Is the U.S. Producing Too Many Almonds? Probably not…
California production will hit 3bn pounds in the next five years. Global demand growth is expected to keep pace with supply expansion. Nominal prices are expected to be lower this season, but trend upward moving forward. It’s highly likely that the five-year average price stays in the profitable range for the majority of California growers, but downside price risk remains.
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California just harvested another record almond crop of an estimated 2.45bn pounds , on an estimated 1,070,000 bearing acres. "Rabobank’s newly-developed – and proprietary – baseline almond supply-and-demand analytical tool provides an average estimate of approximately 1,263,000 bearing acres by 2022,” according to Roland Fumasi, Rabobank Senior Analyst. “We expect an average yield of 2,323 pounds per acre in 2022, resulting in production of just over 2.9bn pounds in four years, and the expectation of breaching 3bn pounds in 2023.”
Global almond demand continues to be driven by the product’s powerful combination of taste, convenience, and healthfulness, coupled with continued rising incomes in developing countries, which drive changes in eating habits. Over the next five years, U.S. domestic demand is expected to continue to rise and remain at approximately 32% of global demand for U.S. almonds, reaching just over 900m pounds by 2022/23.
Based on our average supply and demand expectations, U.S. grower prices range from USD 2.27/pound to USD 2.44/pound, between the 2018/19 and 2022/23 marketing seasons. At the time of writing, reported blend price was approximately USD 2.30/pound. Due to the retaliatory tariffs currently in place, our price estimate for the full 2018/19 season is USD 2.27/pound – pretty close so far. However, considerable risk (volatility) is always looming.
When accounting for the measurable, potential volatility in the industry over the medium-term, based on standard inflationary and foreign currency assumptions, we recognize that there is a much greater probability that prices remain in the profitable zone for most California growers, versus the probability that they drop below the profitable threshold. While there is a small chance that the five-year average price – from 2018/19 to 2022/23 – finishes below USD 2.00/pound, it is four times more likely that the average price finishes above USD 2.50/pound. However, the most likely scenario is that the five-year average price is somewhere in between the two.