Friday, February 09, 2007

Dear Friends:

Market remains firm and steady as we make record shipments for January at 85 million lbs—4 mil more than the prior record in 2002 crop and 20 mil more than a year ago. At the same time we have record 2006 crop receipts of 1.092 billion lbs. We expect another 10 million, bringing the total to about 1.1 billion lbs. This leaves us with an estimated 570 million lbs for the next 6 months and a carry over. The combined record shipment months from 2002 to 2005 crops for the next 6 months is 464 million lbs, an average of 77 mil/month. If we ship at that pace, we will have a carry out of 106 million lbs, and the total season shipments will be 1.074 billion lbs, 50 million more than the record 2003 crop. Accordingly, I would expect strong shipments to continue, giving us final shipments of 1.025 to 1.075 billion lbs and leaving a carry out of 105 to 130 million lbs. Unless there is a big change in this trend, the supply and demand are reasonably balanced at the current prices.

The market price from now on will react to the pollination conditions, which is expected to be later this year—starting week of 19 Feb. Current prices for 2007 crop reflect an expectation for a larger crop—potential 1.2 billion—at a discount of .30 to .40/lb. If pollination conditions are good, we could have a small softening of prices for both crop years then a transition during July to Sept from the higher current levels to the lower new crop levels. If pollination conditions are poor, current crop prices will increase slightly and 2007 crop will increase by a greater amount, bringing the two crops closer together in price.

Aflatoxin update: The EU is working on a proposal to increase sampling of arriving containers for aflatoxin and to standardize the process for all ports. Simultaneously, the Almond Board has developed a voluntary aflatoxin sampling plan (VASP) based upon extensive research that requires a 15kg representative sample to be ground and tested at a USDA certified lab. We expect the EU committee to propose testing 5% of arriving containers participating in the VASP program and 100% of those that are not. We don’t yet know when the program will begin but expect it between now and 2007 crop harvest. EU tolerance remains at 4ppb—lower than USA at 20 ppb and Japan at 10 ppb. Last year over 35 loads were rejected by EU customs for excess aflatoxin. The 5% sampling rate would actually mean an increase over current levels, and therefore expected to result in even more rejections. All considered, I would recommend that handlers prepare for participation in VASP and watch for news on the EU plans. Aflatoxin is a toxin produced by soil fungus and is most often associated with insect damage. Levels in almonds can be reduced by removing insect damaged kernels, blanching and avoiding high moisture during stockpiling and storage.

Salmonella update: The industry is awaiting USDA approval of the Almond Board’s proposed rule to require pasteurization of all North American shipments beginning with 2007 crop, unless purchased by a company certified to do its own pasteurization (the DV Program—Direct Verifiable). Pasteurization can be accomplished by Blanching, Oil Roasting, PPO (propylene oxide) fumigation or Thermal treatment (steam heat in chamber or continuous flow systems). We expect to have USDA news on this rule by end of March. There are several custom pasteurizing services in California available to handlers and buyers. Cost range is .05 to .07 per pound. Research has shown no significant physical or quality changes in PPO or thermal pasteurized almonds. I would expect a price differential between pasteurized and unpasteurized almonds, but that will be negotiated by each handler and buyer. Again I would recommend that handlers make pasteurization plans and that buyers discuss their pasteurization needs with their suppliers. If you are a buyer interested in participating in the DV program, start investigating now.

More information on both issues is available on the Almond Board website:

Please send comments and questions. I’ll discuss bloom conditions, expected acreage and 2007 crop prospects in the next 2 to 4 weeks.

Best regards, Bentzy

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