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Diamond Foods (DMND +4.1%) racks up a tidy gain after Moore Capital discloses it took out a new...

Diamond Foods (DMND +4.1%) racks up a tidy gain after Moore Capital discloses it took out a new position. Though accounting and compliance issues justifiably still weigh heavily on DMND investors, increasing support from institutional investors could tip off that the smoke is finally clearing for the company.
Comments (3)
  • Sometimes smoke clears because the fire has been put out. Other times, there isn't much left to burn. Only time will tell. Speaking of time, seriously, how long does it take to move walnut payments from one quarter to another? I simply cannot understand why this is taking so much time.

     

    The USDA released their walnut estimate a couple hours ago: 470,000 tons, which is about a 2.2% increase over least season's crop. The industry was previously working off the handler's subjective estimate of 513,000 tons and while a larger crop than last season sounds like there will be plenty of nuts to go around the reality is that there will be another shortage. Last season's 460,000 tons was the second largest crop in history and still was a massive shortage when it came to filling demand, prompting the highest prices ever for walnuts, with an average price of $2,870 per ton. (Prior year was $2,040 per ton and previous record was 2007 at $2,290/ton according to the USDA).

     

    The relatively low estimate will turn Diamond's chance of securing enough walnuts from their remaining growers to cover the Oaktree requirements from a long shot into Mission Impossible.
    4 Sep 2012, 05:41 PM Reply Like
  • Let’s try to look at the same fact pattern with a slightly different point of view, WalnutMan. Yes, it is taking a long time for this Diamond fire to reach containment. The process, however, is far more complex than simply moving some payment transactions from one period to another. With a full-on SEC audit of all Diamond subsidiaries everywhere, the process becomes cumbersome and time consuming. I agree, however, that the time factor looms heavily in this particular game and now might be the time to write the report and give the auditors a vacation, already! The SEC is mum about the status of the audit, and news from Mr. Driscoll appears to be sparse, thus fueling speculation of gloom and doom. A good, newsy note from the CEO would at least be palliative therapy for those of us growers and shareholders suffering from smoke inhalation distress.

     

    USDA estimates have been wrong in the past, but it appears that high walnut prices will result from a US crop that is unable to meet demand. I wonder if the Chinese financial uncertainties and Middle East/Africa turmoil will soften the export market at least enough to mitigate the inventory shortfall? Any thoughts on that?

     

    As for me, I am holding DMND for now.
    26 Sep 2012, 02:07 PM Reply Like
  • According to my sources in mainland China, the Chinese crop is coming in short and they are buying from California even at these high prices. They will not publicize their domestic crop being short because they are smart enough to know that you don't give people a reason to raise prices before you buy. The market has already firmed since the opening prices were announced. The turmoil in the Middle East is not likely to have a substantial impact on worldwide consumption - the dropoff in that region will be offset elsewhere. The other producing countries are going to have less overall supply as well from all the reports I am hearing.

     

    The almond market is on fire right now because the crop has come in short of expectations. The early walnut varieties look short of the expectations people had based on the USDA forecast and so they are bullish right now. 88% of the walnut crop comes from Tulare, Howard, Hartley and Chandler varieties and there isn't data on those yet but there should be information on the Tulare within a couple days as they are harvesting that variety now. If I was forced to place a bet on the USDA forecast being off, I would put the actual crop as more likely lower than higher compared to the estimate. As for walnut pricing, I expect it to remain high on the wholesale finished goods side and on the supply side I would expect to see high prices that are relatively close to last season's record high.
    26 Sep 2012, 02:45 PM Reply Like
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