Hi Surandy, good pick-up regarding the Californian pollination...

Hi Surandy, good pick-up regarding the Californian pollination situation. The situation there definitely calls for some attention.

I haven't posted here for some time, in part because I've been doing some research on the side.

In the past, I would often post my research directly on to this site. I don't so often today, to a large extent because this platform simply isn't designed for in-depth research.

There is no way to save a draft, for example, and so on some occasions in the past, I've spent an hour or two writing up a post here, only to lose my work due to a connection issue. As such, these days I publish most of my research notes elsewhere.

However, the topic of this thread dovetails into a subject that I've been researching recently, which is what has drawn me in today.

The subject that I have been looking into pertains to certain theories of a US-based physics professor of the late 20th century, by the name of Paul Handler.

Back in the 1980s, Handler postulated that major volcanic eruptions have predictable impacts on the weather: in fact, he went even further than that, suggesting that powerful volcanoes that take place in low latitudes are the cause of the El Nino/ La Nina weather cycles across the pacific.

What gave Handler's theories a great deal of credence was that, after the massive volcanic eruption of Mt Pinatubo in the Philippines in 1991, Handler issued a series of predictions about the impact of the event on the weather in the United States, which proved to be uncannily accurate.

He accurately predicted, for example, that the Pinatubo eruption would signal the end of the long Californian drought that commenced in 1987, and in early 1993 he suggested that the Mississippi river would burst its banks later that year. Over the summer of that same year the said river did indeed burst its banks, causing major flooding in the surrounding areas.

The reason this may be of interest today, is because at the start of last year, another major volcanic eruption shook the world, this one just due east of Queensland: the Hunga-Tonga explosion of January of 2022 appears to have been most powerful volcanic eruption to occur since Pinatubo blew its top over thirty years ago.

According to Handler's theory, low latitude volcanoes are the trigger for El Ninos, and the Hunga-Tonga volcano, while much further south than Pinatubo, would still fall within the low-latitude zone.

While Handler's theory linking El Ninos to major volcanic activity in the tropics hasn't been widely embraced, the idea that powerful volcanic eruptions can affect weather patterns is fairly well-supported by the weather data.

In the years following on the fiery cataclysm at Pinatubo, for example, California experienced a series of unusually wet years, which proved quite detrimental to the almond crop across a number of years. So, given the eruption of the volcano in Tonga last year, it would be wise to take a closer looks at the weather in California at this critical juncture in the almond-growing cycle.

As Surandy noted previously, there have been widespread concerns in California that the inclement weather during the almond bloom might have an adverse impact on the US almond crop down the track.

Personally, based on my own examination of the weather-data in California, I am a little sceptical about this: while there is no doubt that some of the weather conditions towards the end of February would have made life challenging for the bees, the first few days of the pollination period were actually fairly balmy across California. In addition, cold and wet weather - as we saw in the second week of the bloom- tends to drag out the bloom, providing the bees with more time to get the job done.

In short, I don't feel that the concerns that the inclement weather in California will lead to insufficient pollination are entirely justified. This is not to say, however, that California's growers are quite out of the woods.

While it is always difficult to assess the impact of inclement bloom-time weather on the eventual crop, one weather -related factor that seems easier to get a handle on is post-pollination precipitation.

There is fairly solid data to suggest tha excessive rainfall in the weeks after pollination bodes poorly for the eventual crop in California

Exactly why this is, it is hard to precisely determine: it might be because the nut is in a formative stage during this time frame, and so 'over-watering' of trees could retard the development of the crop.

It could also be due to the impact of 'jacket rot': after the flowers drop off post pollination, a protective jacket forms around the proto-nut. If the jacket ends up getting regularly soaked, there is a good chance that a fungal infection will develop in the jacket that will in turn damage the nut.

Whatever the cause, excessive precipitation in the first three weeks of March does seem to be generally associated with a poor crop.

Holders with long memories might recall Select's shock-crop downgrade in 2017, which seems so long ago now.

The cause of this unpleasant downside surprise seems to have been excessive post-pollination rainfall in 2016, with many of the company's almond growing regions being pummelled by extreme rainfall in September of that year, which in most locations exceeded 100 mm; though Hillston in the North was hit by as much as 176 mm of precipitation within the space of four weeks.

Over in Calfornia, March is the equivalent to our September, and the historical rainfall data from this region does seem to also indicate that heavy rainfall in the first three weeks of that month is associated with unispiring almond crops.

The table below highlights the precipitation over the first three weeks of March in Fresno, which is in the very heart of California's almond growing belt, and the approximate change in statewide almond production, relative to the previous year.


The pattern above does seem to point to some manner of link between the volume of precipitation in the first three weeks of March and the total almond production for the year. Basically, the more it rains in those weeks, the worse the outcome seems to be for Californain growers when the harvest is raked in and tallied.

As you can see from that last row in the table, so far this month, central California has received around 88 mm of rain, with more rain on the way over the next few days, if the forecasts prove to be accurate.

This is something worth keeping tabs on, as based on the table above, it seems that even just 75+ mm is enough to adversely impact the crop, as we saw in both 1982 and more recently in 2018, where the total crop volume was virtually identical to the previous year, despite a substantive year-on-year increase in almond acreage across California.

In summary, it would appear that the current circumstances in California could present an interesting prospect for the contrarian minded trader or investor.

There are two elements of the equation to consider.

Firstly, as discussed above, the preciptiation recorded in California over the course of this month to date is suggestive of a poor almond crop later this year.

All the same, it is worth keeping an eye on the conditions there over the next few days. If the precipitation over the first three weeks ends up exceeding the 100 mm mark in many almond growing locations, I think a poor crop in California is a high probability.

The second element to consider is a local stockmarket phenomenon: the tax-loss selling season, which we are rapidly approaching. It is possible that a sell-down over this period could present a nice opening.

This suggestion might sound a bit trite, and I guess it is, but one thing to bear in mind is that due to the steep rate hikes by the RBA over the past 12 months, the local cash rate in Australia is now the highest it has been in a decade. Any investor who jumped into the stockmarket at any time in the past five years would have no experience of the kind of high-interest rate setting we are in at current.

As such, when we hit the tax-loss selling months of May and June, investors stuck with laggard stocks will have a huge incentive to sell off. By selling, not only do they reduce their tax, but they also can immediately deposit the money in high-interest savings accounts offering fairly attractive rates. I suspect that much of this will be 'knee-jerk', without too much premeditation.

With the SHV share price sitting near 12 month lows, it quite is possible that this stock could get beaten down by a wave of selling over the next three months, dipping well below the $4 mark.

But given the situation in California, if this does come to pass, it might present a nice entry point for traders and investors.

Certainly, it does looks as if we might be looking at a rebound in the almond price within the next 12 months, which is hardly an unfavorable backdrop for a stock leveraged to the almond price.