The almond market is for a “sustained period of higher pricing”, broker PAC Partners said, after the US slashed expectations for its 2019 harvest, citing “unusual weather”.
Melbourne-based PAC Partners said that the 300m-pound (136,000-tonne) “hole” in US production left by the US Department of Agriculture downgrade “is going to shock traders into action.
Buyers will “be concerned about low inventory”, with the official forecast for US almond stocks at the close of 2018-19 “already a very low” 340m pounds, equivalent to about 1.4 months of use.
“The new harvest over August-September was supposed to allow the 2020 carryout to come back to a more comfortable 450m pounds (2.2 months).”
“We are now in for a sustained period of higher almond pricing,” the broker said, although noting some potential “counter weight” from any further tariff moves by China, amid its trade war with the US, and by India.
India last month imposed tariffs on almonds and 27 other US products, including apples and walnuts, in retaliation for Washington ending India’s preferential trade status.
The comments followed the USDA’s cut to 2.20bn pounds in its forecast for almond production this year in California, which is responsible for more than 80% of world output.
“The 2019 almond crop experienced unusual weather,” the USDA said, adding that “significant rainfall during the bloom hindered pollination.
“Strong winds were reported to have damaged trees and knocked off some nuts.
“Instances of rain persisted through April and May, prompting concerns about disease pressure and warranting extra fungal [fungicide] applications.”
Select Harvests shares
Pac Partners’ comments came as it nudged higher to Aus$9.10 its price target on shares in Select Harvests, the Australian almond producer, on which it maintained a “buy” recommendation.
Its forecast factored in the group achieving an almond price of Aus$8.55 per kilogramme in its 2019 financial year, and Aus$8.65 per kilogramme in its 2020 financial year.
“We forecast that almond price trending back 10% to Aus$7.75 per kilogramme over the next two years… with higher Californian crop potential of 3bn pounds in say 2022 versus 2.3bn in recent years and 2.2bn forecast for 2019.”
Select Harvests shares closed down 1.5% at Aus$7.35 on Friday, after on Thursday closing up 4.3% at Aus$7.46, their highest finish in three years.