Situation
Almond exports have improved in the first quarter of 2023 as pressures on the global supply chain eased and transportation costs moderated. Moreover, the uncertainty surrounding the size of the 2023-2024 crop prompted some buyers to secure inventory needs, and the price of almonds increased slightly.
Outlook
In the short-run, uncertainty remains the most certain factor in the almond market. Debate about the size and quality of the 2023-2024 crop will likely persist throughout Q2 2023. Supply-chain pressures are expected to continue to ease in this period, which should bolster exports, even though exchange rates remain elevated. Almond prices are expected to tick higher in the second quarter.
Background
Almond exports in the first eight months of the 2022-2023 crop year (August 1 to the following July 31) were 12% higher than in the previous year, and total almond shipments were 7% above the previous year. This bump in almond exports happened alongside a significant improvement in the global supply chain. The Federal Reserve Bank of New York’s measure of supply-chain pressure recently moved below zero, indicating a period of less supply-chain pressure for the first time since December 2019. As pressures on the supply chain have eased, transportation costs for truck, rail and ocean freight have also moderated.
The supply-chain recovery also coincided with great uncertainty about the size and quality of the 2023-2024 almond crop. Much of California’s almond-bearing region has experienced historically large rainfalls and cold weather. The large rainfalls have drastically improved the outlook for water allocations in the current crop year, but the impacts of adverse weather during the bloom season on pollination are still uncertain. The rain, flooding, wind, and cold weather are less favorable conditions for bees to pollinate the almonds and could prevent farmers from applying disease control fungicides.
Not only was the amount of precipitation historically high, but weather stations in Stockton, Modesto, Merced, Madera, Fresno, and Bakersfield each recorded more days of precipitation, more days of high wind speed and overall average lower temperatures in February and March than the previous several years. Several stations also recorded at least five days of below-freezing weather. Additionally, the number of days with the average temperature above 55-degrees Fahrenheit, a measuring stick for bee activity, were around 60 percent less than the three-year average in Bakersfield and Fresno and more than 70 percent less in Stockton. The uncertain nature of the 2023-2024 almond crop, combined with easing supply-chain conditions and costs, has led to some increased buying activity and price appreciation.
Looking Forward
The size of the almond crop will clarify toward the end of Q2 2023, as nut sets, acreage, flooding impacts, and disease damage will become apparent. In the very short term, it is likely that almond prices will slowly grind higher due to uncertainty, but fundamental changes in the market are unlikely until conditions become clearer.
On the positive side, most almond farmers should see a decrease in their water-expense line item. The heavy rainfall, strong reservoir levels and large snowpack should provide farmers with strong water allocations and push down the price of water on the secondary market. The Drought Severity and Coverage Index (DSCI) over the almond-producing regions has sharply declined, which should correspond to favorable water conditions.
Supply-chain conditions are expected to remain mostly favorable for almond exporters as global growth moderates.
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