The Select Harvests Limited (ASX: SHV) share price is currently up around 15%. Investors are going nuts because of a business update.
Select Harvests’ business update
The almond business gave an update about its 2021 crop and current market conditions.
It said that the harvest has been completed and 100% of the 2021 crop has been delivered to its Carina West processing facility.
With over 60% of the crop processed, management estimate that the crop volume, including from the acquisition of the Piangil orchard, to be approximately 28,250 MT. That represents an increase of 21.5% from 2020’s crop volume of 23,250 MT.
Select Harvests says that processing productivity continues to improve, with prior year investments in technology delivering efficiency gains and further enhancing quality after the harvest.
Market conditions
The company said the almond industry has experienced significant growth in global demand across all markets, particularly in the traditional almond markets of India, Europe and China.
Californian domestic and export almond shipments in the year to date (August 2020 to June 2021) are up 21.7% and forward commitments are up 34%. The combined shipped and committed volume is 3.16 billion pounds, up from 2.56 billion points. Select Harvests said that forward commitments for the 2021 crop are down 29% against the same period last year, with growers reluctant to sell and waiting to understand the potential impact of the drought on supply.
Australian almond exports are up 54% year on year, with the South/Central Asia (India) market up 200%, Europe up 69% and the North East Asia (China) market up 9% during the period.
Last night, the US Department of Agriculture released the 2021 Objective Crop Estimate for the 2021 US almond crop of 2.8 billion points, down 12.5% on the 3.2 billion pound Subjective Estimate released on 12 May 2021. Select Harvests said that the California drought has worsened in recent months, so the Subjective Estimate proved to be too optimistic.
The company said 60% of its 2021 crop is committed at prices in the range of A$5.90 per kilo to $6.40 per kilo. The un-commited portion of the crop is in the lower value grades. 90% of the crop is covered at an exchange rate of $0.73 AUD/USD and the current market price is in the range of A$6.20 per kilo to A$6.60 per kilo.
Both Australian and US processors are experiencing some shipping delays due to container shortages, though it’s only experiencing minor cashflow delays.
Outlook for Select Harvests and thoughts on the share price
The company said the development of the 2022 crop is progressing well with good tree health and sufficient chill hours as the company heads into pollination in August.
Volumes are benefiting as younger orchards reach maturity. Water supply and pricing is “much improved” on recent years and the ongoing focus for 2021 is to maintain the high standard of its horticultural practices and deliver another strong crop.
Farming businesses are interesting ideas. Their profit and share prices can be very cyclical, so it might be wise to wait for when times are tougher again before jumping in on the Select Harvest share price.
