California's nut boom defies gravity
Growers excited but worried about sharp increases in production, value
By TIM HEARDEN
RED BLUFF, Calif. -- Tyler Christensen's family has been growing plums for prunes for five generations, and his dryer is used by prune producers from throughout the region.
But the 37-year-old farmer recognizes which direction the trade winds are blowing.
Now Christensen, whose 1,000 acres of orchards line Highway 99 on the outskirts of town, is climbing aboard the Golden State's nut bandwagon. He has doubled the size of his walnut orchard in the past four years, from 200 to 400 acres.
"Obviously, we've been having some really good luck" with walnuts, he said. "We've had good growing success and good economic success. Those have been the big factors."
Christensen also has about 130 acres of almond trees. But this far north in the Sacramento Valley, the land and conditions are more conducive to walnuts, he said.
"Our county is really beneficial for walnut growth," he said. "In the almond industry, we can barely set the state average, but with walnuts we can set record crops."
Christensen is one of many California producers who are reaping the benefits of a veritable nut boom, as burgeoning global demand, ideal growing conditions and the misfortunes of other crops and other regions have fueled a steep rise in profitability for almonds, walnuts and pistachios.
The production, bearing acres, prices and total value of walnuts and almonds have been rapidly growing for the past two decades -- particularly since 2005, according to the USDA's National Agricultural Statistics Service.
Bearing almond acreage has nearly doubled, from 418,000 acres in 1995 to 810,000 acres this year, NASS reported. Production during that period has jumped from 370 million pounds to an anticipated 2 billion pounds this year.
While the price per pound has remained relatively stable, the total production value for the Golden State's almonds ballooned from $881 million in 1995 to $4.1 billion last year, according to handlers' reports to the California Almond Commission.
Walnut acreage has been trending gradually upward since 1988, from 177,000 acres then to 245,000 for last year's harvest, NASS reported. However, production has more than doubled during that time, and the total crop value has jumped from $193 million 25 years ago to $1.3 billion in 2011, the government reported.
Pistachios are a rising star among nuts, with about 153,000 bearing acres in California. Last year's roughly 550 million-pound pistachio crop dwarfed the 355 million pounds produced in 2009, according to the Fresno-based American Pistachio Growers. The 2012 crop was valued at $1.1 billion, up sharply from $879 million in 2011, NASS reported.
No one can say with any specificity when these sharp upward trends will show signs of easing.
"The way I view that is if anybody claims to really know, you'd better grab your wallet because they're up to something," said Daniel Sumner, an economist and director of the Agricultural Issues Center at the University of California-Davis.
"Very reasonable people have been saying for a decade this almond thing can't continue," Sumner said. "They weren't silly for saying it, but they were wrong."
Most industry representatives say the boom is driven by an expanding middle class in places like China and India, where consumers are becoming more health-conscious and have the money to improve their diets.
"Health is still the driving force," said California Walnut Commission CEO Dennis Balint, referring to studies in recent years that show regular consumption of walnuts can reduce disease risks and even aid male fertility.
Indeed, in a 2011 U.S. market study, the commission found that 86 percent of consumers believed walnuts are healthful and 61 percent said they were buying more than they were five years ago.
The perceived health benefits are a big reason the Almond Board of California sees a potential to sell 200 million pounds more almonds per year by 2016, associate director of agricultural affairs Robert Curtis said in December. China and India consume nearly 300 million pounds of almonds a year already, and there's a potential to sell them another 375 million pounds as those countries urbanize and develop more Western tastes, he said.
Meanwhile, pistachios are known as the "happy nut" in China, which purchases 20 percent of the American crop.
"Primarily where the growth is coming is Chinese growth," said Veronica Nigh, an American Farm Bureau Federation economist in Washington, D.C. "China is the world's largest importer of tree nuts and the U.S. happens to be the largest exporter. ... A lot of that is the market demand has increased in tandem with local consumers' understanding of the nutritional benefits of tree nut consumption."
While demand is ultimately the key to the success of any crop, other factors contribute to the profitability of nuts from California. For one thing, California has some of the most suitable soil and weather in the world, experts say.
"California is certainly the best place in the world to grow almonds," said Brooke Jacobs, who runs the Fruit and Nut Research and Information Center at UC-Davis.
