...Some-one with better skills at analysis might be able to find...

...Some-one with better skills at analysis might be able to find a pattern in the price chart below. There may be a relationship with the estimated or actual crop size - certainly not the weather, nor the asset backing. Much of it looks to be random or in other words market sentiment. Which is basically what UBS's target price is: guesswork, possibly educated, but more likely just a reversion to near the 20-year average...


John, when I first glanced at the above, I wasn't quite sure if that passage was intended to be taken seriously.

The Select Harvest share price has always been strongly correlated with an external vector, as is evident from a cursory glance at the two charts below:





The Select share price and the almond price have always been close compadres, and thus the peaks and the troughs in the SHV share price have largely correlated with that of the almond price. The correlation isn't exact - local variables such as the relative strength of the AUD and the weather in Australia's almond growing regions also weigh into the equation, to some extent- but overwhelmingly, it is the almond price that holds the reins.

Why do you think that posters here have spent so much time fixated with California over the past decade or so? As the largest almond growing region in the world by a wide margin, what happens in California invariably calls the tune for the almond price worldwide.

Historically, the single most significant Californian-related factor driving the almond price is the weather in the western coastal strip of the USA.

There is a widely-expressed sentiment relating to the weather that holds that trying to make forecasts in relation to meteorological events is nothing more that a pointless crap-shoot, if not an exercise in hubris.

I don't think that this rather hackneyed sentiment is entirely correct. The weather does frequently conform to certain patterns, and the impact of such events on crops such as almonds is sometimes fairly predictable.

A freelance researcher today has ready access to a vast conglomeration of weather related data, both from the United States and Australia, not to mention detailed information pertaining to historical almond crops.

If you are willing to do the legwork, the reams of data available provides a blueprint from which you can construct your own Monte Carlo simulations, allowing you to build up a model as to how different meteorological events influence the almond crop.

Over the years, I've dedicated some time to carefully analysing weather-related data from California spanning several decades, in an attempt to pick out the factors that impact almond crop yields.Some factors that garner a great deal of media attention, don't seem to be so important when you take a closer looks. A good example of this is the pollination conditions.

Although the media in California seem to have a bit of a fixation with bloom-time worries, it is actually hard to find strong evidence that poor bloom-time conditions lead to poor crop yields. Mind you, this isn't to say that miserable weather during the bloom doesn't have any adverse impact on the size of a crop.

However, the historical data seems to indicate that any impact is more around the margin. I think the reason for this is at least partly because California is simply swarming with bees in February and March.

If it weren't for the Californian pollination event, many commercial beekeepers in the USA wouldn't make any money, and so at the start of each year, hundreds of them migrate to the Central Valley, drawn to the vast almond orchards like... well, like a bee to honey. So basically, even when the weather is terrible for bee-flight, there are so many hives around the place that they tend to ultimately do the job pretty well.

So, poor bloom-time conditions at the start of the almond cycle doesn't appear to correlate particularly well with poor crops. But one other factor does seem to have a very strong correlation with almond yields.

As noted in my previous post here, excessive post-pollination precipitation does seem to regularly lead to poor Californian crops.

In particular, the first three weeks of March seem to be a critical window. The threshold seems to be about 3 inches, or 75 mm. Anything above that seems to cause complications for the crop down the track, and the precipitation we've seen this month in the almond growing zone of California would certainly be worrisome to almond growers in that state.

I'm going on a bit of a ramble here, and it is a subject that really should be addressed in a separate post.

However, to get things back on track to the subject of this post, there are some indications that the almond price might have already found a bottom.

The chart below is taken from a recent update on a website called Stratamarkets.com. It does appear that Nonpareil kernel prices might be in recovery mode, although it is of course, still early days.



Personally, I suspect that the SHV share price probably has a little further to fall, although I don't think it will fall quite as low as some of the negative nellies here might be hoping.

However, the signs are that the almond price has probably fallen as low as it is going to go, and given the close relationship between the Select share price and almond prices, this should offer some support for the SHV share price in the months ahead.

I actually think the most significant risk factor for this company has so far largely been overlooked on this forum.

While the previous Managing director wasn't flawless, he was fairly proficient in the management of the almond side of the business. The recently appointed MD, David Surveyor, is however, an unknown quantity.

I think that this is something that shareholders would be wise to keep an eye on over the months ahead.