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Drop in almond prices is over, Select Harvests says

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The correction in almond prices is over, as the effects of the Californian drought rule out a supply boom from the US, according to grower Select Harvests.

Australia-based Select Harvests forecast almond prices for 2015-16 were at Aus$12 a kilogramme, compared to an average of Aus$11.45 a kilogramme last season.

Almond prices have eased by around 25% since August, although they are still higher than at any point before 2014.

Prices peak

Changing consumer tastes, and increased health consciousness, has fuelled a boom in almond demand over the last few years, with increasing volumes used in dairy-free milk substitutes.

Dollar-denominated almond prices peaked in the summer of this year, having grown by more than 200% in five years.

But the slow pace of recent shipments from the US has raised fears of easing demand.

Last week, QFN Trading & Agency noted that October, the most important month of the season, saw shipments down 20%, and warned that without improved demand, or a disruption to US production, "there is no reason for prices to stop falling right now".

Demand remains in place

Select Harvests chairman Michael Iwaniw said that despite some "buyer price resistance," the company expected "continued relatively high almond prices in the short to mid-term".

Paul Thompson, the group's managing director, forecast that prices were stable after the autumn fall.

"In the last two months prices have corrected to similar levels to last year and demand has been steady," Mr Thompson said.

"Pricing is likely to stabilize at these levels."

Drought squeezes production

Californian production has been hit by drought, as almonds are a water-intensive crop.

Environmental concerns area being raised that the cultivation of almonds is depleting water resources in the state, which produces the vast majority of the US crop.

Mr Thompson said that the effects of this drought would limit US production.

"Our experience with drought in the early 2000s and research from Davis University California tells us it will take three years for the trees to return to full productivity," he said.

Shares rise

"We are confident that we are not going to see a significant supply increase in the near future," he added.

The USDA has pegged hopes for this season's almond crop at 1.8bn pounds, down from 1.9bn last year.

"Our market intelligence is there is low inventories in the market," Mr Thompson said.

Select Harvests shares in Sydney closed up 1.0%, at Aus$9.50.


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