Almond Demand And Prices Continue To Climb
July 7, 2015 The drought in California, combined with poor pollination, decreased California’s almond crop almost 12% in 2014, which has helped drive prices upward.
According to a new report by Rabobank’s Food & Agribusiness Research and Advisory group (FAR), the year-over-year decline in yields was despite the addition of some 20,000 bearing acres.
“We expect the crop to be short again this year,” Vernon Crowder, FAR senior vice president and senior analyst says.
He adds that even with the additional acres being planted, trees being watered with less-than-ideal groundwater could negatively impact yields. “You’ll probably see some older acreage pulled out where guys just can’t find the water supply,” he says.
Because of all these factors, Crowder expects almond prices will climb even higher. Even if California sees normal rain this next year, yields may still be off because of the groundwater that’s been used to water trees for the last several years. He anticipates production will come back as more growers plant new trees, but prices are likely to remain high.
“I expect on average, prices will be higher the next 10 years than they have been the last 10 years,” he says.
This is thanks in part, too, to increasing middle-income earners overseas, particularly in Asia. “Not only do they value nuts in general, but especially the almond,” Crowder says. “The almond is especially versatile.”
He notes that almonds are often used as ingredients, especially in Europe, which is helping keep demand high in the export market. “It’s hard for the buyers and food manufacturers to find substitutes,” he says. “How do you take the flakes of almonds out of ice cream, or how do you take the almonds out of Almond Joy? It’s hard to make those adjustments, so that’s why we have record high prices.”
For almond producers, these high prices have meant improved profitability despite the drought, especially for growers who already owned their land and have developed almonds over the years.
“That same profitability is encouraging more planting of almonds, as well,” Crowder says.
He adds that planting almond orchards is relatively inexpensive from a capital standpoint, because they don’t require a lot of wire or trellising. Plus, in the third year after planting, an orchard can already be commercially viable. Because of this, many growers of other crops – and even some livestock producers – are starting to grow almonds.
“The challenge the industry has is finding enough quality water, because almonds do like clean water (without salt), but also finding affordable land,” Crowder adds. “That’s getting harder to do.”
But the market is there, and the export market continues to offer promise. Europe, for example, has been paying 50% more over the last year for almonds. Demand from China and India remains strong, too.
Crowder anticipates more almond acreage will be planted north of Fresno, where yields aren’t quite as high but water is more reliable.
“You’re going to continue to see some additional movement from some crops – maybe some more winegrapes moving to almonds,” he adds. “We’re going to be seeing a lot of stone fruit moving to almonds, so you’re going to see that kind of shift in some of the acreage.”
Regarding recent acreage reports, Crowder says the 30,000 acres that were pulled out may sound like a lot, but it’s not that much considering the drought and age of the trees.
“Because of the high prices of the almonds, it really pays growers to try to protect those old trees,” he says. “They’re already in there, so even though they have less yield, it’s still profitable to keep those older orchards in.”
He adds that as many as 60,000 or more acres of almonds might have been planted in the last year.
“That’s consistent with estimates I’m hearing in the industry,” he says. “There have been a lot of increased plantings in the last year or two.”
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