The Select Harvests Limited (ASX: SHV) share price is currently up by 16% after giving the market an exciting update.
Select Harvests is one of the largest almond farmers in Australia.
Select Harvests’ 2022 update
The nut business announced that 80% of its 2022 crop has been processed.
It’s forecasting that the 2022 crop will be between 28,800 mt to 29,200 mt. The 2021 crop volume was 28,250 mt.
The wetter than normal harvest conditions have resulted in lower volume, reduced inshell, as well as additional drying and operational costs.
It also said that 72% of the 2022 crop is committed (including internal sales). The forecast fair value sales price is “slightly higher” at $6.75 per kilo, compared to the previously advised fair valuation sales price of $6.64 per kilo.
Select Harvests said that shipping challenges have eased, and it has continued to focus its marketing efforts on the nearby Indian, South East Asian and Chinese markets.
Current market conditions
In July 2022, it was estimated that the US crop was 2.6 billion pounds and was down 11% on the 2021 actual crop of 2.92 billion pounds.
Select Harvests noted that harvest climactic conditions in both California and Spain have been extremely hot. Early reports from both regions are that volume is significantly down. Almond sizing and quality reportedly have been “adversely impacted”.
Market pricing has strengthened in the last few weeks. A further insight into the long-term drought impact will be provided in November 2022 when the Californian Almond Board releases a report.
The Almond Board of Australia’s July 2022 Position report showed that after the first fourth months of the 2022 crop reporting period, shipments were down 7%, with inshell shipments down 25% due to a “lack of suitable product”. China continues to be a “strong market” with shipments up 23%.
Pollination
Despite Victorian almond growers being 50,000 hives short due to biosecurity restrictions, Select Harvests was able to meet its minimum hive requirements.
It was able to optimise pollination through the strategic placement of hives and the use of pheromones to encourage bee flight efficiency.
Its most recent assessment of its orchards forecasts that its 2023 crop will be approximately 30,000 mt. This is subject to normal ongoing growing conditions. Thankfully, it has experienced very few frost events.
Management comments
Select Harvests Managing Director, Paul Thompson said:
The strengthening of almond pricing is pleasing. The Select Harvests’ team have had to manage some difficult market and operational challenges over the last eighteen months. Market demand is beginning to build, and the Select Harvests’ team continues to focus on the basics: cost, quality, volume and price realization. The pollination of our 2023 crop is just another example of how having the right team makes the difference.
Final thoughts on the Select Harvests share price
The size of the harvest and pricing of the commodity are key for a business like Select Harvests. Both of those factors look promising for 2023. I’m not sure if it’s worth buying now, considering the gain has already happened. However, next time there’s a heavy fall of Select Harvests shares due to negative about almonds could be an opportune time, but not when it’s going strongly.
