Have you been nuts about Aussie almonds lately? Turns out, so has the rest of the world.
Pointing to the Australian Almond Board Position Report for October (covering March to October), agribusiness company Select Harvests (ASX: SHV) has revealed that total year-to-date (YTD) shipments were up 9% on the prior year, while China YTD shipments were up 48%.
The Company is also making headway with India, which is among the top four global almond markets. Almonds were among the Australian tree nut included in the recently negotiated Free Trade Agreement between Australia and India. This Agreement can prove super beneficial for Super Harvests in 2023, giving Aussie almonds a competitive edge.
Despite the positive news, next year, the Company expects only a minor increase in its crop production. It noted that the FY2023 expectation is 30,000 metric tonnes (MT) compared to 29,250 MT delivered in FY2022.
Managing Director of Select Harvests, Paul Thompson, shared, “Similar to previous years the trading market has remained quiet at this time of year. Most customers have acquired their inventory for the Christmas and Chinese New Year consumption peak. Market pricing has remained flat. We do not anticipate any positive movement until there is a clearer picture of the US 2023 crop potential post-bloom and any further acreage removals in mid-February.”
Select Harvests is a Melbourne-based fully integrated almond business, comprising orchards, primary processing and value-added processing of the nuts. This includes everything from growing the almonds to hulling, shelling, roasting and dicing them, among other things, under the Renshaw & Allinga Farms industrial brands.
This year, the weather threw a spanner in the works for Australia’s agriculture industry, bringing on cooler and wetter conditions. The floods affected many crops; somehow, Select Harvests remained immune.
As per its reports, the Company’s “risk mitigation strategies” protected its key irrigation infrastructure from the impacts of the flooding while any orchard inundation was managed by the horticultural teams. In fact, its 2023 crop is already at the kernel-hardening stage of the horticultural cycle, and subject to normal horticultural conditions.
The Company is expecting overall costs to increase because materials, like fertilizers and ag-chem solutions, have become pricier. Though it has managed to reduce its water cost and its management is looking for more avenues to cut costs, these won’t be enough to offset the material costs. Hopefully, its competition experiencing similar bumps will bring about some relief for Select Harvests.
On November 15, California-based agricultural service Land IQ and the Almond Board of California released the US Total Standing Acreage Report 2022. The total acreage was estimated at 1.64 million acres, compared with 1.66 million acres at the same time in 2021. Non-bearing acres (i.e. new plantings going back to 2020 but not yet bearing almonds) dropped to 294,000 acres, from 353,000 acres in 2021. Much land has been stressed or abandoned, impacting crop receipts negatively.
Though this seems like good news for Select Harvests, it’s not conclusive. Many US hullers are expecting to complete processing in December this year (compared to last season where 235 million lbs were processed in January and February). Because of that, there is some uncertainty around the final size of its 2022 crop and how the Company will fare in comparison.
In FY22, Select Harvests witnessed a revenue decline of 12.7% on FY21 to $199.7 million as its EBITDA fell 32.2% to $40.4 million. Its NPAT also took a significant hit, declining over 75% from $25.3 million to $6.2 million.
The Company has had a rough year, but with the new India agreement and the US crop falling short, Select Harvests might just be in with a chance to make up for the losses.
Alinda is a Business Reporter for The Sentiment
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