A farmer needs three things to be successful with nuts -- good ground, plentiful water and optimal water, explained Roger Duncan, a UC Cooperative Extension pomology farm advisor in Modesto. There needs to be very little rain from April through October, and a low probability of frost in March and April, Duncan said.
"I've gone to Europe and other places now, and it just really impresses upon me that what we have here is really unique," he said. "When I grew up here, I assumed the whole world was like this. It just isn't."
In many places around the world, soil is very shallow or contains high amounts of alkali, Duncan said. The Central Valley's deep, alluvial soils allow for larger, more vigorous trees that supply nuts in high quantities as well as quality, he said.
On Christensen's farm one recent morning, Howard walnut trees had become so full that workers were cutting and hauling away branches that were in danger of being ripped away from trees because of their weight. Christensen said it used to bother him to see piles of abandoned branches on the ground, but he got used to it.
"I've seen trees peel just like a banana," he said.
Advances in irrigation efficiency and other growing techniques have helped California orchardists further bolster production. Last year, the Golden State's almond growers produced 2,390 pounds per acre, up from 885 pounds per acre in 1995, according to NASS. In the same period, walnut production per acre has increased from 1.21 tons to 1.92 tons, the agency reported.
The yield increases have helped growers meet the burgeoning demand while keeping prices affordable, Sumner said.
"The biggest story is yields have gone up like crazy as efficiency of production has gone up," he said.
California's growing conditions and efficiencies have enabled the industries to gain a strong reputation around the world for food safety, Sumner and other experts say.
The U.S. has gained a trade advantage over Iranian pistachios, for instance, because growers there bleach their shells with hydrogen peroxide to make them as white as California's, Nigh said.
The European Union purchased more pistachios from Iran than California about 20 years ago, Sumner said. But now California has surpassed its competitor.
Further driving California's nut production are the misfortunes of other crops, which have encouraged many farmers like Christensen to switch. For instance, as a global glut of prunes has lingered, plum acreage for prunes has dropped to an estimated 51,000 this year, down from a peak of 86,000 acres in 2000.
"Prunes have just not been that profitable," Christensen said.
In Stanislaus County, Duncan is contacted almost daily by growers sending him soil and water tests so they can determine if they can grow almonds, he said. He's spoken to many row crop producers on the west side of the valley whose long-term plan is to rotate out of tomatoes and beans and go into permanent crops such as nuts, he said.
"We may not be opening up new ground (for nuts), but we could be converting used ground," Duncan said. "How long will that continue? If the market stays the way it is now, it'll continue until the market can't absorb any more. From what we've seen, the market can absorb a lot more walnuts, almonds and pistachios."
Room to grow
The walnut commission's Balint believes the U.S. has only realized about 25 percent of its potential for marketing walnuts globally. Processors have built new facilities or expanded existing ones in the last few years, bringing California's total to 88.
"Ten years ago, we probably had 50," he said. "So the increase in the number of handlers along with the increased capacity of the old handlers means that in the foreseeable future, I don't think there's going to be a lack of production capacity. If there's a problem, it's huller capacity."
The AFBF's Nigh expects California's nut boom to last at least another five years.
"I don't see any reason for that to be dampened," she said. "There's really strong consumer trends supporting the growth. There's increased acknowledgment of the health benefits of tree nuts, and that's not going away. I don't see any lurking limitations to an increase in demand over the next several years."
But for his part, Christensen is more cautious. He's mindful that California's prune growers are still trying to recover from a dip in grower returns stemming from a busted crop in 2004 that ate into their worldwide market share. He noted that much of California's success is tied to a weak dollar that makes American walnuts more attractive overseas, where 60 percent of the crop is sent.
"The scary part is the industry has staged itself for another 15 years of record crops ahead of us," Christensen said. "In that situation, all of our markets have to fire on all eight cylinders."
While many growers have paid large sums for land, Christensen has avoided taking on new debt, he said.
"We're just trying to be prepared for whatever occurs," he said. "Agriculture is like anything -- history repeats itself. It's just a matter of when."
California Walnut Commission: http://www.walnuts.org
Almond Board of California: http://www.almondboard.com/English/Pages/default.aspx
American Pistachio Growers: http://americanpistachios.org
UC-Davis Fruit and Nut Research and Information Center: http://fruitsandnuts.ucdavis.edu