Understanding The Almond Price Drop

Almond prices have fallen significantly in recent months. But, it’s not quite as bad as some have made it out to be, according to Vernon Crowder, senior vice president and senior analyst for Rabobank’s Food & Agribusiness Research and Advisory group.

Advertisement

“Some of the papers exaggerate, because they’ll use the highest price Nonpareils ever, which were last year, probably close to $5, and then they’ll use the lowest price for the lowest quality variety, which in recent weeks has been $2.60,” Crowder says. “The average last year was maybe a little more than $4.”

As of mid-February 2016, the average price was around $3, which equates to about a 25% drop.

It’s important to consider, though, that almond prices have been unusually high in recent years due to a shortage caused by the drought and low chilling hours. Because yields were down considerably the last couple of years, the crop had to be rationed, even though demand remained strong. This, on top of a strengthening U.S. dollar, drove almond prices up.

These high prices didn’t bode well for many food manufacturers, some of whom changed the mix of nuts in their products or discontinued product lines altogether to avoid paying such high prices for almonds.

Top Articles
Healthy Soils at Center of New $5 Million Initiative for California Citrus Growers

In addition, crop yields in 2015 were higher than expected (presumably due to the recent influx of new plantings), further contributing to a decrease in almond value.

“Especially overseas, some of the buyers said they were not going to pay the high price, so some of the brokers walked away from the deals, which left nuts on the dock,” Crowder says. “Those nuts needed to find homes, so that added to some of the price drop, as well – just people trying to sort out the momentary chaos after the crop came in bigger.”

Now that prices are lower, Crowder says buyers are expressing more interest, both domestically and internationally. But prices aren’t expected to rebound just yet. Buyers are waiting to see how the bloom period goes.

“The initial rains were good, which is good news for the crop, but now that the weather is dry, it’s sort of a mixed bag,” Crowder notes. “On one hand, everybody needs rain – we need more rain to fill up the reservoirs and to keep the snowpack up – but on the other hand, we also need some sunshine in these weeks so the bees have a chance to pollinate the trees.”

If the crop size edges back up to about 2 billion pounds, Crowder anticipates buyers will continue to expect lower prices.

Putting It Into Context
While a 25% price drop sounds significant, Crowder points out that current prices are still quite profitable for almond producers. Over the last 10 years, prices have averaged around $2.50. Today’s prices are still above that average.

Marketers and processors, however, have had a harder time coping with the sudden price drop. “They advanced money on the higher price,” Crowder says.

Those prices will be adjusted, but in the meantime, many of these marketers are dealing with a cash flow crunch from paying higher advances early in the season.

The weather, of course, will play a pivotal role in upcoming almond prices. Even if California gets more rain, Crowder says growers – particularly those in the western San Joaquin Valley – will get very few surface water deliveries this year. Not only are reservoirs not full yet, there have been deferred water deliveries for environmental purposes, as well. “So they’ll still be buying expensive water,” he says.

0