It’s no secret the big three tree nuts — almonds, pistachios, and walnuts — have hit head winds in recent years. Of course, after many years of high-flying, it was only natural for prices to return to earth.
That’s reflected in our survey results, as 31% of nut growers answering this year’s State of the Industry survey plan to increase production in 2017. With the trees taking many years to come into full production, that makes sense. Another 63% of nut growers will hold steady, and just 6% are cutting back.
Almond prices, after coming close to a record-high $5 a pound for ‘Nonpareil’ in 2105, were down to under $3 a pound last year. But almond prices were unusually high in preceding years due to a shortage caused by the drought and low chilling hours.
Because yields were down considerably those last couple of years, the crop had to be rationed, even though demand remained strong. This, on top of a strengthening U.S. dollar, drove almond prices up.
This past winter, California enjoyed much more normal precipitation and chilling hours. Just ask pistachio growers. The 2016 pistachio crop was one the industry had been anticipating for years.
This year’s pistachio crop will top out at about 900 million pounds, well above the previous record of 555 million pounds in 2012. It’s been a roller coaster. The 2015 crop came in at just 275 million pounds. The industry still expects a 1 billion-pound crop around 2020.
Growers of walnuts have really hit price declines. A report from Rabobank Group, “California Walnuts — Confronting Growing Production,” pointed to walnut production increasing nearly 65% in the last 10 years compared with the previous decade.
The increased production caused a bottoming out of market prices last year, a precipitous 30% to 50% drop depending on the cultivar.
That’s reflected in our survey, as most of the nut growers answering questions about whether or not they were concerned about where prices were headed grew at least some walnuts.
For example, one diversified grower, whose farm has been in business many years and who said he was concerned about where prices were headed, said walnuts were over-planted. He has no plans to increase acreage.
Another 1,000 acre-plus grower who said he too was concerned about where prices were headed also pointed to over-planting as a reason, but added that another problem was that export markets were increasing domestic production. He added that he was increasing production in 2017.
Another large diversified grower agreed over-planting at home and competition abroad made for a tough one-two punch. “Imports from China and over-planting/production here are killing us,” he said.
That grower noted his own operation’s 2016 production was up more than 10% over 2015, and he will increase production in 2017.
Another large grower with sales volume between $10 and $20 million said their operation’s production was up more than 10% in 2016 and the best thing they did to improve profits was increase production.
But they won’t be planting this year and they too are concerned where prices are headed: “Strong dollar and increased production mean lower prices for walnuts. Because walnuts take seven years to come into full production, I see this trend continuing for several years.”
Look to History
None of the nut growers answering our survey said they expected to see any significant increases in prices in 2017, however, about the same number of growers as indicated concern over prices said they expected them to stay the same in 2017.
One grower with sales above $10 million said his team wasn’t concerned about where prices were headed, though they’re not increasing production.
Another smaller grower who agreed about prices said simply: “Enough is enough — no need for greed.”
Still another larger grower said he didn’t think prices will decline further in 2017 because they’ve already hit bottom. That grower is ramping up production.
One other grower agreed that prices have already bottomed out, and he was not concerned about where prices were headed. Asked why, he said “I have studied this industry from near the middle of last century.”