By Sameer Patil
Fancy Diwali gift boxes, healthy snack and vegan milk all have one thing common – the almond! It is scientifically proven that almond has significant health benefits for the heart, weight management and diabetes management. Unknown to most people in the country, India is one of the biggest consumers and importers of almonds in the world.
Production and Consumption
Last year, India imported 1,31,000 tonnes of almonds valued at $666 million and constituted the largest market comprising 48 per cent of global imports. Traditionally in India, demand for almonds peaks during the festive season from September to January. The growing perception among Indian consumers about nutritional and health benefits associated with almonds is also driving demand beyond just the festive season.
Data shows Indian almond imports grew at an average annual rate of 9.8 per cent between 2007 and 2018. This growth corelates with the expansion of the Indian economy. As income levels grow coupled with the rising health consciousness, demand for almonds is only expected to grow. On the supply side, the US is the dominant producer followed by Spain and Australia. California is the only state in the US, which grows almond! So, all of the US’ almonds are California almonds.
California almonds have more than 75 per cent market share, while 18 per cent comes from Australia. California’s almond exports to India is valued at about $650 million, according to the US Agriculture Department and California Department of Food and
Agriculture. India’s domestic production is limited to the hill states of Jammu & Kashmir and Himachal Pradesh.
Product crop cycle
Almonds are grown in a mild temperate kind of weather, cool rainy winters and dry summers, accompanied by rich soil, like the California valley. Almond plants are generally planted in February-March and harvesting begins by July, when the fruit begins to split open. Between mid to late August, the splits widen, exposing the shell and this allows the nuts to dry. When properly stored, unshelled almonds generally stay at best quality for two to four weeks at room temperature and for about 12 months in controlled conditions (freezer).
Almonds develop in a shell that is surrounded by a hull (analogous to the fleshy part of a peach). Over the summer, as the nuts mature, the hull dries and splits open, revealing the shell that encases the nut. The nuts dry naturally in this shell before they are harvested – hence, the two types, in-shell and shelled (one for consumption).
India is the world’s biggest in-shell almond importer, but shelled almond imports are a rarity. The reason is straight forward – cost effectiveness. Labour cost and employment generation have made it logical to import in-shell almonds and then shell them in India.
Hedging almond price risk
Almond price has seen remarkable growth of 4.4 per cent in the 11-year period from 2007 to 2018. The annualised volatility of almond spot prices is 13.23 per cent over the past three years.
In June 2019, India imposed tariffs on almonds and 27 other American products in retaliation of the US ending India’s preferential trade status. Reports said these tariffs added about 12 cents per pound to shelled almonds, a 20 per cent increase, and about 4 cents for those still in their shells, a rise of 17 per cent. Similarly, the rupee’s annualised volatility is approximately 8.3 per cent when measured in terms of monthly percentage changes over last 25 years.
Rupee volatility also increases due to external factors such as the 2012-13 Taper Tantrum episode as well as the current coronavirus situation. Given the volatility in both almond prices and the rupee, hedging price risk of almonds is vital for everyone associated in the value chain.
BSE almond contracts
Given the price risk and volatility, BSE is introducing monthly futures contracts in almonds from June 22, the first of its kind not only in India but globally. The contract trading unit is 1,000 kg. The maximum order size is 20,000 kg, delivery units are 1000 kg deliverable at Navi Mumbai. The almond contracts will take the reference rate of Navi Mumbai APMC. Quality specifications should meet FSSAI standards with certified crackout to be of 70 per cent to be based on the net edible yield, with allowable crackout of 68 per cent. The calculation of crackout will be as per net edible yield.
These standard contracts will be extremely convenient for producers and large importers to hedge price risks. Although the size of the almond market is small compared with other commodities, BSE has received a lot of queries from traders, importers and consumers from not only in India, but across the globe, given that it the first-of-its-kind contract anywhere in the world. BSE is confident that the wide dissemination of almond prices on its platform will be used as reference prices for physical market transactions.
BSE is also expanding ties with various physical market participants for strengthening of warehouses and other support infrastructure, essential for grading, sorting and quality certification. The exchange is reaching out to participants and spreading awareness of the benefits of these products and looks forward to a wide participation in the future.
BSE is keen on making the commodity market more vibrant and inclusive, benefitting the entire spectrum of market participants, from producers to traders and end-consumers. Apart from providing its platform for stakeholders of commodities markets to hedge against price risk, the exchange has provided participants with cost-effective and best-in-class technology solutions. BSE plans to systematically develop the commodity market via launch of more unique and innovative products, awareness and research with a view to provide a wider product range to the market participants. – Economic Times
(Sameer Patil is Chief Business Officer at BSE. Views are his own)
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