Select Harvests to cash in despite varroa crisis as California almond crop tanks

A lower-than-expected almond crop from California will keep prices high, supporting ASX-listed producer Select Harvests as it battles a beehive lockdown.

As ASX-listed almond producer Select Harvests faces a potential pollination crisis, it can thank America for delivering some good news.

A lower-than-expected almond crop from California — the world’s biggest producer of the nut — is expected to keep prices high as the outbreak of a deadly bee parasite in NSW is forecast to disrupt pollination across almost half of Select Harvests’ orchards.

Despite NSW authorities containing the outbreak of the varroa mite to exposure sites around Newcastle, Select Harvests chief executive Paul Thompson expects the ban on moving hives around the state to remain in place.

“It is increasingly likely that there will be potential restrictions on moving hives both across state borders and within states. With 50 per cent of the pollinating industry’s hives in NSW, a potential shortage in Victoria and South Australia is looking like a reality,” Mr Thompson said in an ASX statement.

Select Harvests chief executive Paul Thompson at the company's Thomastown plant. Pictures: Angie Basdekis

He said Select Harvests had deployed mitigation strategies, including increasing flower density, and installing windbreaks to support bee flying time and bolster pollination with fewer hives.

“Effective almond pollination is determined by flower density, synchronisation and bee flight hours,” Mr Thompson said.

“Historically, we have been able to produce good nut set and crops even with one of these factors being negatively impacted by nature. Despite extensive research it is impossible to accurately predict the individual impact of these three influencers.”

The United States Department of Agriculture’s objective forecast of a 2.60 billion-pound (1.17 billion kilogram) almond crop this year — 11 per cent lower than 2021, citing early season frost and ongoing drought. Its expectation of a 1900 pound per bearing acre yield for the 2022 crop is the lowest in more than a decade.

A close-up of a varroa mite on the back of a honey bee. Picture: Antoine Franck

A varroa mite on a bee’s back.

Mr Thompson expects almond prices to rise, given the lower-than-expected US almond crop.

“A combination of the lower-than-expected objective estimate vs. prior industry consensus and a strong June California shipment report, may result in an appreciation of the almond price as the industry adjusts to a tighter supply scenario heading into the 2022/23 Californian season,” he said.

“Based on current market conditions, Select Harvests’ 2022 crop is over 62 per cent committed (including internal sales) with a fair valuation sales price of $A6.64/kg. Our estimated 2022 export program is fully hedged at 0.72 cents AUD/USD.

“Global demand for almonds continues to remain strong, with the potential for tighter supply following the lower-than-expected (USDA) objective forecast for the 2022 California almond crop and continued strong shipment numbers.

Select Harvests’ product packed and ready for transport. Picture: Peter Hemphill

Select Harvests expects almond prices to hold up, despite the pollination crisis. Picture: Peter Hemphill

“Select Harvests is focused on processing the remainder of our 2022 crop and delivering another record crop in 2023.”

Select Harvests’ shares firmed 1.4 per cent to $5.27 on Thursday, while the broader share market advanced 0.4 per cent.

Wilson Equity Research analyst James Ferrier, who has an overweight rating on Select Harvests with a $6.77 share price target, said the reduction in supply from California created a “favourable tailwind for almond prices”.

“We currently forecast a USD almond price of $4.78/kg in FY22E, consistent with Select’s 1H22A result, increasing to $5.83/kg in FY23E and $6.59/kg in FY24E,” Mr Ferrier wrote in a note to investors.

“Turning attention to Australia, the varroa mite emergency response continues to pose risk to upcoming pollination. However, the NSW DPI confirmed yesterday that there have been no new detections of varroa mite outside of those linked to previously known cases.

“This is encouraging as we approach the key almond pollination window.”