish growers will face very unprofitable returns if pricing does not increase. With the EURO-USD exchange rate and low yields expected in Spain this fall (perhaps 60% of last year), many growers might not even harvest their crops. Some will still harvest and sell, and others will harvest and store the crop until pricing is more favorable. THE OUTLOOK: There
is more
current crop left to sell compared to this time last year (47 million
lbs.) and we believe there is more buying left to do as well. Once we
get past this transition into the new crop pricing, there is more hope
for stable pricing for the next several years. In the past few weeks,
trades have been made for 2007, 2008, 2009, and 2010 crops - all at
similar price levels. Previous Market Reports: ©2007 Hilltop Ranch, Inc. |
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