A retreat in almond prices from record highs is starting to do their work in reviving demand for the nut, producer Select Harvests said – although the outlook failed to stop a fresh tumble in its shares.
Last year's surge in almond prices, driven by prolonged drought in the key US producing state of California, had "had an impact" in encouraging supplies, while stemming demand, which had also taken a knock from tighter credit conditions in many buying countries, Select Harvests said.
"End users are reluctant to commit to inventory in such an uncertain market and are conducting their buying activities on a hand-to-mouth basis," the Australian-based group added.
Meanwhile, shipments from California began the year with a 12% gain - backed by 2015-16 production which, at 1.9bn pounds according to market estimates, had turned out better than initially expected.
The US Department of Agriculture in December quoted a figure for the harvest of 1.8bn pounds.
However, almond demand "is re-emerging in some markets as credit/stock begins to move through the system," Select Harvests said.
"The current market prices will stimulate demand in the most price sensitive markets - India, China and the Middle East."
The group flagged a mixed outlook for the Californian harvest this year, with – on the plus side for output – snowpack, an important water source, at near-normal levels and the blossoming period enjoying "some of the best conditions in recent years".
More worrying for the state's almond growers is the shortage of water, at 63% of average levels, and a "long range forecast for another hot year".
Select Harvests said that its own output look set for a decline this year from the 2015 record high, by 800 tonnes to 13,700 tonnes, albeit with a better outlook for quality.
The outlook factors in the tendency of almond orchards to alternate years of higher and lower harvests, besides the removal of some older trees.
The retreat in values looks likely to cut average prices this year to Aus$9.00 a kilogramme, from the Aus$11.45 a kilogramme achieved in 2015.
Select Harvests has, with prices falling, reduced the pace of forward sales, with 16% of its output hedged, compared with a 30% figure a year ago.
The comments came as the group unveiled a 41% surge to Aus$23.91m in earnings for the July-to-December period, the first half of its financial year, on revenues up 65% at Aus$166.4m.
It raised its interim dividend by 40% to Aus$0.21 per share.
Select Harvests said it was "on track for another strong year of earnings and cash flow performance", but acknowledged that "uncertainty remains as to the US dollar almond prices which will prevail" as it undertakes its sales programme for this year's crop.
Shares in the group, which hit Aus$13.64 last year during the almond price boom, closed down 8.7% at Aus$4.83 in Sydney.
Broker Canaccord cut to Aus$6.66, from Aus$8.35, its target price for the stock, on which it kept a "buy" rating.
By Mike Verdin