Select Harvests (ASX: SHV) has released a trading update this morning, should investors go nuts for its shares?
About Select Harvests
Select Harvests describes itself as a fully integrated almond business consisting of orchards (owned, leased, joint venture and managed), primary processing (hulling & shelling), secondary processing (blanching, roasting, slicing, dicing, meal), trading and consumer products – it provides the almonds for Lucky, Sunsol, Soland, NuVitality, Renshaw & Allinga Farms, as well as providing retail brands.
The FY20 update
The nut producer said it has completed its 2020 harvest, the entire 2020 crop has now been delivered to the Carina West processing facility.
With 60% of the crop processed, the company estimated that the crop volume is 23,000 MT. In 2019 the total volume was 22,690 MT. So that’s an increase of approximately 1.4%.
Select Harvests described its crop quality as good, however a portion of the crop has been impacted by late harvest rains and wet storage conditions. But the wetter conditions have thankfully reduced water prices. But this has also hurt the demand for almond hull from the stockfeed industry.
The Carina West Processing Facility continues to be more productive after the investment in new sorting technology.
Market conditions
Select Harvests said that export customers are now taking shipments at near normal levels. The overall domestic market has been stable with a shift from food service to retail.
Australian almond exports were down 29% due to COVID-19. China has been stable but Europe and particularly India has seen lower shipments.
There has been a softening of global almond prices due to a larger US almond crop. Select Harvests’ 2020 crop is over 80% committed (including internal sales) in a price range of A$7.25 to A$7.75.
Summary
Beating last year’s crop volume is a decent outcome, but a larger US crop isn’t ideal. I generally don’t like commodity businesses, unless they’re at rock bottom. I’m not a buyer of Select Harvests right now.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
